**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-QSB**
 
 (Mark
        one)
 x
                QUARTERLY
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                    ACT OF
                    1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30
                    2005
 
 OR
 
  ̈
                TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                    ACT OF
                    1934 FOR THE TRANSITION PERIOD FROM _____ TO
                    _____
 
 Commission
        file number: 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)
 
 
 
 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: July 31, 2005 - 1,653,125 common shares
 
 Transitional
        Small Business Disclosure Format (Check
        one):  Yes  [   ]       No  [X]
  1
  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
              9Item
                  3.
              Controls
                  and Procedures
              15PART
                  II.
              OTHER
                  INFORMATION
              15Item
                  1.
              Legal
                  Proceedings
              15Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              15Item
                  3.
              Defaults
                  Upon Senior Securities
              15Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              16Item
                  5.
              Other
                  Information
              16Item
                  6.
              Exhibits
              16SIGNATURES
              17EXHIBIT
                  INDEX
              E-1EXHIBITS
  2
  **PART
        I.**  **FINANCIAL
        INFORMATION**
 **Item
        1.**   **Financial
        Statements**
 
 **THIRD
        CENTURY BANCORP**
 Consolidated
        Condensed Balance Sheets
 
 **As
                  of**
                **June
                  30, 2005**
                **(Unaudited)**
              
              **As
                  of**
                **December
                  31, 2004****Assets**
              
              (in
                  thousands)Cash
                  and due from banks
              
              $
              646
              
              $
              734Interest-bearing
                  demand deposits
              
              
              5,771
              
              
              11,323Cash
                  and cash equivalents
              
              
              6,417
              
              
              12,057Interest-bearing
                  time deposits
              
              
              300
              
              
              200Held
                  to maturity securities
              
              
              11,750
              
              
              10,455Loans,
                  net of allowance for loan losses of $978 and $1,012
              
              
              103,935
              
              
              98,822Premises
                  and equipment
              
              
              2,105
              
              
              2,136Federal
                  Home Loan Bank stock
              
              
              1,041
              
              
              1,019Interest
                  receivable
              
              
              596
              
              
              483Other
                  assets
              
              
              643
              
              
              991Total
                  assets
              
              $
              126,787
              
              $
              126,163**Liabilities**DepositsDemand
              
              $
              8,588
              
              $
              11,164Savings,
                  NOW and money market
              
              
              43,379
              
              
              39,672Time
              
              
              35,339
              
              
              35,572Total
                  deposits
              
              
              87,306
              
              
              86,408Federal
                  Home Loan Bank Advances
              
              
              16,000
              
              
              16,500Other
                  liabilities
              
              
              443
              
              
              358Total
                  liabilities
              
              
              103,749
              
              
              103,266**Commitments
                  and Contingencies**Equity
                  Contributed by ESOP
              
              
              134
              
              
              64**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
              
              
              14,290
              
              
              14,290Retained
                  earnings
              
              
              8,614
              
              
              8,543Total
                  stockholders' equity
              
              
              22,904
              
              
              22,833Total
                  liabilities and stockholders’ equity
              
              $
              126,787
              
              $
              126,163
 
 
 See
        notes
        to consolidated condensed financial statements.
  3
  **THIRD
        CENTURY BANCORP**
 Consolidated
        Condensed Statements of Income
 (Unaudited)
 
 **Three
                  Months Ended June 30**
              
              **Six
                  Months Ended June 30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**(in
                  thousands, except share data)**Interest
                  income**Loans
                  receivable
              
              $
              1,567
              
              $
              1,442
              
              $
              3,086
              
              $
              2,888Investment
                  securities
              
              
              82
              
              
              2
              
              
              145
              
              
              5Federal
                  Home Loan Bank stock
              
              
              11
              
              
              11
              
              
              21
              
              
              26Interest-bearing
                  deposits
              
              
              51
              
              
              20
              
              
              100
              
              
              31Total
                  interest income
              
              
              1,711
              
              
              1,475
              
              
              3,352
              
              
              2,950**Interest
                  expense**Deposits
              
              
              365
              
              
              287
              
              
              676
              
              
              573Federal
                  Home Loan Bank advances
              
              
              160
              
              
              174
              
              
              322
              
              
              354Total
                  interest expense
              
              
              525
              
              
              461
              
              
              998
              
              
              927**Net
                  interest income**
              
              
              1,186
              
              
              1,014
              
              
              2,354
              
              
              2,023Provision
                  for loan losses
              
              
              (20
              )
              
              12
              
              
              (20
              )
              
              24**Net
                  interest income after provision for loan losses**
              
              
              1,206
              
              
              1,002
              
              
              2,374
              
              
              1,999**Other
                  income**Service
                  charges on deposit accounts
              
              
              53
              
              
              56
              
              
              98
              
              
              109Other
                  service charges and fees
              
              
              63
              
              
              57
              
              
              129
              
              
              103Net
                  gains on loan sales
              
              
              27
              
              
              92
              
              
              42
              
              
              138Other
                  income
              
              
              41
              
              
              88
              
              
              83
              
              
              144Total
                  other income
              
              
              184
              
              
              293
              
              
              352
              
              
              494**Other
                  expenses**Salaries
                  and employee benefits
              
              
              706
              
              
              537
              
              
              1,456
              
              
              1,098Net
                  occupancy and equipment expenses
              
              
              93
              
              
              105
              
              
              191
              
              
              221Data
                  processing fees
              
              
              99
              
              
              103
              
              
              199
              
              
              200Other
                  expenses
              
              
              291
              
              
              159
              
              
              547
              
              
              359**Total
                  other expenses**
              
              
              1,189
              
              
              904
              
              
              2,393
              
              
              1,878**Income
                  before income tax**
              
              
              201
              
              
              391
              
              
              333
              
              
              615Income
                  tax expense
              
              
              80
              
              
              137
              
              
              132
              
              
              243**Net
                  income**
              
              $
              121
              
              $
              254
              
              $
              201
              
              $
              372Weighted
                  average common shares
              
              
              1,530
              
              
              n/a
              
              
              1,530
              
              
              n/aEarnings
                  per share
              
              $
              0.08
              
              
              n/a
              
              $
              0.13
              
              
              n/a
 
 See
        notes
        to consolidated condensed financial statements.
 
  4
  **THIRD
        CENTURY BANCORP**
 Consolidated
        Condensed Statement of Stockholders’ Equity
 (Unaudited)
 (Dollar
        amounts in thousands)
 
 
 **Common
                  Stock****Shares
                  Outstanding**
              
              **Amount**
              
              **Retained
                  Earnings**
              
              **Total****Balances,
                  January 1, 2005**
              
              
              1,653,125
              
              $
              14,290
              
              $
              8,543
              
              $
              22,833Net
                  and comprehensive income
              
              
              
              
              
              -
              
              
              203
              
              
              203Cash
                  dividends declared but not paid ($.04 per share
                  outstanding)
              
              
              
              
              
              -
              
              
              (132
              )
              
              (132
              )**Balances,
                  June 30, 2005**
              
              
              1,653,125
              
              $
              14,290
              
              $
              8,614
              
              $
              22,904
 
 
 
 See
        notes
        to consolidated condensed financial statements.
 
 
 
  5
  **THIRD
        CENTURY BANCORP**
 Consolidated
        Condensed Statements of Cash Flows
 (Unaudited)
 
 **Six
                  Months Ended June 30,****2005**
              
              **2004**(in
                  thousands)**Operating
                  Activities**Net
                  income
              
              $
              201
              
              $
              372Adjustments
                  to reconcile net income to net cash provided by operating
                  activitiesProvision
                  for loan losses
              
              
              (20
              )
              
              24Depreciation
              
              
              94
              
              
              94Investment
                  securities (accretion) amortization, net
              
              
              (23
              )
              
              4Gain
                  on sale of loans
              
              
              (17
              )
              
              (53
              )Loans
                  originated for sale in the secondary market
              
              
              (1,434
              )
              
              (5,078
              )Proceeds
                  from sale of loans in the secondary market
              
              
              1,452
              
              
              5,131ESOP
                  compensation expense
              
              
              70
              
              
              -Net
                  change inInterest
                  receivable
              
              
              (113
              )
              
              (15
              )Other
                  assets
              
              
              270
              
              
              (343
              )Other
                  liabilities
              
              
              222
              
              
              147Net
                  cash provided (used) by operating activities
              
              
              702
              
              
              283**Investing
                  Activities**Purchases
                  of FHLB stock
              
              
              (22
              )
              
              (23
              )Purchases
                  of securities held to maturity
              
              
              (7,256
              )
              
              -Proceeds
                  from maturities of securities held to maturity
              
              
              5,985
              
              
              685Purchase
                  of interest-bearing time deposits
              
              
              (200
              )
              
              -Proceeds
                  from maturities of interest-bearing time deposits
              
              
              100Net
                  changes in loans
              
              
              (5,094
              )
              
              473Purchases
                  of premises and equipment
              
              
              (62
              )
              
              (133
              )Net
                  cash provided (used) by investing activities
              
              
              (6,549
              )
              
              1,002**Financing
                  Activities**Net
                  change inDemand
                  and savings deposits
              
              
              1,072
              
              
              1,412Certificate
                  of deposits
              
              
              (233
              )
              
              (553
              )Paid
                  cash dividend on Common Stock
              
              
              (132
              )
              
              -Purchase
                  of ESOP shares
              
              
              -
              
              
              (1,132
              )Net
                  proceeds from stock conversion
              
              
              -
              
              
              15,822Proceeds
                  from FHLB advances
              
              
              -
              
              
              1,500Payments
                  on FHLB advances
              
              
              (500
              )
              
              (4,000
              )Net
                  cash provided (used) by financing activities
              
              
              207
              
              
              13,049**Net
                  Change in Cash and Equivalents**
              
              
              **(5,640**
              **)**
              
              **14,334****Cash
                  and Cash Equivalents, Beginning of Period**
              
              
              **12,057**
              
              
              **4,739****Cash
                  and Cash Equivalents, End of Period**
              
              **$**
              **6,417**
              
              **$**
              **19,073****Additional
                  Cash Flows Information**Interest
                  paid
              
              $
              983
              
              $
              868Income
                  tax paid (net of refunds)
              
              $
              45
              
              $
              157
 
 See
        notes
        to consolidated condensed financial statements.
  6
  **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 Savings
        Bank’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 Savings Bank. 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
        Savings Bank. Mutual Savings Bank conducts business primarily in Johnson
        County
        and surrounding counties. Mutual Savings Bank attracts deposits from the
        general
        public and originates loans for consumer, residential and commercial purposes.
        Mutual Savings Bank’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 Savings Bank 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
        Savings Bank 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 Savings Bank for the fiscal
        year ended December 31, 2004 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 six-month period ended June 30, 2005, 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,
        2004
        has been derived from the audited consolidated balance sheet of Third Century
        as
        of that date.
  Note
        2: Principles of Consolidation
  The
        consolidated financial statements include the accounts of Third Century,
        Mutual
        Savings Bank and Financial. All significant intercompany balances and
        transactions have been eliminated in the accompanying consolidated financial
        statements.
  
   7
  Note
        3: 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. Net income per share for the periods prior
        to the
        conversion is not meaningful. Unearned ESOP shares are not considered
        outstanding for the earnings per share calculation and Third Century has
        no
        potentially dilutive shares as of June 30, 2005. **** The
        factors used in the earnings per share computation for the three and six
        months
        ending June 30, 2005 were as follows:
  **Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30, 2005**
              
              **June
                  30, 2005**Basic:Net
                  income
              
              $
              121
              
              $
              201Weighted
                  average common shares
              
              
              1,530
              
              
              1,530Basic
                  earnings per common share
              
              $
              .
                  08
              
              $
              .
                  13
 
  Note
        4: Effect of Recent Accounting Pronouncements
  In
        June,
        2005 the FASB Board decided not to provide additional guidance on the meaning
        of
        other-than-temporary impairment, but directed the FASB staff to issue a staff
        position (FSP) which will be retitled FSP 115-1, *The
        Meaning of Other-Than-Temporary Impairment and Its Application to Certain
        Investments.* The
        final FSP will supersede EITF Issue No. 03-1, *The
        Meaning of Other-Than-Temporary Impairment and Its Application to Certain
        Investments* ,
        and
        EITF Topic No. D-44, *Recognition
        of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose
        Cost Exceeds Fair Value* .
        FSP
        115-1 will replace guidance in EITF 03-1 on loss recognition with references
        to
        existing other-than-temporary impairment guidance, such as SFAS No. 115, *Accounting
        for Certain Investments in Debt and Equity Securities* .
        FSP
        115-1 will clarify that an investor should recognize an impairment loss no
        later
        than when the impairment is deemed other than temporary, even if a decision
        to
        sell has not been made.
  FSP
        115-1
        will be effective for other-than-temporary impairment analysis conducted
        in
        periods beginning after September 15, 2005. The Company has consistently
        followed the loss recognition guidance in SFAS No. 115, so the adoption of
        FSP
        115-1 will not have any significant impact on the Company’s financial condition
        or results of operation.
  In
        April
        2005, the SEC issued a new rule amending the compliance dates for observing
        SFAS
        123R, which allows companies to implement SFAS 123R at the beginning of their
        next fiscal year, instead of the next reporting period, that begins after
        June
        15, 2005, or, in the case of a small business issuer like Third Century,
        after
        December 15, 2005. The new rule does not change the accounting required by
        SFAS
        123R; it only changes the dates for compliance with the standard. Early adoption
        is permitted in periods in which financial statements have not yet been issued.
        Third Century expects to adopt SFAS 123R on January 1, 2006. We are currently
        evaluating the effect of the recognition and measurement provisions of SFAS
        123R, but we currently believe the adoption of SFAS 123R will not result
        in a
        material impact on Third Century’s results of operations or financial condition.
  Note
        5. Subsequent Events
  On
        July
        20, 2005, the stockholders of Third Century Bancorp approved the Third Century
        Bancorp Stock Option Plan (“Plan”). The Plan provides for the issuance of
        options to employees and directors of the Company to acquire up to 165,312
        shares of Company common stock. Additionally, the stockholders 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.
  
   8
  **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.
 
 (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.
 
  9
  (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, 2004. 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.
  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.
  
   10
  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 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.
  **Comparison
        of Financial Condition at June 30, 2005 and December 31,
        2004**
 
 Total
        assets increased $624,000 or 0.49% to $126.8 million at June 30, 2005 from
        $126.2 million at December 31, 2004. Cash and cash equivalents decreased
        $5.6
        million or 46.78% during the quarter. Total net loans outstanding grew by
        $5.1
        million or 5.17% from $98.8 million as of December 31, 2004 to $139.3 million
        as
        of June 30, 2005. The majority of this loan growth is secured by commercial
        real
        estate ($3.8 million or 74.50%).
  Total
        liabilities increased $483,000 or 0.47% to $103.7 million at June 30, 2005
        from
        $103.3 million at December 31, 2004. During the quarter, balances in the
        demand
        deposit accounts, savings accounts, including money market and NOW accounts,
        and
        time deposits increased by an aggregate total of $898,000 or 1.04% to $87.3
        million at June 30, 2005.
  Total
        equity increased from $22.8 million at December 31, 2004 to $22.9 million
        at
        June 30, 2005, representing an increase of $100,000 or 0.31%. The equity
        contributed by the ESOP increased $70,000 from $64,000 at December 31, 2004
        to
        $134,000 at June 30, 2005. Third Century paid year-to-date cash dividends
        of
        $132,500 from its net income of $201,000.
 
   11
  **Comparison
        of Operating Results for the Three Months Ended June 30, 2005 and
        2004**
  *General.* Net
        income for the quarter ended June 30, 2005 was $121,000 compared to net income
        of $254,000 for the quarter ended June 30, 2004. The decrease of $133,000
        was
        primarily the result of increased salaries and employee benefits and other
        expenses. Salaries and employee benefits increased $169,000 from $537,000
        for
        the quarter ended June 30, 2004 to $706,000 for the quarter ended June 30,
        2005,
        or 31.47%. Other expenses increased $132,000 from $159,000 for the quarter
        ended
        June 30, 2004 to $291,000 for the quarter ended June 30, 2005.
  The
        officer and employee salaries increased approximately $55,000, or 13.59%,
        from
        $408,000 at June 30, 2004 to $463,000 at June 30, 2005. The increase was
        due to
        the addition of a Compliance Officer and a Staff Accountant in response to
        the
        additional regulatory burden placed upon public companies. In addition, the
        contributions paid to the employee pension plan increased $42,000 or 165.05%.
        Also, in July 2004, the Bank recorded the monthly release of shares from
        its
        ESOP trust, which resulted in expense of approximately $37,000 for the quarter
        ended June 30, 2005.
  As
        of May
        1, 2005, the Bank froze the multi-employer defined benefit pension plan as
        a
        cost-control measure for the future. No additional liability was incurred
        as a
        result of this action.
  The
        increase in other expenses will be discussed in more detail under the heading
        of
“Other Expense.”
  *Interest
        Income.* Interest
        income for the quarter ended June 30, 2005 was $1.7 million compared to $1.5
        million for the quarter ended June 30, 2004. The change between these reporting
        periods was an increase of $236,000, which consisted primarily of an increase
        in
        loan interest income by $125,000. Investment income increased by $80,000
        and
        interest income on interest-bearing deposits increased $31,000 during the
        quarter. Average interest-bearing assets for the quarter ended June 30, 2005
        was
        $123.0 million, which represented an increase of $18.8 million or 18.01%,
        from
        the quarter ended June 30, 2004. The yield on those assets decreased from
        5.67%
        at June 30, 2004 to 5.57% at June 30, 2005. The yield declined because average
        investments, which yielded 3.25% at June 30, 2005, as a percent of total
        average
        assets increased from 0.01% for the three months ended June 30, 2004 to 0.08%
        for the three months ended June 30, 2005. Investments as a percentage of
        total
        assets grew faster than average loans outstanding, which yielded 6.14% at
        June
        30, 2005, as a percent of total average assets, which declined from 91.19%
        for
        the three months ended June 30, 2004 to 82.98% for the three months ended
        June
        30, 2005. The average yield on loans increased by 7 basis points, the average
        yield on interest-bearing deposits increased by 95 basis points and the average
        yield on investments increased 179 basis points. The average balances for
        loans
        increased $7.0 million to $102.0 million, the average balances for
        interest-bearing deposits increased $2.1 million to $9.4 million and the
        average
        balances for investments increased $9.3 million to $10.1 million at June
        30,
        2005.
  *Interest
        Expense.* Interest
        expense for the quarter ended June 30, 2005 was $525,000 compared to $461,000
        for the quarter ended June 30, 2004, an increase of $64,000 or 13.88%. Average
        interest-bearing liabilities increased to $94.6 million at June 30, 2005
        from
        $93.1 million at June 30, 2004, with the average interest rate increasing
        from
        1.98% at June 30, 2004 to 2.22% at June 30, 2005.
  *Net
        Interest Income.* Net
        interest income of $1.2 million for the quarter ended June 30, 2005 reflects
        an
        increase of $172,000 or 16.96% from the net interest income for the quarter
        ended June 30, 2004.
  
   12
  *Provision
        for Loan Losses.* Mutual
        Savings Bank recorded a negative provision for loan losses of $20,000 during
        the
        quarter ended June 30, 2005, while a $12,000 provision was made during the
        quarter ended June 30, 2004. In evaluating the adequacy of loan loss allowances,
        management considers factors such as delinquency trends, portfolio composition,
        past loss experience and other factors such as general economic conditions.
        During the past year, Mutual Savings Bank’s level of nonperforming assets
        decreased from $325,000 at June 30, 2004, to $100,000 at June 30, 2005, and
        the
        percentage of nonperforming assets to total assets decreased from 0.27% to
        0.08%
        for the same respective time periods. For the quarter ended June 30, 2005,
        Mutual Savings Bank charged off loans net of recoveries of $3,616 which
        represents a decrease of $34,783 from the quarter ended June 30,
        2004.
  *Other
        Income.* Total
        other income was $184,000 for the quarter ended June 30, 2005 and $293,000
        for
        the quarter ended June 30, 2004, which represented a decrease of $109,000
        or
        37.20% between the reporting periods. The decline of $65,000 in net gains
        on
        loan sales from $92,000 at the quarter ended June 30, 2004 to $27,000 at
        the
        quarter ended June 30, 2005, was due to the reduction in loans sold during
        the
        comparative reporting periods. In the second quarter of 2004, Mutual Savings
        Bank sold $1.8 million of loans to the secondary market as compared to $711,000
        in the second quarter of 2005.
  *Other
        Expense.* Total
        other expense for the quarter ended June 30, 2005 was $1.2 million compared
        to
        $904,000 for the same period last year, an increase of $285,000 or 31.53%.
        As
        previously explained, the salaries and employee benefits increased during
        this
        period by $169,000, or 31.47%. Professional service fees paid to attorneys
        and
        accountants increased $55,000, or 262.05%, due to creation of Third Century
        Bancorp as a public company. Also, the Bank recorded a gain on the sale of
        a
        foreclosed commercial real estate property in June 2004 compared to a loss
        on
        the sale of a foreclosed one-to-four-family mortgage in June 2005. The net
        difference between these two events resulted in increased expense of
        $37,000.
  *Income
        Taxes.* Mutual
        Savings Bank recognized income tax expense of $80,000 for the quarter ended
        June
        30, 2005, as compared to $137,000 for the quarter ended June 30, 2004, which
        represents an increase in the effective tax rate from 35.04% at June 30,
        2004 to
        39.80% at June 30, 2005.
  **Comparison
        of Operating Results for the Six Months Ended June 30, 2005 and
        2004**
  *General.* Net
        income for the six months ended June 30, 2005 was $201,000 compared to net
        income of $372,000 for the six months ended June 30, 2004. The decrease of
        $171,000 was primarily the result of increased salaries and employee benefits.
        This category increased $358,000 from $1.1 million for the six months ended
        June
        30, 2004 to $1.5 million for the six months ended June 30, 2005, or 32.60%.
  Officer
        and employee salaries increased approximately $135,000, or 16.60%, from $816,000
        at June 30, 2004 to $951,000 at June 30, 2005. The increase was due to the
        addition of a Compliance Officer and a Staff Accountant in response to the
        additional regulatory burden placed upon public companies. In addition, the
        contributions paid to the employee pension plan increased $83,000 or 163.03%.
        Also, in July 2004, the Bank recorded the monthly release of shares from
        its
        ESOP trust, which resulted in expense of approximately $76,000 for the six
        months ended June 30, 2005.
  As
        of May
        1, 2005, the Bank froze the multi-employer defined benefit pension plan as
        a
        cost-control measure for the future. No additional liability was incurred
        as a
        result of this action.
  
   13
  *Interest
        Income.* Interest
        income for the six months ended June 30, 2005 was $3.4 million compared to
        $3.0
        million for the six months ended June 30, 2004. The change between these
        reporting periods was an increase of $402,000, which consisted primarily
        of an
        increase in loan interest income by $198,000. Investment income increased
        by
        $140,000, and interest income on interest-bearing deposits increased $69,000
        during the six months ended June 30, 2005, as compared to the six months
        ended
        June 30, 2004. Average interest-bearing assets for the six months ended June
        30,
        2005 was $122.8 million, which represented an increase of $20.2 million,
        or
        19.67%, from the six months ended June 30, 2004. The yield on those assets
        decreased from 5.75% at June 30, 2004 to 5.46% at June 30, 2005. The yield
        declined because average investments, which yielded 2.91% at June 30, 2005,
        as a
        percent of total average assets increased from 0.01% for the three **[six?]** months
        ended June 30, 2004 to 0.08% for the six months ended June 30, 2005. Investments
        as a percentage of total assets grew faster than average loans outstanding,
        which yielded 6.11% at June 30, 2005, as a percent of total average assets,
        which declined from 92.95% for the six months ended June 30, 2004 to 82.31%
        for
        the six months ended June 30, 2005. The average yield on loans increased
        by 5
        basis points, the average yield on interest-bearing deposits increased by
        71
        basis points and the average yield on investments increased 157 basis points.
        The average balances for loans increased $5.7 million to $101.0 million,
        the
        average balances for interest-bearing deposits increased $4.8 million to
        $10.3
        million and the average balances for investments increased $9.2 million to
        $10.0
        million at June 30, 2005.
  *Interest
        Expense.* Interest
        expense for the six months ended June 30, 2005 was $998,000 compared to $927,000
        for the six months ended June 30, 2004, an increase of $71,000 or 7.66%.
        Average
        interest-bearing liabilities increased to $94.7 million at June 30, 2005
        from
        $93.4 million at June 30, 2004, with the average interest rate increasing
        from
        1.99% at June 30, 2004 to 2.11% at June 30, 2005.
  *Net
        Interest Income.* Net
        interest income of $2.4 million for the six months ended June 30, 2005 reflects
        an increase of $331,000 or 16.36% from the net interest income for the six
        months ended June 30, 2004.
  *Provision
        for Loan Losses.* Mutual
        Savings Bank recorded a negative provision for loan losses of $20,000 during
        the
        six months ended June 30, 2005, while a $24,000 provision was made during
        the
        six months ended June 30, 2004. In evaluating the adequacy of loan loss
        allowances, management considers factors such as delinquency trends, portfolio
        composition, past loss experience and other factors such as general economic
        conditions. During the past year, Mutual Savings Bank’s level of nonperforming
        assets decreased from $325,000 at June 30, 2004, to $100,000 at June 30,
        2005,
        and the percentage of nonperforming assets to total assets decreased from
        0.27%
        to 0.08% for the same respective time periods. For the six months ended June
        30,
        2005, Mutual Savings Bank charged off loans net of recoveries of $13,903
        which
        represents a decrease of $57,896 from the six months ended June 30,
        2004.
  *Other
        Income.* Total
        other income was $352,000 for the six months ended June 30, 2005 and $494,000
        for the six months ended June 30, 2004, which represented a decrease of $142,000
        or 28.74% between the reporting periods. The decline of $96,000 in net gains
        on
        loan sales from $138,000 at June 30, 2004 to $42,000 at June 30, 2005, was
        due
        to the reduction in loans sold during the comparative reporting periods.
        During
        the first six months of 2004, Mutual Savings Bank sold $5.1 million of loans
        to
        the secondary market as compared to $1.4 million during the first six months
        of
        2005.
  
   14
  *Other
        Expense.* Other
        expense for the six months ended June 30, 2005 was $2.4 million compared
        to $1.9
        million for the same period last year, an increase of $515,000 or 27.42%.
        As
        previously explained, the salaries and employee benefits increased during
        this
        period by $358,000, or 32.60%. Professional service fees paid to attorneys
        and
        accountants increased $60,000, or 147.72%, due to creation of Third Century
        Bancorp as a public company. Also, the Bank recorded a gain on the sale of
        a
        foreclosed commercial real estate property in June 2004 compared to a loss
        on
        the sale of a foreclosed one-to-four-family mortgage in June 2005. The net
        difference between these two events resulted in increased expense of
        $37,000.
  *Income
        Taxes.* Mutual
        Savings Bank recognized income tax expense of $132,000 for the six months
        ended
        June 30, 2005, as compared to $243,000 for the six months ended June 30,
        2004,
        which represents an increase in the effective tax rate from 39.51% at June
        30,
        2004 to 39.64% at June 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 .
  
 **Item
        3.**  **Controls
        and Procedures**
 
  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), 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 adequate and are designed to ensure that material
        information relating to Third Century would be made known to such officers
        by
        others within Third Century on a timely basis.
  B. Changes
        in internal controls .
        There
        were no significant 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 June 30, 2005 that would
        have a material effect on Third Century’s operations or income.
  **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
  None.
 
 **Item
        3.**  **Defaults
        Upon Senior Securities**
  None.
  
 
  15
  **Item
        4.**  **Submission
        of Matters to a Vote of Security Holders**
  On
        July
        20, 2005, Third Century Bancorp held its annual meeting of shareholders.
        There
        were present at the meeting in person or by proxy the holders of 1,637,861
        votes. At the annual meeting, the following matters were submitted to a vote
        of
        security holders:
  (a)  Election
        of Directors .
        The
        following persons were elected as members of the Board of Directors, for
        the
        terms set forth below:
  **Term
                  Expires**
              **Votes
                  For**
              **Votes
                  Withheld**David
                  A. Coffey
              2006
              1,350,080
              287,781Robert
                  L. Ellett
              2008
              1,462,580
              175,281Robert
                  D. Heuchan
              2007
              1,356,580
              281,281Jerry
                  D. Petro
              2006
              1,458,780
              179,081Robert
                  D. Schafstall
              2008
              1,355,280
              282,581
 
 (b)  Third
        Century Bancorp Stock Option Plan .
        The
        shareholders approved and ratified the Third Century Bancorp Stock Option
        Plan
        submitted to them for approval by the following vote:
  **Votes
                  For**
              **Votes
                  Against**
              **Votes
                  Withheld**
              **Broker
                  Non Votes**1,015,237
              248,578
              14,469
              359,577
 
  (c)  Mutual
        Savings Bank Recognition and Retention Plan and Trust .
        The
        shareholders approved and ratified the Mutual Savings Bank Recognition and
        Retention Plan and Trust submitted to them for approval by the following
        vote:
  **Votes
                  For**
              **Votes
                  Against**
              **Votes
                  Withheld**
              **Broker
                  Non Votes**994,656
              240,856
              42,769
              359,580
 
  **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
  **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:August
                  12, 2005
              By:
              /s/
Robert
                D. HeuchanRobert
                  D. Heuchan
                President
                  and Chief Executive OfficerBy:
              /s/
Debra
                K. HarlowDebra
                  K. Harlow
                Chief
                  Financial Officer
 
  17
  
 **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