[TYPE]     10KSB
[TEST]
[DOCUMENT-COUNT]     2
[NOTIFY-INTERNET]     taylorbank@compuserve.com
[SROS]     NONE
[FILER]
[CIK]     0001003986
[CCC]     $4uojgvh
[NEW-EDGAR-CONTACT]
[PERIOD]     12/31/1997
[TEXT]
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549
Form 10-KSB

(Mark One)
  x  	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 1997

     	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934 	[NO FEE REQUIRED]

For the transition period from         to        

Commission File No. 33-99762

        CALVIN B. TAYLOR BANKSHARES, INC.       
(Exact name of registrant as specified in its Charter)

	              Maryland               	       52-1948274       
	   (State or other jurisdiction	   (I.R.S. Employer
	of incorporation or organization)	   Identification No.)

	      P. O. Box 5, Berlin, Maryland   	          21811   
	(Address of principal executive offices)	       (Zip Code)

Issuer's telephone number, including area code:  (410) 641-1700

Securities registered under Section 12(b) of the Exchange Act:
	                Name of each exchange
		Title of each class                on which registered
		         None                                  None

Securities registered under Section 12(g) of the Exchange Act:
		                      Common Stock
		                       (Title of Class)

Check whether the small business issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the past 
12 months (or for such shorter period that the small business issuer was 
required to file such reports), and (2) has been subject to such filing 
requirements 
for the past 90 days.	             Yes X     No 

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be 
contained, to the best of the small business issuer's knowledge, in definitive 
proxy or information statements 
incorporated by reference in Part III of this Form 10-KSB or any amendment 
to this Form 10-KSB.         [ ]

State small business issuer's revenues for its most recent fiscal 
year:  $18,258,544.

The aggregate market value of the Common Stock held by non-affiliates 
of the small business issuer on December 31, 1997, was $56,700,000.  This 
calculation is based upon an estimation by the Company's Board of Directors 
of fair market value of the Common Stock of $70 per share.  There is not an 
active trading market for the Common Stock and it is not possible to identify 
precisely the market value of the Common Stock.

The Company is filing delinquent Forms 10-SB, Form 3, and Schedule 13D. The
aformentioned forms and schedules are for Directors, Officers, and beneficial
owners of the company, and 5% owners the Company's outstanding Common Stock. 

On March 4, 1998, 810,000 shares of the small business issuer's common 
stock were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual report to Shareholders for the year ended December 
31, 1997, is incorporated by reference in this Form 10-KSB in Part II Item 5,
Item 6, and Item 7.  The Company's Proxy Statement for Annual Meeting of
Shareholders to be held on May 13, 1998, is incorporated by reference in this
Form 10-KSB in Part III, Item 9, Item 10, Item 11, and Item 12.

This Report contains statements which constitute forward-looking statements 
within the meaning of Section 27A of the Securities Act of 1933 and the 
Securities Exchange Act of 1934.  These statements appear in a number 
of places in this Report and include all statements regarding the intent, 
belief or current expectations of the Company, its directors, or its officers
with respect to, among other things: (i) the Company's financing plans; (ii)
trends affecting the Company's financial condition or results of operations;
(iii) the Company's growth strategy and operating strategy; and (iv) the
declaration and payment of dividends.  Investors are cautioned that any such 
forward-looking statements are not guarantees of future performance 
and involve risks and uncertainties, and that actual results may differ 
materially from those projected in the forward-looking statements as a result
of various factors discussed herein and those factors discussed in detail in
the Company's filings with the Securities and Exchange Commission. 

PART I

Item 1. Description of Business

General

	Calvin B. Taylor Bankshares, Inc. (the "Company") was incorporated
as a Maryland corporation on October 31, 1995.  The Bank is a commercial 
bank incorporated under the laws of the State of Maryland on December 17,
The Bank operates 10 banking offices in Worcester County with the
Bank's main office located in Berlin, Maryland.  It is engaged in a 
general commercial and retail banking business serving individuals,
businesses, and governmental units in Worcester County, Maryland and 
neighboring counties.  The Company has acquired land for future Bank
expansion but engaged in no other business excluding the operation of the
Bank.

	The Company's holding company structure can assist the
Bank in maintaining its required capital ratios because the Company  
may, subject to compliance with debt guidelines implemented by the 
Board of Governors of the Federal Reserve System (the "Board
of Governors" or the "Federal Reserve"), borrow money and contribute
the proceeds to the Bank as primary capital.  The holding company
structure also permits greater flexibility in issuing stock for cash, 
property, or services and in reorganization transactions.  Moreover,
subject to certain regulatory limitations, a holding company can purchase
shares of its own stock, which the Bank may not do.  A holding 
company may also engage in certain nonbanking activities which 
the Board of Governors has deemed to be closely related to banking
and proper incidents to the business of a bank holding company.
These activities include making or servicing loans and certain types
of leases; performing certain data processing services; acting as a 
fiduciary or investment or financial advisor; acting as a management 
consultant for other depository institutions; providing courier, appraisal,
and consumer financial counseling services; providing tax planning and
preparation services; providing check guaranty and collection agency 
services; engaging in limited real estate investment activities; underwriting, 
brokering, and selling credit life and disability insurance; engaging in
certain other limited insurance activities; providing discount brokerage
services; underwriting and dealing in certain government obligations 
and money market instruments and providing portfolio investment advice;
acting as a futures commission merchant with respect to certain financial 
instrument transactions; providing foreign exchange advisory and 
transactional services; making investments in certain corporations for 
projects designed primarily to promote community welfare; and owning 
and operating certain healthy savings and loans associations.  Although 
the Company has no present intention of engaging in any of these 
services, if circumstances should lead the Company's management to believe
that there is a need for these services in the Bank's marketing area and
that such activities could be profitably conducted, the management of the 
Company would have the flexibility of commencing these activities upon
filing notice thereof with the Board of Governors.

Location and Service Area

	The Bank conducts a general commercial banking industry in its
primary service area, emphasizing the banking needs of individuals and small
- to medium-sized businesses and professional concerns.  The Bank operates 
from ten branches located throughout Worcester County, Maryland.  The Bank 
draws most of its customer deposits and conducts most of its lending
transactions from within its primary service area which encompasses 
Worcester County,Maryland and neighboring counties.

	Worcester County is located along the shores of the Atlantic Ocean 
and has experienced growth in population in recent years.  The area is growing
as both a resort and retirement community.

	The principal components of the economy of Worcester County are 
tourism and agriculture.  Berlin has a strong component of health-care related
businesses.  The tourist businesses of Ocean City, Maryland, with health-care
facilities in Berlin, Maryland (including Berlin Nursing Home and Atlantic 
General Hospital) are the largest employers in the County.  The largest 
Industrial employers are Perdue Farms and Hudson Farms.

Banking Services

	The Bank offers a full range of deposit services that are typically 
available in most banks and savings and loan associations, including checking 
accounts, NOW accounts, savings accounts and other time deposits of 
various types, ranging from 

daily money market accounts to longer-term certificates of deposit.  The 
transaction accounts and time certificates are tailored to the Bank's principal 
market area at rates competitive to those offered in the area.  In addition,
the Bank offers certain retirement account services, such as Individual 
Retirements Accounts ("IRAs").  All deposits are insured by the Federal 
Deposit Insurance Corporation (the "FDIC") up to the maximum amount allowed
by law (generally, $100,000 per depositor subject to aggregation rules).  The 
Bank solicits these accounts from individuals, businesses, associations and 
organizations, and governmental authorities.

	The Bank also offers a full range of short- to medium-term commercial
 and personal loans.  Commercial loans include both secured and unsecured loans
 for working capital (including inventory and receivables), business expansion 
(including acquisition of real estate and improvements), and purchase of 
equipment and machinery.  Consumer loans include secured and unsecured loans 
for financing automobiles, home improvements, education, and personal
investments.  The Bank also originates mortgage loans and real estate 
construction and acquisition loans.  The Bank's lending activities are 
subject to a variety of lending limits imposed by state and federal law. 
 The Bank may not make any loans to any director, officer, or employee of
the Bank (except for commercial loans to directors who are not officers
or employees) unless the loan is approved by the Board of Directors of the
Bank.  Any such loans must be reviewed every six months by the Board of
Directors.

	Other bank services include cash management services, safe 
deposit boxes, travelers checks, direct deposit of payroll and social security 
checks, and automatic drafts for various accounts.  The Bank is associated
with the MAC network of automated teller machines that may be used by Bank
customers throughout Maryland and other regions.  The Bank also offers
credit card services through a correspondent bank as an agent for the Bank.

Competition

	The Bank faces strong competition in all areas of its operations.  
The competition comes from entities operating in Worcester County and 
neighboring counties and includes branches of some of the largest banks in
Maryland, Delaware, and Virginia. Its most direct competition for deposits
historically has come from other commercial banks, savings banks, savings 
and loan associations, and credit unions operating in Worcester County, 
Maryland.  The Bank competes for deposits with money market mutual funds
and corporate and government securities.  The Bank competes with the same
banking entities for loans, as well as mortgage banking companies and other 
institutional lenders.  The competition for loans varies from time to time 
depending on certain factors.  These factors include, among others, the 
general availability of dependable funds and credit, general and local 
economic conditions, current interest rate levels, conditions in the mortgage
market, and other factors which are not readily predictable.

	At December 31, 1997, there were six other commercial banks and two
savings banks operating in Worcester County, together accounting for twenty 
banking offices.

Employees

	As of December 31, 1997, the Bank had 95 full-time employees and
4 part-time employees.  The Company's operations are conducted through the 
Bank.  Consequently, the Company does not have separate employees.  None 
of the employees of the Bank are represented by any collective bargaining unit.
The Bank considers its relations with its employees to be good.

SUPERVISION AND REGULATION

	The Company and the Bank are subject to state and federal banking
laws and regulations which impose specific requirements or restrictions on, and
provide for general regulatory oversight with respect to, virtually all 
aspects of operations.  These laws and regulations are generally intended to 
protect depositors, not shareholders.  The following is a brief summary of 
certain statutes, rules, and regulations affecting the Company and the Bank. 
To the extent that the following summary describes statutory or regulatory 
provisions, it is qualified in its entirety by reference to the particular 
statutory and regulatory provisions.  Any change in applicable laws or 
regulations may have a material adverse effect on the business and prospects 
of the Company.  The banking industry is also likely to change significantly 
as a result of the passage of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (the "Interstate Banking Act").  The operations of the
 Company and the Bank may be affected by legislative changes and the policies 
of various regulatory authorities.  The Company is unable to predict the 
nature or the extent of the effect on its business and earnings that fiscal 
or monetary policies, economic control, or new federal or state legislation 
may have in the future.

The Company

	Because it owns the outstanding common stock of the Bank, the Company
is a bank holding company within the meaning of the federal Bank Holding 
Company Act of 1956 (the "BHCA").  Under the BHCA, the Company is subject to 
periodic examination by the Federal Reserve and is required to file periodic 
reports of its operations and such additional information as the
Federal Reserve may require.  The Company's and the Bank's activities are 
limited to banking, managing or controlling banks, furnishing services to or 
performing services for its subsidiaries, or engaging in any other activity 
that the Federal Reserve determines to be so closely related to banking or 
managing and controlling banks as to be a proper incident thereto.

	Investments, Control, and Activities.  With certain limited exceptions, 
the BHCA requires every  bank holding company to  obtain the prior approval of 
the Federal Reserve before (i) acquiring substantially all the assets of any
bank, acquiring direct or indirect ownership or control of any voting shares of 
any 
bank if after such acquisition it would own or control more than 5% of the 
voting shares of such bank (unless it already owns or controls the majority of 
such shares), or (iii) merging or consolidating with another bank holding 
company.

	In addition, and subject to certain exceptions, the BHCA and the
Change in Bank Control Act, together with regulations thereunder, require
Federal Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank 
holding company, such as the Company.  Control is conclusively presumed to
exist if an individual or company acquires 25% or more of any class of voting 
securities of the bank holding company.  Because the Company's Common Stock
is registered under the Securities Exchange Act of 1934, under Federal Reserve 
regulations control will be rebuttably presumed to exist if a person acquires  
least 10% of the outstanding shares of any class of voting securities of the
Company. The regulations provide a procedure for challenge of the rebuttable
control presumption.

	Under the BHCA, the Company is generally prohibited from
engaging in, or acquiring direct or indirect control of more than 5% of t
he voting shares of any company engaged in nonbanking activities, unless
the Federal Reserve, by order or regulation, has found those activities to be
so closely related to banking or managing or controlling banks as to be a 
proper incident thereto.  Some of the activities that the Federal Reserve has 
determined by regulation to be proper incidents to the business of banking
include making or servicing loans and certain types of leases, engaging in 
certain insurance and discount brokerage activities, performing certain data
processing services, acting in certain circumstances as a fiduciary or 
investment or financial advisor, owning savings associations, and making 
investments in certain corporations or projects designed primarily to promote 
community welfare.

	Source of Strength; Cross-Guarantee.  In accordance with Federal Reserve
policy, the Company is expected to act as a source of financial strength to 
the Bank and to commit resources to support the Bank in circumstances in 
which the Company might not otherwise do so.  Under the BHCA, the Federal 
Reserve may require a bank holding company to terminate any activity or 
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary 
of a bank) upon the Federal Reserve's determination that such activity or 
control constitutes a serious risk to the financial
soundness or stability of any subsidiary depository institution of the 
bank holding company. Further, federal bank regulatory authorities have 
additional discretion to require a bank holding company to divest itself 
of any bank or nonbank subsidiary if the agency determines that divestiture 
may aid the depository institution's financial condition.  The Bank may be 
required to indemnify, or cross-guarantee, the FDIC 
against losses it incurs with respect to any other Bank controlled by the 
Company, which in effect makes the Company's equity investments in healthy 
bank subsidiariesavailable to the FDIC to assist 
any failing or failed bank subsidiary of the Company.

The Bank

	General.  The Bank operates as a state nonmember banking association 
incorporated under the laws of the State of Maryland and is subject to 
examination by the FDIC and the Commissioner.  Deposits in the Bank 
are insured by theFDIC up to a maximum amount
(generally $100,000 per depositor, subject to aggregation rules).  
The Commissioner and FDIC regulate or monitor all areas of the Bank's 
operations, including security devices and procedures, adequacy 
of capitalization and loss reserves, loans, investments, borrowings, 
deposits, mergers, issuances of securities, payment of dividends, interest 
rates payable on deposits,interest rates or fees 
chargeable on loans, establishment of branches, corporate 
reorganizations, maintenance of books and records, and adequacy of staff 
training to carry on safe lending and deposit gathering practices.  
The FDIC requires the Bank to maintain certain capital ratios and imposes 
limitations on the Bank's aggregate investment in real estate, 
bank premises, and furniture and fixtures.  
The Bank is required by the FDIC and the Commissioner to prepare quarterly 
reports on the Bank's financial condition.

	Under FDICIA, all insured institutions must undergo periodic on-site
examination by their appropriate banking agency.  The cost of examinations of 
insured depository institutions and any affiliates may be assessed by the 
appropriate agency against each institution or affiliate as it deems 
necessary or appropriate.
  Insured institutions are required to submit annual reports to the FDIC and 
the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other
appropriate agencies a method for insured depository
institutions to provide supplemental disclosure of the estimated fair market 
valueof assets and liabilities, to the extent feasible and practicable, in 
any balance sheet, financial statement, report of condition, or other report 
of any insured depository
institution.  FDICIA also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to:(i) 
internal controls, information systems, and audit systems; (ii) loan 
documentation; 
(iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset 
quality.

	Transactions With Affiliates and Insiders.  The Bank is subject to 
Section 23A of the Federal Reserve Act, which places limits on the amount 
of loans or extensions of credit to, or investment in, or certain other 
transactions with, affiliates and on the amount of advances to third parties 
collateralized by the securities or obligations of affiliates.
  In addition, most of these loans and certain other transactions must
be secured in prescribed amounts.  The Bank is 
also subject to Section 23B of the Federal Reserve Act which, among other 
things, prohibits an institution from engaging in certain 
transactions with certain affiliates unless the transactions are 
on terms substantially the same, or at least
as favorable to such institution or its subsidiaries, 
as those prevailing at the time
for comparable transactions with nonaffiliate companies.  The Bank is subject
to certain restrictions on extensions of credit to executive officers, 
directors, certain principal shareholders, and their related interests.
  Such extensions of credit (i) must be made on substantially the same terms, 
including interest rates and collateral, as those prevailing at the time for 
comparable transactions with third parties, and (ii) must not involve more
 than the normal risk of repayment or present other unfavorable features.

	Branching.  Under Maryland law, the Bank may open branches 
state-wide, subject to the prior approval of the Commissioner and the FDIC.
  Maryland law permits banking organizations in other states to 
acquire Maryland banking organizations, as long as such states 
grant similar privileges for acquiring banking organizations in 
their states to banking organizations in 
Maryland, by opening a de novo branch, by acquiring an existing branch from 
a Maryland depository institution, or as a result of an interstate 
merger with a Maryland banking organization.  The Company is planning to open 
a new Bank in the State of Delaware.  The new bank will be subject to the laws 
of the State of Delaware.

	Community Reinvestment Act.  The Community Reinvestment Act
requires that each insured depository institution shall be evaluated by its 
primary federal regulator with respect to its record in meeting the credit 
needsof its local community, including low and moderate income neighborhoods,
consistent with the safe and sound operation of those institutions.  These 
factors are also considered in evaluating mergers, acquisitions, and 
applications to open a branch or facility.  The Bank received a satisfactory 
rating in its most recent evaluation.

	Other Regulations.  Interest and certain other charges collected or 
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates.  The Bank's loan operations are also subject 
to certain federal laws applicable to credit transactions, such as the federal 
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial 
institutions to provide information to enable the public and public officials 
determine whether a  financial institution is fulfilling its obligation to 
help meet the housing needs of the community it serves, 
the Equal Credit Opportunity Act prohibiting discrimination on the basis of 
race, creed, or other prohibited 
factors in extending credit, the Fair Credit Reporting Act of 1978 governing 
use and provision of information to credit reporting agencies, the Fair Debt
Collection Act governing the manner in which consumer debts may be collected 
by collection agencies, and the rules and regulations of the various federal 
agencies charged with the responsibility of implementing such 
federal laws.  The deposit operations of the Bank are also subject 
to the Right to Financial Privacy
 Act, which imposes a duty to maintain confidentiality of consumer financial 
records and prescribes procedures for complying with administrative subpoenas 
of financial records, and the Electronic Funds Transfer Act and Regulation E 
issued by the Federal Reserve Board to implement that act, which governs 
automatic deposits to and withdrawals from deposit accounts and customers' 
rights and liabilities arising from the use of automated teller machines 
and other electronic banking services.

Deposit Insurance

	The deposits of the Bank are currently insured to a maximum of
$100,000 per depositor, subject to certain aggregation rules.  The FDIC 
establishes rates for the payment of premiums by federally insured banks 
and thrifts for deposit insurance.  Separate insurance funds (BIF and SAIF)
are maintained for commercial banks and thrifts, with insurance premiums
from the industry used to offset losses from insurance payouts when banks 
and thrifts fail. During 1996, the FDIC revised the range of premiums from 
$.00 to $.31 per $100 in deposits.

	The assessment rate for the Bank is currently $1,000 for each six-month 
period.In addition to the FDIC assessment, banks are required to pay 
an assessment to the Financial Corporation (FICO) 
to service the interest on its bond obligations.  For the first 
semi-annual period of 1997, the FICO assessment rate was 1.30 
basis points for BIF deposits.  The insurance assessment will remain 
at $.00 to $.31 per $100 in deposits through June, 1998.  
Any increase in deposit insurance premiums for the Bank will 
increase the Bank's cost of funds, and 
there can be no assurance that such costs can be passed on to the 
Bank's customers.

Dividends

	The principal source of the Company's cash revenues comes from dividends 
received from the Bank.  The amount of dividends that may be paid by the Bank 
to the Company depends on the Bank's earnings 
and capital position and is limited by federal 
and state laws, regulations, and policies.  The Federal Reserve has 
stated that bank dividends under circumstances in which the bank holding 
company fails to meet minimum capital requirements or in which earnings 
are impaired.


	The Company's ability to pay any cash dividends to its shareholders in 
the future will depend primarily on the Bank's ability to pay dividends to the 
Company.  In order to pay dividends to the Company, the Bank must comply 
with the requirements of all applicable laws and regulations.  Under Maryland
law, the Bank must pay a cash dividend only from the following, after 
providing for due or accrued expenses, losses, interest, 
and taxes:  (i) its undivided profits, or (ii) with the prior approval of the 
Commissioner, its surplus in excess 
of 100% of its required capital stock.  Under FDICIA, the Bank may not pay a 
dividend if, after paying the dividend, 
the Bank would be undercapitalized.  See 
"Capital Regulations" below.  See Item 5 for a discussion of dividends paid by 
the Bank in the past two years.

	In addition to the availability of funds from the Bank, the future dividend 
policy of the Company is subject to the discretion of the Board of Directors and
 will depend upon a number of factors, including future earnings, financial 
condition, cash needs, and general business conditions.  If dividends should 
be declared in the future, the amount of such dividends presently cannot be
 estimated and it cannot be known whether such dividends would continue 
for future periods.

Capital Regulations

	The federal bank regulatory authorities have adopted risk-based 
capital guidelines for banks and bank holding companies that are designed 
to make regulatory capital requirements more sensitive to differences in risk 
profile among banks and bank holding companies, account for off-balance 
sheet exposure, and minimize disincentives for holding liquid assets.  The 
resulting capital ratios represent qualifying capital as a percentage of total 
risk-weighted assets and off-balance sheet items.  The guidelines are minimums, 
and the regulators have noted that banks and bank holding companies 
contemplating significant expansion programs should not allow expansion to 
diminish their capital ratios and should maintain ratios well in excess of 
minimums.  The current guidelines require all bank holding companies 
and federally regulated banks to maintain a minimum risk-based total capital 
ratio equal to 8%, of which at least 4% must be Tier 1 capital.  Tier 1 capital
includes common shareholders' equity before the unrealized gains and losses 
on securities available for sale, qualifying perpetual preferred stock, and
minority interests in equity accounts of consolidated subsidiaries, but excludes
goodwill and most other intangibles, and excludes the allowance for loan and
lease losses.  Tier 2 capital includes the excess of any preferred stock not 
included in Tier 1 capital, mandatory convertible securities, hybrid capital 
instruments, subordinated debt and intermediate 
term-preferred stock, and general reserves for loan and lease losses 
up to 1.25% of risk-weighted assets.

	Under the guidelines, banks' and bank holding companies' assets
are given risk-weights of 0%, 20%, 50%, and 100%.  In addition, certain
off-balance sheet items are given credit conversion 
factors to convert them to asset equivalent amounts to which an 
appropriate risk-weight will apply.  These
computations result in the total risk-weighted assets.  Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating.  Most investment securities are 
assigned to the 20% category, except for municipal or state revenue bonds, 
which have a 50% rating, and direct obligations of or obligations guaranteed
by the United States Treasury or United States Government agencies, which 
have a 0% rating.

	The federal bank regulatory authorities have also implemented a
leverage ratio, which is Tier 1 capital as a percentage of average total assets
less intangibles, to be used as a supplement to the risk-based guidelines.
  The principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity
capital base.  The minimum required leverage ratio for top-rated institutions 
is 3%, but most institutions are required to maintain an additional cushion of 
at least 100 to 200 basis points.

	FDICIA established a new capital-based regulatory scheme designed 
to promote early intervention for troubled banks and requires the FDIC to choose
the least expensive resolution of bank failures.  The new capital-based 
regulatory framework contains five categories for compliance with regulatory 
capital requirements, including "well capitalized," "adequately capitalized," 
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized."  To qualify as a "well capitalized" institution, a bank 
must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no 
less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate 
regulatory agency to meet and maintain a specific capital level.  As of 
December 31, 1997, the Company and the Bank were qualified as "well 
capitalized."  See "Item 6. Management's Discussion and Analysis or 
Plan of Operation - Capital."












Item 2. Description of Property    

	The Company has a main office and nine branch locations, all of 
which are owned by the Company.  The locations are described as follows:

OFFICE			LOCATION	                                       	Square Footage        
  
Main Office		24 North Main Street, Berlin, Maryland 21811		6,500
East Berlin Office	10524 Old Ocean City Boulevard, Berlin, Maryland 21811		1,500
20th Street Office	100 20th Street, Ocean City, Maryland 21842		3,100
Ocean Pines Office	11003 Cathell Road, Berlin, Maryland 21811		2,420
Mid-Ocean City Office	9105 Coastal Highway, Ocean City, Maryland 21842		1,984
North Ocean City Office	14200 Coastal Highway, Ocean City, Maryland 21842		2,545
West Ocean City Office	9923 Golf Course Road, Ocean City, Maryland 21842		2,496
Downtown Pocomoke Office	144 Market Street, Pocomoke, Maryland 21851		3,240
South Pocomoke Office	121 Ames Plaza, Pocomoke, Maryland 21851		1,715
Snow Hill Office	108 West Market Street, Snow Hill, Maryland 21863		3,773

	The Main Office is the centralized location for all nine branches; that
 is to say that all proof and bookkeeping is performed there.

	Each branch has a manager that also serves as its loan officer as 
well, with exception of the East Berlin Office which does not have a loan
 officer.  All ten offices participate in normal day-to-day banking operations.

	Five offices offer automated teller machines; these being the 
20th Street, Ocean Pines, Mid-Ocean City, West Ocean City, and South 
Pocomoke Offices.  The Company operates one automated teller machine 
which is located off premises at a local hospital.


Item 3. Legal Proceedings

	There are no material pending legal proceedings to which the Company 
or the Bank or any of their properties are subject.


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

	There were no matters submitted to a vote of the shareholders 
of the Company during the fourth quarter of 1997.

PART II


Item 5. Market for Common Equity and Related Stockholder Matters

	In response to this Item, the information included on page 15 
of the Company's Annual Report to Shareholders for the year ended 
December 31, 1997, is incorporated herein by reference.


Item 6. Management's Discussion and Analysis or Plan of Operation

	In response to this Item, the information included on pages 2
 through 14 of the Company's Annual Report to Shareholders for the 
year ended December 31, 1997, is incorporated herein by reference.


Item 7. Financial Statements

	In response to this Item, the information included on pages 16 
through 38 of the Company's Annual Report to Shareholders for the year
ended December 31, 1997, is incorporated herein by reference.





PART III
Item 8. Changes in and Disagreements with Accountants on Accounting 
and Financial Disclosures

	Not applicable.


Item 9. Directors and Executive Officers; Compliance with Section 16(a)
 of the Exchange Act

	The table below sets forth certain information about the nominees and
 officers, including age, position with the Company, and position the Calvin 
B.  Taylor Banking Company (the "Bank), the Company's wholly owned banking 
C.  subsidiary. All of the nominees are currently directors of the Company 
D.  and the bank are nominated as directors. Each of the nominees has 
E.  been a director of the Company since its formation on October 31, 1995.

				     Title or Position with the
Name			Age		Corporation		Title or Position with the Bank

James R. Bergey, Jr.	  42	     Director			   	Director
James R. Bergey, Sr.	  63	     Senior Vice President,			Senior Vice President,
				     Secretary and Director			Manager of Ocean City
									Branches, and Director
Richard L. Bunting.	  68	     Director			 	Director
John H. Burbage, Jr. 	  54	     Director			 	Director
Reese F. Cropper, Jr.	  55	     President, Chief Executive		President, CEO
Director	
Hale Harrison.		  50	     Director			   	Director
Gerald T. Mason		  49	     Director				Director
William H. Mitchell	  48	     Treasurer				Vice President and Cashier
Joseph E. Moore		  54	     Director				Director
Horace D. Quillin, Sr.	  69	     Director				Director
Michael L. Quillin, Sr.	  58	     Director			   	Director
Hugh F. Wilde, Sr.	  69	     Director				Director



Item 10. Executive Compensation 

The table below presents a summary of the compensation for the last three
 fiscal years of  Mr. Reese F. Cropper , Jr., Chief Executive Officer and
 President of the Company and Bank, and Mr. James R. Bergey, Sr., Senior 
Vice President and Secretary of the Company and Bank. No other executive
 officers of the Company and Bank received an annual salary and bonus which
 exceeded $100,000 during any of the past three fiscal years.

Annual Compensation

Name and Principal Position	Year	   Salary		Bonus	 All Other Compensation (1)

Reese F. Cropper, Jr. - President	
and Chief Executive Officer
   	1997	$157,300		                    6,642			  3,325
				1996	$142,509		                    5,720			  3,153
				1995	$115,623	                  	  4,818			  2,299

James R. Bergey, Jr., Senior
Vice President and Secretary	
    1997	$113,740		                    4,890			  1,450
				1996	$102,959		                    4,136			  1,411
				1995	$ 93,640	                 		  3,760			  1,432

		

(1)  Represents benefits paid by the bank in connection with the use
 of an automobile.


	Directors of the Company received a fee of $440 for each board 
meeting attended and $440 for each of the Bank's executive committee meetings 
attended. The Company also paid a director emeriti fee of $160 for each board
meeting attended. Two directors, Richard L. Bunting and Horace D, Quillin, Sr.,
are paid by salary rather than a director's fee. Mr. Bunting and Mr. Quillin  
received a salary of $33,068 each in 1997. The total fees paid by the Company to
directors, excluding Mr. Cropper, Mr. Bergey, Mr. Bunting, and Mr. Quillin, 
during 1997, were $61,200.



Item 11. Security Ownership of Certain Beneficial Owners and Management

	In response to this item, the information included on pages 7 through 
8 of the Company's Proxy Statement for the Annual Meeting of Shareholders 
to be held May 12, 1998, is incorporated herein by reference.

The table below sets forth certain information about the nominees and officers,
including age, position with the Company, and position the 
Calvin B. Taylor Banking 
Company (the "Bank), the Company's wholly owned banking subsidiary. All of the
 nominees are currently directors of the Company and the bank are nominated as 
directors. Each of the nominees has been a director of the Company since its
 formation on October 31, 1995.

				     Title or Position with the
Name			Age		Corporation		Title or Position with the Bank

James R. Bergey, Jr.	  42	     Director			   	Director
James R. Bergey, Sr.	  63	     Senior Vice President,			Senior Vice President,
                      				     Secretary and Director			Manager of Ocean City
								                                               	Branches, and Director
Richard L. Bunting.	  68	     Director			 	Director
John H. Burbage, Jr.	 54      Director			 	Director
Reese F. Cropper, Jr. 55      President, Chief Executive		President, Chief Exec.
				                          Officer, and Director		    	Officer, and Director
Hale Harrison.		      50	     Director			   	Director
Gerald T. Mason		     49	     Director   				Director
William H. Mitchell	  48	     Treasurer		  		Vice President and Cashier
Joseph E. Moore		     54      Director    			Director
Horace D. Quillin, Sr. 	  69	     Director				Director
Michael L. Quillin, Sr.	  58	     Director		 	Director
Hugh F. Wilde, Sr.	       69	     Director				Director

	Mr. James R. Bergey, Jr. was first elected as a Director of the Bank
on February 2, 1994. His current term expires May, 1998. Mr. Bergey became 
a Director of the Company on October 31, 1995. Mr. Bergey is a Certified 
Public Accountant and a Partner with Faw, Casson, & Co., LLP in Ocean City, 
Maryland. He is also Chairman of the Board of Directors of Atlantic General 
Hospital in Berlin, Maryland.

	Mr. James R. Bergey, Sr. was first elected as a Director of the Bank 
on February 4, 1987. His current term expires May, 1998. Mr. Bergey became
a Director, Senior Vice President, and Secretary of the Company on October
31, 1995. Mr. Bergey has been employed by the Bank since 1954.

	Mr. Richard L. Bunting was first elected Director of the bank on 
February 3, 1988. His current term expires May, 1998. He is also a member of t
he Bank's Executive Committee. Mr. Bunting became a Director of the Company 
on October 31, 1995. He is the retired President and owner of William B. 
Tilghman Co., in Pocomoke, Maryland.

	Mr. John H. Burbage, Jr. was first elected as a Director of the Bank
on February 4, 1987. His current term expires May, 1998. Mr. Burbage became
a Director of the Company on October 31, 1995. Mr. Burbage is the owner 
of Mystic Harbour Development Co., Mystic Harbour Utility Co., Bethany 
Land Co., and Style Guide Clothing Stores.

	Mr. Reese F. Cropper, Jr. has been employed by the Bank since May 
1962 and was elected President in January 1974. Mr. Cropper was first elected 
Director of the Bank on March 6, 1974. His current term expires May, 1998. He
is a member of the Executive Committee of the Bank. Mr. Cropper became
President, Chief executive officer, and a director of the Company on October
31, 1995. He is the past president of the Maryland Bankers Association and he
serveda six year term as a member of the Banking Board of the State of 
Maryland from 1983 to 1989. Mr. Cropper is also a Director of 
Atlantic General Hospital.

	Mr. Hale Harrison was first elected as a Director of the Bank on January
8, 1975. His current term expires May, 1998. Mr. Harrison became a Director of
the Company on October 31, 1995. He owns and operates several motels and
restaurants in Ocean City, Maryland. Mr. Harrison serves as a member of the
board of directors and as a member of the finance committee of Atlantic General 
Hospital.

	Mr. Gerald T. Mason was first elected as a Director of the bank on 
February 2, 1994. His current term expires May, 1998. Mr. Mason became a 
Director of the Company on October 31, 1995. Mr. Mason is the Administrator 
for Worcester County and serves as a director of Hospice.

	Mr. Joseph E. Moore was first elected Director of the Bank on November 
3, 1976. His current term expires May, 1998. Mr. Moore became a Director of the 
Company on October 31, 1995. Mr. Moore is a Partner at the law firm Williams, 
Hammond, Moore, Shockley & Harrison, P.A. He is the Chairman of the Berlin 
Board of Zoning Appeals and a member of the board of directors at Atlantic 
General Hospital. 

	Mr. Horace D. Quillin, Sr. was first elected as Director of the Bank 
on August 2, 1972. His current term expires May, 1998. Mr. Quillin became
 a Director of the Company on October 31, 1995. He is the Chairman of the 
Executive Committee. He is the retired owner and operator of Berlin Ice 
Company in Berlin, Maryland.

	Mr. Michael L. Quillin, Sr. was first elected Director of the Bank on
December 6, 1978. His current term expires May, 1998. Mr. Quillin became a
 Director of the Company on October 31, 1995. Mr. Quillin owns and operates 
several motels in Ocean City, Maryland. He is a director and treasurer of the 
Quillin Foundation. Mr. Quillin is also a member of the Ocean City Chamber 
of Commerce.

	Mr. Hugh F. Wilde. Sr. Was first elected as a Director of the Bank 
on December 12, 1967. His current term expires May, 1998. Mr. Wilde became 
a Director of the Company on October 31, 1995. He is the President of the 
Executive Corporation and a Partner in W.I.I. Ltd. Partnership.
Mr. Wilde operatesa motel in Ocean City, Maryland and is a 
member of the ocean City Chamber of Commerce. 

	Mr. William H. Mitchell has been employed by the Bank since June
1970. He became Vice President of the Bank on February 3, 1988. Mr. Mitchell
became Cashier of the Bank on February 5, 1986. He became Treasurer of the 
Corporation on October 31, 1995.


Item 12. Certain Relationships and Related Transactions

	In response to this item, the information included on page 8 of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be 
held May 13, 1998, is incorporated herein by reference.

There are two sets of directors that have a family relationship. James R. 
Bergey, Sr. is the father of James R. Bergey, Jr.; and Reese F. 
Cropper, Jr. and Joseph E. Moore are first cousins.

	None of the directors of the Company and the Bank have been 
involved in any administrative or criminal proceedings. Mr. Mitchell has not
been involved in any administrative or criminal proceedings.


Item 13. Exhibits and Reports on Form 8-K

(a)	Exhibits

3.1  Articles of Incorporation of the Company (incorporated by 
reference to Exhibit 3.1 of Registration Statement Form
		 S-4, File No. 33-99762).

3.2  Bylaws of the Company (incorporated by reference to Exhibit 
3.2 of Registration Statement Form S-4, File 
		No. 33-99762).

	13	Annual Report to Shareholders for the year ended December 31,
 1996.
	13 (a)   Amendment  - the 1997 Annual Report for Calvin B. Taylor Bankshares, 
Inc.

	21	Subsidiaries of the Company.

(b)	Reports on Form 8-K
		No reports on Form 8-K were filed during the fourth quarter
 of the year ended December 31, 1997.



SIGNATURES

	In accordance with Section 13 or 15(d) of the Securities Exchange Act 
of 1934, the registrant has duly caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized.

		CALVIN B. TAYLOR BANKSHARES, INC.
		(Registrant)

Date:	                          	By:                                         
     
Reese F. Cropper, Jr.
President and Chief Executive Officer

	In accordance with the Securities Exchange Act of 1934, this report 
has been signed below by the following persons on behalf of the registrant and
 in the capacities and on the dates indicated.

Date:	                      	By:                                             
           
			James R. Bergey, Jr.
			Director

Date:	                      	By:                                             
    
           
			James R. Bergey, Sr.
			Executive Vice President

Date:	                      	By:                                              
   
           
			Richard L. Bunting
			Director

Date:	                      	By:                                             
    
           
			John H. Burbage, Jr.
			Director

Date:	                      	By:                                             
    
           
			Reese F. Cropper, Jr.
			President and Chief Executive Officer

Date:	                      	By:                                             
    
           
			Hale Harrison
			Director

Date:	                      	By:                                             
               
			Gerald T. Mason
			Director

Date:	                      	By:                                               
           
			Joseph E. Moore
			Director


Date:	                      	By:                                                

           
			Horace D. Quillin, Sr.
			Director

Date:	                      	By:                                             
 
           
			Michael L. Quillin
			Director

Date:	                      	By:
                                             			


EXHIBIT 13

ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1997

Calvin B. Taylor Bankshares, Inc.



1997 Annual Report

Calvin B. Taylor Banking Company

BUSINESS OF THE COMPANY

	Calvin B. Taylor Bankshares, Inc. (the "Company") was incorporated 
as a Maryland corporation on October 31, 1995, to become a one-bank holding 
company by acquiring all of the capital stock of Calvin B. Taylor Banking 
Company (the "Bank").  The Bank was incorporated 
under the laws of the State of Maryland 
on December 17, 1907. The Bank was organized as a nonmember state bank under
the laws of the State of Maryland. The Bank is engaged in a general commercial 
banking business, emphasizing in its marketing the Bank's local management and 
ownership, from its main office location in its primary service area of 
Worcester County and its neighboring counties.  The Bank offers a full range 
of deposit services that are typically available in most 
banks and savings and loan associations, including checking accounts, NOW 
accounts, savings accounts and other time deposits of
various types, ranging from daily money market accounts to longer-term 
certificates of deposit.  In addition, the Bank offers certain retirement 
account services, such as Individual Retirement Accounts.  
The Bank also offers a full range of short- to medium-term commercial and 
personal loans.  The Bank also originates and holds
or sells into the secondary market fixed and variable rate 
mortgage loans and real estate construction and acquisition loans.  
Other bank services include cash management services, safe deposit boxes,
travellers checks, direct deposit of payroll
and social security checks, and automatic drafts for various accounts.  


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Company's financial
statements and related notes and other statistical information included 
elsewhere herein.

Overview
	Consolidated income of the Company is derived primarily from operations 
of the Bank.  The 1997 net income was $4,934,903, compared to $4,535,641
 for 1996.  The Company continued its history of above average earnings with
 a return on equity of 11.90% and return on assets of 1.99% for 1997, compared 
to returns of 11.71% and 1.87% for 1996.

Results of Operations
	The Company reported net income of $4,934,903, or $6.09 per share, 
for the year ended December 31, 1997, which was 
an increase of $399,262, or 8.80%,
over the net income of $4,535,641, or $5.60 
per share, for the year ended December
31, 1996.  The primary reason for the change in profitability is the increase 
in net interest income.

	Net interest income increased $737,565, or 6.88%, to $11,464,583 in 
1997, from $10,727,018 in 1996.  This increase in net interest income was the 
result of an increase in interest revenue of 
$611,837 and a decrease in interest 
expense of $125,728.  The yield 
on interest-earning assets increased to 7.60% 
in 1997, from 7.53% in 1996, while the combined yield on deposits and
borrowed funds decreased to 2.90% from 3.01% for the same period.
  Net interest income increased primarily because the balance of 
interest-earningassets grew faster than the 
balance of deposits and borrowed funds.  A secondary cause of the increase 
in net interest income is the decline in the cost of funds.

	The provision for loan losses was $50,000 in 1997, a decrease of
 $143,000 from the $193,000 provision in 1996.  The decreased provision is 
the result of a $1,839 decrease in net charge-offs for 1997, while the loan 
portfolio growth slowed during 1997.  During 1997, the Company had net 
charge-offs of $9,677 which was .01% of average loans while during 1996
 there were net charge-offs of $11,516.

	Both noninterest income and noninterest expense changed by less
 than 8.00% during 1997, compared to 1996.  Discussion of these items is 
presented later under their respective headings.

Net Interest Income
	The primary source of income for the Company is net interest income, 
which is the difference between revenue on interest-earning 
assets, such as investment securities and loans, and interest 
incurred on interest-bearing sources of funds, such as 
deposits and borrowings.  The level of net interest income is 
determined primarily by the average balance of interest-earning 
assets and funding sources and the various rate spreads 
between the interest-earning assets and the Company's funding sources.  
The table "Average Balances, Income and Expenses,
and Rates" which follows shows the Company's average volume of interest-earning 
assets and interest-bearing liabilities for 1997 and 1996, and 
related income/expense and yields.  Changes in net interest income from 
period to period result from 
increases or decreases in the volume of interest-earning 
assets and interest-bearing liabilities, and increases or decreases in 
the average rates earned and paid on such assets and liabilities.  
The volume of interest-earning assets and interest-bearing
liabilities is affected by the ability to manage the earning-asset portfolio
(which includes loans), and the availability of particular sources 
of funds, such as noninterest bearing deposits.  The table "Analysis of 
Changes in Net Interest Income" shows the amount of net interest 
income change from rate changes and from activity changes.

	The key performance measure for net interest income is the "net
margin on interest-bearing assets," or net interest income divided by average
interest-earning assets.  The Company's net interest margin for 1997, was 
5.03% compared to 4.84% for 1996.  Because  most of the loans of the Bank
are written with a demand feature, the income of the Bank should not change
dramatically as interest rates change.  Management of the Company expects to
maintain the net margin on interest-earning assets. The net margin may decline,
however, if competition increases, loan demand decreases, or the cost of funds 
rises faster than the return on loans and securities.  
Although such expectations arebased on management's judgment, actual 
results will depend on a number of factors that cannot be predicted with 
certainty, and fulfillment of management's 
expectations cannot be assured.


Average Balances, Interest, and Yields 

For the Year Ended                                For the Year Ended 

December 31, 1997                         December 31, 1996 
Average balance   Interest   Yield            Average balance   Interest   Yield

Assets

Federal funds sold and 
securities sold
under repurchase
agreements$21,772,942 $1,213,039 5.57% $23,969,126 $1,259,685 5.26%
Interest bearing 
deposits    1,243,208     69,397 5.58%   1,704,150     95,268 5.59%

Investment
securities:
U. S.
Treasury   47,767,048  2,856,937 5.98%  43,711,492  2,583,671 5.91%
State and
municipal  11,991,438    706,528 5.89%  13,903,680    801,909 5.77%
Other         249,030     20,000 8.03%     239,800     17,511 7.30%
Total
investment
securities 60,007,516  3,583,465 5.97%  57,854,972  3,403,091 5.88%
Loans:
Commercial 15,039,707  1,272,668 8.46%  15,633,923  1,367,904 8.75%
Mortgage  131,512,234 11,012,492 8.37% 124,541,433 10,420,312 8.37%
Consumer    5,010,982    510,50010.19%   5,093,110    530,99010.43%
Total
loans     151,562,923 12,795,660 8.44% 145,268,466 12,319,206 8.48%
Allowance
for loan
losses      2,053,552                    1,882,458
Total
loans, net
of 
allowance 149,509,371 12,795,660 8.56% 143,386,008 12,319,206 8.59%
Total
interest-earning 
assets    232,533,037 17,661,561 7.60% 226,914,256 17,077,250 7.53%
Noninterest-bearing
cash        9,997,110     -             10,031,886     -   
Premises
and
equipment   3,967,373     -              3,526,237     -   

Other 
assets      1,839,672     -              1,776,380     -   

Total
assets  $ 248,337,192 17,661,561     $ 242,248,759 17,077,250 


Liabilities and Stockholders' Equity

Interest-bearing 
Deposits
Savings 
and NOW 
deposits $ 53,793,965  1,389,996 2.58%  52,217,712  1,360,659 2.61%
Money market 
and 
supernow   55,012,180  1,497,011 2.72%  53,398,291  1,486,936 2.78%
Other 
time 
deposits   62,944,109  3,078,856 4.89%  63,458,397  3,242,018 5.11%
Total
interest-bearing 
deposits  171,750,254  5,965,863 3.47% 169,074,400  6,089,613 3.60%
Borrowed
funds          80,743      1,820 2.25%     135,884      3,798 2.80%
Total interest-bearing
liabilities171,830,997 5,967,683 3.47% 169,210,284  6,089,613 3.60%
Noninterest-bearing 
deposits   34,304,946     -             33,499,139     -   

          206,135,943  5,967,683       202,709,423  6,093,411 

Other
liabilities   738,550     -                820,691     -   
Stockholders' 
equity     41,462,699     -             38,718,645     -   

Total liabilities 
and
stockholders' 
equity $  248,337,192  5,967,683       242,248,759   6,093,411 

Net interest 
spread                          4.13%                            3.93%
Net interest income   11,693,878        10,983,839 
Net margin on 
interest-earning 
assets                          5.03%                            4.84%

Interest on tax-exempt securities, including dividends, are reported
on fully taxable equivalent basis.


Analysis of Changes in Net Interest Income

                     Year ended December 31,          Year ended December 31,
                     1997 compared with 1996          1996 compared with 1995
                     variance due to                  variance due to

                     Total    Rate    Volume          Total    Rate     Volume

Earning assets

Interest bearing
deposits           $(25,871) (104)   (25,767)       $(19,813)  4,324   (24,137)
Federal funds
sold                (46,646) 68,873 (115,519)        142,948 (86,922)  229,870 
Investment securities:
U. S. Treasury      273,266  33,583  239,683         (51,095) 61,263  (112,358)
U. S. Agency        (95,381) 14,955 (110,336)        157,715  (1,457)  159,172 
Other                 2,489   1,815      674           4,905   3,683     1,222 
Loans:
Demand and time     (95,236)(43,242) (51,994)        198,482   3,412   195,070 
Mortgage            592,180   8,724  583,456         528,199 (10,752)  538,951 
Installment         (20,490)(11,924)  (8,566)        (18,433)  4,753   (23,186)
Total interest 
revenue             584,311  72,680  511,631         942,908 (21,696)  964,604 

Interest-bearing liabilities

Savings and NOW 
deposits            29,337  (11,803)  41,140        (62,047)(105,360)   43,313 
Money market 
and supernow        10,075  (34,791)  44,866        (99,684) (65,391)  (34,293)
Other time 
deposits          (163,162)(136,882) (26,280)       477,137  125,456   351,681 
Other borrowed 
funds               (1,978)    (434)  (1,544)        (2,007)    (162)   (1,845)

Total interest 
expense           (125,728)(183,910)  58,182        313,399  (45,457)  358,856 

Net interest 
income         $   710,03   256,590  453,449        629,509   23,761   605,748 


Interest on tax-exempt securities, including dividends, are reported 
on fully taxable equivalent basis.

The variance that is both rate/volume related is reported with
the rate variance.

Composition of Loan Portfolio

	Because loans are expected to produce higher yields than
investment securities and other interest-earning assets (assuming that
loan losses are not excessive), the absolute volume of loans and the
volume as a percentage of total earning assets is an important determinant 
of net interest margin.  Average loans, net of the allowance for loan 
losses, were $149,509,371 and $143,386,008 during 1997 and 1996,
respectively, which constituted 64.30% and 63.19% of average 
interest-earning assets for the periods.  At December 31, 1997, the 
Company's loan to deposit ratio was 71.18% compared to 72.96% at 
December 31, 1996, while the 1997 average loans to average deposits
 were 72.56%.  The Bank extends loans primarily to customers located
 in and near Worcester County.  There are no industry concentrations 
in the Bank's loan portfolio.  The Bank does, however, have a substantial
 portion of its loans in real estate and its performance will be influenced
 by the real estate market in the region.

Compositon of Loan Portfolio
                                      December 31,
                   1997                              1996 
                           Percent                            Percent 
                  Amount   of total                 Amount    of total 

Commercial  $ 13,237,003   8.87%                16,481,935    10.91%
Real estate  129,549,396  86.79%               127,381,520    84.30%
Construction   1,372,853   0.92%                 2,277,132     1.51%
Consumer       5,112,378   3.42%                 4,959,548     3.48%

Total loans  149,271,630 100.00%               151,100,135   100.00%

Less allowance for credit losses
               2,080,798                         2,040,475 
Net loans    147,190,832                       149,059,660


Loan Maturity Schedule and Sensitivity to Changes in Interest Rates
                                  December 31, 1997 

                                 Over one 
               One year          through        Over five 
               or less           five years     years             Total 

Commercial   $  13,237,003          -              -           13,237,003 
Real estate    129,549,396          -              -          129,549,396 
Construction     1,372,853          -              -            1,372,853 
Consumer           436,889       4,122,176      553,313         5,112,378 
Total          144,596,141       4,122,176      553,313       149,271,630 

Fixed interest 
rate         $     436,889       4,122,176      553,313         5,112,378 
Variable interest
rate (demand)  144,159,252          -              -          144,159,252 
Total          144,596,141       4,122,176      553,313       149,271,630 


As of December 31, 1997, $144,159,252, or 96.58%, of the total
loans were either variable arte loans or loans written on demand.

The Company has the following commitments, lines of credit, and
letters of credit outstanding as of December 31, 1997 and 1996, respectively.

                                   1997                        1996 
Construction loans         $  2,616,516               $   6,948,259 
Other loan commitments        1,981,942                   4,500,515 
Standby letters of credit     1,119,080                   1,162,117 
               
Total                      $  5,717,538               $  12,610,891 

The following table sets forth the composition of the Company's
loan portfolio as of December 31, 1997 and 
1996, respectively.

	Loan commitments are agreements to lend to a customer as 
long as there is no violation of any condition to the contract.  Loan
commitments may have interest fixed at current rates, fixed expiration 
dates, and may require the payment of a fee. Letters of credit are commitments 
issued to guarantee the performance of a customer to a third party.  Loan
commitments and letters of credit are made on the same terms, including 
collateral, as outstanding loans.  The Company's exposure to credit loss
in the event of nonperformance by the borrower is represented by the contract
amount of the commitment.  Management is not aware of any accounting
loss the Company will incur by the funding of these commitments.

Loan Quality

	The allowance for loan losses represents a reserve for potential losses
in the loan portfolio.  The adequacy of the allowance for loan losses is 
evaluated periodically based on a review of all significant loans, 
with a particular emphasis on non-accruing, past due, 
and other loans that management believes require attention.  The determination 
of the reserve level rests upon management's judgment 
about factors affecting loan quality and assumptions about the economy. 
Management considers the year-end allowance appropriate and adequate to 
cover possible losses in the loan portfolio; however, management's judgment
is based upon a number of assumptions about future events, which are believed
to be reasonable, but which may or may not prove valid.  Thus, there can be no 
assurance that charge-offs in future periods will not exceed the allowance for
loan loss or that additional increases in the loan loss allowance will not be 
required.

	For significant problem loans, management's review consists of 
evaluation of the financial strengths of the borrowers and guarantors, the
related collateral, and the effects of economic conditions.  The overall 
evaluation of the adequacy of the total allowance for 
loan losses is based on an analysis of historical loan loss 
ratios, loan charge-offs, delinquency trends, and previous 
collection experience, along with an assessment of the effects of external 
economic conditions. Although the Bank has a history 
of low loan charge-offs, its current
policy is to maintain an allowance of approximately 1.35% of gross loans unless 
management's evaluation of the risk associated with each loan indicates that 
the allowance should be higher.  This allowance may be increased for 
reserves for specific loans identified as substandard during 
management's loan review.

	The table "Allocation of Allowance for Loan Losses" which follows 
shows the specific allowance applied by loan type and also the general 
allowance included in the December 31, 1997 and 1996, allowance for loan losses.

	The provision for loan losses is a charge to earnings in the current period
to replenish the allowance and maintain it at a level management has determined
to be adequate.  As of December 31, 1997 and 1996, the respective allowance for
loan losses were 1.39% and 1.35% of outstanding loans.


Allocation of Allowance for Loan Losses

                         1997                              1996 

Commercial         135,128   6.49%                   191,819   9.40%
Real estate        749,644  36.03%                   665,194  32.60%
Construction         5,491   0.26%                     9,109   0.45%
Consumer           158,785   7.63%                   159,296   7.81%
Commitments         22,992   1.10%                    57,244   2.81%
General          1,008,758  48.49%                   957,813  46.93%
               
Total          $ 2,080,798  100.00%              $ 2,040,475   100.00%



Allowance for Loan Losses

                                1997                              1996 



Balance at beginning
of year                     $  2,040,475                      $  1,858,991 

Loan losses:
 Commercial                       -                                    196 
 Mortgages                        13,701                             4,694 
 Consumer                          4,854                            18,105 

Total loan losses                 18,555                            22,995 


Recoveries on loans
previously charged off:
 Commercial                          198                               425 
 Consumer                          8,680                            11,054 
       
Total loan recoveries              8,878                            11,479 


Net loan losses                    9,677                            11,516 
Provision for loan losses 
charged to expense                50,000                           193,000 

Balance at end of year       $ 2,080,798                       $ 2,040,475 


Allowance for loan losses
to loans outstanding
at end of year                     1.39%                             1.35%


Net charge-offs to
average loans                      0.01%                             0.01%


	As a result of management's ongoing review of the loan portfolio, 
loans are classified as nonaccrual when it is not reasonable to expect 
collection of interest under the original terms.  These loans are classified as
nonaccrualeven though the presence of collateral or the borrower's 
financial strength may be sufficient toprovide for ultimate repayment.
Interest on nonaccrualloans is recognized only when received. A delinquent loan 
is generally placed in nonaccrual status when it becomes 90 days 
or more past due.  When a loan is placed in nonaccrual status, all 
interest which has been accrued on the loan but remains unpaid is reversed 
and deducted from earnings as a reduction of reported
interest income.  No additional interest is accrued on the loan balance 
until the collection of both principal and interest becomes reasonably certain.

	The Company had no nonperforming loans at December 31, 1997, while
year-end 1996 nonperforming loans totaled $67,194.  Where real estate acquired 

by foreclosure and held for sale is included with nonperforming 
loans, the result comprises nonperforming assets.  Loans are classified as 
impaired when the collection of contractual obligations, including 
principal and interest, is doubtful. Management has identified no significant 
impaired loans as of December 31, 1997 or 1996.

Liquidity and Interest Rate Sensitivity

	The primary objective of asset/liability management is to ensure the 
steady growth of the Company's primary source of earnings, net interest income. 
Net interest income can fluctuate with significant interest rate movements.  To
lessen the impact of these margin swings, the balance sheet should be
structured so that repricing opportunities exist for both assets and 
liabilities in roughly equivalent amounts at approximately the same time 
intervals.  Imbalances in these repricing opportunities at any point in 
time constitute interest rate sensitivity.

	Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to provide sufficient 
funds to cover deposit withdrawals and payment of debt and operating 
obligations.  These funds can be obtained by converting assets to 
cash or by attracting new deposits.

	Average liquid assets (cash and amounts due from banks, interest bearing
deposits in other banks, federal funds sold, and investment securities) were 
45.14% of average deposits for 1997, compared to 46.19% for 1996.

	Interest rate sensitivity may be controlled on either side of the balance
sheet.  On the asset side, management can exercise some control on maturities. 
Also, loans may be structured with rate floors and ceilings on variable 
rate notes and by providing for repricing opportunities on fixed rate notes.  
The Company's investment portfolio, including federal funds sold, 
provides the most flexible and fastest control over rate sensitivity since 
it can generally be restructured more quickly than the loan portfolio.

	On the liability side, deposit products can be restructured so as to offer
incentives to attain the maturity distribution desired.  Competitive factors 
sometimes make control over deposits more difficult and less effective.

	Interest rate sensitivity refers to the responsiveness of interest-bearing 
assets and liabilities to changes in market interest rates.  The 
rate-sensitive position, or gap, is the difference in the volume 
of rate-sensitive  assets and liabilities at a given time interval.  
The general objective of gap management is to actively manage 
rate-sensitive assets and liabilities to reduce the impact of 
interest rate fluctuations on the net interest margin.  Management 
generally attempts to maintain a balance between rate-sensitive assets and 
liabilities as the exposure period is lengthened to minimize the overall 
interest rate risk to the Company.

	The asset mix of the balance sheet is continually evaluated in terms of
several variables; yield, credit quality, appropriate funding sources, 
and liquidity. Management of the liability mix of the balance sheet 
focuses on expanding the various funding sources.

	The interest rate sensitivity position at December 31, 1997, is presented
in the table "Interest Sensitivity Analysis." The difference between 
rate-sensitive assets and rate-sensitive liabilities, or the 
interest rate sensitivity gap, is shown at the bottom of the table.
The Company was asset-sensitive for all time horizons. For asset-sensitive 
institutions, if interest rates should decrease, the net interest 
margins should decline.  Since all interest rates and yields do not adjust 
at the same velocity, the gap is only a general indicator of rate sensitivity.


Interest Sensitivity Analysis

                                 December 31, 1997
                           After three
                 Within    but within    After one
                 three      twelve       but within     After
                 months     months       five years   five years    Total

Assets

Earning assets:
Federal funds 
sold           20,207,703  $  -          $  -         $  -         $ 20,207,703 
Interest-bearing 
deposits          100,000     935,000       194,000      -            1,229,000 
Investment 
securities     18,330,186  22,310,552    22,608,522     2,310,000    65,559,260 
Loans         144,214,543     381,598     4,122,176       553,313   149,271,630 

Total earning 
assets     $  182,852,432  23,627,150    26,924,698     2,863,313   236,267,593 



Liabilities
Interest-bearing 
liabilities:
Money market   55,482,239     -             -            -           55,482,239 
Savings and 
NOW deposits   55,214,983     -             -            -           55,214,983 
Certificates 
$100,000 and 
over            1,490,525   5,653,695     1,203,917      -            8,348,137 
Certificates 
under $100,000 17,566,176  27,644,757     9,443,318      -           54,654,251 

Total 
interest-bearing 
liabilities  129,753,923   33,298,452    10,647,235      -          173,699,610 

Period gap    53,098,509   (9,671,302)   16,277,463   2,863,313      62,567,983 

Cumulative
gap           53,098,509   43,427,207    59,704,670  62,567,983      62,567,983 


Ratio of 
cumulative gap 
to total earning 
assets            22.47%       18.38%      25.27%       26.48%          26.48%


	The table "Investment Securities Maturity Distribution and Yields" shows that 
as of December 31, 1997, $40,640,738 of the investment portfolio matures in one 
year or less.  The balance of the debt securities mature within five 
years except for the only debt security classified as "available-for-sale." 
The funds invested in federal funds sold provide liquidity so that only 
debt securities with an original maturity in excess of ten years have 
been classified as "available-for-sale."  Other sources of liquidity 
include letters of credit, overnight federal funds, and reverse repurchase 
agreements available from correspondent banks.  The total 
lines of credit available from correspondent banks at December 31, 1997, 
was $15,000,000.



Investment Security Maturity Distribution and Yields

                             
                       1997                            1996
                                    Year-end                      Year-end
                                    tax equivalent                tax equivalent
                    Book value      yields          Book value    yields

U.S. Treasury 
securities:

One year or less $  34,909,733        5.76%      $  21,739,065     5.56%

Over one 
through five        18,980,412        6.00%         25,452,039     6.12%

Over ten years       2,310,000        7.29%          2,125,000     7.29%

Total U.S. Treasury 
securities          56,200,145        5.90%         49,316,104     5.92%


State, county, and 
municipal 
securities:
 
One year or less     5,731,005        5.74%          7,843,837     5.75%

Over one through 
five                 3,628,110        6.10%          7,575,301     6.14%

Over ten years            -             - %               -          - %

Total state, county, 
and municipal 
securities           9,359,115        5.88%         15,419,138     5.94%


Total investment 
securities:

One year or less    40,640,738        5.75%         29,582,902     5.61%
 
Over one 
through five        22,608,522        6.02%         33,027,340     6.12%
  
Over ten years       2,310,000        7.29%          2,125,000     7.29%

Total debt 
securities          65,559,260        5.90%         64,735,242     5.92%


Equity securities      263,450        8.03%            235,400     8.33%

Total securities $  65,822,710        5.91%      $  64,970,642     5.93%

Yields are calculated based on amortized cost.


Deposits and Other Interest-Bearing Liabilities

	Average interest-bearing  liabilities  increased $2,620,713, or  
1.55%, to  $171,830,997 in  1997,  from  $169,210,284 in
1996.  Average interest-bearing  deposits  increased $2,675,404, or 1.58%,
1997.   to  $171,750,254 in  1997, from  $169,074,400  in  1996,
while average demand deposits increased $805,807, or 2.41% to $34,304,946
in 1997, from $33,499,139 in 1996.  A December 31, 1997, total deposits were 
$206,793,198, compared to $204,297,806 at December 31, 1996, 
an increase of 1.22%.

	The following table sets forth the deposits of the Company by
category as of December 31, 1997 and 1996, respectively.

                                        December 31,
                            1997                               1996
                                Percent of                         Percent of
                     Amount     deposits                Amount     deposits
Demand deposit 
accounts         33,093,588     16.00%              31,837,470     15.58%

NOW accounts     23,836,816     11.53%              23,873,331     11.69%

Money market 
and Supernow 
accounts         55,482,239     26.83%              53,907,865     26.39%

Savings 
accounts         31,378,167     15.17%              30,003,012     14.69%

Time deposits 
less than 
$100,000         54,654,251     26.43%              55,270,915     27.05%

Time deposits 
of $100,000 
or more           8,348,137      4.04%               9,405,213      4.60%


Total deposits  206,793,198    100.00%             204,297,806    100.00%


	Core deposits, which exclude certificates of deposit of $100,000 
or more, provide a relatively stable funding source for the Company's loan
portfolio and other earning assets.  The Company's core deposits increased
$3,552,468 during 1997. Deposits, and particularly core deposits, have been
the Company's primary source of funding and have enabled the Company to
meet both its short-term and long-term liquidity needs.  Management anticipates 
that such deposits will continue to be the Company's primary source of funding 
in the future.  The maturity distribution of the Company's time deposits over 
$100,000 at December 31, 1997, is shown in the following table.


                                       December 31, 1997

                                              After six
                               After three    through      After
               Within three    through        twelve       twelve
               months          six months     months       months    Total


Certificates 
ofdeposit 
of $100,000
or more      $ 1,490,525     $ 5,653,695    $ 1,203,917      -     $ 8,348,137 


	Large certificate of deposit customers tend to be extremely sensitive to 
interest rate levels, making these deposits less reliable sources 
of funding for liquidity planning purposes than core deposits.  Some financial 
institutions partially fund their balance sheets using large certificates of 
deposit obtained through brokers.  These brokered deposits are generally 
expensiveand are unreliable as long-term funding sources.  Accordingly, the 
Company does not accept brokered deposits.

	Borrowed funds consist of an obligation under capital lease which is
paying down over the five year lease term which expires in 1998.



Noninterest Income

	Noninterest income for 1997 was $853,278, compared to noninterest
income in 1996 of $791,305, an increase of $61,973, or 7.83%.  The Bank has
restructured its credit card merchant fees which resulted in an increased in 
credit card income of $18,115.  Service charges on deposits have grown with the
growth in deposits while the Bank has implemented only a modest increase 
in the fee schedule.  

	The following table presents the principal components of noninterest 
income for the years ended December 31, 1997 and 1996, respectively.


                          Noninterest Income
                                    
                               1997                     1996

Serivice charges on 
deposit accounts         $  607,647               $  567,154 

Other noninterest 
revenue                     245,631                  224,151 

Total noninterest 
income                   $  853,278               $  791,305 



Noninterest income as 
a percentage of average 
total assets                  0.34%                    0.33%


Noninterest Expense

	Noninterest expense increased by $325,286, or 7.54%, from $4,314,750 
in 1996 to $4,640,036 in 1997.  Increased personnel costs were due primarily to
annual raises.  Other operating expenses have increased with the growth in 
deposits and loans and as general prices have increased.

	The Company has plans to open a second bank in Delaware during the first
half of 1998.  The opening of this office is expected to increase noninterest 
expense.



	The following table presents the principal components of noninterest 
expense for the years ended December 31, 1997 and 1996, respectively.


Noninterest Expense
                                       1997             1996

Compensation and related expenses   2,757,865        2,573,228 
Occupancy expense                     366,170          363,175 
Furniture and equipment expense       450,593          417,582 
Amortization of intangible assets      18,249           18,368 
Advertising                           117,356          124,635 
Courier service                        66,615           66,910 
Deposit insurance                      31,666            2,000 
Director fees                          64,352           61,200 
Dues, donations, and subscriptions     58,658           41,384 
Freight                                47,145           28,604 
Liability insurance                    56,172           52,068 
Postage                               150,210          153,123 
Professional fees                      63,194           53,864 
Stationery and supplies               163,105          139,428 
Telephone                              61,145           65,388 
Teller machine fees                    65,207           53,197 
Miscellaneous                         102,334          100,596 
  
Total noninterest expense         $ 4,640,036      $ 4,314,750 


Noninterest expense as a 
percentage of average 
total assets                            1.87%            1.78%


Capital

 Under the capital guidelines of the Federal Reserve Board and the
FDIC, the Company and the Bank are currently required to maintain a minimum
risk-based total capital ratio of 8%, with at least 4% being Tier 1 capital. 
Tier 1 capital consists of common shareholders' equity, qualifying perpetual 
preferred stock, and minority interests in equity accounts 
of consolidated subsidiaries,less certain intangibles.  In addition, the 
Company and the Bank must maintaina minimum Tier 1 leverage 
ratio (Tier 1 capital to total assets) of at least 3%, but 
this minimum ratio is increased by 100 to 200 basis points for other than the 
highest-rated institutions.

	At December 31, 1997, the Company and the Bank exceeded their 
regulatory capital ratios, as set forth in the following table.
Analysis of Capital


                             Analysis of Capital

                     Required       1997                     1996
                     Minimums       Company    Bank          Company    Bank
Total risk-based 
capital ratio        8.0%           36.1%      32.5%         33.6%      32.8%

Tier I risk-based 
capital ratio        4.0%           34.9%      31.2%         32.3%      31.5%

Tier I 
leverage ratio       3.0%           16.7%      14.8%         15.8%      15.4%



Accounting Rule Changes

	FASB Statement No. 125, Accounting for Transfers and Servicing 
of Financial Assets and Extinguishment of Liabilities requires recognition of
financial and servicing assets an entity controls and the liabilities it has 
incurred after a transfer has occurred.  The Statement was effective for 
transfers occurring after December 31, 1996.

	FASB Statement No. 128, Earnings Per Share replaces the presentation 
of primary earnings per share with a presentation of basic earnings per share.  
It also requires a dual presentation of basic and diluted earnings per share 
on the face of the income statement.  It is effective for financial 
statements issued for periods ending after December 15, 1997.  Because of the
noncomplex capital structure of the Company, this pronouncement did not 
change the earnings per share presentation.

	FASB Statement No. 129, Disclosure of Information about Capital 
Structure establishes standards for disclosing information about an entity's
capital structure, including dividend and liquidation preferences, participation
rights and any unusual voting rights.  It is effective for financial 
statements for periods ending after December 15, 1997.  There were no changes
to the Bank's financial statements as a result of this new standard.

	FASB Statement No. 130, Reporting Comprehensive Income requires that 
all items that are required to be recognized under accounting standards as 
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.  
Comprehensive income of the Bank would include unrealized gains and losses on
securities available for sale, net of tax. This Statement is effective for 
financial statements for periods beginning after December 15, 1997.

	FASB Statement No. 131, Disclosures about Segments of an Enterprise 
and Related Information requires that a public company report financial and
descriptive information about its reportable operating segments.  Operating
segments are components of an enterprise about which separate financial 
information is available that is evaluated regularly by management in 
deciding how to allocate resources and in assessing performance.  Generally, 
financial information is required to be reported on the basis that is used 
internally for evaluating segment performance and deciding how to allocate 
resources to segments.  This Statement is effective for financial statements 
for periods beginning after December 15, 1997.

Impact of Inflation

	Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company and the Bank are primarily monetary in nature.
Therefore, interest rates have a more significant effect on the Company's 
performance than do the effects of changes in the general rate of inflation 
and change in prices. In addition, interest rates do not necessarily move in 
the same direction or in the same magnitude as the prices of goods and 
services.  As discussed previously, management seeks to manage the 
relationships between interest sensitive assets and liabilities in 
order to protect against wide interest rate fluctuations, including those 
resulting from inflation.  See "Liquidity and Interest Rate Sensitivity" above. 

Industry Developments

	Certain recently enacted and proposed legislation could have an effect on
both the costs of doing business and the competitive factors facing the 
financial institution industry.  The Company is unable at this time to assess
the impact of this legislation on its financial condition or results of 
operations. 

Year 2000 Issues

	The Company anticipates replacing its in-house computer system by the 
first quarter of 1999.  It will only invest in hardware and software that 
will operate effectively through and past the year 2000 (y2k).  The current 
hardware and software vendors have made changes to get their computers and 
programs year 2000 compliant.  In addition to its mainframe, the Company has 
numerous portable computers.  It is in the process of accessing which 
computers and programs will need to be replaced before the end of 1999.  
Because the Bank routinely upgrades its computers, the cost to replace old 
machines and software is not expected to exceed the normal replacement costs 
for the next two years.  The largest y2k exposure to most banks is the 
preparedness of its customers.  Management is addressing with its customers 
the possible consequences of not being prepared for y2k.  
Should large borrowers not sufficiently address this area, the Company may 
experience an increase in loan defaults.  The amount of potential loss from 
this issue is not quantifiable.  Management is reducing its exposure to these
losses by educating its customers.


MARKET FOR COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

	The Company's Articles of Incorporation authorize it to issue up to
2,000,000 shares of the common stock.

	As of February 24, 1998, there were approximately 595 holders of
record of the common stock and 810,000 shares of Common Stock issued and 
outstanding. There is no established public trading market in the stock, and 
there is no likelihood that a trading market will develop in the near future. 
The development of a trading market may be inhibited because a large portion 
of the Company's shares is held by insiders.  Transactions in the common 
stock are infrequent and are negotiated privately between the persons 
involved in those transactions.

	All outstanding shares of common stock of the Company are entitled 
to share equally in dividends from funds legally available, when, as, and if 
declared by the Board of Directors.   The Company paid dividends of $2.70 per
share in 1997, and $2.10 per share in 1996.  During both 1997 and 1996, the 
Company paid a special midyear dividend of $1.00 per share that is not expected
to be an annual event.


EXHIBIT 13 (a)

Calvin B. Taylor Bankshares, Inc.
and Subsidiaries




Table of Contents


								Page

Report of Independent Auditors					   1

Consolidated Financial Statements

	Consolidated Balance Sheets				   2

	Consolidated Statements of Income				    3

	Consolidated Statements of Changes			   4
	in Stockholder's Equity

	Consolidated Statements of				  5-6
	Cash Flows

	Notes to Consolidated Financial				  7-24
	Statements


Report of Independent Auditors
The Board of Directors and Stockholders
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Berlin, Maryland


	We have audited the accompanying consolidated balance sheets of Calvin B.
 Taylor Bankshares, Inc. and Subsidiaries as of December 31, 1997, 1996, and
 1995, and the related statements of income, changes in stockholders' equity,
 and cash flows for the years then ended.  
These consolidated financial statements are the responsibility of the Company's
 management.  
Our responsibility is to express an opinion on these financial statements based
 on our audits.

	We conducted our audits in accordance with generally accepted auditing
 standards.  
Those standards require that we plan and perform the audit to obtain reasonable
 assurance 
about whether the financial statements are free of material misstatement.  An
 audit includes 
examining, on a test basis, evidence supporting the amounts and disclosures in
 the financial 
statements.  An audit also includes assessing the accounting principles used
 and significant 
estimates made by management, as well as evaluating the overall financial
 statement 
presentation.  We believe that our audits provide a reasonable basis for our
 opinion.

	In our opinion, the consolidated financial statements referred to above present
 fairly, 
in all material respects, the financial position of Calvin B. Taylor Bankshares,
 Inc. and 
Subsidiaries as of December 31, 1997, 1996, and 1995, and the results of their
 operations and 
their cash flows for the years then ended in conformity with generally accepted
 accounting 
principles.








Salisbury, Maryland
January 5, 1998


Consolidated Balance Sheets
                                               December 31,
                        			              1997       	 1996        	   1995      
		Assets
Cash and due from banks $    9,150,979  $         9,802,923  $      11,028,482 
Federal funds sold and 
securities purchased under
agreements to resell	       20,207,703           14,000,000         31,000,000 
Interest-bearing deposits    1,229,000            1,423,000          2,009,000 
Investment securities available for sale 2,573,450 2,360,400         2,517,530 
Investment securities held to maturity 
(approximate market   value of $63,457,503,
62,789,427, and $53,408,540)          63,249,260     62,610,242    53,207,744 
Loans, less allowance for credit 
losses of $2,080,798, $2,040,475, 
and $1,858,991                  147,190,832       149,059,660     136,319,638 
Premises and equipment            4,152,389         3,473,786       3,393,761 
Accrued interest income           1,790,423         1,626,619       1,450,219 
Intangible assets                   107,476            66,812          15,552 
Deferred income taxes               104,061           154,323          28,103 
Other assets                       137,039             63,200          74,431 


                          $     249,892,612  $     244,640,965  $  241,044,460 

Liabilities and Stockholders' Equity
Deposits
  Noninterest-bearing $          33,093,588  $      31,837,470  $   40,938,084 
  Interest-bearing              173,699,610        172,460,336     161,902,004 
                                206,793,198        204,297,806     202,840,088 
Accrued interest payable            433,344            428,451         456,222 
Accrued income taxes                 21,527             81,197         589,913 
Obligation under capital lease       61,720            126,611         193,511 
Other liabilities                     5,806              7,827           3,649 
                                207,315,595        204,941,892     204,083,383 

Stockholders' equity
  Common stock, par value 
$1 per share; authorized
    2,000,000 shares; 
issued and outstanding 810,000 shares  810,000         810,000         810,000 
  Surplus			                     		17,290,000       17,290,000      17,290,000 
  Retained earnings          		   	24,120,666       21,372,763      18,538,122 
          			                    		42,220,666       39,472,763      36,638,122 
  Net unrealized gain on 
securities available for sale         356,351          226,310         322,955 
          		                    			42,577,017       39,699,073      36,961,077 

                   				     $     249,892,612  $   244,640,965  $  241,044,460 

   
 
The accompanying notes are an integral part of these financial statements.


Calvin B. Taylor Bankshares, Inc.
and subsidiaries

Consolidated Statements of Income
                                            Years Ended December 31,       
      
				                             1997              1996              1995      
Interest and dividend revenue
  Loans, including fees 			$     12,793,350  $    12,314,677  $    11,610,958 
  U. S. Treasury securities       2,856,937        2,583,671        2,634,766 
  State and municipal securities    486,343          554,258          444,412 
  Federal funds sold and securities 
    purchased under agreements to resell 
                                  1,213,039        1,259,685        1,116,737 
  Time certificates of deposit       69,397           95,268          115,081 
  Equity securities                  13,200           12,870           12,606 
          Total interest and dividend revenue 
                                 17,432,266        16,820,429       15,934,560 




Interest expense

  Deposit interest                5,965,863         6,089,613        5,774,207 
  Other                               1,820             3,798            5,805 
          Total interest expense  5,967,683         6,093,411        5,780,012 

          Net interest income    11,464,583        10,727,018       10,154,548 

Provision for credit losses          50,000           193,000           60,000 
    Net interest income 
     after provision             11,414,583        10,534,018       10,094,548 
     for credit losses

Other operating revenue

  Service charges on deposit accounts 607,647         567,154          540,182 
  Other noninterest revenue          245,631          224,151          217,053 
          Total other operating revenue 853,278       791,305          757,235 

Other expenses

  Salaries                         2,291,375        2,109,328        1,998,463 
  Employee benefits                  466,490          463,900          417,972 
  Occupancy                          366,170          363,175          354,992 
  Furniture and equipment            450,593          417,582          426,095 
  Other operating                  1,065,408          960,765        1,157,559 
          Total other expenses     4,640,036        4,314,750        4,355,081 

Income before income taxes         7,627,825        7,010,573        6,496,702 
Income taxes                       2,692,922        2,474,932        2,376,787 

Net income                $        4,934,903  $     4,535,641  $     4,119,915 

   Earnings per common share   $        6.09  $          5.60  $          5.09 

The accompanying notes are an integral part of these financial statements.




Calvin B. Taylor Bankshares, Inc.
and subsidiaries

Consolidated Statements of Changes in Stockholders' Equity


								                                                	Unrealized  
		   	                    Common stock    	  Undivided 		gain on    
			                   Shares     Par value    Surplus    profits   securities   

Balance, December 31, 1994   810,000 $810,000  17,290,000  5,228,207    -   

 Net income            -              -            -         4,119,915      -   

 Cash dividend, $1.00 per share    -       -         -      (810,000)       -   

 Change in unrealized gain         -       -         -         -       322,955 
      on securities 

 Balance, December 31, 1995   810,000  810,000 17,290,000 18,538,122  322,955 

 Net income     		               -        -         -      4,535,641     -   

 Cash dividend, $2.10 per share  -        -         -     (1,701,000)    -   

 Change in unrealized gain       -        -         -          -      (96,645)
      on securities 

 Balance, December 31, 1996  810,000  810,000 17,290,000  21,372,763   226,310 

 Net income                 	    -        -         -      4,934,903      -   

Cash dividend, $2.70 per share    -       -         -     (2,187,000)     -   

 Change in unrealized gain	       -       -         -           -     130,041 
     on securities 

 Balance, December 31, 1997  810,000  $810,000 17,290,000  24,120,666  356,351 

 
   
 The accompanying notes are an integral part of these financial statements.



Calvin B. Taylor Bankshares, Inc.
and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 

      1997  	          1996 	           1995      

Cash flows from operating activities
  Interest received         		$  16,835,399 	 $ 16,187,302 	 $   15,262,895 
  Fees and commissions received     856,139        761,379          691,058 
  Interest paid    			           (5,962,790)    (6,121,182)      (5,624,996)
  Cash paid to suppliers and employees(4,297,300)(3,979,974)     (4,005,200)
  Income taxes paid 	          	   (2,885,011) (3,049,058)       (1,907,237)

                                  4,546,437      3,798,467        4,416,520 


Cash flows from investing activities
  Proceeds from maturities       33,192,000     43,555,000       35,334,183 
     of investment securities
  Purchase of investment        (33,399,142)   (52,501,096)     (24,278,134)
securities held to maturity
  Certificates of deposits purchased 194,000       586,000          592,000 
    , net of maturities
  Loans made, net of principal collected 1,818,828  (12,933,022)   (5,517,381)
  Purchases of and deposits 
   on premises, equipment, 
    software, and other intangibles (1,039,865)     (437,851)      (254,341)
  Proceeds from sale of equipment         -           17,125            -   

                           				        765,821    (21,713,844)     5,876,327 

Cash flows from financing activities
  Net increase (decrease) in
     Time deposits            		  (1,673,740)       2,732,698      9,929,539 
     Other deposits                4,169,132       (1,274,980)     1,188,361 
  Payments on capital lease          (64,891)         (66,900)       (67,914)
  Dividends paid                  (2,187,000)      (1,701,000)      (810,000)

               			                   243,501         (310,182)    10,239,986 


Net increase (decrease) in cash    5,555,759      (18,225,559)    20,532,833 
      and cash equivalents

Cash and cash equivalents at      23,802,923       42,028,482     21,495,649 
       beginning of year

Cash and cash equivalents      $  29,358,682     $ 23,802,923 $   42,028,482 
       at end of year
   
The accompanying notes are an integral part of these financial statements.


Calvin B. Taylor Bankshares, Inc.
and Subsidiaries

Consolidated Statements of Cash Flows
(Continued)


                                            Years Ended December 31, 

                                1997 	           1996 	           1995      

Reconciliation of net income to net cash provided by
   operating activities

   Net income		           $  4,934,903 	      $ 4,535,641 	       $  4,119,915 

   Adjustments to reconcile net income to net cash 
      provided by operating activities
        Depreciation and amortization  347,663    346,078             353,440 
        Provision for credit losses     50,000    193,000              60,000 
        Deferred income taxes          (31,560)   (65,410)             (4,292)
        Amortization of premiums and  (433,063)  (456,727)           (586,404)
                 accretion of discounts, net
        (Gain) loss on disposition of assets -    (12,287)                  -   
        Loss on security sale               -         -                  817 
        Decrease (increase) in 
           Accrued interest receivable (163,804) (176,400)           (86,895)
           Other assets                (100,904)  (33,119)           (65,360)
        Increase (decrease) in
           Accrued interest payable       4,893   (27,771)           155,016 
           Accrued income taxes         (59,670) (508,716)           473,842 
           Other liabilities             (2,021)    4,178             (3,559)

                                   $  4,546,437  $ 3,798,467   $  4,416,520 

The accompanying notes are an integral part of these financial statements.





Calvin B. Taylor  Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


 1.	Summary of Significant Accounting Policies

	The accounting and reporting policies reflected in the financial statements
 conform to generally accepted accounting principles and to general practices
 within the banking industry.

	Calvin B. Taylor Bankshares, Inc. is a bank holding company.  Its principal 
subsidiary, Calvin B. Taylor Banking Company, is a financial institution
operating primarily in Worcester County, Maryland. The Bank offers deposit
 services and loans to individuals, 
small businesses, associations and government entities.  Other services include
 direct deposit 
of payroll and social security checks, automatic drafts from accounts, automated
 teller machine services, safe deposit boxes, money orders and travelers
 cheques.  The Bank also offers credit card services and discount brokerage
 services through correspondents.

	Calvin B. Taylor Bankshares, Inc.'s other subsidiary, Calvin B. Taylor Bank of 
Delaware, is a financial institution in the process of formation which is
 expected to begin operation in Sussex County, Delaware during 1998.

	The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions that
 affect the reported amounts of assets and liabilities and disclosure of
 contingent assets and liabilities at 
the date of the financial statements.  These estimates and assumptions may
 affect the reported 
amounts of revenues and expenses during the reporting period.  Actual results
 could differ from these estimates.

Principles of consolidation
	The consolidated financial statements of Calvin B. Taylor Bankshares, Inc. 
include the accounts of its wholly owned subsidiaries, Calvin B. Taylor Banking
 Company and Calvin B. Taylor Bank of Delaware.

Cash equivalents
	For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, federal funds sold, and overnight securities
 purchased under agreements to resell.  Federal funds are purchased and sold for
 one-day periods.

Investment securities
	As securities are purchased, management determines if the securities should be 
classified as held to maturity or available for sale.  Securities which
 management has the intent and ability to hold to maturity are recorded at
 amortized cost which is cost adjusted for amortization of premiums and
 accretion of discounts to maturity.  During 1995, the Financial Accounting
 Standards Board (FASB) provided a one-time opportunity to transfer securities 
between classifications.  All securities classified as available-for-sale were
 transferred from the held-to-maturity classification.

	Gains and losses on disposal are determined using the specific-identification 
	method.

Premises and equipment
	Premises and equipment are recorded at cost less accumulated depreciation.  
Depreciation is computed under both straight-line and accelerated methods over
 the estimated useful lives of the assets.

The accompanying notes are an integral part of the financial statements.
Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


 1.	Summary of Significant Accounting Policies (Continued)

Intangible assets
	Intangible assets are amortized over their useful lives using the straight-line
 method.

Loans and allowance for credit losses
	Interest on loans is credited to income based on the principal amounts
 outstanding.  
The accrual of interest is discontinued when any portion of the principal or 
interest is ninety days past due and collateral is insufficient to discharge the
 debt in full.

	The allowance for credit losses is maintained at a level deemed appropriate by 
management to provide adequately for known and inherent risks in the loan
 portfolio.  The 
allowance is based upon a continuing review of past loan loss experience,
 current economic 
conditions which may affect the borrowers' ability to pay, and the underlying
 collateral value 
of the loans.  If the current economy or real estate market were to suffer a
 severe downturn, 
the estimate for uncollectible accounts would need to be increased.  Loans which
 are deemed 
to be uncollectible are charged off and deducted from the allowance.  The
 provision for credit 
losses and recoveries on loans previously charged off are added to the 
allowance.

	Loans are considered impaired when, based on current information, management 
considers it unlikely that collection of principal and interest payments will be
 made according 
to contractual terms.  Generally, loans are not reviewed for impairment until 
the accrual of 
interest has been discontinued.

Income taxes
	The provision for income taxes includes taxes payable for the current year and 
deferred income taxes.  Deferred income taxes are provided for the temporary 
differences 
between financial and taxable income.  Tax expense and tax benefits are 
allocated to the banks 
and company based on their proportional share of taxable income.

Per share data
	Earnings per common share and dividends per common share are determined by 
dividing net income and dividends by the 810,000 shares outstanding.

 2.	Cash and Equivalents

	The Bank normally carries balances with other banks that exceed the federally 
insured limit.  The average balances carried in excess of the limit, including 
unsecured federal 
funds sold to the same banks, were $21,777,954 for 1997, $24,057,839 for 1996, 
and $17,812,744 for 1995.

	Banks are required to carry noninterest-bearing cash reserves at specified 
percentages of deposit balances.  The Bank's normal amount of cash on hand and 
on deposit with other 
banks is sufficient to satisfy the reserve requirements.

 3.	Lines of Credit

	The Bank has available lines of credit, including overnight federal funds, 
reverse 
repurchase agreements and letters of credit, totaling $15,000,000, as of 
December 31, 1997, 1996, and 1995.

The accompanying notes are an integral part of the financial statements.



Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


 4.	Investment Securities

 	Investment securities are summarized as follows:

                        Amortized 	  Unrealized	    Unrealized	     Market  
December 31, 1997      	   cost        gains   	     losses    	     value      
Available for sale
  U.S. Treasury          1,992,885  $   317,115      $     -     $   2,310,000 
  Equity                     -          263,450            -           263,450 

     		          $       1,992,885  $   580,565      $     -     $   2,573,450 
 
   Held to maturity
  U.S. Treasury 	 $     53,890,145  $   175,832     $    3,052    $ 54,062,925 
  State and municipal    9,359,115       40,321          4,858       9,394,578 

      		          $     63,249,260      216,153     $    7,910      63,457,503 
 
December 31, 1996
Available for sale
  U.S. Treasury  $       1,991,698  $   133,302     $       -    $   2,125,000 
  Equity                     -          235,400             -          235,400 

                 $       1,991,698  $   368,702  $          -    $   2,360,400 
 
Held to maturity
  U.S. Treasury         47,191,104  $   160,982  $      19,461    $ 47,332,625 
  State and municipal   15,419,138       42,037          4,373      15,456,802 

                  $     62,610,242  $   203,019   $     23,834    $ 62,789,427  
   
 December 31, 1995 
Available for sale
 U.S. Treasury   $       1,991,373  $   274,257  $         -      $  2,265,630 
  Equity                     -          251,900            -         251,900 

                 $       1,991,373  $   526,157  $         -      $  2,517,530 
 
Held to maturity
  U.S. Treasury   $     42,879,867  $   221,904 $         52,002  $ 43,049,769 
  State and municipal   10,327,877       40,505            9,611    10,358,771 

                  $     53,207,744  $   262,409  $        61,613  $ 53,408,540 



The accompanying notes are an integral part of the financial statements.
Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

 4.	Investment Securities (Continued)

	The amortized cost and estimated market value of debt securities, by 
contractual maturity and the amount of pledged securities, follow.  Actual
 maturities may 
differ from contractual maturities because borrowers may have the right to call
 or prepay 
obligations with or without call or prepayment penalties.


        December 31, 1997     	  December 31, 1996        December 31, 1995     
        Amortized     Market    Amortized     Market    Amortized       Market
    	       cost        value       cost       value      cost          value   
Available for sale due
  After ten years 
    $   1,992,885  $ 2,310,000  $1,991,698  $ 2,125,000 $1,991,373  $2,265,630 

Held to maturity due
  In one year or less
     $ 40,640,738 $40,725,433 $ 29,582,902 $29,606,635 $36,980,277 $37,050,458 
  After one year 
    through five years
       22,608,522  22,732,070   33,027,340  33,182,792   15,077,56  15,233,557 
  After five through
     ten years
           -            -            -              -     1,149,904  1,124,525 
 
     $63,249,260 $63,457,503  $62,610,242  $62,789,427 $53,207,744 $53,408,540 


Pledged securities
   $   5,494,785  $ 5,531,876  $6,751,564  $6,920,996  $6,071,589  $ 6,165,365 

	Investments are pledged to secure deposits of federal and local governments.

	Securities with an amortized cost of $50,000 were sold from the held-to-
maturity portfolio during 1995 because they did not conform to the Bank's 
investment policy.

 5.	Loans and Allowance for Credit Losses

	Major classifications of loans are as follows:


				                                 1997             1996      	   1995      

Demand and time             $     13,237,003   $    16,481,935  $   13,701,631 
Mortgage                         129,549,396       127,381,520     118,210,875 
Construction                       1,372,853         2,277,132       1,018,052 
Installment                        5,112,378         4,959,548       5,248,071 

                                 149,271,630       151,100,135     138,178,629 

Allowance for credit losses        2,080,798         2,040,475       1,858,991 

Loans, net                 $     147,190,832     $ 149,059,660  $  136,319,638 

The accompanying notes are an integral part of the financial statements.


Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


 5.	Loans and Allowance for Credit Losses (Continued)

	The rate repricing distribution of the loan portfolio follows: 

                                 1997      	      1996      	      1995      

Immediately		             $ 144,169,000      $ 145,893,311    $ 132,930,558 
Within one year                 427,141            734,733          504,027 
Over one to five years        4,122,176          3,911,648        4,247,071 
Over five years                 553,313            560,443          496,973 

            			           $ 149,271,630      $ 151,100,135    $ 138,178,629 

	Outstanding loan commitments and letters of credit are as follows:


                                       1997     	      1996      	      1995    
Loan commitments
  Construction and land development $ 2,616,516  $  6,948,259  $    4,344,065 
  Other                               1,981,942     4,500,515       2,190,300 

                   			           $    4,598,458  $ 11,448,774  $    6,534,365 
   
Standby letters of credit
  Secured by deposits             $   1,021,080  $  1,020,467  $      315,045 
  Other                                  98,000       141,650         142,710 

                                 $    1,119,080  $  1,162,117  $      457,755 


	Loan commitments are agreements to lend to customers as long as there is no 
violation of any conditions of the contracts.  Loan commitments generally have
 interest at current market rates, fixed expiration dates, and may require
 payment of a fee.  
	Letters of credit are commitments issued to guarantee the performance of a
 customer to a third party.

	Loan commitments and letters of credit are made on the same terms, including 
collateral, as outstanding loans.  The Bank's exposure to credit loss in the
 event of nonperformance by the borrower is represented by the contract amount 
of the commitment.  Management is not aware of any accounting loss the Bank will
 incur by the funding of these commitments.

	The Bank makes loans to customers located primarily in the Delmarva 
region.  Although the loan portfolio is diversified, its performance will be
 influenced by the economy of the region.

The accompanying notes are an integral part of the financial statements.


Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


 5.	Loans and Allowance for Credit Losses (Continued)

	Transactions in the allowance for credit losses were as follows:


                                  1997      	 	     1996      	      1995      

Beginning balance	          $    2,040,475 	  $    1,858,991   $    1,798,685 
Provision charged to operation      50,000           193,000           60,000 
Recoveries                           8,878            11,479           25,986 

                                 2,099,353         2,063,470        1,884,671 
Loans charged off                   18,555            22,995           25,680 

Ending balance              $    2,080,798    $    2,040,475    $   1,858,991 

	Amounts past due 90 days or more, and still accruing interest, and nonaccrual 
loans are as follows:


      		  December 31, 1997       December 31, 1996        December 31, 1995    
               90 days                90 days                 90 days 		
           or more   Nonaccrual    or more   Nonaccrual    or more  Nonaccrual

Demand and time $ 1,645  $   -    $   54,000  $  -      $   11,117  $     -   
Mortgage        201,047      -       244,748    66,587     399,614    107,042 
Installment      12,671      -        20,413       607      17,776        -   

            $   215,363  $   -    $  319,161  $ 67,194   $ 428,507  $ 107,042 
 
Interest not accrued
  on nonaccrual loans	    $  -                 $    896             $  11,008 

	Management has identified no impaired loans at December 31, 1997, 1996, and 
1995.

The accompanying notes are an integral part of the financial statements.



Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

6.	Intangibles

	A summary of intangible assets and the related amortization is as follows:


               Estimated useful life  	  1997         1996       	    1995      

Computer software     3 - 5 years     $ 159,388    $ 159,388        $141,678 
Other acquisition costs3 - 25 years       1,718        1,718           1,718 
Organization costs       5 years        110,831       51,918             -   

                                        271,937      213,024         143,396 
Accumulated amortization                164,461      146,212         127,844 

Net intangible assets            $      107,476    $  66,812     $    15,552 

Amortization expense             $        18,249    $ 18,368     $    8,413 


7.	Bank Premises and Equipment

	A summary of bank premises and equipment and the related depreciation is as 
follows:

          		Estimated useful life	         1997         1996           1995     
Land 				                         $   1,882,545   $  991,013   $     758,857 
Premises         5-50 years           3,443,345    3,437,718       3,358,437 
Furniture and equipment 5-40 years    2,294,630    2,212,325       2,154,193 
Construction-in-progress                  8,610         -               -   
Property held under 
   capital lease    5 years             329,303      329,303         329,303 

                                      7,958,433    6,970,359       6,600,790 
Accumulated depreciation              3,806,044    3,496,573       3,207,029 

Net premises and equipment         $  4,152,389  $ 3,473,786   $   3,393,761 

Depreciation expense               $    329,414  $   327,710   $     345,027 

	The Bank leases data processing equipment under a capital lease expiring in 
1998.  
The assets under the lease are recorded at the present value of the minimum 
lease payments at 
inception less accumulated depreciation. The liability is the present value of 
remaining 
payments.

	Minimum future lease payments as of December 31, 1997, including maintenance, 
under the capital lease total $90,720, including $29,000 for the maintenance
 agreement.

	The interest rate on the capital lease was imputed based on the Bank's 
incremental 
borrowing rate at the inception of the lease.


The accompanying notes are an integral part of the financial statements.


Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

 8.	Deposits

		Major classifications of interest-bearing deposits are as follows:

                                  1997     		      1996      	      1995      

Money market and Supernow 	$ 55,482,239  	  $ 53,907,865     $  50,796,846 
Savings and NOW              55,214,983       53,876,343        49,161,728 
Other time                   63,002,388       64,676,128        61,943,430 

                         $  173,699,610   $  172,460,336    $  161,902,004 

	Included in other time deposits are certificates of deposit of $100,000 or more
 with the following maturities:

Three months or less     $    1,490,525   $    2,244,402    $    1,168,771 
Over three through twelve months 5,653,695     6,110,871         4,886,481 
Over one through five years      1,203,917     1,049,940         1,548,458 

                          $      8,348,137  $  9,405,213     $   7,603,710 
 
Interest expense           $       506,234  $    428,182     $     250,237 

	No certificates of deposit have remaining maturities in excess of five years.

 9.	Other Operating Expenses

		The components of other operating expenses follow:

                                       1997     	      1996      	      1995    
Amortization of intangible assets  $    18,249     $   18,368     $    8,413 
Advertising                            117,356        124,635        129,578 
Courier service                         66,615         66,910         64,814 
Deposit insurance                       31,666          2,000        225,546 
Director fees                           64,352         61,200         61,125 
Dues, donations, and subscriptions      58,658         41,384         37,636 
Freight                                 47,145         28,604         81,320 
Liability insurance                     56,172         52,068         47,835 
Postage                                150,210        153,123        138,344 
Professional fees                       63,194         53,864         49,914 
Stationery and supplies                163,105        139,428        115,814 
Telephone                               61,145         65,388         55,030 
Teller machine fees                     65,207         53,197         45,525 
Miscellaneous                          102,334        100,596         96,665 

                                $    1,065,408    $   960,765     $1,157,559 


The accompanying notes are an integral part of the financial statements.
Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

10.	Income Taxes

		The components of income tax expense are as follows:


                      		     1997      	      1996      	      1995      
Current
  Federal			       $     2,346,813       $     2,134,931       $    1,926,206 
  State                    377,669               405,411              454,873 

                         2,724,482             2,540,342            2,381,079 
Deferred                   (31,560)              (65,410)              (4,292)

                   $     2,692,922       $     2,474,932       $    2,376,787 

		The components of the deferred tax benefit are as follows:

Provision for credit losses $(15,574)    $      (70,207)        $     (23,172)
Pension expense              1,795                1,974                 6,701 
Depreciation                 (16,247)            (1,351)               11,440 
Discount accretion            11,470                269                 3,884 
Health insurance premium deposits (13,350)           -                    -   
Nonaccrual loans                 346              3,905                (3,145)

                     $        (31,560)    $      (65,410)        $     (4,292)

		The components of the net deferred tax assets are as follows:

Deferred tax asset
  Allowance for credit losses $  562,373   $     546,799         $     476,592 
  Health insurance premium deposits 13,350           -                   -   
  Nonaccrual loans                    -              346                 4,251 

                                 575,723         547,145               480,843 
Deferred tax liabilities         
  Depreciation                   212,282         228,529               229,880 
  Pension                         13,973          12,178                10,204 
  Discount accretion              21,193           9,723                 9,454 
  Unrealized gain on securities 
   available for sale            224,214         142,392               203,202 

                                 471,662         392,822               452,740 

                        $        104,061    $    154,323        $       28,103 

The accompanying notes are an integral part of the financial statements.
Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


10.	Income Taxes (Continued)

	A reconciliation of the provision for taxes on income from the statutory 
federal income tax rates to the effective income tax rates follows:


                                       					  1997  		  1996  		  1995  

Statutory federal income tax rate             34.0 %     34.0 %     34.0 %
Increase (decrease) in tax rate resulting from
  Tax-exempt income                           (1.9)      (2.4)      (2.1)
  State income taxes net of federal	           3.2        3.7        4.6 
          income tax benefit
  Other                                         -         -          0.1 

                                              35.3%      35.3 %     36.6 %


11.	Lease Commitments

	The Bank leases the land on which the Route 50 branch is located and the 
branch office in South Pocomoke.  Lease obligations will require payments as
 follows:



                                          Minimum
   Period                                 rentals  

    1998                              $    18,162 
    1999                                   16,495 
    2000                                   13,162 
    2001                                   13,162 
    2002                                   13,162 
                                      $    74,143 

	The Route 50 lease provides for an increase in rent every 121/2 years based 
on the consumer price index.  The lease also provides an option to renew for a 
twenty-five 
year period subject to the same terms at the expiration of the initial term, 
August 31, 1999.

	The South Pocomoke lease provides for an increase in rent every five years 
based on the consumer price index.  The lease expires January 1, 2003.  All 
costs associated 
with the properties, including real estate taxes, are obligations of the Bank.

The accompanying notes are an integral part of the financial statements.




Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


12.	Pension Plan

	The Bank has a defined benefit pension plan covering substantially all of the 
employees.  Benefits are based on years of service and the employee's average 
rate of earnings 
for the final five full years before retirement. The Bank's funding policy is to
 contribute 
annually an amount that can be deducted for income tax purposes, determined 
using the 
projected unit credit cost method.  Assets of the plan are held in deposit 
accounts and 
mortgage loans.  The following table sets forth the financial status of the 
plan:


                                    1997      		      1996      	      1995     
Accumulated benefit obligation
  Vested				                 $  1,603,951 		 $  1,433,780    $    1,279,175 
  Nonvested                         2,169           7,380             8,022 

                             $  1,606,120    $  1,441,160    $    1,287,197 

Plan assets at fair value    $  2,219,851    $  2,004,200    $    1,799,123 
Projected benefit obligation    2,310,520       2,080,175         1,890,146 
Projected plan assets             (90,669)        (75,975)          (91,023)
        in excess of benefit obligations
Unrecognized prior service cost    70,821          80,939            91,057 
Unrecognized net (gain) loss       29,610          (4,250)           (8,653)
Unamortized net obligation         26,418          30,820            35,222 
       from transition
Prepaid pension expens     $       36,180   $      31,534     $      26,603 
       included in other assets

		Net pension expense includes the following components:

Service cost               $       82,851   $      81,063     $      66,172 
Interest cost                     143,866         130,838           119,413 
Actual return on assets          (180,123)       (165,889)         (146,874)
Amortization of unrecognized       10,118          10,118            10,118 
            prior service cost
Amortization of transition obligations 4,402        4,402             4,402 
Deferred loss                      28,240          18,598            13,237 

Net pension expense        $       89,354  $       79,130     $      66,468 

		Assumptions used in the accounting for net pension expense were:


                                            1997     	    1996     	  1995    

Discount rates				                           7.00%        7.00%       7.00%
Rates of increase in compensation levels     6.00%        6.00%       6.00%
Long-term rate of return on assets           7.50%        8.00%       8.00%


The accompanying notes are an integral part of the financial statements.


Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


13.	Fair Value of Financial Instruments

	The estimated fair values of the Bank's financial instruments are summarized
 below.  
The fair values of a significant portion of these financial instruments are 
estimates derived 
using present value techniques prescribed by the FASB and may not be indicative 
of the net 
realizable or liquidation values.  The calculation of estimated fair values is 
based on market 
conditions at a specific point in time and may not reflect current or future 
fair values.


                     December 31, 1997   December 31, 1996  December 31, 1995
                  Carrying     Fair     Carrying    Fair    Carrying    Fair
                  amount       value    amount      value   amount      value   
Financial assets
  Cash and due from 
    banks   9,150,979   9,263,907  9,802,923  9,887,787  11,028,482 11,119,681 
  Federal funds sold
           20,207,703  20,207,703 14,000,000  14,000,000  31,000,000 1,000,000 
  Interest-bearing deposits   
            1,229,000   1,238,186  1,423,000   1,433,599   2,009,000 2,027,014 
  Investment  securities (total)
           65,822,710  66,030,953 64,970,642  65,149,827 55,725,274 55,926,070 
  Loans, net
      147,190,832  146,996,644 149,059,660 148,899,731 136,319,638 136,178,402 
  Accrued interest receivable 
        1,790,423    1,790,423  1,626,619    1,626,619   1,450,219   1,450,219 

Financial liabilities
  Noninterest-bearing deposits
     $ 33,093,588  $ 33,093,588 31,837,470 31,837,470 40,938,084  40,938,084 
  Interest-bearing deposits
      173,699,610  173,776,507 172,460,336 172,641,527 161,902,004 162,121,003 
Obligation under capital lease
          61,720        61,720     126,611     126,611     193,511    193,511 
  Accrued interest payable
         433,344       433,344     428,45      428,451     456,222    456,222 

	The fair value of silver coin included with cash is determined based on quoted 
market prices.

	The fair value of interest-bearing deposits with other financial institutions 
is estimated based on quoted interest rates for certificates of deposit with 
similar remaining terms.

	The fair values of equity securities are determined using market quotations.  
The fair 
values of debt securities are estimated using a matrix that considers yield to 
maturity, credit quality, and marketability.

The accompanying notes are an integral part of the financial statements.



Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


13.	Fair Value of Financial Instruments (Continued)

	The fair value of fixed-rate loans is estimated to be the present value of 
scheduled 
payments discounted using interest rates currently in effect for loans of the 
same class and 
term.  The fair value of variable-rate loans,  including loans with a demand 
feature, is 
estimated to equal the carrying amount.  The valuation of loans is adjusted for 
possible loan losses.

	The fair value of interest-bearing checking, savings, and money market deposit 
accounts is equal to the carrying amount.  The fair value of fixed-rate time 
deposits is 
estimated based on interest rates currently offered for deposits of similar 
remaining maturities.

	It is not practicable to estimate the fair value of outstanding loan 
commitments, unused lines, and letters of credit.

14.	Related Party Transactions

	The executive officers and directors of the Bank enter into loan transactions 
with the 
Bank in the ordinary course of business.  The terms of these transactions are 
similar to the 
terms provided to other borrowers entering into similar loan transactions.


                                        	    1997      		      1996      



Beginning balance		                      $  9,482,547  		$  7,178,848 
Advances                                    2,651,499       3,328,459 
                                           12,134,046      10,507,307 
Repayments                                  2,667,073       1,024,760 

Ending balance                           $  9,466,973    $  9,482,547 

	The Bank obtains legal services from a law firm in which one of the principal 
attorneys is also a member of the Bank's Board of Directors.  Fees charged 
for these services 
are at similar rates charged by unrelated law firms for similar legal work.  
Amounts paid to 
this related party totaled $4,374 and $2,183 during the years ended 
December 31, 1997 and 1996.

The accompanying notes are an integral part of the financial statements.


Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements


15.	Capital Standards

	The Federal Reserve Board and the Federal Deposit Insurance Corporation have 
adopted risk-based capital standards for banking organization.  These standards 
require ratios 
of capital to assets for minimum capital adequacy and to be classified as well 
capitalized under 
prompt corrective action provisions.  The capital ratios and minimum capital 
requirements of the Bank are as follows:


                                                               To be well 
                              Actual       Capital adequacy    capitalized
(in thousands)               Amount  Ratio   Amount   Ratio   Amount    Ratio  

      December 31, 1997     
  Total capital
   (to risk-weighted assets)  38,896 32.5% >  9,589 >  8.0%  > 11,986 > 10.0%
  Tier 1 capital
    (to risk-weighted assets) 37,391 31.2% >  4,795 >  4.0% >   7,192  >  6.0%
  Tier 1 capital
   (to average assets)        37,391 14.8% > 10,090  > 4.0% >  12,612  >  5.0%


      December 31, 1996     
  Total capital
    (to risk-weighted assets) 39,779 32.8% >  9,702  > 8.0% >  12,128  > 10.0%
  Tier 1 capital
    (to risk-weighted assets) 38,257 31.5% >  4,851  > 4.0% >   7,277  >  6.0%
  Tier 1 capital
   (to average assets)        38,257 15.4% >  9,962  > 4.0% >   12,453  > 5.0%


	Tier 1 capital consists of capital stock, surplus, and undivided profits and 
total capital 
includes a limited amount of the allowance for credit losses.  In calculating 
risk-weighted 
assets, specific risk percentages are applied to each category of asset and 
off-balance sheet items.

	Failure to meet the capital requirements could affect the Bank's ability to 
pay dividends and accept deposits, and may significantly affect the operations 
of the Bank.


The accompanying notes are an integral part of the financial statements.




Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

16.	Parent Company Financial Information

	The balance sheets and statements of income and cash flows for Calvin B. 
Taylor Bankshares, Inc. (Parent Only) follow: 


                                                    			December 31,
Balance Sheets 						                      1997                       1996      
                 				Assets

Cash and due from banks				       $          255,797         $       909,975 
Interest-bearing deposits                    500,000                     -   
Securities available for sale                263,450                 235,400 
Investment in subsidiary banks            40,598,524              38,338,929 
Premises and equipment                       874,125                 232,156 
Organization costs                            90,808                  42,400 
Other assets                                   2,597                  33,087 
          Total assets              $     42,585,301        $     39,791,947 


			 Liabilities and Stockholders' Equity


Liabilities
  Accounts payable			               $           -           $          1,963  
  Deferred income taxes                        8,284                  90,911 
          Total liabilities                    8,284                  92,874 
Stockholders' equity
  Common stock, par value $1.00 per share; authorized  
    2,000,000 shares; issued and outstanding 810,000 shares
                                             810,000                 810,000 
  Additional paid-in capital              17,290,000              17,290,000 
  Retained earnings                       24,120,666              21,372,763 
  Net unrealized gain on securities available for sale  
                                             356,351                 226,310 
          Total stockholders' equity      42,577,017              39,699,073 
          Total liabilities and
             stockholders' equity      $  42,585,301        $     39,791,947 


 				Statements of Income

                                              Years Ended December 31,
                       			                    1997     		 	         1996       
Interest revenue 				                   $        30,586     $         5,228 
Dividend revenue                                 13,200               9,702 
Dividends from subsidiary                     5,929,000           2,916,000 
Equity in undistributed income of subsidiary (1,001,768)          1,618,986 
Rental income                                     1,575                -   
                                              4,972,593           4,549,916 

Expenses
  Occupancy            		                         4,476                  51 
  Furniture and equipment                         2,616                 -   
  Other                                          31,406              17,235 
                                                 38,498              17,286 

Income before income taxes                    4,934,095           4,532,630 
Income taxes (benefit)                             (808)             (3,011)
Net income                              $     4,934,903   $       4,535,641    

The accompanying notes are an integral part of the financial statements.



Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

16.	Parent Company Financial Information (Continued)


                                                 Years Ended December 31,
Statements of Cash Flows				                    1997                1996     

Cash flows from operating activities
  Interest and dividends received 	    $       5,728,997    $       2,930,930 
  Rental payments received                         1,575                 -   
  Cash paid for operating expenses               (27,340)              (7,768)
  Income taxes refunded (paid)                     3,162                 (150)
                                               5,706,394            2,923,012 
Cash flows from investing activities
  Organization costs                             (58,912)             (51,918)
  Purchase premises and equipment               (614,660)            (260,119)
  Investment in new subsidiary                (3,000,000)                -   
  Purchase of certificate of deposit            (500,000)                -   
                                              (4,173,572)            (312,037)

Cash flows from financing activities
  Dividends paid                              (2,187,000)          (1,701,000)

Net increase in cash                            (654,178)             909,975 

Cash and equivalents at beginning of year        909,975                  -   
Cash and equivalents at end of year      $       255,797     $        909,975 


Reconciliation of net income to net cash
   provided by operating activities
    Net income					                         $  4,934,903         $  4,535,641 
    Adjustments to reconcile net income to net 
       cash used in operating activities
       Undistributed net income of subsidiary  1,001,768           (1,618,986)
        Noncash distribution from subsidiary    (242,000)                -   
        Amortization and depreciation            13,121                 9,518 
        Increase (decrease) in other liabilities (1,963)                 -   
        Decrease (increase) in other assets         565                (3,161)
                                           $  5,706,394          $  2,923,012 


The accompanying notes are an integral part of the financial statements.



Calvin B. Taylor Bankshares, Inc. 
and Subsidiaries

Notes to Consolidated Financial Statements

17.	Quarterly Results of Operations (Unaudited)


                                           Three months ended
                           December 31,   September 30,   June 30,  March 31,   

1997
Interest revenue    $    4,462,491     4,523,650       4,250,828    4,195,297 
Interest expense         1,541,685     1,534,663       1,440,196    1,451,139 
Net interest income      2,920,806     2,988,987       2,810,632    2,744,158 
Provision for loan losses   25,000            -           25,000           -   
Net income               1,282,099     1,352,094       1,114,717    1,185,993 

Earnings per share   $        1.58     $    1.67       $    1.38    $    1.46 


1996
Interest revenue    $    4,358,710     4,442,713       3,986,962    4,032,044 
Interest expense         1,540,696     1,554,252       1,481,600    1,516,863 
Net interest income      2,818,014     2,888,461       2,505,362    2,515,181 
Provision for loan losses  143,000        25,000          25,000          -     
Net income               1,186,056     1,261,815       1,075,940    1,011,830 

Earnings per share    $       1.46     $    1.56       $    1.33    $    1.25 


1995
Interest revenue   $    4,106,171      4,129,395       3,857,144    3,841,850 
Interest expense        1,552,072      1,533,621       1,371,182    1,323,137 
Net interest income     2,554,099      2,595,774       2,485,962    2,518,713 
Provision for loan losses  35,000           -             25,000         -      
Net income              1,027,995      1,104,832       1,043,672      943,416 

Earnings per share   $       1.27     $     1.36       $    1.29     $   1.17 


18.	Contingencies

	The Company is involved in various legal actions arising from normal business 
activities.  Management believes that the ultimate liability or risk of loss 
resulting from these actions will not materially affect the Company's financial 
position.




The accompanying notes are an integral part of the financial statements.


Signatures

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


Calvin B. Taylor



Date:_________________________          By:___________________________
                                          Reese F. Cropper, Jr.
                                          President and CEO

Date:________________________           By:___________________________
                                           William H. Mitchell
                                           Chief Financial Officer


This statement has not been reviewed, or confirmed for accuracy or relevance,
by the Federal Deposit Insurance Corporation.




EXHIBIT 21

SUBSIDIARIES OF THE COMPANY

	Calvin B. Taylor Banking Company, a state bank organized under the
laws of the State of Maryland.

	Calvin B. Taylor Company, Delaware is in organization to be chartered
under the laws of the State of Delaware.