[ARTICLE] 9
[CURRENCY] 
<TABLE>
<S>                             <C>
[PERIOD-TYPE]                   6-MOS
[FISCAL-YEAR-END]                          DEC-31-1998
[PERIOD-END]                               JUN-30-1998
[EXCHANGE-RATE]                                      1
[CASH]                                          85,909
[INT-BEARING-DEPOSITS]                           2,929
[FED-FUNDS-SOLD]                                 8,184
[TRADING-ASSETS]                                     0
[INVESTMENTS-HELD-FOR-SALE]                          0
[INVESTMENTS-CARRYING]                         515,179
[INVESTMENTS-MARKET]                                 0
[LOANS]                                      1,323,089
[ALLOWANCE]                                     18,609
[TOTAL-ASSETS]                               2,076,018
[DEPOSITS]                                   1,724,617
[SHORT-TERM]                                    31,971
[LIABILITIES-OTHER]                             22,144
[LONG-TERM]                                     20,040
[PREFERRED-MANDATORY]                                0
[PREFERRED]                                          0
[COMMON]                                        13,290
[OTHER-SE]                                     203,277
[TOTAL-LIABILITIES-AND-EQUITY]               2,076,018
[INTEREST-LOAN]                                 56,664
[INTEREST-INVEST]                               16,414
[INTEREST-OTHER]                                   746
[INTEREST-TOTAL]                                73,824
[INTEREST-DEPOSIT]                              29,566
[INTEREST-EXPENSE]                              33,200
[INTEREST-INCOME-NET]                           40,624
[LOAN-LOSSES]                                    2,160
[SECURITIES-GAINS]                                 342
[EXPENSE-OTHER]                                 41,699
[INCOME-PRETAX]                                 15,135
[INCOME-PRE-EXTRAORDINARY]                      15,135
[EXTRAORDINARY]                                      0
[CHANGES]                                            0
[NET-INCOME]                                     9,089
[EPS-PRIMARY]                                     0.69
[EPS-DILUTED]                                     0.68
[YIELD-ACTUAL]                                    4.52
[LOANS-NON]                                     15,719
[LOANS-PAST]                                     5,400
[LOANS-TROUBLED]                                     0
[LOANS-PROBLEM]                                      0
[ALLOWANCE-OPEN]                                18,943
[CHARGE-OFFS]                                    3,730
[RECOVERIES]                                     1,236
[ALLOWANCE-CLOSE]                               18,609
[ALLOWANCE-DOMESTIC]                            18,609
[ALLOWANCE-FOREIGN]                                  0
[ALLOWANCE-UNALLOCATED]                              0
</TABLE>




SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

________________________

Form 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

________________________


For the Quarterly Period Ended June 30, 1998, Commission Files 
Number 0-11012

VERMONT FINANCIAL SERVICES CORP.

A DELAWARE CORPORATION 

IRS EMPLOYER IDENTIFICATION NO.  03-0284445

100 Main Street, Brattleboro, Vermont 05301

Telephone:  (802) 257-7151

__________________________
                
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.


Yes  X  No___

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

As of July 31, 1998  13,166,560









VEREMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES

INDEX

Part I FINANCIAL INFORMATION

Item 1. Financial Statements
			
Consolidated Balance Sheets				3
			
Consolidated Statements of Income			4

Consolidated Statements of Cash Flows			5

Notes to Consolidated Financial Statements		6

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations		7

Item 3.  Quantitative and Qualitative Disclosures about
About Market Risk					9

Part II Other Information					10

Signatures						10










<TABLE>
VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
Consolidated Balance Sheets(unaudited)
June 30, 1998 and December 31, 1997
(in thousands,except per share data)              <C>              <C>
                                                June 30,         December 31,

ASSETS                                            1998               1997 

Cash and Due from Banks                      $   85,909        $      95,495 
Interest Bearing Balances with Banks              2,929                   44 
Federal Funds Sold                                8,184                2,470 
    Total Cash & Cash Equivalents                97,022               98,009 
Securities Available for Sale 
  U.S. Treasury and U.S. Government Agencies    210,207              295,775 
  Mortgage Backed Securities                    202,447              199,122 
  State and Municipal                            10,246                9,987 
  Other                                          92,279               22,765 
    Total Securities Available for Sale         515,179              527,649 
Loans: 
  Commercial                                    183,536              166,418 
  Commercial Real Estate                        263,232              273,089 
  Residential Real Estate                       766,521              765,634 
  Consumer                                      109,800              109,360 
    Total Loans                               1,323,089            1,314,501 
  Less:  Allowance for Loan Losses               18,609               18,943 
    Net Loans                                 1,304,480            1,295,558 
Premises and Equipment                           43,165               46,620 
Real Estate Held for Investment                   1,277                1,298 
Other Real Estate Owned (OREO) - net of 
 reserve of $0 in 1998 and $0 in 1997             2,639                2,794 
Goodwill & Other Intangibles                     59,404               61,729 
Other Assets                                     52,852               63,795 
    Total Assets                             $2,076,018           $2,097,452 

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Demand                                     $  270,973           $  228,935 
  Savings, NOW & Money Market Accounts          938,628              915,937 
  Other Time:  Under $100,000                   436,627              472,437 
               Over    $100,000                  78,389               68,863 
    Total Deposits                            1,724,617            1,686,172 
Federal Funds Purchased and Securities Sold  
  Under Agreements to Repurchase                 60,679               87,818 
Liabilities for Borrowed Money                   52,011               86,899 
Other Liabilities                                22,144               22,967 
    Total Liabilities                         1,859,451            1,883,856 
Stockholders' Equity
Common Stock - $1 Par Value
   Authorized 20,000,000 shares
   Issued :               1998 - 13,289,710
                          1997 - 13,243,357      13,290               13,243 
Preferred Stock - $1 Par Value
    Authorized 5,000,000 shares
Capital Surplus                                 117,106              116,640 
Undivided Profits                                86,672               81,562 
Security Valuation Allowance                      2,164                2,152 
Treasury Stock,at cost - 1998 - 94,095
                         1997 - 52               (2,665)                  (1)
    Total Stockholders' Equity                  216,567              213,596 
    Total Liabilities and
        Stockholders' Equity                 $2,076,018           $2,097,452 

Diluted Tangible Book Value per
 share of Common Stock                           $11.92               $11.48


</TABLE>
<TABLE>
VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except share data)
(unaudited)
                                     <C>        <C>           <C>      <C>
                                    Three Months Ended       Six Months Ended
                                        June 30,                  June 30,
                                    1998          1997       1998        1997

Interest Income:
Interest and Fees on Loans       $28,189       $20,129    $56,664     $39,550 
Interest on Securities
   Available for Sale:
Taxable Interest Income            8,060         4,808     16,116       9,240 
Tax Exempt Income                    189            28        298         179 
Interest on Fed Funds Sold and
 Other Short Term Investments        311           158        746         224 
Total Interest Income             36,749        25,123     73,824      49,193 
Interest Expense:
Interst on Deposits               14,880         9,350     29,566      18,318 
Interest on Fed Funds Purchased,
 Borrowed Money and Securities
 Sold under Agreements to
 Repurchase                        1,626         1,337      3,634       2,460 
Total Interest Expense            16,506        10,687     33,200      20,778 
Net Interest Income               20,243        14,436     40,624      28,415 
Less: Provision for Loan Losses    1,035           700      2,160       1,450 

Net Interest Income After
 Provision for Loan Losses        19,208        13,736     38,464      26,965 
Other Operating Income
Securities Gains                     195             0        342           6
Trust Department Income            1,527         1,381      3,152       2,771 
Service Charges on Deposit
 Accounts                          3,689         1,623      7,089       3,131 
Credit Card Merchant Income          924           822      1,802       1,672 
Other Loan Related Fee Income        510           114        562         243 
Other Noninterest Income           2,633         1,698      5,423       3,349 
Other Loan Related Fee Income
Total Other Operating Income       9,478         5,638     18,370      11,172 

Other Operating Expense
Salaries and Wages                 7,716         5,023     15,198       9,806 
Pension and Other Employee
 Benefits                          1,698         1,384      3,491       2,861 
Occupancy of Bank Premises, net    1,830           914      3,722       1,906 
Furniture and Equipment            2,270         1,165      4,384       2,274 
Goodwill Amortization              1,130           173      2,259         344 
FDIC Assessment                      128            35        260          67 
Credit Card Merchant Expense         484           549      1,164       1,106 
OREO & Collection Expense/Losses,
  net                                461           244        890         534 
Other Noninterest Expense          4,996         3,184     10,331       6,086 
Total Other Operating Expense     20,713        12,671     41,699      24,984 
Net Overhead                     (11,235)       (7,033)  (23, 329)    (13,812)
Income Before Income Taxes         7,973         6,703     15,135      13,153 
Applicable Income Tax Expense      3,163         2,193      6,046       4,243 
Net Income                        $4,810        $4,510     $9,089      $8,910 

Average Shares Outstanding
          Basic               13,250,521     9,683,173 13,254,546   9,593,958 
          Diluted             13,344,812     9,793,318 13,352,517   9,711,926 

Earnings Per Common Share (Based on
   Average Number of Common Shares 
   Outstanding for the Respective
   Period) Net Income -- Basic     $0.36         $0.47      $0.69       $0.93 
   Net Income -- Diluted           $0.36         $0.46      $0.68       $0.92 


</TABLE>
<TABLE>
VERMONT FINANCIAL SERVICES CORP.
Condensed Statement of Cash Flows
(unaudited)
                                           <C>                    <C>
                                             6 months ended June 30,
                                           1998                  1997

OPERATING ACTIVITIES                              (in thousands)

Net Income                              $  9,089            $   8,910 
Adjustments to reconcile net income
  to net cash provided
  by operating activities:
    Provision for loan losses              2,160                1,450 
    Provision for depreciation             3,615                2,002 
    Amortization and accretion on
      securities                             227                  278 
    Deferred income taxes                    117                1,160 
    Security (gains)                        (342)                  (6)
    Proceeds  from sale of loans         120,432               32,184 
    Loans originated for sale           (126,631)             (31,727)
    Losses on OREO                            87                   44 
    Decrease (Increase) in interest
      receivable and other assets         16,011               (3,061)
    Decrease in real estate held for
      investment                              21                   25 
    (Decrease) Increase in interest
      payable and other liabilities         (823)                 253 
     NET CASH PROVIDED BY 
        OPERATING ACTIVITIES              23,963               11,512 
INVESTING ACTIVITIES
     Proceeds from the sale of the
       securities                          4,799               14,092 
     Proceeds from the maturity of
       the securities                    139,022               34,564 
     Purchases of securities            (131,225)             (49,127)
     Proceeds from sales of OREO           1,399                  877 
     Net cash and cash equivalents
       from Eastern Bancorp.                   -               41,054 
     Net decrease (increase) in loans     (6,214)              19,958 
     Purchase of premises and equipment   (3,019)              (3,511)
     NET CASH PROVIDED BY INVESTING
        ACTIVITIES                         4,762               57,907 
FINANCING ACTIVITIES
    Net (decrease) increase in deposits   38,445              (15,615)
    Net (decrease) in short-term
        borrowings                       (62,027)             (11,220)
    Issuance of common stock                 513                1,129 
    Purchase of treasury stock            (2,664)                   -  
    Cash dividends                        (3,979)              (2,772)
    NET CASH (USED BY) FINANCING
       ACTIVITIES                        (29,712)             (28,478)
INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                              (987)              40,941 
Cash and cash equivalents at beginning
   of period                              98,009               63,797 
CASH AND CASH EQUIVALENTS AT END
   OF PERIOD                             $97,022             $104,738 

Non-monetary Transactions:
     Transfer of loans to OREO for the periods ended  June 
30, 1998 and 1997 totaled $1,331 and $513.


VERMONT FINANCIAL SERVICES CORP.

Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements should
be read with the audited financial statements and notes thereto included in 
the annual report on Form 10-K and Form 10-K/A.  In the opinion of 
Management, all adjustments which are necessary for the fair presentation 
of the statement of the consolidated financial position of Vermont Financial
Services Corp., (VFSC or the Company), and the consolidated results of the
Company's operations and cash flow for the interim periods presented herein 
are reflected and all such adjustments are of a normal recurring nature. 
Certain items from interest income have been reclassified to noninterest
income and noninterest expense in accordance with Statement of Financial 
Accounting Standards (SFAS) No. 91, Accounting for Nonrefundable Fees and 
Costs Associated With Originating or Acquiring Loans and Initial Direct Cost
of Leases. There is no impact on net income associated with these
reclassifications.

Operating results for any interim period are not necessarily indicators of
results for any other interim period or the entire year.

2.	New Accounting Pronouncements

The Financial Accounting Standards Board (FASB)  has issued Financial
Accounting Standard (SFAS) No. 131, "Disclosures about Segments of an 
Enterprise and Related Information", which establishes standards for the way
public enterprises are to report information about operating segments in
annual financial statements and requires those enterprises to report selected
financial information about operating segments in its interim financial
reports issued to shareholders. Under this statement, operating segments
are defined as components of a company for which separate financial 
information is available and is used by management to allocate resources
and assess performance (management approach). This statement is effective
for the Company's December 31, 1998 financial statements and is effective
for interim financial statements beginning in 1999. The company anticipates
providing segment information for its Trust Department and United Bank.

The FASB has also issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which provides for matching the timing
of gain or loss recognition on the hedging instrument with the recognition 
of (a) the changes in fair value of the hedged asset or liability that are
attributable to the hedged risk or (b) the earnings effect of the hedged 
forecasted transaction.  The standard is effective for fiscal quarters
beginning after June 15, 1999. The Company expects adoption of this standard 
to have an immaterial impact on its financial statements.

3.	Acquisition

On June 26, 1997, the Company acquired all of the outstanding common stock
of Eastern Bancorp, Inc. ("Eastern"), a thrift holding company with total
assets of approximately $800 million headquartered in Dover, NH, for
approximately $26.9 million in cash and $72.7 million in VFSC common stock
(1,784,774 shares at $41.5625 per share).

This acquisition was accounted for by the purchase method and, accordingly,
the results of operations  of Eastern have been included in VFSC's 
consolidated financial statements from June 27, 1997. The excess of the
purchase price over the fair value of the net identifiable assets acquired
of approximately $57 million has been recorded as goodwill and is being
amortized on a straight-line basis over 15 years.

Eastern's primary subsidiary, Vermont Federal Bank, was merged into VFSC's
primary subsidiary, Vermont National Bank, on September 22,1997.
	
4.	Stock Split

On October 14, 1997 the Company paid a two-for-one stock split which was
effected as astock dividend. All per share and outstanding share amounts have 
been retroactively restated for the effects of this stock split.

5.	Comprehensive Income

The Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income as of January 1, 1998. SFAS No. 130 establishes standards for the 
reporting and display of comprehensive income and its components (such as 
changes in unrealized investment gains and losses). Comprehensive income
includes net income and any changes in equity from non-owner sources that
bypass the income statement. The purpose of reporting comprehensive income
is to report a measure of all changes in equity of an enterprise that result 
from recognized transactions and other economic events of the period other
than transactions with owners in their capacity as owners. Application of
SFAS No. 130 has not impacted the amounts previously reported for net income
or effected the comparability of previously issued financial statements.


</TABLE>
<TABLE>
The following table summarizes comprehensive income for the six months ended
June 30, 1998 and 1997:
                                            <C>                 <C>
                                            1998                1997

Net Income                                $9,089              $8,910
Other comprehensive income, net of tax:
    Unrealized gains (losses) on 
     investments
    Unrealized holding gain (loss)
     arising during the period net of
     income tax expense (benefit) of  
     $126 and $159 for 1998 and 1997,
     respectively.                           234                 296

     Less reclassification adjustment for
      gains included in net income net of
      income tax expense of $(120) and
      $(2) for 1998 and 1997, respectively.(222)                  (4)

Other comprehensive income                   12                  292
Comprehensive income                     $9,101               $9,202

ITEM 2.

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

	For the Six-Month Periods Ended June 30, 1998 and 1997

Overview

	The first half of 1998 resulted in net income of $9,089,000, or a 2% increase
over  $8,910,000 in earnings for the same period of 1997. Diluted earnings
per share for the six months ended June 30, were $0.68 and $0.92 for the first 
half of 1998 and 1997, respectively. Diluted cash earnings per share (earnings
before the effects of the amortization of goodwill) were $0.85 and $0.96 for
the six months ended June 30, 1998 and 1997, respectively. The reduction in 
earnings per share reflects the additional shares issued in conjunction with
last year's acquisition of Eastern Bancorp,Inc. and $850,000 of pre-tax 
expenses associated with the integration of Eastern's subsidiary, Vermont 
Federal Bank(VFB), into Vermont Financial Services Corp.'s main banking
subsidiary, Vermont National Bank(VNB).

The accompanying unaudited condensed consolidated financial statements should
be read with the audited financial statements and notes thereto included in
the Company's annual report on Form 10-K.  In the opinion of Management, all
adjustments which are necessary to the fair statement of the consolidated
financial position of Vermont Financial Services Corp., the (Company), and 
the consolidated results of the Company's operations and cash flow for the 
interim periods presented herein are reflected and all such adjustments are of
a normal recurring nature.

Except for historical information contained herein, the matters discussed in
this filing, may express "forward-looking" statements. Those "forward-
looking" statements may involve risk and uncertainties, including statements
concerning future events or performances and assumptions  and other statements
that are other than statements of historical facts. The Company wishes to 
caution readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made. Readers are advised that various factors
- including, but not limited to, changes in laws, regulations or Generally
Accepted Accounting Principles; the Company's competitive position within
the markets served or increasing consolidation within the banking industry;
certain customers and vendors of critical systems or services failing to 
comply with Year 2000 programming issues; unforeseen changes interest rates;
any unforeseen downturns in the local, regional or national economies - 
could cause the Company's actual results or circumstances for 
future periods to differ materially from those anticipated or projected. 
Vermont Financial Services Corp. does not undertake, and specifically
disclaims any obligation, to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect the occurrence of
unanticipated events or circumstances after the date of such statements.

Results of Operations

Net interest income of $40.6 million for the first half of 1998 represented a
$12.2 million increase from the same period in 1997. The increase was
primarily a result of the acquisition of earning assets and financial resources
from Eastern Bancorp, Inc. Net interest margin was 4.52% and net interest
spread was 4.47% during the first six months of 1998, compared to 4.91% and 
4.67%, respectively, during the same period in 1997.  A $614.6 million increase
in largely lower yielding average earning assets caused the lower margin and
spread.

Noninterest income, before securities gains, increased $6,862,000 primarily due
to a $3,958,000 increase in service charges on deposits, a $381,000 increase
in trust department income and a $910,000 increase in mortgage related fee 
income.

Noninterest expense increased $16,685,000 largely due to a $6,022,000, or 48%,
increase in salaries and benefits.  This increase was due to the additional
staff associated with the purchase of Eastern and normal salary adjustments for 
existing staff. Primarily attributable to the Eastern merger were increases in 
occupancy/equipment expenses and goodwill amortization of $3,926,000 and
$1,915,000. Other noninterest expense increased $4,438,000, or 72%, primarily
due to the following:

</TABLE>
<TABLE>
    <C>                                <C>                <C>
	Expense Item			                  Increase(000)       		Increase (%)
	Marketing Expense			                  $527	      		       99%
	Professional Services(*)		             688       			     106
	Printing & Supplies			                 499      			       73
	Deposit Related Franchise Taxes(**)	   631       			     311
	Telephone Expense			                   638	       		     105
	Postage				                            537      			       89
					                          ------------     			----------
		(total)	                     		    $3,520       			     108%

(*)  does not include increase related to integration of VFB into VNB
(**) reflects 100% increase in statutory rate effective August 1,1998

Also included in this increase were $237,000 in expenses related to the "Year
2000" issue. In the Company's December 31, 1997 form 10-K, the Company
estimated that incur between $1.5 million and $2.5 million of nonrecurring
expenses over the course of 1998 and 1999 to protect against the potential 
problems from "Year 2000". Management's current projection is for an 
additional $1.2 million of Year 2000 expenses in 1998 and $1.5 million in 1999,
primarily in the first half of that year. In addition, management is 
projecting approximately $1.0 million of capital expenditures for "Year 2000"
during the course of 1998 and 1999. These will be depreciated over 3 to 5 years
depending on useful life. 

Asset Quality

Nonperforming assets totaled $18.4 million as of June 30, 1998, a $3.2 million
decrease from $21.6 million on June 30, 1997 and a $1.4 million decrease
from $19.8 million at December 31, 1997.  As of June 30, 1997 nonperforming 
assets were 0.88% of total assets, down from 1.00% a year ago and 0.94% at
December 31, 1997.

The allowance for loan losses was $18.6 million at June 30, 1998, down from
$21.4 million a year ago and $18.9 million at December 31,1997, reflecting 
the lower levels of nonperforming assets.  The allowance for loan losses 
was 118% of nonperforming loans and 101% of nonperforming assets as of 
June 30, 1998.

The following table provides information with respect to the Company's past
due loans, the 	Components of nonperforming assets and the allowance for
loan losses at the dates indicated:


</TABLE>
<TABLE>
	
                                             <C>                <C>
                                         June 30,1998      December 31, 1997

Loans 90 days past due and still
 accruing interest                          $5,400              $6,055
Nonperforming assets:
     Nonaccrual loans                      $15,719             $17,006
     Other real estate owned                 2,639               2,794
Total nonperforming assets                 $18,358             $19,800
Nonperforming assets to period end 
 loans net of unearned income, plus
 other real estate owned                      1.19%               1.50%
Allowance for loan losses                  $18,609             $18,943


The following table details the Company's impaired loans 
as of  June 30, 1998:

	Total impaired loans              	$27,487
	Impaired loans with a specific
  valuation reserve	                  5,560
	Impaired loans without a specific
  valuation reserve                 	21,927
	Valuation reserve for impaired
  loans                              	2,319
	Average impaired loans            	$30,703

Financial Condition

Total assets of $2.1 billion, decreased $0.1 billion while total deposits of 
$1.7 billion and total loans of $1.3 billion, remained essentially the same
as their June 30, 1997 balances. Compared to their yearend balances, assets,
loans and deposits largely remained unchanged. As of June 30, 1998 goodwill had 
decreased to approximately $59.4 million from $60.8 million at June 30, 1997
and $61.7 million at December 31, 1997 as a result of finalization of the 
purchase accounting adjustments associated with the Eastern merger and normal 
amortization of approximately $1.1 million per quarter.

Capital Resources

Stockholders' equity increased from $213.6 million at year end to $216.6 
million at June 30, 1998. Equity as a percent of total assets increased from
10.18% at year end 1997 to 10.43% at June 30, 1998.  This increase was 
primarily the result of the earnings retained by the Company.  Also, Tier I
and Total Risk Based Capital ratios rose to 12.35% and 13.60% from their
year end levels of 11.98% and 13.24%, respectively.  The above ratios are in
excess of all regulatory requirements and place the Company in the "well
capitalized" regulatory classification.

Recent Developments

The Company has retained the services of a national consulting firm to 
review each business line and support area within its organization, 
including the mortgage banking, consumer lending, commercial loan, trust and
the operations and technology area. The consultant's cost is $0.5 million
and will be expensed in the third quarter. The Company expects that 
immediately realizable profit opportunities will offset most of the third
quarter expense, but expects the most significant revenue enhancements and 
cost savings will not be seen until early 1999. 

The Company also plans a major renovation to its branch operations in 
Chittenden County, Vermont at a total cost of approximately $2-3 million. 
In addition, the company plans to purchase new remittance processing
equipment, upgrade VNB's credit card software and purchase a new system for
originating mortgage loans, each costing approximately $0.5 million. All
additions will be funded through operations of the Company.

Effective June 11, 1998, James E. Griffin retired from the Company's Board
of Directors after 26 years of service. Mr. Griffin is President of
J. R. Resources, Inc. of Rutland, Vermont.

The company announced on July 2, 1998 the election of Susan V. Duprey to a 
three year term on its Board of Directors effective July 16, 1998. Ms.
Duprey is currently President and shareholder in the law firm of Devine, 
Millimet and Branch, P.A. headquartered in Manchester, NH where she
practices in the areas of real estate law, municipal law and health care law.

On May 21, 1998, the Company announced that its Board of Directors has 
authorized the repurchase of up to 500,000 shares of it's outstanding
common stock, approximately 3.8% of the 13,275,970 shares outstanding as of
March 31, 1998. Shares purchased under this program will be held in treasury
stock to cover unexcercised stock options that are expected to be exercised 
in the future. The repurchase program will be accomplished through transactions
on the open market. Through June 30, 1998. 106,000 shares had been
repurchased at an average price of $28.42.


ITEM 3. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity and Liquidity

See discussion and analysis of interest rate sensitivity and liquidity provided
in the Company's Annual Report filed on Form 10-K and Form 10-K/A for the 
year ended December 31, 1997. There have been no material changes in reported 
market risks faced by the Company since the filing of the Company's Annual 
Report Form 10-K and Form 10-K/A.

PART II.  OTHER INFORMATION
	
ITEM 1.  LEGAL PROCEEDINGS
		NONE

ITEM 2.  CHANGES IN SECURITIES 
		NONE

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
		NONE

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

On June 11, 1998 the Company held its annual meeting of stockholders. The 
first of the two items of business was the election of four directors,
Allyn W. Coombs, Phillip M. Drumheller, John K. Dwight and Stephen A. Morse. 
Each director was elected with over 96% of the votes cast in favor. The
second of the two items was to ratify and approve the Vermont Financial 
Services Corp. 1994 Amended and Restated Stock Option Plan. Over 94% of 
the votes cast were in favor.

ITEM 5.  OTHER INFORMATION

						NONE

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

						NONE

			VERMONT FINANCIAL SERVICES CORP.

Dated August 11, 1998	/s/_____________________________________
			                   John D. Hashagen, Jr.

Dated August 11, 1998	/s/_____________________________________
                     	Richard O. Madden
		


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