UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

Commission File Number: 000-50047

CALVIN B. TAYLOR BANKSHARES, INC.

I.R.S. Employer Identification No.: 52-1948274State of incorporation: Maryland
Address of principal executive offices: 24 North MainStreet, Berlin, Maryland 21811Issuer’s telephone number: (410) 641-1700
Indicate by check mark whether the registrant (1) has filedall reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. YES   X   NO ____
Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of "accelerated filer and large accelerated filer" in Rule 12b-2 ofthe Exchange Act. Large accelerated filer ____ Accelerated filer   X  Non-accelerated filer ____

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act). YES ____ NO   X  
Indicate the number of shares outstanding of each of theissuer’s classes of common stock, as of the latest practicable date: Theregistrant had 3,106,870 shares ofcommon stock ($1.00 par) outstanding as of October 31, 2007.
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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryForm 10-QIndex**Part I - Financial		InformationPageItem 1Consolidated		Financial StatementsConsolidated		Balance Sheets as of September 30, 2007 and December 31, 20063 Consolidated		Statements of Income for the three months ended		September 30, 2007 and 20064Consolidated		Statements of Income for the nine monthsended		September 30, 2007 and 20065Consolidated		Statements of Cash Flows for the nine months ended		September 30, 2007 and 20066-7Notes to		Consolidated Financial Statements8-9Item 2Management’s		Discussion and Analysis of Financial Conditionand Results		of Operations10-14Item 3Quantitative		and Qualitative Disclosures About Market Risks 14Item 4Controls and		Procedures15Part II - Other		InformationItem 1Legal		Proceedings16Item 1ARisk Factors16Item 2Unregistered		Sales of Equity Securities and Use of Proceeds16-17Item 3Defaults Upon		Senior Securities17Item 4Submission of		Matters to a Vote of Security Holders17Item 5Other		Information17Item 6Exhibit Index17Signatures18Exhibits19-21
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       		Calvin B. Taylor Bankshares, Inc. and Subsidiary 		Part I - Financial Information  		Consolidated Balance Sheets   		(unaudited)  		September 30,		December 31, 		2007		2006		Assets		Cash and due from banks		 $             17,169,053 		 $             21,138,799 		Federal funds sold		42,751,013 		24,616,735 		Interest-bearing deposits		5,718,296 		2,055,689 		Investment securities available for sale		32,909,275 		18,854,192 		Investment securities held to maturity (approximate   		  fair value of $45,304,127 and $56,031,190)		45,000,560 		56,271,631 		Loans, less allowance for loan losses  		  of $2,174,631 and $2,175,418		226,829,094 		231,251,783 		Premises and equipment		6,529,955 		6,562,837 		Accrued interest receivable		1,656,078 		1,692,622 		Computer software		153,953 		175,383 		Bank owned life insurance		4,672,219 		4,530,259  		Other assets		                     538,437 		                     382,236  		 $           383,927,933 		 $           367,532,166 		Liabilities and Stockholders' Equity		Deposits  		  Noninterest-bearing		 $             84,634,462 		 $             79,625,853 		  Interest-bearing		              218,676,003 		              210,698,907  		              303,310,465 		              290,324,760 		Securities sold under agreements to repurchase		                  4,862,232 		                  5,624,048 		Note payable		                     103,879 		                     120,737 		Accrued interest payable 		                     491,616 		                     340,155 		Deferred income taxes		                     778,296 		                     719,714 		Other liabilities		                       85,472 		                     233,196  		              309,631,960 		              297,362,610 		Stockholders' equity  		  Common stock, par value $1 per share   		   authorized 10,000,000 shares, issued and outstanding  		   3,106,870 shares at September 30, 2007, and  		   3,149,356 shares at December 31, 2006		                  3,106,870 		                  3,149,356 		  Additional paid-in capital		                12,546,805 		                14,117,732 		  Retained earnings		                56,699,156 		                51,053,985  		                72,352,831 		                68,321,073 		  Accumulated other comprehensive income		                  1,943,142 		                  1,848,483  		                74,295,973 		                70,169,556  		 $           383,927,933 		 $           367,532,166          		See accompanying Notes to Consolidated Financial Statements   
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       		Calvin B. Taylor Bankshares, Inc. and Subsidiary 		Consolidated Statements of Income (unaudited)   		For the three months ended 		September 30, 		2007		2006		Interest and dividend revenue  		  Loans, including fees		 $               4,163,017 		 $               4,118,206 		  U.S. Treasury and government agency securities		                     793,673 		                     709,789 		  State and municipal securities		                       14,965 		                       36,227 		  Federal funds sold 		                     608,500 		                     450,742 		  Interest-bearing deposits		                       51,474 		                       20,962 		  Equity securities		                         9,596 		                         8,152 		          Total interest and dividend revenue		                  5,641,225 		                  5,344,078    		Interest expense  		  Deposits		                  1,222,347 		                     832,106 		  Borrowings		                       11,036 		                       14,005 		    Total interest expense		                  1,233,383 		                     846,111    		    Net interest income		                  4,407,842 		                  4,497,967     		Provision for loan losses		                              -   		                              -    		    Net interest income after provision for loan losses		                  4,407,842 		                  4,497,967    		Noninterest revenue  		  Service charges on deposit accounts		                     244,484 		                     272,495 		  ATM and debit card revenue		                     145,509 		                     127,202 		  Miscellaneous revenue		                     103,968 		                       84,844 		    Total noninterest revenue		                     493,961 		                     484,541    		Noninterest expenses  		  Salaries		                     876,444 		                     818,334 		  Employee benefits		                     196,587 		                     179,344 		  Occupancy		                     180,344 		                     188,231 		  Furniture and equipment		                     117,194 		                     150,167 		  Other operating		                     469,590 		                     517,384 		    Total noninterest expenses		                  1,840,159 		                  1,853,460    		    Income before income taxes		                  3,061,644 		                  3,129,048 		Income taxes		                  1,100,500 		                  1,141,500    		Net income		 $               1,961,144  				 $               1,987,548  		   		Earnings per common share - basic and diluted		 $                        0.63 		 $                        0.63       		See accompanying Notes to Consolidated Financial Statements      
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       		Calvin B. Taylor Bankshares, Inc. and Subsidiary 		Consolidated Statements of Income (unaudited)   		For the nine months ended 		September 30, 		2007		2006		Interest and dividend revenue  		  Loans, including fees		 $             12,514,743 		 $             11,761,056 		  U.S. Treasury and government agency securities		                  1,979,548 		                  2,090,989 		  State and municipal securities		                       54,650 		                     127,539 		  Federal funds sold 		                  1,527,614 		                     788,780 		  Interest-bearing deposits		                       96,985 		                       56,285 		  Equity securities		                       50,744 		                       51,554 		          Total interest and dividend revenue		                16,224,284 		                14,876,203    		Interest expense  		  Deposits		                  3,369,510 		                  2,210,833 		  Borrowings		                       27,487 		                       36,260 		    Total interest expense		                  3,396,997 		                  2,247,093    		    Net interest income		                12,827,287 		                12,629,110     		Provision for loan losses		                              -   		                              -    		    Net interest income after provision for loan losses		                12,827,287 		                12,629,110    		Noninterest revenue  		  Service charges on deposit accounts		                     773,950 		                     852,560 		  ATM and debit card revenue		                     377,049 		                     337,585 		  Miscellaneous revenue		                     314,924 		                     298,313 		    Total noninterest revenue		                  1,465,923 		                  1,488,458    		Noninterest expenses  		  Salaries		                  2,586,155 		                  2,462,366 		  Employee benefits		                     602,606 		                     562,831 		  Occupancy		                     520,745 		                     537,140 		  Furniture and equipment		                     344,163 		                     389,597 		  Other operating		                  1,388,370 		                  1,448,024 		    Total noninterest expenses		                  5,442,039 		                  5,399,958    		    Income before income taxes		                  8,851,171 		                  8,717,610 		Income taxes		                  3,206,000 		                  3,148,500    		Net income		 $               5,645,171  				 $               5,569,110  		   		Earnings per common share - basic and diluted		 $                        1.80 		 $                        1.75       		See accompanying Notes to Consolidated Financial Statements
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       		Calvin B. Taylor Bankshares, Inc. and Subsidiary 		Consolidated Statements of Cash Flows (unaudited)   		For the nine months ended 		September 30, 		2007		2006		Cash flows from operating activities  		  Interest and dividends received		 $             15,810,513 		 $             14,636,435 		  Fees and commissions received		                  1,319,628 		                  1,367,603 		  Interest paid		                (3,245,536)		                (2,087,971)		  Cash paid to suppliers and employees		                (5,190,909)		                (5,181,433)		  Income taxes paid		                (3,337,063)		                (3,220,114) 		                  5,356,633 		                  5,514,520 		Cash flows from investing activities  		  Certificates of deposit purchased, net of maturities		                (3,671,107)		                       (3,268)		  Proceeds from maturities of investments available  		     for sale		                16,000,000 		                              -   		  Purchase of investments available for sale		              (29,458,743)		              (13,750,206)		  Proceeds from maturities of investments held to   		     maturity		                33,450,000 		                58,150,000 		  Purchase of investments held to maturity		              (22,171,766)		              (16,026,291)		  Loans made, net of principal collected		                  4,422,689 		              (24,404,008)		  Proceeds from sale of equipment		                         8,224 		                              -   		  Purchases of premises, equipment,  		    and computer software		                   (373,516)		                   (335,505) 		                (1,794,219)		                  3,630,722  		    		Cash flows from financing activities  		  Net increase (decrease) in  		    Time deposits		                16,669,168 		                12,149,970 		    Other deposits		                (3,683,463)		              (12,139,491)		    Securities sold under agreements to repurchase		                   (761,816)		                     (60,291)		  Principal payments on note payable		                     (16,858)		                     (15,878)		  Common shares repurchased		                (1,613,413)		                (1,111,431) 		  Dividends paid		                              -   		                (4,462,578) 		                10,593,618 		                (5,639,699)   		Net increase (decrease) in cash and cash equivalents		                14,156,032 		                  3,505,543 		Cash and cash equivalents at beginning of period		                45,771,812 		                50,425,595 		Cash and cash equivalents at end of period		 $             59,927,844 		 $             53,931,138 
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       		Calvin B. Taylor Bankshares, Inc. and Subsidiary 		Consolidated Statements of Cash Flows (unaudited)   		For the nine months ended 		September 30, 		2007		2006		Reconciliation of net income to net cash provided  		  by operating activities  		  Net income		 $               5,645,171 		 $               5,569,110 		  Adjustments to reconcile net income to net cash  		    provided by operating activities  		    Depreciation and amortization		                     419,498 		                     452,549 		    Deferred income taxes		                            118 		                              -   		    Amortization of premiums and accretion of  		      discounts, net		                   (450,380)		                   (148,182)		    (Gain) loss on disposition of assets		                            106 		                         2,651 		    Decrease (increase) in  		      Accrued interest receivable		                       36,544 		                     (91,585)		      Cash surrender value of bank owned life insurance		                   (141,960)		                   (120,288)		      Other assets		                   (156,201)		                     (98,235)		    Increase (decrease) in  		      Accrued interest payable		                     151,461 		                     159,122 		      Other liabilities		                   (147,724)		                   (210,622) 		 $               5,356,633 		 $               5,514,520       		  Composition of cash and cash equivalents  		    Cash and due from banks		 $             17,169,053 		 $             19,188,701 		    Federal funds sold 		                42,751,013 		                34,737,015 		    Interest-bearing deposits, except for time deposits		                         7,778 		                         5,422  		 $             59,927,844 		 $             53,931,138                                                 		See accompanying Notes to Consolidated Financial Statements
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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited)**
1. Basis of Presentation	The accompanying unaudited consolidated financial	statements have been prepared in accordance with generally accepted	accounting principles in the United States of America for interim financial	information and with the instructions to Form 10-Q. Accordingly, they do not	include all the information and footnotes required by generally accepted	accounting principles for complete financial statements. In the opinion of	management, all adjustments considered necessary for a fair presentation of	financial position and results of operations have been made. These	adjustments are of a normal recurring nature. Results of operations for the	nine months ended September 30, 2007 are not necessarily indicative of the	results that may be expected for the year ending December 31, 2007. For	further information, refer to the audited consolidated financial statements	and related footnotes included in the Company's Form 10-K for the year ended	December 31, 2006.
	Consolidation has resulted in the elimination of all	significant intercompany accounts and transactions.

Cash Flows	For purposes of reporting cash flows, cash and cash	equivalents include cash on hand, amounts due from banks, federal funds	sold, and interest-bearing deposits except for time deposits. Federal funds	are purchased and sold for one-day periods.

Per share data	Earnings per common share are determined by dividing net	income by the weighted average number of common shares outstanding for the	period, as follows:
 		2007		2006		Three months ended September 30		           3,113,341 		           3,176,307 		Nine months ended September 30		           3,132,836 		           3,182,979 
2. Comprehensive IncomeComprehensive income consists of:
 		For the nine months ended 		September 30, 		2007		2006		Net income		 $        5,645,171 		 $        5,569,110 		Unrealized gain on investment securities  		  available for sale, net of income taxes		                94,659 		              250,861 		Comprehensive income		 $        5,739,830 		 $        5,819,971 
3. Loan commitmentsLoan commitments are agreements to lend to customers as	long as there is no violation of any conditions of the contracts.	Outstanding loan commitments and letters of credit consist of:
 				September 30, 2007				December 31, 2006				Loan commitments 				 $     33,362,846   				 $      40,423,268  				Standby letters of credit 				 $       1,385,719   				 $        1,682,942  
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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)**
4. New accounting standards	The following accounting pronouncements have been	approved by the Financial Accounting Standards Board and would apply to the	Company if the Company or the Bank entered into an applicable activity.

FASB Statement No. 157, *Fair Value Measurements*	defines fair value, establishes a framework for measuring fair value, and	expands disclosures about fair value measurements.  SFAS No. 157 will	be applied prospectively and is effective for fiscal years beginning after	November 15, 2007, and interim periods within those fiscal years. 	Management does not expect SFAS No. 157 to have a material impact on the	Company’s consolidated financial statements.

FASB Statement No. 159, *The Fair Value Option for	Financial Assets and Financial Liabilities - including an amendment of FASB	Statement No. 115*. This Statement permits companies to choose to measure	many financial instruments and certain other items at fair value. The	objective is to improve financial reporting by providing companies with the	opportunity to mitigate volatility in reported earnings caused by measuring	related assets and liabilities differently without having to apply complex	hedge accounting provisions. This Statement is expected to expand the use of	fair value measurement, which is consistent with the Board’s long-term	measurement objectives for accounting for financial instruments. SFAS No.	159 is effective for fiscal years beginning after November 15, 2007. Early	adoption is permitted as of the beginning of a fiscal year that begins on or	before November 15, 2007, provided the entity also elects to apply the	provisions of FASB Statement No. 157, *Fair Value Measurements.*	Management does not expect SFAS No. 159 to have a material impact on the	Company's consolidated financial statements.

In September 2006, the Financial Accounting Standards	Board (FASB) ratified the consensus reached by the Emerging Issues Task	Force ("EITF") on issue No. 06-4, *Accounting for Deferred Compensation	and Postretirement Benefit Aspects of Endorsement Split-Dollar Life	Insurance Arrangements*determining whether the postretirement benefit	associated with an endorsement split-dollar life insurance arrangement is	effectively settled in accordance with FASB Statement No. 106, *Employers’	Accounting for Postretirement Benefits Other Than Pensions*(or Opinion	12, *Omnibus Opinion*-1967, if the arrangement does not constitute a	plan). The Task Force concluded that for a split-dollar life insurance	arrangement, an employer should recognize a liability for future benefits in	accordance with Statement 106 or Opinion 12 (depending on whether a	substantive plan is deemed to exist) based on the substantive agreement with	the employee. Management does not expect the adoption of EITF Issue No.	06-4, which is effective for fiscal years beginning after December 15, 2007,	to have a material impact on the Company's consolidated financial	statements.

The accounting policies adopted by management are	consistent with accounting principles generally accepted in the United	States of America and are consistent with those followed by peer Banks.

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryPart I. Financial InformationItem 2. Management's Discussion and Analysis of Financial Condition andResults of Operations*This Report contains statements which constituteforward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933 and the Securities Exchange Act of 1934. These statements appear ina number of places in this Report and include all statements regarding theintent, belief or current expectations of the Company, its directors, or itsofficers with respect to, among other things: (i) the Company's financing plans;(ii) trends affecting the Company's financial condition or results ofoperations; (iii) the Company's growth strategy and operating strategy; and (iv)the declaration and payment of dividends. Investors are cautioned that any suchforward-looking statements are not guarantees of future performance and involverisks and uncertainties, and that actual results may differ materially fromthose projected in the forward-looking statements as a result of various factorsdiscussed herein and those factors discussed in detail in the Company's filingswith the Securities and Exchange Commission.*
The following discussion of the financial condition andresults of operations of the Registrant (the Company) should be read inconjunction with the Company's financial statements and related notes and otherstatistical information included elsewhere herein.

GeneralCalvin B. Taylor Bankshares, Inc. (Company) was incorporatedas a Maryland corporation on October 31, 1995. The Company owns all of the stockof Calvin B. Taylor Banking Company (Bank), a commercial bank that wasestablished in 1890 and incorporated under the laws of the State of Maryland onDecember 17, 1907. The Bank operates nine banking offices in Worcester County,Maryland and one banking office in Ocean View, Delaware. The Bank'sadministrative office is located in Berlin, Maryland. The Bank is engaged in ageneral commercial and retail banking business serving individuals, businesses,and governmental units in Worcester County, Maryland, Ocean View, Delaware, andneighboring counties.

The Company currently engages in no business other thanowning and managing the Bank.

Critical Accounting PoliciesThe Company’s financial condition and results of operationsare sensitive to accounting measurements and estimates of inherently uncertainmatters. When applying accounting policies in areas that are subjective innature, management uses its best judgment to arrive at the carrying value ofcertain assets. One of the most critical accounting policies applied is relatedto the valuation of the loan portfolio. Management estimates the appropriateallowance for loan losses, including the timing of loan charge-offs.

The allowance for loan losses represents a reserve forpotential losses in the loan portfolio. It is one of the most difficult andsubjective judgments. The adequacy of the allowance for loan losses is evaluatedquarterly based on a review of the loan portfolio, with particular emphasis onnon-accruing, past due, and other loans that management believes requireattention. The determination of the reserve level relies on management'sjudgment about factors affecting loan quality, current trends in delinquenciesand charge-offs, and anticipated changes in the composition and size of theportfolio, as well as an analysis of historical loan loss ratios. Managementalso considers external factors such as changes in the interest rateenvironment, the view of the Bank’s regulators, economic conditions in theBank’s service area and beyond, and legislation that affects the bankingindustry. 

Financial ConditionTotal assets of the Company increased $16.4 million fromDecember 31, 2006 to September 30, 2007. Average assets for the third quarter of2007 were down $2.5 million from the comparable period in 2006. Due to theeffect of seasonal resort business, it is normal for third quarter assets to behigher than the beginning or end of the same year. 

Combined deposits and customer repurchase agreementsincreased $12.2 million during the first nine months of 2007. Average combineddeposits and retail repurchase agreements increased $1.6 million from thirdquarter 2006 to 2007. Management carefully monitors deposit levels and theireffect on liquidity, taking steps to retain core deposits.

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The Company’s investment portfolio has increased by $2.8million in the first nine months of 2007. Investment securities that areclassified as available for sale are comprised of both equity and debtsecurities. In mid-2006, management began classifying purchases of short-term U.S. Treasury Bills as available for sale. This has resulted in a gradual shift ofinvestment balances from held to maturity into available for sale. This strategyprovides increased availability of liquid funds for loan growth or withdrawalsfrom deposit accounts. 

During 2007, the Bank’s gross loan portfolio has decreased by$4.4 million. At the end of the second quarter, loan volume year-to date wasflat. Reductions in the portfolio during the third quarter are attributable toseasonal line of credit pay downs, scheduled repayment of real estatedevelopment loans, and unanticipated payoffs of commercial mortgages in whichthe bank participated. Additionally, loan originations are down due toconditions in the regional real estate market.

Based on its quarterly review of the consolidated loanportfolio, the Company determined that an allowance of $2.2 million was adequateas of September 30, 2007. Historically, the Company has low levels of loandelinquencies and charge-offs. Loans delinquent ninety days or more and stillaccruing interest totaled $432,856 or .19% of the portfolio at September 30,2007, and $239,620 or .10% of the portfolio at December 31, 2006. There were nononaccrual loans as of September 30, 2007 or December 31, 2006. Loans past due90 days or more and still accruing had been evaluated by management and wereeither well-collateralized or repayment was imminent. 

The Company makes loans to customers located primarily in theDelmarva region. Although the loan portfolio is diversified, its performancewill be influenced by the economy of the region.

LiquidityThe Company’s major sources of liquidity are loan repayments,maturities of short-term investments including federal funds sold, and increasesin core deposits. Throughout the first quarter of the year, when the Banktypically experiences a decline in deposits, federal funds sold and investmentsecurities are primary sources of liquidity. During the second quarter of theyear, additional sources of liquidity become more readily available as businessborrowers start repaying loans, and the Bank receives seasonal deposits.Throughout the second and third quarters the Bank maintains a high liquiditylevel. Funds from seasonal deposits are generally invested in short-term U.S.Treasury Bills and overnight federal funds. 

The Company has available lines of credit, includingovernight federal funds, reverse repurchase agreements and letters of credit,totaling $21,000,000 as of September 30, 2007.

Average liquid assets (cash and amounts due from banks,interest-bearing deposits in other banks, federal funds sold, and investmentsecurities) compared to average deposits and retail repurchase agreements were44.50% for the third quarter of 2007 compared to 39.66% for the second quarterof 2007 and 44.81% for the third quarter of 2006. 

Results of OperationsNet income for the three months ended September 30, 2007***,***was $1,961,144 or $.63 per share, compared to $1,987,548 or $.63 pershare for the third quarter of 2006. This represents a decrease of $26,404 or1.33%. Year to date net income has increased $76,061 from $5,569,110 or $1.75per share in 2006 to $5,645,171 or $1.80 per share in 2007. The key componentsof net income are discussed in the following paragraphs. 

In the first nine months of 2007, as compared to 2006, netinterest income increased $198,177 (1.57%). Net interest income decreased$90,125 (2.00%) in third quarter 2007 compared to third quarter 2006. Whileinterest and dividend revenues increased $297,147 (5.56%), interest expenseincreased $387,272 (45.77%). The expense increase is due to the movement ofdeposits from noninterest-bearing and lower rate interest-bearing deposits tohigher rate time deposits. 

The tax-equivalent quarterly yield on interest-earning assetsincreased by 36 basis points from 6.08% for third quarter 2006 to 6.44% in 2007.The quarterly yield on interest-bearing liabilities increased by 68 basispoints, from 1.52% in 2006 to 2.20% in 2007. In combination, these shiftscontributed to a decrease in net margin on interest-earning assets of 8 basispoints.

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The following table presents information including averagebalances of interest-earning assets and interest-bearing liabilities, the amountof related interest income and interest expense, and the resulting yields bycategory of interest-earning asset and interest-bearing liability. In thistable, dividends and interest on tax-exempt securities and loans are reported ona fully taxable equivalent basis, which is a non-GAAP measure as defined in SECRegulation G and Item 10 of SEC Regulation S-K. Management believes that thesemeasures provide better yield comparability as a tool for managing net interestincome.
		Average Balances, Interest, and Yields 		For the quarter ended 		For the quarter ended 		September 30, 2007		 		September 30, 2006 		Average    		Average    		balance		 		Interest		Yield		 		balance 		Interest		Yield		Assets         		  Federal funds sold		$47,006,543  		$608,500 		5.14% 		$34,536,931  		$450,742 		5.18%		  Interest-bearing deposits		4,071,750 		51,474		5.02% 		2,200,454 		20,962		3.78%		  Investment securities		70,316,915 		867,151		4.89% 		86,506,091 		806,850		3.70%		  Loans, net of allowance		231,364,706 		4,197,629		7.20% 		230,717,689 		4,142,871		7.12%		    Total interest-earning assets		352,759,914 		5,724,754 		6.44% 		353,961,165 		5,421,425 		6.08%		Noninterest-bearing cash		17,044,550    		18,497,065   		Other assets		13,685,396    		13,556,213   		        Total assets		$383,489,860     		$386,014,443    		Liabilities and Stockholders' Equity         		Interest-bearing deposits         		  NOW 		$51,798,447  		         46,082 		0.35% 		$55,258,697  		         32,594 		0.23%		  Money market		32,766,614 		77,517		0.94% 		42,420,120 		82,943		0.78%		  Savings		44,127,495 		82,274		0.74% 		47,520,408 		70,538		0.59%		  Other time		88,056,153 		1,016,474		4.58% 		68,473,727 		646,031		3.74%		    Total interest-bearing deposits		216,748,709 		1,222,347		2.24% 		213,672,952 		832,106		1.55%		Securities sold under agreements         		  to repurchase		5,353,325 		9,421		0.70% 		6,872,328 		12,059		0.70%		Borrowed funds		105,956 		1,615		6.05% 		128,086 		1,946		6.03%		    Total interest-bearing liabilities		222,207,990 		1,233,383		2.20% 		220,673,366 		846,111		1.52%		Noninterest-bearing deposits		89,017,589 		                  -   		95,741,109 		                  -   		311,225,579 		1,233,383 		1.57% 		316,414,475 		846,111 		1.06%		Other liabilities		432,671    		457,252   		Stockholders' equity		71,831,610    		69,142,716   		        Total liabilities and         		        stockholders' equity		$383,489,860     		$386,014,443    		Net interest spread   		4.24%    		4.56%		Net interest income  		$4,491,371  		    		$4,575,314  		 		Net margin on interest-earning assets   		5.05%    		5.13%          		Tax equivalent adjustment in:         		    Investment income  		$48,917     		$52,682  		    Loan income  		$34,612     		$24,665            
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The Company’s net interest income is one of the mostimportant factors in evaluating its financial performance. Management usesinterest sensitivity analysis to determine the effect of rate changes. Netinterest income is projected over a one-year period to determine the effect ofan increase or decrease in the prime rate of 100 basis points. If prime were todecrease one hundred basis points, and all assets and liabilities maturingwithin that period were fully adjusted for the rate change, the Company wouldexperience a decrease of approximately 5.9% in net interest income. Conversely,if prime were to increase one hundred basis points, and all assets andliabilities maturing within that period were fully adjusted for the rate change,the Company would experience a corresponding increase in net interest income.The sensitivity analysis does not consider the likelihood of these rate changesnor whether management’s reaction to this rate change would be to reprice itsloans or deposits. 

No provision for loan losses was charged to expense duringthe first three quarters of 2007 or 2006. Net loans charged-off (recovered) were$787 during the first nine months of 2007 versus ($69) in the same period in2006. 

Noninterest revenue for the third quarter of 2007 is $9,420(1.94%) more than last year. Noninterest revenue for the year-to-date is $22,535(1.51%) less than last year. For both the quarter and the year-to-date,increased ATM and VISA debit card revenue helped to offset declines in depositaccount service charges which are volume-related. Included in miscellaneousrevenue is the increase in cash surrender value of bank owned life insurance,which is $21,672 higher in the first nine months of 2007 than in the same periodfor 2006. 

Noninterest expense for the third quarter of 2007 is $13,301(.72%) less than last year. During the quarter, increased salary and benefitexpense is offset by reduced occupancy, furniture and equipment, and otheroperating expenses. Included in the quarterly and year-to-date furniture andequipment expense is a $21,837 reduction in personal property taxes which arepaid on receipt of invoices, generally late in the third quarter and early inthe fourth quarter. Noninterest expense for the year-to-date is $42,081 (.78%)more than last year. Salaries and benefits are up $163,564 reflecting payincreases implemented early in the year, and related benefit increases.Occupancy and furniture and equipment are down in part due to some significantrepair costs incurred in 2006. Other operating expenses are down $59,654 in partdue cost savings in postage and stationery resulting from reduced noticemailings. Courier costs are down $30,558 (37.40%) due to the May 2007implementation of electronic image capture and transmission of processed itemsfrom branch locations to the central processing area in Berlin. A notable costincrease of $24,795 (18.42%) in ATM/Debit Card processing fees, relatesprimarily to volume of transactions.

The Bank employed 95 full time equivalent employees as ofSeptember 30, 2007. The Bank hires seasonal employees during the summer, andemploys year-round part-time employees to meet peak-time demands. The Companyhas no employees other than those hired by the Bank.

Income taxes are $57,500 higher this year than last, on apre-tax income increase of $133,561. The Company’s effective tax rate hasincreased from 36.12% through September 2006 to 36.22% through September 2007.This results from the decrease of tax preferenced revenues in actual dollars andas a percentage of total revenues. Additionally, the Company’s marginal federalstatutory rate has increased due to annualized taxable income exceeding $10million.

Plans of OperationThe Bank offers a full range of deposit services includingchecking, NOW, Money Market, and savings accounts, and time deposits includingcertificates of deposit. The transaction accounts and time certificates aretailored to the Bank’s principal market areas at rates competitive to thoseoffered in the area. In addition, the Bank offers certain retirement accountservices, such as Individual Retirements Accounts ("IRAs"). All deposits areinsured by the Federal Deposit Insurance Corporation (the "FDIC") up to themaximum amount allowed by law (generally, $100,000 for non-IRA accounts perdepositor and $250,000 for IRAs per depositor, subject to aggregation rules).The Bank solicits these accounts from individuals, businesses, associations andorganizations, and governmental authorities. 

The Company, through the Bank, offers a full range of short-to medium-term commercial and personal loans. Commercial loans include bothsecured and unsecured loans for working capital (including inventory andreceivables), business expansion (including acquisition of real estate andimprovements), and purchase of equipment and machinery. Consumer loans includesecured and unsecured loans for financing automobiles, home improvements,education, and personal investments. The Company originates commercial andresidential mortgage loans and real estate construction and acquisition loans.These lending activities are subject to a variety of lending limits imposed bystate and federal law. The Bank may not make any loans to any director orexecutive officer (except for commercial loans to directors who are not officersor employees) unless the Board of Directors of the Bank approves the loans. TheBoard of Directors reviews such loans every six months.

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Other bank services include cash management services, 24-hourATM’s, debit cards, safe deposit boxes, travelers’ checks, direct deposit ofpayroll and social security, and automatic drafts for various accounts. The Bankoffers bank-by-phone and Internet banking services, including electronicbill-payment, to both commercial and retail customers. The Bank also offersnon-deposit products including retail repurchase agreements and discountbrokerage services through a correspondent bank. The Bank offers individualcustomers up to $50 million in FDIC insured deposits through the Certificate ofDeposit Account Registry Services®.
Capital Resources and AdequacyTotal stockholders’ equity increased $4,126,417 from December31, 2006 to September 30, 2007. This increase is attributable to comprehensiveincome recorded during the period, as detailed in Note 2 of the Notes toFinancial Statements, reduced by $1,613,413 used to repurchase and retire 42,486shares of common stock. Stock repurchases were at prices ranging from $36.00 to$38.50 per share.

Under the capital guidelines of the Federal Reserve Board andthe FDIC, the Company and Bank are currently required to maintain a minimumrisk-based total capital ratio of 8%, with at least 4% being Tier 1 capital.Tier 1 capital consists of stockholders' equity less accumulated othercomprehensive income. In addition, the Company and the Bank must maintain aminimum Tier 1 leverage ratio (Tier 1 capital to total assets) of at least 4%,but this minimum ratio is increased by 100 to 200 basis points for other thanthe highest-rated institutions.

Tier one risk-based capital ratios of the Company as ofSeptember 30, 2007 and December 31, 2006 were 33.8% and 32.2%, respectively.Both are substantially in excess of regulatory minimum requirements. 

Website Access to SEC ReportsThe Bank maintains an Internet website at www.taylorbank.com. The Company’s periodic SEC reports, includingannual reports on Form 10-K, quarterly reports on Form 10-Q, and current reportson Form 8-K, are accessible through this website. Access to these filings isfree of charge. The reports are available as soon as practicable after they arefiled electronically with the SEC. **Item 3. Quantitative and Qualitative Disclosures About Market RiskThe Company’s principal market risk exposure relates tointerest rates on interest-earning assets and interest-bearing liabilities.Unlike most industrial companies, the assets and liabilities of financialinstitutions such as the Company and the Bank are primarily monetary in nature.Therefore, interest rates have a more significant effect on the Company'sperformance than do the effects of changes in the general rate of inflation andchange in prices. In addition, interest rates do not necessarily move in thesame direction or in the same magnitude as the prices of goods and services. Asdiscussed previously, management monitors and seeks to manage the relationshipsbetween interest sensitive assets and liabilities in order to protect againstwide interest rate fluctuations, including those resulting from inflation. 

At September 30, 2007, the Company’s interest ratesensitivity, as measured by gap analysis, showed the Company was asset-sensitivewith a one-year cumulative gap of 28.68%, as a percentage of interest-earningassets. Generally asset-sensitivity indicates that assets reprice more quicklythan liabilities and in a rising rate environment net interest income typicallyincreases. Conversely, if interest rates decrease, net interest income woulddecline. The Bank has classified its demand mortgage and commercial loans asimmediately repriceable. Unlike loans tied to prime, these rates do notnecessarily change as prime changes since the decision to call the loans andchange the rates rests with management. 

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**Item 4. Controls and proceduresDisclosure controls and procedures are designed andmaintained by the Company to ensure that information required to be disclosed inthe Company’s publicly filed reports is recorded, processed, summarized andreported in a timely manner. Such information must be available to management,including the Chief Executive Officer (CEO) and Treasurer, to allow them to maketimely decisions about required disclosures. Even a well-designed and maintainedcontrol system can provide only reasonable, not absolute, assurance that itsobjectives are achieved. Inherent limitations in any system of controls includeflawed judgment, errors, omissions, or intentional circumvention of controls.

The Company’s management, including the CEO and Treasurer,performed an evaluation of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures as of September 30, 2007. Based onthat evaluation, the Company’s management, including the CEO and Treasurer, hasconcluded that the Company’s disclosure controls and procedures are effective.The projection of an evaluation of controls to future periods is subject to therisk that procedures may become inadequate due to changes in conditionsincluding the degree of compliance with procedures.
**Changes in Internal ControlsDuring the quarter ended on the date of this report, therewere no significant changes in the Company’s internal control over financialreporting that have had or are reasonably likely to have a material affect onthe Company’s internal control over financial reporting. As of September 30,2007, the Company’s management, including the CEO and Treasurer, has concludedthat the Company’s internal controls over financial reporting are effective. 

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryPart II. Other Information**
Item 1 Legal ProceedingsNot applicable

Item 1A Risk Factors		The Company and the Bank are subject to various types		of risk during the normal conduct of business. There has been no		material increase in any level of risk incurred by the Company or the		Bank during the quarter covered by this report. Following are		descriptions of the significant categories of risk most relevant to the		Company.

Credit risk is the risk to the Company’s		earnings or capital from the potential of an obligor to fulfill its		contractual commitment to the Company. Credit risk is most closely		associated with the Company’s lending activities.Interest rate risk is the risk to earnings or		capital from the potential movement in interest rates. It is the		sensitivity of the Company’s future earnings to interest rate changes.Liquidity risk is the risk to earnings or		capital from the Company’s inability to meet its obligations when they		come due without incurring unacceptable losses or costs.Market risk is the risk to earnings or capital		from changes in the value of portfolios of financial instruments. For		the Company, market risk is the risk of a decline in market value of its		securities portfolio.Transaction risk is the risk to earnings or		capital arising from problems with service or product delivery.		Transaction risk is the risk of a failure in the Company’s operating		processes, such as automation, employee integrity, or internal controls.Compliance risk is the risk to earnings or		capital from noncompliance with laws, rules, and regulations. Compliance		risk is one of the greatest risks the Company faces.Reputation risk is the risk to earnings or		capital from negative public opinion. Customer and public relations are		critical to the Company’s success. Accordingly, the Company’s reputation		is extremely important and anything that would impair that reputation is		a significant risk.Strategic risk is the risk to earnings or		capital arising from adverse business decisions or improper		implementation of those decisions.
Item 2 Unregistered Sales of Equity Securities and Use ofProceeds
( c ) The following table presents information about		the Company’s repurchase of its equity securities during the calendar		quarter ended on the date of this Form 10-Q.
      				(c) Total number				(d) Maximum number  				(a) Total				(b) Average				of Shares Puchased				of Shares that may 				Number				Price Paid				as Part of a Publicly				yet be Purchased				Period				of Shares				per Share				Announced Program				Under the Program				July 				    17,458  				               38.50  				      17,458  				288,814				August 				      6,194  				               38.50  				        6,194  				282,620 				September 				      2,400  				               38.50  				        2,400  				280,220				Totals 				    26,052    				      26,052   
 

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The Company publicly announced on August 14, 2003,		that it would repurchase up to 10% of its outstanding equity stock at		that time, which equated to a total of 324,000 common shares available		for repurchase. As of January 1, 2005, and again on May 18, 2007, this		plan was renewed, by public announcement, making up to 10% of the		Company’s outstanding equity stock at the time of renewal. This equated		to a total of 314,072 common shares, available for repurchase as of May		18, 2007. There is no expiration date for this program. No other stock		repurchase plan or program existed or exists simultaneously, nor has any		other plan or program expired during the period covered by this table.		Common shares repurchased under this plan are retired. 

Item 3 Defaults Upon Senior Securities		Not applicable

Item 4 Submission of Matters to a Vote of Security Holders		Not applicable.

Item 5 Other information		Not applicable.

Item 6 Exhibits		Exhibits					31. Certifications of Principal Executive Officer			and Principal Financial Officer pursuant to Section 302 of the			Sarbanes-Oxley Act of 2002.			32. Certification of Principal Executive Officer			and Principal Financial Officer pursuant to Section 906 of the			Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
  **Calvin B. Taylor Bankshares, Inc.      
Date: November 6, 2007
By:
/s/:Raymond M. Thompson  
Raymond M. Thompson  
Chief Executive Officer      
Date: November 6, 2007
By:
/s/:Jennifer G. Hawkins  
Jennifer G. Hawkins  
Treasurer (Principal Financial Officer)
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Exhibit 31.1Certification - Pursuant to Section 302 of the Sarbanes-OxleyAct of 2002

I, Raymond M. Thompson, certify that:I have reviewed this quarterly report on Form 10-Q of Calvin B. TaylorBankshares, Inc.;

1. Based on my knowledge, this report does not contain any untrue	statement of a material fact or omit to state a material fact necessary to	make the statements made, in light of the circumstances under which such	statements were made, not misleading with respect to the period covered by	this report;	2. Based on my knowledge, the financial statements, and other financial	information included in this report, fairly present in all material respects	the financial condition, results of operations and cash flows of the	registrant as of, and for, the periods presented in this report;	3. The registrant’s other certifying officers and I are responsible for	establishing and maintaining disclosure controls and procedures (as defined	in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over	financial reporting (as defined in Exchange Act Rules 13a-15(f) and	15d-15(f)) for the registrant and we have:			a) designed such disclosure controls and procedures, or caused			such disclosure controls and procedures to be designed under our			supervision, to ensure that material information relating to the			registrant, including its consolidated subsidiary, is made known to			us by others within those entities, particularly during the period			in which this report is being prepared;			b) designed such internal control over financial reporting, or			caused such internal control over financial reporting to be designed			under our supervision, to provide reasonable assurance regarding the			reliability of financial reporting and the preparation of financial			statements for external purposes in accordance with generally			accepted accounting principles;			c) evaluated the effectiveness of the registrant’s disclosure			controls and procedures and presented in this report our conclusions			about the effectiveness of the disclosure controls and procedures,			as of the end of the period covered by this report based on such			evaluation; and			d) disclosed in this report any change in the registrant’s			internal control over financial reporting that occurred during the			most recent fiscal quarter that has or is reasonably likely to			materially affect the registrant’s internal control over financial			reporting; and	4. The registrant’s other certifying officers and I have disclosed, based	on our most recent evaluation of internal control over financial reporting,	to the registrant’s auditors and the audit committee of the registrant’s	board of directors (or persons performing the equivalent function):			a) all significant deficiencies and material weaknesses in the			design or operation of internal control over financial reporting			which are reasonably likely to adversely affect the registrant’s			ability to record, process, summarize and report financial			information; and			b) any fraud, whether or not material, that involves management			or other employees who have a significant role in the registrant’s			internal control over financial reporting.  **Calvin B. Taylor Bankshares, Inc.   
Date: November 6, 2007
By:
/s/:Raymond M. Thompson  
Raymond M. Thompson  
Chief Executive Officer
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Exhibit 31.2Certification - Pursuant to Section 302 of the Sarbanes-OxleyAct of 2002

I, Jennifer G. Hawkins, certify that:I have reviewed this quarterly report on Form 10-Q of Calvin B. TaylorBankshares, Inc.;

1. Based on my knowledge, this report does not contain any untrue	statement of a material fact or omit to state a material fact necessary to	make the statements made, in light of the circumstances under which such	statements were made, not misleading with respect to the period covered by	this report;	2. Based on my knowledge, the financial statements, and other financial	information included in this report, fairly present in all material respects	the financial condition, results of operations and cash flows of the	registrant as of, and for, the periods presented in this report;	3. The registrant’s other certifying officers and I are responsible for	establishing and maintaining disclosure controls and procedures (as defined	in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over	financial reporting (as defined in Exchange Act Rules 13a-15(f) and	15d-15(f)) for the registrant and we have:			a) designed such disclosure controls and procedures, or caused			such disclosure controls and procedures to be designed under our			supervision, to ensure that material information relating to the			registrant, including its consolidated subsidiary, is made known to			us by others within those entities, particularly during the period			in which this report is being prepared;			b) designed such internal control over financial reporting, or			caused such internal control over financial reporting to be designed			under our supervision, to provide reasonable assurance regarding the			reliability of financial reporting and the preparation of financial			statements for external purposes in accordance with generally			accepted accounting principles;			c) evaluated the effectiveness of the registrant’s disclosure			controls and procedures and presented in this report our conclusions			about the effectiveness of the disclosure controls and procedures,			as of the end of the period covered by this report based on such			evaluation; and			d) disclosed in this report any change in the registrant’s			internal control over financial reporting that occurred during the			most recent fiscal quarter that has or is reasonably likely to			materially affect the registrant’s internal control over financial			reporting; and	4. The registrant’s other certifying officers and I have disclosed, based	on our most recent evaluation of internal control over financial reporting,	to the registrant’s auditors and the audit committee of the registrant’s	board of directors (or persons performing the equivalent function):			a) all significant deficiencies and material weaknesses in the			design or operation of internal control over financial reporting			which are reasonably likely to adversely affect the registrant’s			ability to record, process, summarize and report financial			information; and			b) any fraud, whether or not material, that involves management			or other employees who have a significant role in the registrant’s			internal control over financial reporting.  **Calvin B. Taylor Bankshares, Inc.   
Date: November 6, 2007
By:
/s/:Jennifer G. Hawkins  
Jennifer G. Hawkins  
Treasurer (Principal Financial Officer)
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Exhibit 32Certification - Pursuant to 18 U.S.C. 1350(Section 906 of the Sarbanes-Oxley Act of 2002)

We, the undersigned, certify that to the best of our knowledge, based upon areview of the Quarterly Report on Form 10-Q for the period ended September 30,2007 of the Registrant (the "Report"):
(1) The Report fully complies with the requirements of Section			13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;			and			(2) The information contained in the Report fairly presents, in			all material respects, the financial condition and results of			operations of the Registrant.
  **Calvin B. Taylor Bankshares, Inc.      
Date: November 6, 2007
By:
/s/:Raymond M. Thompson  
Raymond M. Thompson  
Chief Executive Officer      
Date: November 6, 2007
By:
/s/:Jennifer G. Hawkins  
Jennifer G. Hawkins  
Treasurer (Principal Financial Officer)
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