UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**Form 10-Q**
Quarterly Report Pursuant to Section 13 or 15(d)			of the Securities Exchange Act of 1934For the quarterly period ended June 30, 2009Commission File No. 000-50047
Calvin B. Taylor Bankshares, Inc.(Exact name of registrant as specified in its Charter)

Maryland(State of incorporation or organization)

52-1948274(I.R.S. Employer Identification No.)

24 North Main Street, Berlin, Maryland 21811(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (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]

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files).N/A (not required at this time)

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, a non-accelerated filer, or a smallerreporting company. See the definitions of "large accelerated filer,""accelerated filer" and "smaller reporting company" in Rule 12b-2 of theExchange Act.        Large accelerated filer ____                                                                                     Accelerated filer [X]        Non- accelerated filer ____ (Do not check if a smallerreporting company)     Smaller reporting company ____
Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Act). No [X] 

On July 31, 2009, 3,013,872 shares of the registrant's commonstock were issued and outstanding.
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******Calvin B. Taylor Bankshares, Inc. and Subsidiary

Form 10-Q

Index**Part I - Financial		InformationPageItem 1Consolidated		Financial StatementsConsolidated		Balance Sheets as of June 30, 2009 and December 31, 20083 Consolidated		Statements of Income for the three months ended June		30, 2009 and 20084Consolidated		Statements of Income for the six monthsended June		30, 2009 and 20085Consolidated		Statements of Cash Flows for the six months ended June		30, 2009 and 20086-7Notes to		Consolidated Financial Statements8-14Item 2Management’s		Discussion and Analysis of Financial Conditionand Results		of Operations15-24Item 3Quantitative		and Qualitative Disclosures About Market Risks 25Item 4Controls and		Procedures25Part II - Other		InformationItem 1Legal		Proceedings26Item 1ARisk Factors26Item 2Unregistered		Sales of Equity Securities and Use of Proceeds27Item 3Defaults Upon		Senior Securities27Item 4Submission of		Matters to a Vote of Security Holders27Item 5Other		Information27Item 6Exhibits27-30Signatures31
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		Part I - Financial Information, Item 1 Financial Statements 		Calvin B. Taylor Bankshares, Inc. and Subsidiary 		Consolidated Balance Sheets   		(unaudited)  		June 30		December 31, 		2009		2008		Assets		Cash and due from banks		 $             16,377,032 		 $               8,769,784 		Federal funds sold		                30,025,624 		                26,460,842 		Interest-bearing deposits		                11,184,692 		                15,517,115 		Investment securities available for sale		                37,515,995 		                33,975,271 		Investment securities held to maturity (approximate   		  fair value of $39,949,617 and $33,523,422)		                39,503,779 		                32,621,797 		Loans, less allowance for loan losses  		  of $879,255 and $707,152		              243,797,780 		              241,430,914 		Premises and equipment		                  6,586,128 		                  6,326,312 		Accrued interest receivable		                  1,441,464 		                  1,704,260 		Computer software		                     153,598 		                     156,372 		Bank owned life insurance		                  5,000,900 		                  4,914,810  		Other assets		                     858,876 		                     725,034  		 $           392,445,868 		 $           372,602,511 		Liabilities and Stockholders' Equity		Deposits  		  Noninterest-bearing		 $             78,427,333 		 $             70,652,032 		  Interest-bearing		              231,610,433 		              221,807,181  		              310,037,766 		              292,459,213 		Securities sold under agreements to repurchase		                  6,994,606 		                  5,742,765 		Note payable		                       61,473 		                       74,046 		Accrued interest payable 		                     242,284 		                     359,673 		Deferred income taxes		                  1,301,515 		                  1,437,813 		Other liabilities		                     295,674 		                     245,507  		              318,933,318 		              300,319,017 		Stockholders' equity  		  Common stock, par value $1 per share   		   authorized 10,000,000 shares, issued and outstanding  		   3,021,644 shares at June 30, 2009, and  		   3,048,397 shares at December 31, 2008		                  3,021,644 		                  3,048,397 		  Additional paid-in capital		                  9,444,272 		                10,406,403 		  Retained earnings		                59,059,780 		                56,569,913  		                71,525,696 		                70,024,713 		  Accumulated other comprehensive income		                  1,986,854 		                  2,258,781  		                73,512,550 		                72,283,494  		 $           392,445,868 		 $           372,602,511          		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 		June 30 		2009		2008		Interest and dividend revenue  		  Loans, including fees		 $               3,964,295 		 $               4,202,710 		  U.S. Treasury and government agency securities		                     396,248 		                     503,184 		  State and municipal securities		                       11,085 		                         9,589 		  Federal funds sold 		                       16,956 		                     196,420 		  Interest-bearing deposits		                       28,016 		                       53,812 		  Equity securities		                       13,929 		                       18,715 		          Total interest and dividend revenue		                  4,430,529 		                  4,984,430 		Interest expense  		  Deposits		                     641,791 		                     985,875 		  Borrowings		                         8,112 		                         7,886 		    Total interest expense		                     649,903 		                     993,761    		    Net interest income		                  3,780,626 		                  3,990,669     		Provision for loan losses		                     296,500 		                         5,284  		    Net interest income after provision for loan losses		                  3,484,126 		                  3,985,385    		Noninterest revenue  		  Service charges on deposit accounts		                     252,016 		                     279,991 		  ATM and debit card		                     134,913 		                     135,278 		  Bank owned life insurance		                       42,926 		                       50,087 		  Miscellaneous revenue		                       70,360 		                       70,925 		    Total noninterest revenue		                     500,215 		                     536,281 		Noninterest expenses  		  Salaries		                     907,929 		                     892,763 		  Employee benefits		                     210,847 		                     223,356 		  Occupancy		                     180,733 		                     183,472 		  Furniture and equipment		                     111,322 		                     129,112 		  Data proccessing		                       69,327 		                     113,965 		  ATM and debit card		                       69,950 		                       72,730 		  Deposit insurance premiums		                     252,843 		                       11,377 		  Other operating		                     397,214 		                     319,254 		    Total noninterest expenses		                  2,200,165 		                  1,946,029    		    Income before income taxes		                  1,784,176 		                  2,575,637 		Income taxes		                     633,000 		                     932,700 		Net income		 $               1,151,176 		 $               1,642,937    		Earnings per common share - basic and diluted		 $                        0.38 		 $                        0.53    		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 six months ended 		June 30 		2009		2008		Interest and dividend revenue  		  Loans, including fees		 $               8,027,341 		 $               8,379,255 		  U.S. Treasury and government agency securities		                     845,412 		                  1,137,993 		  State and municipal securities		                       21,398 		                       20,800 		  Federal funds sold 		                       33,187 		                     447,894 		  Interest-bearing deposits		                     106,780 		                     121,938 		  Equity securities		                       40,069 		                       47,036 		          Total interest and dividend revenue		                  9,074,187 		                10,154,916 		Interest expense  		  Deposits		                  1,359,337 		                  2,149,907 		  Borrowings		                       16,034 		                       15,089 		    Total interest expense		                  1,375,371 		                  2,164,996    		    Net interest income		                  7,698,816 		                  7,989,920     		Provision for loan losses		                     629,600 		                       76,493  		    Net interest income after provision for loan losses		                  7,069,216 		                  7,913,427    		Noninterest revenue  		  Service charges on deposit accounts		                     500,078 		                     522,962 		  ATM and debit card		                     252,592 		                     248,817 		  Bank owned life insurance		                       86,090 		                       98,549 		  Miscellaneous revenue		                     122,275 		                     134,189 		    Total noninterest revenue		                     961,035 		                  1,004,517 		Noninterest expenses  		  Salaries		                  1,803,659 		                  1,759,705 		  Employee benefits		                     430,050 		                     444,767 		  Occupancy		                     378,437 		                     371,320 		  Furniture and equipment		                     236,967 		                     240,462 		  Data proccessing		                     141,134 		                     183,440 		  ATM and debit card		                     148,652 		                     140,718 		  Deposit insurance premiums		                     265,397 		                       17,482 		  Other operating		                     759,089 		                     639,914 		    Total noninterest expenses		                  4,163,385 		                  3,797,808    		    Income before income taxes		                  3,866,866 		                  5,120,136 		Income taxes		                  1,377,000 		                  1,855,000 		Net income		 $               2,489,866 		 $               3,265,136    		Earnings per common share - basic and diluted		 $                        0.82 		 $                        1.06    		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 six months ended 		June 30, 		2009		2008		Cash flows from operating activities  		  Interest and dividends received		 $                9,365,428 		 $                9,955,388 		  Fees and commissions received		                      699,948 		                      911,169 		  Interest paid		                 (1,492,760)		                 (2,302,316)		  Cash paid to suppliers and employees		                 (3,711,547)		                 (3,570,478)		  Income taxes paid		                 (1,464,434)		                 (1,838,615) 		                   3,396,635 		                   3,155,148 		Cash flows from investing activities  		  Certificates of deposit purchased, net of maturities		                   4,292,385 		                 (1,514,507)		  Proceeds from maturities of investments available  		     for sale		                 17,000,000 		                 17,000,000 		  Purchase of investments available for sale		               (20,971,715)		                 (1,980,283)		  Proceeds from maturities of investments held to   		     maturity		                 11,450,000 		                 13,810,000 		  Purchase of investments held to maturity		               (18,337,596)		               (13,183,013)		  Loans made, net of principal collected		                 (3,020,989)		                 (3,574,465)		  Proceeds from sale of repossessed loan collateral		                        39,501 		                                -   		  Purchases of premises, equipment,  		    and computer software		                    (546,566)		                    (112,144)		  Proceeds from sale of equipment		                          1,400 		                                -    		               (10,093,580)		                 10,445,588   		   		Cash flows from financing activities  		  Net increase (decrease) in  		    Time deposits		                   1,965,728 		                 (6,890,769)		    Other deposits		                 15,612,825 		                 (1,213,275)		    Securities sold under agreements to repurchase		                   1,251,841 		                      807,831 		  Payments on note payable		                      (12,573)		                      (11,842) 		  Common shares repurchased		                    (988,884)		                    (478,440) 		                 17,828,937 		                 (7,786,495)   		Net increase in cash and cash equivalents		                 11,131,992 		                   5,814,241 		Cash and cash equivalents at beginning of period		                 35,270,664 		                 40,568,264 		Cash and cash equivalents at end of period		 $              46,402,656 		 $              46,382,505                		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 six months ended 		June 30, 		2009		2008		Reconciliation of net income to net cash provided  		  by operating activities  		  Net income		 $               2,489,866 		 $               3,265,136 		  Adjustments to reconcile net income to net cash  		    provided by operating activities  		Provision for loan losses		                     629,600 		                       76,493 		    (Gain) loss on sale of repossessed loan collateral		                       (1,203)		                              -   		    (Gain) loss on sale of equipment and computer software		                       15,580 		                              -   		    Amortization of premiums and accretion of  		      discount, net		                       28,379 		                     (90,043)		    Depreciation and amortization		                     272,546 		                     285,933 		    Decrease (increase) in  		      Accrued interest receivable		                     262,796 		                   (109,536)		      Cash surrender value of bank owned life insurance		                     (86,090)		                     (98,549)		      Other assets		                   (147,617)		                     107,290 		    Increase (decrease) in  		      Accrued interest payable		                   (117,389)		                   (137,320)		      Accrued income taxes		                         1,208 		                              -   		      Other liabilities		                       48,959 		                   (144,256) 		 $               3,396,635 		 $               3,155,148       		  Composition of cash and cash equivalents  		    Cash and due from banks		 $             16,359,555 		 $             14,691,171 		    Federal funds sold 		                30,025,624 		                31,643,783 		    Interest-bearing deposits, except for time deposits		                       17,477 		                       47,551  		 $             46,402,656 		 $             46,382,505                                              		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 statementsconform with accounting principles generally accepted inthe United States of America and to the instructions to Form 10-Q. Interimfinancial statements do not include all the information and footnotes requiredfor complete financial statements. In the opinion of management, all adjustmentsconsidered necessary for a fair presentation of financial position and resultsof operations for these interim periods have been made. These adjustments are ofa normal recurring nature. Results of operations for the six months ended June30, 2009 are not necessarily indicative of the results that may be expected inany other interim period or for the year ending December 31, 2009. For furtherinformation, refer to the audited consolidated financial statements and relatedfootnotes included in the Company's Form 10-K for the year ended December 31,2008.   Consolidation has resulted in the elimination of allsignificant intercompany accounts and transactions.Cash Flows   For purposes of reporting cash flows, cash and cashequivalents include cash on hand, amounts due from banks, federal funds sold,and interest-bearing deposits except for time deposits. Federal funds arepurchased and sold for one-day periods.
Per share data   Earnings per common share are determined by dividing netincome by the weighted average number of common shares outstanding for theperiod, as follows:
 		2009		2008		Three months ended June 30		                    3,025,055 		                    3,091,956 		Six months ended June 30		                    3,032,475 		                    3,094,857 
 

2. Comprehensive Income   Comprehensive income consists of:
 		For the six months ended 		June 30, 		2009		2008		Net income		 $                 2,489,866 		 $                 3,265,136 		Unrealized gain (loss) on investment securities  		  available for sale, net of income taxes		                     (271,927)		                     (157,086)		Comprehensive income		 $                 2,217,939 		 $                 3,108,050 
 

 

 

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)**
3. Investment Securities	   	Investment securities are summarized as follows:
  		Amortized 		Unrealized		Unrealized		Fair  		cost		gains		losses		value 		June 30, 2009     		Available for sale     		  U.S. Treasury		 $         32,258,772 		 $          954,677 		 $            8,774 		 $         33,204,675  		  State and municipal		                 400,000 		                 5,223  		                 405,223  		  Equity		              1,691,841 		          2,214,256 		                     -   		              3,906,097   		 $         34,350,613 		 $       3,174,156 		 $            8,774 		 $         37,515,995  		Held to maturity     		  U.S. Treasury		 $         25,506,530 		 $          453,245 		 $          16,321 		 $         25,943,454  		  U.S. Government agency		            10,999,942 		               18,549 		               6,898 		            11,011,593  		  State and municipal		              2,997,307 		                 6,562 		               9,299 		              2,994,570   		 $         39,503,779 		 $          478,356 		 $          32,518 		 $         39,949,617        		December 31, 2008     		Available for sale     		  U.S. Treasury		 $         28,309,823 		 $       1,408,794 		 $                  -   		 $         29,718,617  		  State and municipal		                 400,000 		                 5,220 		                  590 		                 404,630  		  Equity		              1,691,841 		          2,160,183 		                     -   		              3,852,024   		 $         30,401,664 		 $       3,574,197 		 $               590 		 $         33,975,271  		Held to maturity     		  U.S. Treasury		 $         24,519,603 		 $          861,569 		 $                  -   		 $         25,381,172  		  U.S. Government agency		              6,999,443 		               32,657 		               1,016 		              7,031,084  		  State and municipal		              1,102,751 		                 8,415 		                     -   		              1,111,166   		 $         32,621,797 		 $          902,641 		 $            1,016 		 $         33,523,422 
 

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)**
3. Investment Securities (Continued)	    The table below shows the gross unrealized losses and	fair value of securities that are in an unrealized loss position as of June	30, 2009, aggregated by length of time that individual securities have been	in a continuous unrealized loss position. 
 		Less than 12 months		12 months or more		Total 		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized 		value		losses		value		losses		value		losses       		U. S. Treasury		 $      7,960,625 		 $      25,095 		 $                   -   		 $             -   		 $      7,960,625 		 $      25,095 		U. S. Government Agency		         3,993,473 		           6,898 		                      -   		                -   		         3,993,473 		           6,898 		State and municipal		         1,960,949 		           9,299 		                      -   		                -   		         1,960,949 		           9,299  		 $    13,915,047 		 $      41,292 		 $                   -   		 $             -   		 $    13,915,047 		 $      41,292 
    The debt securities for which an unrealized loss is	recorded are issues of the U.S. Treasury, the Federal Home Loan Bank (a U.	S. government agency), and general and highly rated revenue obligations of	states and municipalities. The Company has the ability and the intent to	hold these securities until they are called or mature at face value.	Fluctuations in fair value reflect market conditions, and are not indicative	of an other-than-temporary impairment of the investment.	    The amortized cost and estimated fair value of debt	securities, by contractual maturity and the amount of pledged securities,	follow. Actual maturities may differ from contractual maturities because	issuers may have the right to call or prepay obligations with or without	call or prepayment penalties.
 		June 30, 2009		December 31, 2008 		Amortized		Fair		Amortized		Fair 		cost		value		cost		value     		Available for sale    		  Within one year		 $      7,191,889 		 $      7,194,855 		 $    17,159,259 		 $    17,201,296 		  After one year    		   through five years		       23,470,675 		       23,795,668 		         9,554,499 		         9,960,076 		  After ten years		         1,996,208 		         2,619,375 		         1,996,065 		         2,961,875  		 $    32,658,772 		 $    33,609,898 		 $    28,709,823 		 $    30,123,247      		Held to maturity    		  Within one year		 $    21,117,003 		 $    21,446,196 		 $    13,766,474 		 $    14,027,311 		  After one year    		   through five years		       18,386,676 		       18,503,421 		       18,855,323 		       19,496,111  		 $    39,503,679 		 $    39,949,617 		 $    32,621,797 		 $    33,523,422      		Pledged securities		 $    24,722,541 		 $    25,852,188 		 $    25,023,730 		 $    26,891,914 
 

    Investments are pledged to secure deposits of federal and	local governments. Pledged securities also serve as collateral for	securities sold under agreements to repurchase.

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)**
4. Loan commitments	    Loan 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:
 		June 30, 2009		December 31, 2008		Loan commitments and lines of credit  		  Construction and land development		 $               13,084,249 		 $               15,218,812  		  Other		                  19,321,342 		                  22,245,089   		 $               32,405,591 		 $               37,463,901     		Standby letters of credit		 $                 1,874,527 		 $                 1,921,878 
 

5. Assets Measured at Fair Value   The Company values investment securities classified as	available for sale at fair value on a recurring basis. The fair value	hierarchy established in Statement of Financial Accounting Standards No.	157, *Fair Value Measurements,* defines three input levels for fair	value measurement. Level 1 is based on quoted market prices in active	markets for identical assets. Level 2 is based on significant observable	inputs other than those in Level 1. Level 3 is based on significant	unobservable inputs. The Company values US Treasury securities, government	agency securities, and an equity investment in an actively traded public	utility under Level 1. Municipal debt securities and equity investments in	community banks are valued under Level 2. The Company has no assets measured	at fair value on a recurring basis that are valued under Level 3 criteria.	At June 30, 2009, values for available for sale investment securities were	established as follows:
 		Total		Level 1 Inputs		Level 2 Inputs		Investment securities available for sale		 $      37,515,995 		 $      33,488,739 		 $        4,027,256 
    The Company does not have the intent to sell any of these	securities; and deems that it is more likely than not that it will not have	to sell any of these securities before recovery of their individual cost	basis.	   	Estimated fair values of the Company’s financial	instruments, including cash, interest-bearing deposits, investment	securities, loans, and interest-bearing deposit liabilities are detailed in	the Company’s 2008 Form 10-K. It is not practicable for the Company to	disclose this information for interim periods.

 

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)**
6.  New accounting standards	   	The following accounting pronouncements have been	approved by the Financial Accounting Standards Board but have not become	effective as of December 31, 2008. These pronouncements would apply to the	Company if the Company or the Bank entered into an applicable activity.
**Statements of Financial Accounting Standards *   	SFAS No. 141, "Business Combinations (Revised 2007)."*	SFAS 141R replaces SFAS 141, *"Business Combinations,"* and applies to	all transactions and other events in which one entity obtains control over	one or more other businesses. SFAS 141R requires an acquirer, upon initially	obtaining control of another entity, to recognize the assets, liabilities	and any non-controlling interest in the acquiree at fair value as of the	acquisition date. SFAS 141R is applicable to the accounting for business	combinations closing on or after January 1, 2009. It has had no impact on	the Company’s financial statements.*   	SFAS No. 160, "Noncontrolling Interest in Consolidated	Financial Statements, an amendment of ARB Statement No. 51."* SFAS 160	amends Accounting Research Bulletin (ARB) No. 51, *"Consolidated Financial	Statements,"* to establish accounting and reporting standards for the	non-controlling interest in a subsidiary and for the deconsolidation of a	subsidiary. SFAS 160 clarifies that a non-controlling interest in a	subsidiary, which is sometimes referred to as minority interest, is an	ownership interest in the consolidated entity that should be reported as a	component of equity in the consolidated financial statements. SFAS 160	became effective on January 1, 2009 and had no impact on the Company’s	financial statements. *   	SFAS No. 161, "Disclosures About Derivative Instruments	and Hedging Activities, an Amendment of FASB Statement No. 133."*	SFAS 161 amends SFAS 133, *"Accounting for Derivative Instruments and	Hedging Activities,"* to amend and expand the disclosure requirements of	SFAS 133 to provide greater transparency about (i) how and why an entity	uses derivative instruments, (ii) how derivative instruments and related	hedge items are accounted for under SFAS 133 and its related	interpretations, and (iii) how derivative instruments and related hedged	items affect an entity’s financial position, results of operations and cash	flows. SFAS 161 became effective on January 1, 2009 and had no impact on the	Company’s financial statements. *   	SFAS No. 165, "Subsequent Events."*SFAS 165	establishes general standards of accounting for and disclosure of events	that occur after the balance sheet date but before financial statements are	issued or available to be issued. SFAS 165 defines (i) the period after the	balance sheet date during which a reporting entity’s management should	evaluate events or transactions that may occur for potential recognition or	disclosure in the financial statements (ii) the circumstances under which an	entity should recognize events or transactions occurring after the balance	sheet date in its financial statements, and (iii) the disclosures an entity	should make about events or transactions that occurred after the balance	sheet date. SFAS 165 became effective for periods ending after June 15,	2009. SFAS 165 did not have a significant impact on the Company’s financial	statements. *   	SFAS No. 166, "Accounting for Transfers of Financial	Assets, an Amendment of FASB Statement No. 140."*SFAS 166 amends	SFAS 140, *"Accounting for Transfers and Servicing of Financial Assets and	Extinguishments of Liabilities,"* to enhance reporting about transfers of	financial assets, including securitizations, and where companies have	continuing exposure to the risks related to transferred financial assets.	SFAS 166 eliminates the concept of a *"qualifying special-purpose entity"*	and changes the requirements for derecognizing financial assets. SFAS 166	also requires additional disclosures about all continuing involvements with	transferred financial assets including information about gains and losses	resulting from transfers during the period. SFAS 166 will be effective	January 1, 2010 and is not expected to have a significant impact on the	Company’s financial statements. 

 

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)***    SFAS No. 167, "Amendments to FASB Interpretation	No. 46(R)." SFAS 167 amends FIN 46 (Revised December 2003), *"Consolidation of Variable Interest Entities,"* to change how a company	determines when an entity that is insufficiently capitalized or is not	controlled through voting (or similar rights) should be consolidated.	SFAS 167 requires additional disclosures about the reporting entity’s	involvement with variable-interest entities and any significant changes in	risk exposure due to that involvement as well as its affect on the entity’s	financial statements. SFAS 167 will be effective January 1, 2010 and is not	expected to have a significant impact on the Company’s financial statements.	*   	SFAS No. 168, "The FASB Accounting Standards Codification	and the Hierarchy of Generally Accepted Accounting Principles, a Replacement	of FASB Statement No. 162."*SFAS 168 replaces SFAS 162, *"The	Hierarchy of Generally Accepted Accounting Principles"* and establishes	the FASB Accounting Standards Codification (the *"Codification"*) as	the source of authoritative accounting principles recognized by the FASB to	be applied by non-governmental entities in the preparation of financial	statements in conformity with generally accepted accounting principles.	Rules and interpretive releases of the SEC under authority of federal	securities laws are also sources of authoritative guidance for SEC	registrants. All guidance contained in the Codification carries an equal	level of authority. All non-grandfathered, non-SEC accounting literature not	included in the Codification is superseded and deemed non-authoritative.	SFAS 168 will be effective for the Company’s financial statements for	periods ending after September 15, 2009. SFAS 168 is not expected have a	significant impact on the Company’s financial statements. 
**Financial Accounting Standards Board Staff Positions and	Interpretations *   	FSP EITF 03-6-1, "Determining Whether Instruments Granted	in Share-Based Payment Transactions Are Participating Securities."*	FSP EITF 03-6-1 provides that unvested share-based payment awards that	contain nonforfeitable rights to dividends or dividend equivalents (whether	paid or unpaid) are participating securities and shall be included in the	computation of earnings per share pursuant to the two-class method. FSP	EITF 03-6-1 became effective on January 1, 2009 and had no impact on the	Company’s financial statements *   	FSP SFAS. 132R-1, "Employers’ Disclosures about	Postretirement Benefit Plan Assets."*FSP SFAS 132R-1 provides guidance	related to an employer’s disclosures about plan assets of defined benefit	pension or other post-retirement benefit plans. Under FSP SFAS 132R-1,	disclosures should provide users of financial statements with an	understanding of how investment allocation decisions are made, the factors	that are pertinent to an understanding of investment policies and	strategies, the major categories of plan assets, the inputs and valuation	techniques used to measure the fair value of plan assets, the effect of fair	value measurements using significant unobservable inputs on changes in plan	assets for the period and significant concentrations of risk within plan	assets. The disclosure required by FSP SFAS 132R-1 will be effective	beginning with the financial statements for the year-ended December 31, 2009	and is not expected to have a significant impact on the Company’s financial	statements. *   	FSP SFAS 157-4, "Determining Fair Value When the Volume	and Level of Activity for the Asset or Liability Have Significantly	Decreased and Identifying Transactions That Are Not Orderly."*	FSP SFAS 157-4 affirms that the objective of fair value when the market for	an asset is not active is the price that would be received to sell the asset	in an orderly transaction, and clarifies and includes additional factors for	determining whether there has been a significant decrease in market activity	for an asset when the market for that asset is not active. FSP SFAS 157-4	requires an entity to base its conclusion about whether a transaction was	not orderly on the weight of the evidence. FSP SFAS 157-4 also amended	SFAS 157, *"Fair Value Measurements,"* to expand certain disclosure	requirements. The provisions of FSP SFAS 157-4 became effective on January	1, 2009 and had no impact on the Company’s financial statements 

 

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**Calvin B. Taylor Bankshares, Inc. and SubsidiaryNotes to Consolidated Financial Statements (unaudited) (continued)***    FSP SFAS 115-2 and SFAS 124-2, "Recognition and	Presentation of Other-Than-Temporary Impairments." FSP SFAS 115-2 and	SFAS 124-2 (i) changes existing guidance for determining whether an	impairment is other than temporary to debt securities and (ii) replaces the	existing requirement that the entity’s management assert it has both the	intent and ability to hold an impaired security until recovery with a	requirement that management assert: (a) it does not have the intent to sell	the security; and (b) it is more likely than not it will not have to sell	the security before recovery of its cost basis. Under FSP SFAS 115-2 and	SFAS 124-2, declines in the fair value of held-to-maturity and	available-for-sale securities below their cost that are deemed to be other	than temporary are reflected in earnings as realized losses to the extent	the impairment is related to credit losses. The amount of the impairment	related to other factors is recognized in other comprehensive income. The	Company adopted the provisions of FSP SFAS 115-2 and SFAS 124-2 during the	second quarter of 2009. Adoption of FSP SFAS 115-2 and SFAS 124-2 did not	significantly impact the Company’s financial statements. *   	FSP SFAS 107-1 and APB 28-1, "Interim Disclosures about	Fair Value of Financial Instruments."* FSP SFAS 107-1 and APB 28-1 amends	SFAS 107, *"Disclosures about Fair Value of Financial Instruments,"* to	require an entity to provide disclosures about the fair value of financial	instruments in interim financial information and amends Accounting	Principles Board (APB) Opinion No. 28, *"Interim Financial Reporting,"*	to require those disclosures in summarized financial information at interim	reporting periods. Interim disclosures required by FSP SFAS 107-1 and APB	28-1 are included in Note 5 – Assets Measured at Fair Value. *   	FSP SFAS 141R-1, "Accounting for Assets Acquired and	Liabilities Assumed in a Business Combination That Arise from	Contingencies."* FSP SFAS 141R-1 amends the guidance in SFAS 141R to	require that assets acquired and liabilities assumed in a business	combination that arise from contingencies be recognized at fair value if	fair value can be reasonably estimated. If fair value of such an asset or	liability cannot be reasonably estimated, the asset or liability would	generally be recognized in accordance with SFAS 5, *"Accounting for	Contingencies,"* and FASB Interpretation (FIN) No. 14, *"Reasonable	Estimation of the Amount of a Loss."* FSP SFAS 141R-1 removes subsequent	accounting guidance for assets and liabilities arising from contingencies	from SFAS 141R and requires entities to develop a systematic and rational	basis for subsequently measuring and accounting for assets and liabilities	arising from contingencies. FSP SFAS 141R-1 eliminates the requirement to	disclose an estimate of the range of outcomes of recognized contingencies at	the acquisition date. For unrecognized contingencies, entities are required	to include only the disclosures required by SFAS 5. FSP SFAS 141R-1 also	requires that contingent consideration arrangements of an acquiree assumed	by the acquirer in a business combination be treated as contingent	consideration of the acquirer and should be initially and subsequently	measured at fair value in accordance with SFAS 141R. FSP SFAS 141R-1 is	effective for assets or liabilities arising from contingencies the Company	acquires in business combinations occurring after January 1, 2009. 

    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.

General    Calvin 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. The Bank employed 96 full time equivalentemployees as of June 30, 2009. The Bank hires seasonal employees during thesummer. The Company has no employees other than those hired by the Bank.

Critical Accounting Policies    The 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.     The allowance for loan losses (ALLL) represents management’sbest estimate of inherent probable losses in the loan portfolio as of thebalance sheet date. It is one of the most difficult and subjective judgments.The adequacy of the allowance for loan losses is evaluated no less thanquarterly. The determination of the balance of the allowance for loan losses isbased on management’s judgments about the credit quality of the loan portfolioas of the review date. It should be sufficient to absorb losses in the loanportfolio as determined by management’s consideration of factors including ananalysis of historical losses, specific reserves for non-performing or past dueloans, delinquency trends, portfolio composition (including segment growth orshifting of balances between segments, products and processes, andconcentrations of credit, both regional and by relationship), lending staffexperience and changes, critical documentation and policy exceptions, riskrating analysis, interest rates and the competitive environment, economicconditions in the Bank’s service area, and results of independent reviews,including audits and regulatory examinations.

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Financial Condition    Total assets of the Company increased $19.8 million (5.33%)from December 31, 2008 to June 30, 2009. Combined deposits and customerrepurchase agreements increased $18.8 million (6.31%) during the same period.Average total assets and average total deposits increased $18.8 million and$20.7 million, respectively, from second quarter 2008 to second quarter 2009.Management believes that some of the recent growth in deposit balances resultsfrom market instability that is part of a continuing general economic recession.Consumers often seek the safety of conservatively run community banks when thestock market has a significant and prolonged downturn. For further discussion ofseasonal activity that affects deposit levels, see the section titled Liquidity.

Loan Portfolio    During the first half of 2009, the Bank’s gross loanportfolio has grown $2.5 million (1.05%). Growth in the loan portfolio has beenfunded by increased deposit balances. Because loans earn at higher average ratesthan the cost of funds, this use of investable funds has a positive effect onearnings. There is no adverse impact on the Company’s ability to meet liquiditydemands resulting from increases in the loan portfolio.   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. Throughout 2008 and 2009, thelocal and regional economies have been adversely affected by a recession ofnational and international reach.

Loan Quality and the Allowance for Loan Losses    The allowance for loan losses (ALLL) represents an amountwhich management believes to be adequate to absorb identified and inherentlosses in the loan portfolio as of the balance sheet date. Valuation of theallowance is completed no less than quarterly. The determination of theallowance is inherently subjective as it relies on estimates of potential lossrelated to specific loans, the effects of portfolio trends, and other internaland external factors.     The ALLL consists of (i) formula-based reserves comprised ofpotential losses in the balance of the loan portfolio segmented into homogeneouspools, (ii) specific reserves comprised of potential losses on loans thatmanagement has identified as impaired and (iii) unallocated reserves.Unallocated reserves are not associated with a specific portfolio segment or aspecific loan, but may be appropriate if properly supported and in accordancewith GAAP.    The Company evaluates loan portfolio risk for the purpose ofestablishing an adequate allowance for loan losses. In determining an adequatelevel for the formula-based portion of the ALLL, management considers historicalloss experience for major types of loans. Homogenous categories of loans areevaluated based on loss experience in the most recent five years, applied to thecurrent portfolio. This formulation gives weight to portfolio size and lossexperience for categories of real estate construction loans, other real estatesecured loans, other loans to commercial borrowers, and other consumer loans.However, historical data may not be an accurate predictor of loss potential inthe current loan portfolio. Management also evaluates trends in delinquencies,the composition of the portfolio, concentrations of credit, and changes inlending products, processes, or staffing. Management further considers externalfactors such as the interest rate environment, competition, current local andnational economic trends, and the results of recent independent reviews byauditors and banking regulators.     The ongoing slow-down in the real-estate market has affectedboth the price and time to market residential and commercial properties.Management closely monitors such trends and the potential effect on the Company.In recent months, borrowers whose cash flow is impaired as a result ofprevailing economic conditions have also experienced depressed real estatevalues. Management recognizes that the combination of these circumstances –reduced revenue and depressed collateral values, may increase the likelihood ofloss in the Bank’s real estate secured loan portfolio. Management closelymonitors conditions that might indicate deterioration of collateral value onsignificant loans and, when possible, obtains additional collateral as requiredto limit the Bank’s loss exposure. 
 

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    Management employs a risk rating system which gives weight tocollateral status (secured vs. unsecured), and to the absence or improperexecution of critical contract or collateral documents. Unsecured loans andthose loans with critical documentation exceptions, as defined by management,are considered to have greater loss exposure. Management incorporates thesefactors in the formula-based portion of the ALLL. Additionally, consideration isgiven to those segments of the loan portfolio which management deems to pose thegreatest likelihood of loss.    Management believes that in a general economic downturn, suchas the region has experienced through 2008 and 2009, the Bank has increasedlikelihood of loss is in unsecured loans - commercial and consumer, and insecured consumer loans. Reserves for these segments of the portfolio areincluded in the formula-based portion of the ALLL. As of June 30, 2009,management reserved 75 bp against unsecured loans, and consumer loans secured byother than real estate. Both of these reserves were increased during the firstand second quarters of this year in recognition of the prolonged economicchallenges to regional, national, and global economies. Additionally, managementreserved 10.0% against overdrawn checking accounts which are a distinct highrisk category of unsecured loan.     The depth and length of the current recession has resulted inunusual stress to the Bank’s real estate secured portfolio as well. Risingdelinquencies and falling collateral values have caused the Bank to sufferhistorically high losses in real estate secured loans. The Bank continuallyevaluates loss potential in the mortgage portfolio and provides specificreserves at the time a potential loss is identified.     Historically, the absence or improper execution of a documenthas not resulted in a loss to the Bank, however, management recognizes that theBank’s loss exposure is increased until a critical contract or collateraldocumentation exception is cured. At June 30, 2009, management reserved 10 bpagainst the outstanding balances of loans identified as having criticaldocumentation exceptions.    The provision for loan losses is a charge to earnings in thecurrent period to maintain the allowance at a level management has determined tobe appropriate. The allowance is increased by current period provisions and byrecoveries of amounts previously charged-off. The allowance is decreased whenloans are charged-off as losses, which occurs when they are deemed to beuncollectible. Adjustments made to bring the balance in the allowance to thelevel established by management may result in an increase or decrease toexpense. Provisions for loan losses of $296,500 and $629,600 were made for thesecond quarter of 2009 and year-to-date, respectively. This compares toprovisions for loan losses of $5,284 and $76,493 for the comparable periods in2008. The year-to-year increases in the level of the ALLL and the provision forloan loss reflect the consequences of the current economy. As the recessioncontinues and borrowers suffer personal and professional financial hardship, thelikelihood of loss on previously performing loans has increased. As Managementidentifies loans with heightened loss potential, a provision for those losses isrecorded.     Management considers the June 30, 2009 allowance appropriateand adequate to absorb identified and inherent losses in the loan portfolio.However, there can be no assurance that charge-offs in future periods will notexceed the allowance for loan losses or that additional increases in the loanloss allowance will not be required. As of June 30, 2009, management hasidentified two loans with balances totaling $17,569 which are anticipated to bewholly charged-off within the next 12 months.

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    The following is a schedule of transactions in the allowancefor loan losses. The Bank experienced net charge-offs of $383,998 in the secondquarter of 2009 and $457,497 in the current year to date. As described earlier,management attributes the increased loan losses to the effects of the currenteconomic recession on some of the Bank’s customers and, subsequently, on theBank.
		Allowance for Loan Losses    		For six months ended 		For the year ended  		June 30 		December 31  		2009		2008 		2008 		Balance at beginning of year		 $        707,152 		 $        195,525  		 $        195,525  		Loans charged-off:     		  Real estate - construction and land		                       - 		                       -  		                       -  		  Real estate - mortgage		           369,150 		                       -  		                       -  		  Commercial		             73,105 		             59,199  		             76,383  		  Consumer		             29,548 		             10,000  		             34,532  		        Total loan losses		           471,803 		             69,199  		           110,915  		Recoveries on loans previously charged off:     		  Real estate - construction		                       - 		                       -  		                       -  		  Real estate - mortgage		                  318 		                       -  		                       -  		  Commercial		                  276 		                       -  		               3,785  		  Consumer		             13,712 		                  160  		               1,231  		        Total loan recoveries		             14,306 		                  160  		               5,016        		Net loan charge-offs (recoveries)		           457,497 		             69,039  		           105,899  		Provision for loan losses charged to expense		           629,600 		             76,493  		           617,526  		Balance at end of period		 $        879,255 		 $        202,979  		 $        707,152        		Average loans outstanding during the period		 $ 244,373,445 		 $ 242,945,890  		 $ 238,873,590  		Annualized net charge-offs as a percentage of     		average loans outstanding during the period		0.38%		0.06% 		0.04%       		Gross loans outstanding at the end of the period		 $ 244,677,035 		 $ 241,777,229  		 $ 242,138,066  		Allowance for loan losses to gross loans     		outstanding at the end of the period		0.36%		0.08% 		0.29% 
    The accrual of interest on a loan is discontinued when principal or interestis ninety days past due or when the loan is determined to be impaired, unlesscollateral is sufficient to discharge the debt in full and the loan is inprocess of collection. When a loan is placed in nonaccruing status, any interestpreviously accrued but unpaid, is reversed from interest income. Interestpayments received on nonaccrual loans may be recorded as cash basis income, oras a reduction of principal, depending on management’s judgment on a loan byloan basis. Accrual of interest may be restored when all principal and interestare current and management believes that future payments will be received inaccordance with the loan agreement.

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    Nonperforming loans are loans past due 90 or more days and still accruingplus nonaccrual loans. Nonperforming assets are comprised of nonperforming loanscombined with real estate acquired in foreclosure and held for sale. There wereno nonperforming assets other than nonperforming loans as of June 30, 2009 orDecember 31, 2008, as shown in the following table.
 		June 30,		December 31, 		2009		2008		Loans 90 days or more past due and still accruing  		Real estate		 $           583,372 		 $        4,602,365 		Commercial		                       -   		                40,000 		Consumer		                  4,212 		                  5,427  		              587,584 		           4,647,792   		Nonaccruing loans		           1,801,010 		              199,724 		Total nonperforming loans		 $        2,388,594 		 $        4,847,516    		Interest not accrued on nonaccruing loans		 $           100,964 		 $               6,797    		Interest included in net income on nonaccruing loans,  		year-to-date		 $               9,231 		 $                    -   
 

    Included in amounts past due 90 days or more and still accruing at December31, 2008, was a loan with a principal balance of $4,500,000. The Bank has beennotified that there is a lien on the property securing this loan that issuperior to the Bank’s liens. The Bank was not aware of this lien at the timethe loan was originated, and the Bank’s settlement agent did not discover thelien during the title examination process. The Bank has filed a claim with thetitle company that has insured its lien. The Bank believes the title companywill indemnify the Bank for any losses resulting from the superior lien,although there is no guarantee that this will be the case. As of June 30, 2009,interest on this loan was current. The Bank’s claim with the title company hasnot yet been settled.    Loans are considered impaired when, based on current information, managementconsiders it unlikely that collection of principal and interest payments will bemade according to contractual terms. Generally, loans are not reviewed forimpairment until the accrual of interest has been discontinued, althoughmanagement may categorize a performing loan as impaired based on knowledge ofthe borrower’s financial condition, devaluation of collateral, or othercircumstances that are deemed relevant to loan collection. Impaired loans mayhave specific reserves, or valuation allowances, allocated to them in the ALLL.Estimates of loss reserves on impaired loans may be determined based on any ofthe three measurement methods described in Financial Accounting Standard 114(FAS 114): (1) the present value of future cash flows, (2) the fair value ofcollateral, if repayment of the loan is expected to be provided by underlyingcollateral, or (3) the loan’s observable fair value. The Bank selects andapplies, on a loan-by-loan basis, the appropriate valuation method. Loansdetermined to be impaired, but for which no specific valuation allowance is madebecause management believes the loan is secured with adequate collateral or theBank will not take a loss on such loan, are grouped with other homogeneous loansfor evaluation under formula-based criteria described previously. 

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    Impaired loans including nonaccruing loans totaled $4,573,646 and $8,888,200,at June 30, 2009, and December 31, 2008, respectively. Principal balances ofimpaired loans include $419,770 which is guaranteed by a government agency atboth June 30, 2009, and December 31, 2008. 
 						June 30, 2009						December 31, 2008						Impaired loans with valuation allowances,   						including nonaccruing loans						 $            2,309,722 						 $               4,328,618 						Valuation allowances on impaired loans						 $               660,497 						 $                  605,405    						Impaired loans with no valuation allowances						 $            2,263,924 						 $               4,559,582    						Total impaired loans						 $            4,573,646 						 $               8,888,200 
Liquidity   Liquidity represents the ability to provide steady sources offunds for loan commitments and investment activities, as well as to providesufficient funds to cover deposit withdrawals and payment of debt and operatingobligations. These funds can be obtained by converting assets to cash or byattracting new deposits. The Company’s major sources of liquidity are loanrepayments, maturities of short-term investments including federal funds sold,and increases in core deposits. Funds from seasonal deposits are generallyinvested in short-term U.S. Treasury Bills and overnight federal funds.     Due to its location in a seasonal resort area, the Banktypically experiences a decline in deposits, federal funds sold and investmentsecurities throughout the first quarter of the year when business customers areusing their deposits to meet cash flow needs. Beginning late in the secondquarter and throughout the third quarter, additional sources of liquidity becomemore readily available as business borrowers start repaying loans, and the Bankreceives deposits from seasonal business customers, summer residents andtourists.     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 were38.91% for the second quarter of 2009 compared to 35.70% for the same quarter of2008.    The Company has available lines of credit, includingovernight federal funds and reverse repurchase agreements, totaling $28,000,000as of June 30, 2009.    Average net loans to average deposits were 81.98% versus87.83% as of June 30, 2009 and 2008, respectively. Average net loans increasedby .33% while average deposits grew by 7.50%. Funding for loan growth wasprovided by deposit increases. Because loans earn higher average rates than theBank’s cost of funds, this results in a positive effect on earnings. Averagedeposit balance increases occurred in interest-bearing accounts, especially timedeposits. Average non-interest bearing deposit balances increased by a modest..32%. Neither changes in deposit portfolio composition nor the increase inoutstanding loan balances has a negative impact on the Company’s ability to meetliquidity demands.

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Interest Rate Sensitivity    The primary objective of asset/liability management is toensure the steady growth of the Company's primary source of earnings, netinterest income. Net interest income can fluctuate with significant interestrate movements. To lessen the impact of these margin swings, the balance sheetshould be structured so that repricing opportunities exist for both assets andliabilities in roughly equivalent amounts at approximately the same timeintervals. Imbalances in these repricing opportunities at any point in timeconstitute interest rate sensitivity.    Interest rate sensitivity refers to the responsiveness ofinterest-bearing assets and liabilities to changes in market interest rates. Therate-sensitive position, or gap, is the difference in the volume ofrate-sensitive assets and liabilities at a given time interval. The generalobjective of gap management is to actively manage rate-sensitive assets andliabilities to reduce the impact of interest rate fluctuations on the netinterest margin. Management generally attempts to maintain a balance betweenrate-sensitive assets and liabilities as the exposure period is lengthened tominimize the overall interest rate risk to the Company.    Interest rate sensitivity may be controlled on either side ofthe balance sheet. On the asset side, management exercises some control overmaturities. Also, loans are written to provide repricing opportunities on fixedrate notes. The Company's investment portfolio, including federal funds sold,provides the most flexible and fastest control over rate sensitivity since itcan generally be restructured more quickly than the loan portfolio.    On the liability side, deposit products are structured tooffer incentives to attain the maturity distribution desired. Competitivefactors sometimes make control over deposits more difficult and, therefore, lesseffective as an interest rate sensitivity management tool.    The asset mix of the balance sheet is continually evaluatedin terms of several variables: yield, credit quality, appropriate fundingsources, and liquidity. Management of the liability mix of the balance sheetfocuses on expanding the various funding sources.    As of June 30, 2009, the Company was cumulativelyasset-sensitive for all time horizons. For asset-sensitive institutions, ifinterest rates should decrease, the net interest margins should decline. Sinceall interest rates and yields do not adjust at the same velocity, the gap isonly a general indicator of rate sensitivity.

Results of Operations    Net income for the three months ended June 30, 2009***,***was $1,151,176 or $.38 per share, compared to $1,642,937 or $.53 pershare for the second quarter of 2008. This represents a decrease of $491,761 or29.93% from the prior year. Year to date net income has decreased $775,270 or$.24 per share from $3,265,136 ($1.06/share) in 2008 to $2,489,866 ($.82/share)in 2009. The key components of net income are discussed in the followingparagraphs.     For the second quarter of 2009 compared to 2008, net interestincome decreased $210,043 (5.26%). Net interest income decreased $291,104(3.64%) in the first six months of 2009 compared to the same period of 2008. Thedecrease in interest and dividend revenue is primarily attributable to marketrate reductions which have resulted in the dramatic downward repricing ofovernight federal funds. Interest expense decreased in the second quarter of2009 by $343,858 (34.60%) relative to the comparable period last year due tolower rates on all deposits, but particularly time deposits. For the year todate, interest expense is down $789,625 (36.47%) relative to the previous yearto date.    The Company’s net interest income is one of the mostimportant factors in evaluating its financial performance. Management usesinterest rate 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 5.1% 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 an increase in net interest income of the samepercentage. The sensitivity analysis does not consider the likelihood of theserate changes nor whether management’s reaction to this rate change would be toreprice its loans or deposits or both.     The tax-equivalent quarterly yield on interest-earning assetsdecreased by 96 basis points from 6.13% for second quarter 2008 to 5.17% in2009. The quarterly yield on interest-bearing liabilities decreased by 77 basispoints from 1.89% in 2008 to 1.12% in 2009. In combination, these shiftscontribute to a decrease in net margin on interest-earning assets of 49 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		June 30, 2009		June 30, 2008		Average  		Average  		balance		Interest		Yield		balance		Interest		Yield      		Assets      		  Federal funds sold		 $   34,243,326 		 $        16,956 		0.20%		 $   36,853,798 		 $      196,420 		2.14%		  Interest-bearing deposits		      10,736,142 		           28,016 		1.05%		        6,187,025 		           53,812 		3.50%		  Investment securities		      62,036,785 		         453,877 		2.93%		      47,007,470 		         573,601 		4.91%		  Loans, net of allowance		    243,492,267 		      4,018,705 		6.62%		    242,688,085 		      4,244,251 		7.03%		    Total interest-earning assets		    350,508,520 		      4,517,554 		5.17%		    332,736,378 		      5,068,084 		6.13%		Noninterest-bearing cash		      10,790,225   		        9,982,276   		Other assets		      13,469,191   		      13,275,910   		        Total assets		 $ 374,767,936   		 $ 355,994,564         		Liabilities and Stockholders' Equity      		Interest-bearing deposits      		  NOW 		 $   49,940,208 		           27,331 		0.22%		 $   49,985,477 		           49,790 		0.40%		  Money market		      33,228,034 		           41,051 		0.50%		      30,608,620 		           71,854 		0.94%		  Savings		      43,726,854 		           53,922 		0.49%		      40,745,123 		           75,144 		0.74%		  Other time		    100,633,809 		         519,487 		2.07%		      85,698,618 		         789,087 		3.70%		    Total interest-bearing deposits		    227,528,905 		         641,791  				1.13%		    207,037,838 		         985,875  				1.92%		Securities sold under agreements to repurchase & federal funds purchased		        5,751,306 		             7,126 		0.50%		        3,853,559 		             6,532 		0.68%		Borrowed funds		             63,638 		                986 		6.21%		             88,308 		             1,354 		6.17%		    Total interest-bearing liabilities		    233,343,849 		         649,903  				1.12%		    210,979,705 		         993,761  				1.89%		Noninterest-bearing deposits		      69,497,742   		      69,272,622   		    302,841,591 		         649,903 		0.86%		    280,252,327 		         993,761 		1.43%		Other liabilities		           535,249   		           856,698   		Stockholders' equity		      71,391,096   		      74,885,539   		        Total liabilities and      		        stockholders' equity		 $ 374,767,936   		 $ 355,994,564   		Net interest spread  		4.05%  		4.24%		Net interest income 		 $   3,867,651   		 $   4,074,323  		Net margin on interest-earning assets  		4.43%  		4.92%      		Tax equivalent adjustment in:      		    Investment income 		 $        32,615   		 $        42,113  		    Loan income 		 $        54,410   		 $        41,541  
 

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    Provisions for loan losses of $296,500 and $5,284 were recorded during thesecond quarter of 2009 and 2008, respectively. Net loans charged-off were$457,497 and $69,039 during the first half of 2009 and 2008, respectively.Management attributes the increased loan losses to the generally poor state ofthe economy which has had an adverse effect on certain borrowing customers. SeeLoan Quality and the Allowance for Loan Losses for a discussion of the provisionfor loan losses.    Noninterest revenue for the second quarter of 2009 is $36,066 (6.73%) lowerthan the comparable period last year. Noninterest revenue for the year-to-dateis $43,482 (4.33%) less than last year. Both the quarter and the year-to-dateresults are largely due to decreased service charges on deposit accounts and thereduced rate of growth in cash surrender value of bank owned life insurance.    Noninterest expense for the second quarter of 2009 is $254,136 (13.06%), morethan last year of which $241,466 is due to increased FDIC premiums. Noninterestexpense year-to-date is $365,577 (9.63%) more than last year of which $247,915is due to FDIC premium increases. FDIC insurance premiums have jumpeddramatically due to increased rates and assessable balances, the expiration ofthe one-time insurance premium credit, and the accrual of a special assessmentto restore the deposit insurance fund to target levels.    Income taxes for the six months ended June 30, 2009 are $478,000 (25.77%)lower than the same period last year, on a pre-tax income decrease of $1,253,270(24.48%). This is consistent with the Company’s effective tax rate ofapproximately 35.5%. 

Plans of Operation    The Bank offers a full range of deposit services including checking, NOW,Money Market, and savings accounts, and time deposits including certificates ofdeposit. The transaction, savings, and certificate of deposit accounts aretailored to the Bank’s principal market areas at rates competitive to thoseoffered in the area. The Bank also offers Individual Retirement Accounts (IRA),Health Savings Accounts, and Education Savings Accounts. All deposits areinsured by the Federal Deposit Insurance Corporation (FDIC) up to the maximumamount allowed by law. The Bank solicits these accounts from individuals,businesses, associations and organizations, and governmental authorities. TheBank offers individual customers up to $50 million in FDIC insured depositsthrough the Certificate of Deposit Account Registry Services® network.     FDIC deposit insurance has been temporarily increased from $100,000 to$250,000 per depositor through December 31, 2013.    The Bank also offers a full range of short- to medium-term commercial andpersonal loans. Commercial loans include both secured and unsecured loans forworking capital (including inventory and receivables), business expansion(including acquisition of real estate and improvements), and purchase ofequipment and machinery. Consumer loans include secured and unsecured loans forfinancing automobiles, home improvements, education, and personal investments.The Bank originates commercial and residential mortgage loans and real estateconstruction and acquisition loans. These lending activities are subject to avariety of lending limits imposed by state and federal law. The Bank lends todirectors and officers of the Company and the Bank under terms comparable tothose offered to other borrowers entering into similar loan transactions. TheBoard of Directors approves all loans to officers and directors and reviewsthese loans every six months.    Other bank services include cash management services, 24-hour ATM’s, debitcards, safe deposit boxes, travelers’ checks, direct deposit of payroll andsocial security funds, 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 offers a remotecapture service that enables commercial customers to electronically capturecheck images and make on-line deposits. The Bank also offers non-depositproducts including retail repurchase agreements and discount brokerage servicesthrough a correspondent bank. 

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** 

Capital Resources and Adequacy   Total stockholders’ equity increased $1,229,056 from December 31, 2008 toJune 30, 2009. This increase is attributable to comprehensive income recordedduring the period, as detailed in Note 2 of the Notes to Financial Statements,reduced by $988,883 used to repurchase and retire 26,753 shares of common stock.    Under the capital guidelines of the Federal Reserve Board and the FDIC, theCompany and Bank are currently required to maintain a minimum risk-based totalcapital ratio of 8%, with at least 4% being Tier 1 capital. Tier 1 capitalconsists of stockholders' equity less accumulated other comprehensive income. Inaddition, the Company and the Bank must maintain a minimum Tier 1 leverage ratio(Tier 1 capital to total assets) of at least 4%, but this minimum ratio isincreased by 100 to 200 basis points for other than the highest-ratedinstitutions.    Tier one risk-based capital ratios of the Company as of June 30, 2009 andDecember 31, 2008 were 31.5% and 31.8%, respectively. Both are substantially inexcess of regulatory minimum requirements.    The Company and the Bank did not seek assistance under the federally fundedTroubled Asset Relief Program (TARP) developed in the lastquarter of 2008. Neither the Company nor the Bank will benefit directly fromTARP funds. The Bank has not engaged in subprime mortgage lending, andhas no investments in mortgage backed securities.   Late in 2008, the Company and the Bank elected to participate in theTemporary Liquidity Guarantee Program (TLG), which, in combination withtemporary deposit insurance limit increases, provide the security of additionalinsurance to depositors. These actions have contributed to an increase indeposits in the Bank as investors seek the safety of insured deposits incommunity banks. Deposit insurance premiums will increase as a result of thehigher deposit balances, the higher insurance limits, participation in TLG, andhigher insurance rates. Management does not expect to pass all of the additionalinsurance premium costs on to customers.   In the most stable economic times, the Company cannot reliably predict theeffect of changing government policies on earnings, or loan and deposit levels.Management expects 2009 to bring lower interest revenues and higher feesassociated with loan collection and increased deposit insurance premiums. Thefull impact of the dramatic developments of 2008 on future results of operationof the Company and the Bank, are uncertain. 

Website Access to SEC Reports    The Bank maintains an Internet website at www.taylorbank.com.The Company’s periodic SEC reports, including annual reports on Form 10-K,quarterly reports on Form 10-Q, and current reports on Form 8-K, are accessiblethrough this website. Access to these filings is free of charge. The reports areavailable as soon as practicable after they are filed electronically with theSEC. 

 

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** 

Item 3. Quantitative and Qualitative Disclosures About Market Risk    The Company’s principal market risk exposure relates to interest rates oninterest-earning assets and interest-bearing liabilities. Unlike most industrialcompanies, the assets and liabilities of financial institutions such as theCompany and the Bank are primarily monetary in nature. Therefore, interest rateshave a more significant effect on the Company's performance than do the effectsof 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 samemagnitude as the prices of goods and services. As discussed previously,management monitors and seeks to manage the relationships between interestsensitive assets and liabilities in order to protect against wide interest ratefluctuations, including those resulting from inflation.     At June 30, 2009, the Company’s interest rate sensitivity, as measured by gapanalysis, showed the Company was asset-sensitive with a one-year cumulative gapof 22.30%, as a percentage of interest-earning assets. Generallyasset-sensitivity indicates that assets reprice more quickly than liabilitiesand in a rising rate environment net interest income typically increases.Conversely, if interest rates decrease, net interest income would decline. TheBank has classified its demand mortgage and commercial loans as immediatelyrepriceable. Unlike loans tied to prime, these rates do not necessarily changeas prime changes since the decision to call the loans and change the rates restswith management. 
**Item 4. Controls and procedures    Disclosure controls and procedures are designed and maintained by the Companyto ensure that information required to be disclosed in the Company’s publiclyfiled reports is recorded, processed, summarized and reported in a timelymanner. Such information must be available to management, including the ChiefExecutive Officer (CEO) and Treasurer, to allow them to make timely decisionsabout required disclosures. Even a well-designed and maintained control systemcan provide only reasonable, not absolute, assurance that its objectives areachieved. Inherent limitations in any system of controls include flawedjudgment, errors, omissions, or intentional circumvention of controls.    The Company’s management, including the CEO and Treasurer, performed anevaluation of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures as of June 30, 2009. Based on thatevaluation, 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 Controls    During the quarter ended on the date of this report, there were nosignificant changes in the Company’s internal control over financial reportingthat have had or are reasonably likely to have a material effect on theCompany’s internal control over financial reporting. As of June 30, 2009, theCompany’s management, including the CEO and Treasurer, has concluded that theCompany’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 Proceedings    Not applicable

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

Credit risk is the risk to the Company’s earnings or capital from thepotential of an obligor failing to fulfill its contractual commitment to theCompany. Credit risk is most closely associated with the Company’s lendingactivities.

Interest rate risk is the risk to earnings or capital from thepotential movement in interest rates. It is the sensitivity of the Company’sfuture earnings to interest rate changes.

Liquidity risk is the risk to earnings or capital from the Company’sinability to meet its obligations when they come due without incurringunacceptable losses or costs.

Market risk is the risk to earnings or capital from changes in thevalue of portfolios of financial instruments. For the Company, market risk isthe risk of a decline in market value of its securities portfolio.

Transaction risk is the risk to earnings or capital arising fromproblems with service or product delivery. Transaction risk is the risk of afailure in the Company’s operating processes, such as automation, employeeintegrity, or internal controls.

Compliance risk is the risk to earnings or capital from noncompliancewith laws, rules, and regulations. Compliance risk is one of the greatest risksthe Company faces.

Reputation risk is the risk to earnings or capital from negativepublic opinion. Customer and public relations are critical to the Company’ssuccess. Accordingly, the Company’s reputation is extremely important andanything that would impair that reputation is a significant risk.

Strategic risk is the risk to earnings or capital arising from adversebusiness decisions or improper implementation of those decisions.

 

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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds( c ) The following table presents information about the Company’s repurchaseof its equity securities during the calendar quarter ended on the date of thisreport.
    		(c) Total number		(d) Maximum number  		(a) Total		(b) Average		of Shares Purchased		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		April		               3,184 		               36.75 		                                3,184 		199,124		May		               1,406 		               36.75 		                                1,406 		197,718 		June		               2,724 		               36.68 		                                2,724 		194,994		Totals		               7,314 		               36.73 		                                7,314  
    The Company publicly announced on August 14, 2003, that it would repurchaseup to 10% of its outstanding equity stock at that time, which equated to a totalof 324,000 common shares available for repurchase. As of January 1, 2005, andagain on May 18, 2007, this plan was renewed by public announcement, making upto 10% of the Company’s outstanding equity stock available for repurchase at thetime of each renewal. This equated to a total of 314,072 common shares availablefor repurchase as of May 18, 2007.     There is no expiration date for this program. No other stock repurchase planor program existed or exists simultaneously, nor has any other plan or programexpired during the period covered by this table. Common shares repurchased underthis plan are retired. 

Item 3 Defaults Upon Senior Securities    Not applicable

Item 4 Submission of Matters to a Vote of Security Holders		   		The Company held its annual meeting on May 13, 2009, during which the		items detailed in the proxy statement dated March 11, 2009, were		approved. This includes the reelection of the Board of Directors.

Item 5 Other information		    There is no information required to be disclosed in a report on Form		8-K during the period covered by this report, which has not been		reported.

Item 6 Exhibits and Reports on Form 8-K		   		a) 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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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: August 6, 2009_______
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: August 6, 2009_______
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 June 30, 2009 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: August 6, 2009_______
By:
/s/ Raymond M. Thompson  
Raymond M. Thompson  
Chief Executive Officer      
Date: August 6, 2009_______
By:
/s/ Jennifer G. Hawkins  
Jennifer G. Hawkins  
Treasurer (Principal Financial Officer)
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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: August 6, 2009_______
By:
/s/ Raymond M. Thompson  
Raymond M. Thompson  
Chief Executive Officer      
Date: August 6, 2009_______
By:
/s/ Jennifer G. Hawkins  
Jennifer G. Hawkins  
Treasurer (Principal Financial Officer)
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