**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      one)





ý
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
                2006





OR





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE TRANSITION PERIOD FROM ______ TO
                ______





Commission
      file number: 000-50828





**THIRD
      CENTURY BANCORP**


(Exact
      name of small business issuer as specified in its charter)





Indiana
            20-0857725(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                Number)








80
      East
      Jefferson Street


Franklin,
      Indiana 46131


(Address
      of principal executive offices)





(317)
      736-7151


(Issuer’s
      telephone number)





Check
      whether the Issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve
      months (or for such shorter period that the registrant was required to file
      such
      reports) and (2) has been subject to such requirements for the past 90
      days.


YES ý   NO o





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


YES o   NO ý





APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: October 31, 2006 - 1,653,125 common shares





Transitional
      Small Business Disclosure Format (Check one): Yes o No ý





THIRD
      CENTURY BANCORP


FORM
      10-QSB





INDEX





Page
                No.PART
                I.
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements
            3Consolidated
                Condensed Balance Sheets
            3Consolidated
                Condensed Statements of
                Income
            4Consolidated
                Condensed Statement of Stockholders’
                Equity
            5Consolidated
                Condensed Statements of Cash
                Flows
            6Notes
                to Unaudited Consolidated Condensed Financial
                Statements
            7Item
                2.
            Management’s
                Discussion and Analysis or Plan of
                Operation
            10Item
                3.
            Controls
                and Procedures
            16PART
                II. OTHER INFORMATION
            16Item
                1.
            Legal
                Proceedings
            16Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            16Item
                3.
            Defaults
                Upon Senior Securities
            16Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            16Item
                5.
            Other
                Information
            16Item
                6.
            Exhibits
            16SIGNATURES
            
            17EXHIBIT
                INDEX
            E-1EXHIBITS





*Index*


**PART
      I.**  **FINANCIAL
      INFORMATION**


**Item
      1.**   **Financial
      Statements**





**THIRD
      CENTURY BANCORP**


Consolidated
      Condensed Balance Sheets





**As
                of**
            
            **As
                of****September
                30, 2006**
              **(Unaudited)**
            
            **December
                31, 2005****Assets**
            (in
                thousands)Cash
                and due from banks
            
            $
            411
            
            $
            602Interest-earning
                demand deposits
            
            
            6,042
            
            
            7,251Cash
                and cash equivalents
            
            
            6,453
            
            
            7,853Interest-earning
                time deposits
            
            
            --
            
            
            200Held
                to maturity securities
            
            
            5,569
            
            
            9,210Loans,
                net of allowance for loan losses of $935 and $926
            
            
            112,634
            
            
            105,557Premises
                and equipment
            
            
            4,343
            
            
            2,897Federal
                Home Loan Bank stock
            
            
            1,205
            
            
            1,041Interest
                receivable
            
            
            670
            
            
            592Other
                assets
            
            
            658
            
            
            797Total
                assets
            
            $
            131,532
            
            $
            128,147**Liabilities**DepositsDemand
            
            $
            11,474
            
            $
            10,215Savings,
                NOW and money market
            
            
            39,065
            
            
            44,264Time
            
            
            36,702
            
            
            34,129Total
                deposits
            
            
            87,241
            
            
            88,608Federal
                Home Loan Bank advances
            
            
            24,100
            
            
            16,500Other
                liabilities
            
            
            559
            
            
            486Total
                liabilities
            
            
            111,900
            
            
            105,594**Commitments
                and Contingencies****Equity
                Contributed by ESOP**
            
            
            295
            
            
            203**Stockholders'
                Equity**Preferred
                stock, without par value, authorized and unissued
              2,000,000
                shares
            
            
            --
            
            
            --Common
                stock, without par valueAuthorized
                - 20,000,000 sharesIssued
                and outstanding - 1,653,125 shares
            
            
            13,630
            
            
            14,290Unearned
                RRP shares
            
            
            --
            
            
            (778
            )Retained
                earnings
            
            
            5,707
            
            
            8,838Total
                stockholders' equity
            
            
            19,337
            
            
            22,350Total
                liabilities and stockholders’ equity
            
            $
            131,532
            
            $
            128,147








See
      notes
      to consolidated condensed financial statements.


3
 *Index*


**THIRD
      CENTURY BANCORP**


Consolidated
      Condensed Statements of Income


(Unaudited)





**Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**(dollars
                in thousands, except per share amounts)**Interest
                Income**Loans
                receivable
            
            $
            1,882
            
            $
            1,615
            
            $
            5,378
            
            $
            4,702Investment
                securities
            
            
            66
            
            
            103
            
            
            237
            
            
            248Federal
                Home Loan Bank stock
            
            
            13
            
            
            11
            
            
            39
            
            
            31Interest-earning
                deposits
            
            
            51
            
            
            32
            
            
            131
            
            
            132Total
                interest income
            
            
            2,012
            
            
            1,761
            
            
            5,785
            
            
            5,113**Interest
                expense**Deposits
            
            
            563
            
            
            396
            
            
            1,561
            
            
            1,071Federal
                Home Loan Bank advances
            
            
            278
            
            
            167
            
            
            662
            
            
            490Total
                interest expense
            
            
            841
            
            
            563
            
            
            2,223
            
            
            1,561**Net
                interest income**
            
            
            1,171
            
            
            1,198
            
            
            3,562
            
            
            3,552Provision
                for loan losses
            
            
            15
            
            
            ---
            
            
            45
            
            
            (20
            )**Net
                interest income after provision for loan losses**
            
            
            1,156
            
            
            1,198
            
            
            3,517
            
            
            3,572**Other
                income**Service
                charges on deposit accounts
            
            
            73
            
            
            57
            
            
            217
            
            
            155Other
                service charges and fees
            
            
            70
            
            
            63
            
            
            227
            
            
            192Net
                gains on loan sales
            
            
            16
            
            
            22
            
            
            61
            
            
            64Other
                income
            
            
            56
            
            
            73
            
            
            183
            
            
            136Total
                other income
            
            
            215
            
            
            215
            
            
            688
            
            
            547**Other
                expenses**Salaries
                and employee benefits
            
            
            738
            
            
            734
            
            
            2,203
            
            
            2,190Net
                occupancy and equipment expenses
            
            
            150
            
            
            116
            
            
            388
            
            
            340Data
                processing fees
            
            
            102
            
            
            88
            
            
            312
            
            
            287Professional
                Services
            
            
            34
            
            
            9
            
            
            87
            
            
            110ATM
                Expense
            
            
            34
            
            
            30
            
            
            93
            
            
            82Other
                expenses
            
            
            180
            
            
            189
            
            
            525
            
            
            530Total
                other expenses
            
            
            1,238
            
            
            1,166
            
            
            3,608
            
            
            3,539**Income
                before income tax**
            
            
            133
            
            
            247
            
            
            597
            
            
            580Income
                tax expense
            
            
            52
            
            
            102
            
            
            235
            
            
            234**Net
                income**
            
            $
            81
            
            $
            145
            
            $
            362
            
            $
            346Weighted
                average common shares - basic
            
            
            1,487
            
            
            1,518
            
            
            1,478
            
            
            1,525Weighted
                average common shares- diluted
            
            
            1,487
            
            
            1,519
            
            
            1,480
            
            
            1,525Earnings
                per share - basic
            
            $
            0.05
            
            $
            0.10
            
            $
            0.24
            
            $
            0.23Earnings
                per share - diluted
            
            $
            0.05
            
            $
            0.10
            
            $
            0.24
            
            $
            0.23Dividends
                declared per share
            
            $
            0.04
            
            $
            0.04
            
            $
            0.12
            
            $
            0.12Return
                of capital declared per share
            
            
            --
            
            
            --
            
            $
            2.00
            
            
            --





See
      notes
      to consolidated condensed financial statements.


4
 *Index*


**THIRD
      CENTURY BANCORP**


Consolidated
      CondensedStatement of Stockholders’ Equity


(Unaudited)


(Dollar
      amounts in thousands)








**Common
                Stock****Shares**
            
            
            
            **Unearned**
            
            **Retained****Outstanding**
            
            **Amount**
            
            **RRP
                shares**
            
            **Earnings**
            
            **Total****Balances,
                January 1, 2006**
            
            
            1,653,125
            
            $
            14,290
            
            $
            (778
            )
            $
            8,838
            
            $
            22,350Net
                and comprehensive income
            
            
            --
            
            
            --
            
            
            --
            
            
            362
            
            
            362Reclassification
                of unearned compensation upon adoption
              of
                SFAS 123 (R)
            
            
            --
            
            
            (778
            )
            
            778
            
            
            --
            
            
            --Amortization
                of RRP
            
            
            --
            
            
            118
            
            
            --
            
            
            --
            
            
            118Return
                of capital paid ($2.00 per share)
            
            
            --
            
            
            --
            
            
            --
            
            
            (3,306
            )
            
            (3,306
            )Dividends
                paid ($.12 per share outstanding)
            
            
            --
            
            
            --
            
            
            --
            
            
            (187
            )
            
            (187
            )**Balance,
                September 30, 2006**
            
            
            1,653,125
            
            $
            13,630
            
            $
            --
            
            $
            5,707
            
            $
            19,337





See
      notes
      to consolidated condensed financial statements.





5
 *Index*


**THIRD
      CENTURY BANCORP**


Consolidated
      Condensed Statements of Cash Flows


(Unaudited)


**Nine
                Months Ended September 30,****2006**
            
            **2005**(in
                thousands)**Operating
                Activities**Net
                income
            
            $
            362
            
            $
            346Adjustments
                to reconcile net income to net cash provided by operating
                activitiesProvision
                for loan losses
            
            
            45
            
            
            (20
            )Depreciation
            
            
            146
            
            
            138Investment
                securities (accretion) amortization, net
            
            
            (16
            )
            
            (17
            )Capitalization
                of mortgage servicing rights
            
            
            (36
            )
            
            (35
            )Gain
                on sale of loans
            
            
            (61
            )
            
            (64
            )Loans
                originated for sale in the secondary market
            
            
            (3,628
            )
            
            (1,661
            )Proceeds
                from sale of loans in the secondary market
            
            
            3,689
            
            
            1,725RRP
                compensation expense
            
            
            118
            
            
            45ESOP
                compensation expense
            
            
            92
            
            
            104Net
                change inInterest
                receivable
            
            
            (77
            )
            
            (137
            )Other
                assets
            
            
            175
            
            
            (105
            )Other
                liabilities
            
            
            72
            
            
            310Net
                cash provided (used) by operating activities
            
            
            881
            
            
            629**Investing
                Activities**Purchases
                of FHLB stock
            
            
            (164
            )
            
            (22
            )Purchases
                of securities held to maturity
            
            
            (1,900
            )
            
            (8,256
            )Proceeds
                from maturities of securities held to maturity
            
            
            5,557
            
            
            8,456Purchase
                of interest-bearing time deposits
            
            
            --
            
            
            (200
            )Proceeds
                from maturities of interest-bearing time deposits
            
            
            200
            
            
            200Net
                changes in loans
            
            
            (7,122
            )
            
            (4,678
            )Purchases
                of premises and equipment
            
            
            (1,593
            )
            
            (751
            )Net
                cash provided (used) by investing activities
            
            
            (5,022
            )
            
            (5,251
            )**Financing
                Activities**Net
                change inDemand
                and savings deposits
            
            
            (3,939
            )
            
            (1,057
            )Certificate
                of deposits
            
            
            2,573
            
            
            (905
            )Cash
                dividend on common stock
            
            
            (187
            )
            
            (186
            )Return
                of capital dividend on common stock
            
            
            (3,306
            )
            
            --Purchase
                of RRP shares
            
            
            --
            
            
            (328
            )Proceeds
                from FHLB advances
            
            
            18,200
            
            
            2,000Payments
                on FHLB advances
            
            
            (10,600
            )
            
            (1,000
            )Net
                cash provided (used) by financing activities
            
            
            2,741
            
            
            (1,476
            )**Net
                Change in Cash and Equivalents**
            
            
            **(1,400**
            **)**
            
            **(6,098**
            **)****Cash
                and Cash Equivalents, Beginning of Period**
            
            
            **7,853**
            
            
            **12,057****Cash
                and Cash Equivalents, End of Period**
            
            **$**
            **6,453**
            
            **$**
            **5,959****Additional
                Cash Flows Information**Interest
                paid
            
            $
            2,155
            
            $
            1,536Income
                tax paid (net of refunds)
            
            $
            280
            
            $
            113See
                notes to consolidated condensed financial statements.


6
 *Index*


**THIRD
      CENTURY BANCORP**


Notes
      to
      Unaudited Consolidated Condensed Financial
      Statements





Third
      Century Bancorp (Third Century) is an Indiana corporation that was formed on
      March 15, 2004 for the purpose of owning all of the capital stock of Mutual
      Savings Bank (Mutual or Bank) following the completion of Mutual’s
      mutual-to-stock conversion. Third Century offered for sale 1,653,125 shares
      of
      its common stock at $10.00 per share in a public offering to eligible depositors
      that was completed on June 14, 2004. On June 29, 2004, Third Century purchased
      all of the capital stock issued by Mutual. Prior to that date, Third Century
      had
      no assets or liabilities.




The
      activities of Third Century are primarily limited to holding the stock of
      Mutual. Mutual conducts business primarily in Johnson County and surrounding
      counties. Mutual attracts deposits from the general public and originates loans
      for consumer, residential and commercial purposes. Mutual’s profitability is
      significantly dependent on net interest income, which is the difference between
      interest income generated from interest-earning assets (i.e. loans and
      investments) and the interest expense paid on interest-bearing liabilities
      (i.e.
      customer deposits and borrowed funds). Net interest income is affected by the
      relative amount of interest-earning assets and interest-bearing liabilities
      and
      the interest received or paid on these balances. The level of interest paid
      or
      received by Mutual can be significantly influenced by a number of factors,
      such
      as governmental monetary policy, competition within our market area and the
      performance of the national and local economies.




Mutual
      also owns one subsidiary, Mutual Financial Services, Inc. (Financial), which
      is
      engaged primarily in mortgage life insurance sales and servicing.




Note
      1: Basis of Presentation




The
      accompanying unaudited consolidated condensed financial statements were prepared
      in accordance with instructions for Form 10-QSB and, therefore, do not include
      information or footnotes necessary for a complete presentation of financial
      position, results of operations and cash flows in conformity with accounting
      principles generally accepted in the United States of America. Accordingly,
      these financial statements should be read in conjunction with the consolidated
      financial statements and notes thereto of Mutual for the fiscal year ended
      December 31, 2005 included in Third Century’s Annual Report filed as an
      attachment to its 10-KSB. However, in the opinion of management, all adjustments
      (consisting of only normal recurring accruals) which are necessary for a fair
      representation of the financial statements have been included. The results
      of
      operations for the nine-month period ended September 30, 2006, are not
      necessarily indicative of the results which may be expected for the entire
      year.




The
      consolidated condensed balance sheet of Third Century as of December 31, 2005
      has been derived from the audited consolidated balance sheet of Third Century
      as
      of that date.




Note
      2: Change in Accounting Principle




Effective
      January 1, 2006, Third Century adopted Statement of Financial Accounting
      Standards No.123(R), *Share−Based
      Payment* ("SFAS
      123(R)"). SFAS 123(R) addresses all forms of share−based payment awards,
      including shares under employee stock purchase plans, stock options, restricted
      stock, and stock appreciation rights. SFAS 123(R) requires all share-based
      payments to be recognized as expense, based upon their fair values, in the
      financial statements over the vesting period of the awards. Third Century has
      elected the modified prospective application and, as a result, has recorded
      no
      compensation expense as all outstanding options were fully vested at December
      31, 2005. Prior to the adoption of SFAS 123(R), Third Century accounted for
      its
      stock options in accordance with Accounting Principles Board Opinion (APB)
      No.
      25, “Accounting for Stock Issued to Employees.” All options were granted with an
      exercise price equal to the fair value of the stock at the date of grant and
      accordingly, no compensation expense was recognized. Certain disclosures
      required by SFAS 123(R) have been omitted due to their immaterial nature. Prior
      to the adoption of SFAS 123(R), unearned compensation related to the RRP shares
      was classified as a separate component of stockholders’ equity. In accordance
      with SFAS 123(R), on January 1, 2006, the balance in unearned compensation
      was
      reclassified to the appropriate equity accounts.


7
 *Index*





The
      following table illustrates the effect on net income and earnings per share
      if
      the Company had applied the fair value provisions of SFAS No. 123, Accounting
      for Stock-Based Compensation. Amounts are in thousands, except for per share
      data.





Three
                Months
              Ended
            
            Nine
                Months
              EndedSeptember
                30, 2005
            
            September
                30, 2005Net
                income, as reported
            
            $
            145
            
            $
            346Less:
                Total stock-based compensation cost determined under the fair value
                based
                  method, net of income taxes
            
            
            (571
            )
            
            (571
            )Pro-forma
                net loss
            
            $
            (426
            )
            $
            (225
            )Basic
                as reported
            
            $
            0.10
            
            $
            0.23Proforma
                basic earnings per share
            
            $
            (0.28
            )
            $
            (0.15
            )Diluted
                earnings per share as reported
            
            $
            0.10
            
            $
            0.23Basic
                and diluted pro-forma
            
            $
            0.12
            
            $
            (0.15
            )





Note
      3. Stock Option Plan




Pursuant
      to the Plan, options may be issued which are defined as incentive stock options
      or as non-qualified stock options. Incentive stock options are intended to
      qualify under the provisions of Internal Revenue Code Section 422 (“IRC”), which
      include, among other things, a requirement that the option price is not less
      than the fair value of the shares as of the date of grant. Non-qualified stock
      options are those that do not meet the requirements of the provisions of the
      IRC, and, accordingly, may contain terms that are different from those in place
      for incentive stock options. During the third quarter of 2005, Third Century
      awarded 146,300 options to employees and non-employee directors at an exercise
      price of $13.10 which equaled the market price for the stock as of the date
      of
      the grant. As a result of the capital restructuring through the $2.00 return
      of
      capital dividend, the exercise price of the options was adjusted to $11.10.
      In
      accordance with SFAS 123(R), a comparison of the fair value of the modified
      award was made to the fair value of the original award and it was determined
      that no incremental value was transferred as a result of the modification and
      no
      compensation expense was recognized. These options were immediately vested.
      Through the nine months ending September 30, 2006, there was no activity related
      to the option plan.




Note
      4: Principles of Consolidation




The
      consolidated financial statements include the accounts of Third Century, Mutual
      and Financial. All significant intercompany balances and transactions have
      been
      eliminated in the accompanying consolidated financial statements.




Note
      5: Earnings Per Share




Earnings
      per share is computed based upon the weighted average common shares outstanding
      during the period. 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
      three and nine months ending September 30, 2006 and September 30,
      2005:




**Three
                Months**
              **Ended**
              **September
                30,**
            
            **Three
                Months**
              **Ended**
              **September
                30,**
            
            **Nine
                Months**
              **Ended**
              **September
                30,**
            
            **Nine
                Months**
              **Ended**
              **September
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Basic:Net
                income
            
            $
            81
            
            $
            145
            
            $
            362
            
            $
            346Weighted
                average common sharesoutstanding
            
            
            1,487
            
            
            1,518
            
            
            1,478
            
            
            1,525Basic
                earnings per common share
            
            $
            0.05
            
            $
            0.10
            
            $
            0.24
            
            $
            0.23






8
 *Index*




Diluted:Net
                  Income
              
              $
              81
              
              $
              145
              
              $
              362
              
              $
              346Weighted
                  average common sharesoutstanding
              
              
              1,487
              
              
              1,518
              
              
              1,478
              
              
              1,525Add:
                  Dilutive effects of assumedexercises
                  of stock options
              
              
              --
              
              
              1
              
              
              2
              
              
              --Average
                  shares and dilutivepotential
                  common shares
              
              
              1,487
              
              
              1,519
              
              
              1,480
              
              
              1,525Diluted
                  earnings per common share
              
              $
              0.05
              
              $
              0.10
              
              $
              0.24
              
              $
              0.23





Note
      6: Effect of Recent Accounting Pronouncements




The
      FASB
      has issued a proposed amendment to SFAS No. 128, Earnings Per Share, to clarify
      guidance for mandatory convertible instruments, the treasury stock method,
      contingently issuable shares, and contracts that may be settled in cash or
      share. The primary impact on Third Century of the proposed Statement is the
      change to the treasury stock method for year-to-date diluted earnings per share.




Currently,
      SFAS No. 128 requires that the number of incremental shares included in the
      denominator be determined by computing a year-to-date weighted average of the
      number of incremental shares included in each quarterly diluted EPS computation.
      Under the proposed amendment to SFAS 128, the number of incremental shares
      included in year-to-date diluted earnings per share would be computed using
      the
      average market price of common shares for the year-to-date period, independent
      of the quarterly computations. This computational change is not expected to
      have
      a significant impact on the Third Century’s diluted earnings per
      share.




In
      March
      2006, the Financial Accounting Standards Board (FASB) issued Statement of
      Financial Accounting Standard (SFAS) No. 156. This Statement amends SFAS 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,* with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities.




SFAS
      No.
      156 requires an entity to initially recognize a servicing asset or servicing
      liability at fair value each time it undertakes an obligation to service a
      financial asset by entering into a servicing contract in other specific
      situations.




In
      addition, SFAS No. 156 permits an entity to choose either of the following
      subsequent measurement methods for each class of separately recognized servicing
      assets and servicing liabilities:




·
            Amortization
                method—Amortize servicing assets or servicing liabilities in proportion
                to
                and over the period of estimated net servicing income or net servicing
                loss and assess servicing assets or servicing liabilities for impairment
                or increased obligation based on fair value at each reporting date.


·
            Fair
                value measurement method—Measure servicing assets or servicing liabilities
                at fair value at each reporting date and report changes in fair value
                in
                earnings in the period in which the changes occur.




SFAS
      No.
      156 is effective at the beginning of an entity’s first fiscal year that begins
      after September 15, 2006 and should be applied prospectively for recognition
      and
      initial measurement of servicing assets and servicing liabilities. Earlier
      adoption is permitted as of the beginning of an entity’s fiscal year, provided
      the entity has not yet issued financial statements, including interim financial
      statements, for any period of that fiscal year.




Third
      Century did not early adopt SFAS No. 156 on January 1, 2006. Management is
      currently evaluating the effect of adoption of this Statement on Third Century’s
      financial condition or results of operations.




9
 *Index*


Note
      7. Construction of Franklin Central Branch




In
      August
      2005, Mutual Savings Bank purchased land in Franklin Township, which is located
      in southeastern Marion County, for $407,550. Construction of a new branch,
      to be
      known as the Franklin Central Branch, began in the fourth quarter of 2005.
      The
      board of Mutual awarded a contract to Waugh Company for the construction of
      the
      Franklin Central Branch in southeast Marion County. In addition, the Bank
      entered into contracts with Diebold, Inc., a vendor who provides ATM, vault
      and
      teller equipment, and PrinceAlexander, an architectural firm, to perform work
      for and provide services to the Franklin Central Branch project. These contracts
      represented estimated construction costs to the Bank as follows:




Land
                acquisition
            
            $
            407,550Waugh
                & Company
            
            $
            766,322Diebold,
                Inc.
            
            $
            92,179PrinceAlexander
            
            $
            67,688Total
            
            $
            1,333,739


The
      Franklin Central Branch opened for business on June 1, 2006.





Note
      8. Reclassifying Entries to the Consolidated Condensed Financial Statements




Reclassifications
      to the consolidated condensed income statements for the three and nine months
      ended September 30, 2005 were made to conform to the consolidated condensed
      income statement presentation of the three and nine months ended September
      30,
      2006.







**Item
      2.**   **Management’s
      Discussion and Analysis or Plan of
      Operations**





**Forward
      Looking Statements**





This
      Quarterly Report on Form 10-QSB (“Form 10-QSB”) contains statements which
      constitute forward looking statements within the meaning of the Private
      Securities Litigation Reform Act of 1995. These statements appear in a number
      of
      places in this Form 10-QSB and include statements regarding the intent, belief,
      outlook, estimate or expectations of Third Century (as defined in the notes
      to
      the consolidated condensed financial statements), its directors or its officers
      primarily with respect to future events and the future financial performance
      of
      Third Century. Readers of the Form 10-QSB are cautioned that any such forward
      looking statements are not guarantees of future events or performance and
      involve risks and uncertainties, and that actual results may differ materially
      from those in the forward looking statements as a result of various factors.
      The
      accompanying information contained in this Form 10-QSB identifies important
      factors that could cause such differences. These factors include changes in
      interest rates; loss of deposits and loan demand to other financial
      institutions; substantial changes in financial markets; changes in real estate
      values and the real estate market; or regulatory changes, as discussed further
      below:




(a)  **Regulatory
      Risk** .
      The
      banking industry is heavily regulated. These regulations are intended to protect
      depositors, not shareholders. Third Century and Mutual are subject to regulation
      and supervision by the Indiana Department of Financial Institutions, Federal
      Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve
      System. The burden imposed by federal and state regulations puts banks at a
      competitive disadvantage compared to less regulated competitors such as finance
      companies, mortgage banking companies and leasing companies. The banking
      industry continues to lose market share to competitors.




(b)  **Legislation** .
      Because
      of concerns relating to the competitiveness and the safety and soundness of
      the
      industry, Congress continues to consider a number of wide-ranging proposals
      for
      altering the structure, regulation, and competitive relationships of the
      nation’s financial institutions. Management cannot predict whether or in what
      form any of these proposals will be adopted or the extent to which the business
      of Third Century or Mutual may be affected thereby.


10
 *Index*


(c)  **Credit
      Risk** .
      One of
      the greatest risks facing lenders is credit risk, that is, the risk of losing
      principal and interest due to a borrower’s failure to perform according to the
      terms of a loan agreement. While management attempts to provide an allowance
      for
      loan losses at a level adequate to cover probable incurred losses based on
      loan
      portfolio growth, past loss experience, general economic conditions, information
      about specific borrower situations, and other factors (all as discussed below
      in
      Critical Accounting Policies--Allowance for Loan Losses), future adjustments
      to
      reserves may become necessary, and net income could be significantly affected,
      if circumstances differ substantially from assumptions used with respect to
      such
      factors.




(d)  **Exposure
      to Local Economic Conditions** .
      Mutual’s primary market area for deposits and loans encompasses Johnson County,
      in central Indiana. A substantial percent of the Bank’s business activities are
      within this area. This concentration exposes the Bank to risks resulting from
      changes in the local economy. A dramatic drop in local real estate values would,
      for example, adversely affect the quality of the Bank’s loan
      portfolio.




(e)  **Interest
      Rate Risk.** Third
      Century’s earnings depend to a great extent upon the level of net interest
      income, which is the difference between interest income earned on loans and
      investments and the interest expense paid on deposits and other borrowings.
      Interest rate risk is the risk that the earnings and capital will be adversely
      affected by changes in interest rates.




(f)  **Competition** .
      The
      activities of Third Century and Mutual in the geographic market served involve
      competition with other banks as well as with other financial institutions and
      enterprises, many of which have substantially greater resources than those
      available to Third Century. In addition, non-bank competitors are generally
      not
      subject to the extensive regulation applicable to Third Century and
      Mutual.





**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, 2005. 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 portfolios. 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.






11
 *Index*


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 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 the expected net charge-offs for one year. 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.




An
      unallocated reserve is maintained to recognize the imprecision in estimating
      and
      measuring loss when evaluating reserves for individual loans or pools of loans.
      Allowances on individual loans are reviewed quarterly and historical loss rates
      are reviewed annually and adjusted as necessary based on changing borrower
      and/or collateral conditions and actual collection and charge-off experience.




Mutual’s
      primary market area for lending is Johnson County, Indiana. When evaluating
      the
      adequacy of the 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 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.




**Comparison
      of Financial Condition at September 30, 2006 and at December 31,
      2005**




Total
      assets increased $3.4 million or 2.64% to $131.5 million at September 30, 2006
      from $128.1 million at December 31, 2005. Total net loans outstanding grew
      by
      $7.0 million or 6.70% to $112.6 million at September 30, 2006 from $105.6
      million at December 31, 2005. The majority of the loan originations consisted
      of
      adjustable rate, one-to-four family, mortgage loans that have a fixed rate
      for
      the first five years ($4.6 million or 289.96%) and commercial construction
      loans
      ($1.8 million or 40.29%). Cash and cash equivalents decreased $1.4 million
      or
      17.83% and held to maturity securities decreased $3.6 million or 39.53% to
      fund
      loan growth through September 30, 2006.




Total
      liabilities increased by $6.3 million or 5.97% to $111.9 million at September
      30, 2006 from $105.6 million at December 31, 2005. The Bank paid off $10.6
      million in advances and borrowed an additional $18.2 million to meet its daily
      operational cash flow needs, which resulted in a net increase in Federal Home
      Loan Bank advances of $7.6 million or 46.06%. Total deposits decreased $1.4
      million or 1.54% to $87.2 million at September 30, 2006 from $88.6 million
      at
      December 31, 2005. The majority of the decrease in deposits was in money market
      savings accounts (decreased $2.3 million or 13.13%) and NOW checking accounts
      (decreased $2.1 million or 11.93%). These decreases were offset by an increase
      in time deposits of $2.6 million or 7.54%, which was primarily due to the
      introduction of certificates of deposit with maturities of eleven and twenty-two
      months.


12
 *Index*




Total
      stockholders’ equity decreased to $19.3 million at September 30, 2006 from $22.4
      million at December 31, 2005, representing a decrease of $3.1 million or 13.48%.
      The $3.3 million return of capital was recognized by the Third Century as a
      reduction of retained earnings as of March 16, 2006 and represented a
      significant portion of the decrease. The equity contributed by the ESOP
      increased $92,000 to $295,000 at September 30, 2006 from $203,000 at December
      31, 2005. Third Century paid year-to-date cash dividends, exclusive of the
      return of capital dividend, of $187,000.





**Comparison
      of Operating Results for the Three Months Ended September 30, 2006 and
      2005**




*General.* Net
      income for the quarter ended September 30, 2006 was $81,000 compared to net
      income of $145,000 for the quarter ended September 30, 2005. Net interest income
      decreased $27,000 or 2.25% while other expense increased by $72,000 or 6.17%.
      See the following subsections for further discussion of these
      changes.




*Interest
      Income.* Interest
      income for the quarter ended September 30, 2006 was $2.0 million compared to
      $1.8 million for the quarter ended September 30, 2005. The increase during
      the
      comparative periods reflected an increase of $251,000, which consisted primarily
      of an increase in interest income from loans by $267,000 or 16.53%.




Average
      interest-earning assets for the quarter ended September 30, 2006 was $125.7
      million, which represented an increase of $2.0 million or 1.58%, from the
      quarter ended September 30, 2005. The yield on those assets increased to 6.40%
      at September 30, 2006 from 5.69% at September 30, 2005. The average yield on
      loans increased by 54 basis points, the average yield on interest-earning
      deposits increased 160 basis points and the average yield on investments
      increased 65 basis points. The average balances for loans increased $7.5 million
      to $112.6 million. The average balances for interest-earning deposits decreased
      $102,000 to $5.6 million and the average balances for investments decreased
      $5.3
      million to $6.3 million at September 30, 2006.




*Interest
      Expense.* Interest
      expense for the quarter ended September 30, 2006 was $841,000 compared to
      $563,000 for the quarter ended September 30, 2005, an increase of $278,000
      or
      49.38%. Average interest-bearing liabilities increased to $99.3 million for
      the
      quarter ended September 30, 2006 from $95.2 million for the quarter ended
      September 30, 2005, with the average interest rate increasing to 3.38% for
      the
      quarter ended September 30, 2006 from 2.37% for the quarter ended September
      30,
      2005.




*Net
      Interest Income.* Net
      interest income of $1.2 million for the quarter ended September 30, 2006
      reflects a $27,000 or 2.25% decrease from the net interest income before
      provision for loan losses for the quarter ended September 30, 2005.




*Provision
      for Loan Losses.* Mutual
      recorded a provision for loan losses of $15,000 during the quarter ended
      September 30, 2006, while no provision was recorded during the quarter ended
      September 30, 2005. In evaluating the adequacy of loan loss allowances,
      management considers factors such as delinquency trends, portfolio compositions,
      past loss experience and other factors such as general economic conditions.
      During the past year, Mutual’s nonperforming assets decreased to $63,000 at
      September 30, 2006 from $85,000 at September 30, 2005 and the percentage of
      nonperforming assets to total assets decreased to 0.05% from 0.07% for the
      same
      respective time periods. Mutual recorded net charge offs of $11,000 for the
      quarter ended September 30, 2006 and $40,000 for the quarter ended September
      30,
      2005.




*Other
      Income.* Total
      other income was $215,000 for the quarters ended September 30, 2006 and 2005.
      Income from fiduciary services decreased $17,000 or 44.07% to $22,000 for the
      quarter ended September 30, 2006 while service charges on deposit accounts
      increased $16,000 or 28.07% to $73,000 for the quarter ended September 30,
      2006.
      The decrease in income from fiduciary services was due to an estate fee
      collected in July 2005 of approximately $24,000. The increase in service charges
      on deposit accounts was due to the changes made to the Bank’s deposit fee
      structure.


13
 *Index*


*Other
      Expense.* Total
      other expense for each of the quarters ended September 30, 2006 and 2005 was
      $1.2 million. The category increased $72,000 or 6.17% between the two reporting
      periods. Net occupancy and equipment expenses increased $34,000 or 29.31% to
      $150,000 for the quarter ended September 30, 2006. The Bank started recording
      depreciation and utility expenses for its Franklin Central Branch, which opened
      June 1, 2006. In addition, Mutual
      upgraded the landscaping at its Trafalgar and Main Street locations and
      increased real estate taxes due to an increase in rates and taxable
      property.




Professional
      services increased $25,000 or 277.78% to $34,000 for the quarter ended September
      30, 2006 from $9,000 for the quarter ended September 30, 2005 .
      In
      2005, an adjustment was made to decrease management’s estimate used to accrue
      audit fees.




Data
      processing fees increased $14,000 or 15.91% to $102,000 for the quarter ended
      September 30, 2006 from $88,000 for the quarter ended September 30, 2005 as
      a
      result of increased billings.




*Income
      Taxes.* Mutual
      recognized income tax expense of $52,000 for the quarter ended September 30,
      2006, as compared to $102,000 for the quarter ended September 30, 2005, which
      represents a decrease in the effective tax rate to 39.10% at September 30,
      2006
      from 41.30% at September 30, 2005.





**Comparison
      of Operating Results for the Nine Months Ended September 30, 2006 and
      2005**




*General.* Net
      income for the nine months ended September 30, 2006 was $362,000 compared to
      net
      income of $346,000 for the nine months ended September 30, 2005. Net interest
      income increased $10,000 or 0.28%, other income increased $141,000 or 25.78%,
      and other expense increased by $69,000 or 1.95%. See the following subsections
      for further discussion of these changes.




*Interest
      Income.* Interest
      income for the nine months ended September 30, 2006 was $5.8 million compared
      to
      $5.1 million for the nine months ended September 30, 2005. The increase during
      the comparative periods reflected an increase of $672,000, which consisted
      primarily of an increase in interest income on loans by $676,000 or 14.38%.
      This
      increase was offset by a decrease of $11,000 or 4.44% in investment income.




Average
      interest-earning assets for the nine months ended September 30, 2006 was $124.4
      million, which represented an increase of $2.2 million or 1.78% from the $122.2
      million for the nine months ended September 30, 2005. The average yield on
      those
      assets increased to 6.20% for the nine months ended September 30, 2006 from
      5.58% for the nine months ended September 30, 2005. The average yield on loans
      increased by 36 basis points, the average yield on interest-earning deposits
      increased 140 basis points and the average yield on investments increased 97
      basis points. The average balances for loans increased $8.2 million to $110.6
      million while the average balances for interest-earning deposits decreased
      $2.9
      million to $5.0 million and investments decreased $2.8 million to $7.7 million
      at September 30, 2006.




*Interest
      Expense.* Interest
      expense for the nine months ended September 30, 2006 was $2.2 million compared
      to $1.6 million for the nine months ended September 30, 2005, an increase of
      $662,000 or 42.41%. Average interest-bearing liabilities increased to $95.9
      million for the nine months ended September 30, 2006 from $94.4 million for
      the
      nine months ended September 30, 2005, with the average interest rate increasing
      to 3.09% for the nine months ended September 30, 2006 from 2.20% for the nine
      months ended September 30, 2005.




*Net
      Interest Income.* Net
      interest income of $3.6 million for the nine months ended September 30, 2006
      reflects a $10,000 or 0.28% change from the net interest income for the nine
      months ended September 30, 2005.




14
 *Index*


*Provision
        for Loan Losses.* Mutual Savings Bank recorded a provision for loan losses
        of $45,000 during the nine months ended September 30, 2006, while a $20,000
        negative provision was made during the nine months ended September 30, 2005.
        In
        evaluating the adequacy of loan loss allowances, management considers factors
        such as delinquency trends, portfolio compositions, past loss experience
        and
        other factors such as general economic conditions. During the past year,
        Mutual’s nonperforming assets decreased to $63,000 at September 30, 2006 from
        $85,000 at September 30, 2005 and the percentage of nonperforming assets
        to
        total assets decreased to 0.05% from 0.07% for the same respective time periods.
        Mutual recorded net charge offs of $36,000 for the nine months ended September
        30, 2006 and $53,000 for the nine months ended September 30, 2005.


*Other
      Income.* Total
      other income was $688,000 for the nine months ended September 30, 2006 and
      $547,000 for the nine months ended September 30, 2005, which represented an
      increase of $141,000 or 25.78%. Service charges on deposit accounts increased
      $62,000 or 40.00% to $217,000 for the nine months ended September 30, 2006
      from
      $155,000 for the nine months ended September 30, 2005. This increase resulted
      from Mutual implementing changes to its deposit fee structure.




Other
      income increased $47,000 or 34.56% to $183,000 for the nine months ended
      September 30, 2006 from $136,000 for the nine months ended September 30, 2005.
      This category included gains and losses on the sale of REO properties. For
      the
      nine months ended September 30, 2006, the Bank recorded a gain on the sale
      of a
      REO property for $20,000 while the Bank recorded a loss of $19,000 on the sale
      of a REO property during the nine months ended June 30, 2005.




Other
      service charges and fees increased $35,000 or 18.23% to $227,000 for the nine
      months ended September 30, 2006 from $192,000 for the nine months ended
      September 30, 2005. Commercial loan fees increased $11,000 or 38.14% to $41,000
      for the nine months ended September 30, 2006. In addition, commissions and
      fees
      collected on funds provided to immediately clear monetary instruments drawn
      on
      the Bank through Travelers Express increased $10,000 or 142.47%. ATM fees
      increased to $90,000 for the nine months ended September 30, 2006 from $81,000
      for the nine months ended September 30, 2005, which represented an increase
      of
      $9,000 or 11.55%.




*Other
      Expense.* Total
      other expense for the nine months ended September 30, 2006 and 2005 was $3.6
      million. Net occupancy and equipment expenses increased $48,000 or 14.12% to
      $388,000 for the nine months ended September 30, 2006. The Bank started
      recording depreciation and utility expenses for its Franklin Central Branch,
      which opened June 1, 2006. In addition, Mutual upgraded the landscaping at
      its
      Trafalgar and Main Street locations and increased real estate taxes due to
      an
      increase in rates and taxable property.




Data
      processing fees increased $25,000 or 8.71% to $312,000 for the nine months
      ended
      September 30, 2006 from $287,000 for the nine months ended September 30, 2005
      as
      a result of increased billings.




*Income
      Taxes.* Mutual
      recognized income tax expense of $235,000 for the nine months ended September
      30, 2006, as compared to $234,000 for the nine months ended September 30, 2005,
      which represents a decrease in the effective tax rate to 39.36% at September
      30,
      2006 from 40.34% at September 30, 2005.





**Other**





The
      Securities and Exchange Commission maintains a Web site that contains reports,
      proxy information statements, and other information regarding registrants that
      file electronically with the Commission, including Third Century. The address
      is http://www.sec.gov .





15
 *Index*





**Item
      3.  Controls
      andProcedures**





A. Evaluation
      of disclosure controls and procedures .
      Third
      Century’s chief executive officer and chief financial officer, after evaluating
      the effectiveness of Third Century’s disclosure controls and procedures (as
      defined in Sections 13a-15(e) and 15d-15(e) of regulations promulgated under
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end
      of the most recent fiscal quarter covered by this quarterly report (the
“Evaluation Date”), have concluded that as of the Evaluation Date, Third
      Century’s disclosure controls and procedures were effective in ensuring that
      information required to be disclosed by Third Century in reports it files or
      submits under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and forms.




B. Changes
      in internal control over financial reporting .
      There
      were no changes in Third Century’s internal control over financial reporting
      identified in connection with Third Century’s evaluation of controls that
      occurred during Third Century’s last fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, Third Century’s
      internal control over financial reporting.





**PART
      II.** **OTHER
      INFORMATION**





**Item
      1.**   **Legal
      Proceedings**





Third
      Century, from time to time, is a party to routine litigation, which arises
      in
      the normal course of business, such as claims to enforce liens, condemnation
      proceedings on properties in which Mutual Savings Bank holds security interests,
      claims involving the making and servicing of real property loans, and other
      issues incident to the business of Third Century. There were no lawsuits pending
      or known to be contemplated against Third Century at September 30, 2006 that
      would have a material effect on Third Century’s operations or
      income.




**Item
      2.**   **Unregistered
      Sales of EquitySecurities and Use of Proceeds**




None.





**Item
      3.**   **Defaults
      UponSenior Securities**




None.





**Item
      4.**   **Submission
      of Matters to a Vote ofSecurity Holders**




None.





**Item
      5.**   **Other
      Information**




None.





**Item
      6.**   **Exhibits**




The
      exhibits filed as part of this Form 10-QSB are listed in the Exhibit Index,
      which is incorporated by this reference.





16
 *Index*


**Signatures**





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





**THIRD
                CENTURY BANCORP**Date:November
                13, 2006
            By:
            /s/Robert
                D. HeuchanRobert
                D. Heuchan
              President
                and Chief Executive OfficerBy:
            /s/Debra
                K. HarlowDebra
                K. Harlow
              Chief
                Financial Officer








17
 *Index*


**Exhibit
      Index**





**Exhibit
                No.**
            **Description**31.1
            Rule
                13a-14(a) Certification of Robert D. Heuchan, President and Chief
                Executive Officer31.2
            Rule
                13a-14(a) Certification of Debra K. Harlow, Vice President and Chief
                Financial Officer32.1
            Section
                1350 Certification of Robert D. Heuchan32.2
            Section
                1350 Certification of Debra K. Harlow








E-1