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, 1997, 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, 1997  6,560,320


                 Item 1. FINANCIAL INFORMATION
                 VERMONT FINANCIAL SERVICES CORP.
                    Consolidated Balance Sheets
                 June 30, 1997 and December 31, 1996
              ($ in thousands, except per share data)
                          (unaudited)

                                               June 30,   December 31,
ASSETS                                           1997         1996 

Cash and Due from Banks                       $   95,895   $   61,962 
Interest Bearing Balances with Banks               5,868           60 
Securities Available for Sale:
 U.S. Treasury and U.S. Government Agencies      249,592      194,727 
 Mortgage Backed Securities                      282,260       67,055 
 State and Municipal                              10,976       10,558 
 Other                                            22,993       18,780 
  Total Securities Available for Sale            565,821      291,120 

Federal Funds Sold                                 2,975        1,775 
Loans:
 Commercial                                      181,550      181,372 
 Commercial Real Estate                          277,069      199,640 
 Residential Real Estate                         750,025      432,561 
 Consumer                                        136,141       96,863 
  Total Loans                                  1,344,785      910,436 
 Less:  Allowance for Loan Losses                 21,408       13,647 
  Net Loans                                    1,323,377      896,789 
Premises and Equipment                            43,480       23,618 
Real Estate Held for Investment                    1,728        1,360 
Other Real Estate Owned (OREO) - net of 
 reserve of $1,590 in 1997 and $87 in 1996         4,404          697 
Goodwill & Other Intangibles                      60,786        6,327 
Other Assets                                      49,526       29,273 
 Total Assets                                 $2,153,860   $1,312,981 

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
 Demand                                          216,098     162,887 
 Savings, NOW & Money Market Accounts            872,193     620,111 
  Other Time:  Under $100,000                    555,729     261,427 
               Over  $100,000                     66,156      38,833 
  Total Deposits                               1,710,176   1,083,258 
Federal Funds Purchased and Securities Sold
 Under Agreements to Repurchase                   60,565      77,672 
Liabilities for Borrowed Money                   131,563      23,169 
Other Liabilities                                 51,595       9,165 

 Total Liabilities                             1,953,899   1,193,264 
Stockholders' Equity
Common Stock - $1 Par Value
 Authorized 20,000,000 shares
 Issued :  1997 - 6,651,613
           1996 - 4,892,442                        6,652       4,892 
Preferred Stock - $1 Par Value
 Authorized 5,000,000 shares
Capital Surplus                                  120,826      49,590 
Undivided Profits                                 77,290      71,151 
Security Valuation Allowance                        (737)     (1,029)
Treasury Stock,at cost - 1997 - 149,656
                         1996 - 180,021           (4,070)     (4,887)
 Total Stockholders' Equity                      199,961     119,717 
 Total Liabilities and Stockholders' Equity   $2,153,860  $1,312,981 

 Fully Diluted Tangible Book Value   
  per Share of Common Stock                       $21.08     $23.73


Vermont Financial Services Corp.
Consolidated Statements of Income
(in thousands)

(unaudited)

                                      Three Months Ended   Six Months Ended
                                            June 30,             June 30,
                                      1997          1996   1997        1996
Interest Income:
Interest and Fees on Loans            $20,345    $20,386   $40,072    $40,777
Interest on Securities
        Available for Sale:
 Taxable Interest Income                4,808      3,729     9,240      7,267
 Tax Exempt Income                         28        118       179        238
Interest on Fed Funds Sold                158        243       224        499
     Total Interest Income             25,339     24,476    49,715     48,781

Interest Expense:
Interst on Deposits                     9,350      9,087    18,318     18,456
Interest on Fed Funds Purchased,
 Borrowed Money and Securities
 Sold under Agreements to Repurchase    1,337      1,073     2,460      2,134
     Total Interest Expense            10,687     10,160    20,778     20,590
     Net Interest Income               14,652     14,316    28,937     28,191
Less: Provision for Loan Losses           700        900     1,450      1,800
Net Interest Income After
 Provision for Loan Losses             13,952     13,416    27,487     26,391
Other Operating Income  
Securities Gains                            0          0         6          8
Trust Department Income                 1,381        871     2,771      1,747
Service Charges on Deposit Accounts     1,623      1,515     3,131      3,106
Serviced Mortgage Fees                    304        280       570        583
Credit Card Merchant Income               822        656     1,672      1,308
Other Noninterest Income                1,394      1,110     2,779      2,197
     Total Other Operating Income       5,524      4,432    10,929      8,949

Other Operating Expense
Salaries and Wages                      5,081      4,595     9,963      9,050
Pension and Other Employee Benefits     1,402      1,325     2,911      2,699
Occupancy of Bank Premises, net           914        852     1,906      1,744
Furniture and Equipment                 1,165        993     2,274      2,007
FDIC Assessment                            35          1        67          3
Credit Card Merchant Expense              549        450     1,106        996
OREO & Collection Expense/Losses, net     244        417       534        818
Other Noninterest Expense               3,383      3,082     6,502      5,832
     Total Other Operating Expense     12,773     11,715    25,263     23,149

Net Overhead                           (7,249)    (7,283)  (14,334)   (14,200)

Income Before Income Taxes              6,703      6,133    13,153     12,191
Applicable Income Tax Expense           2,193      2,124     4,243      4,241

Net Income                            $ 4,510    $ 4,009   $ 8,910    $ 7,950 

Average Fully Diluted
 Shares Outstanding                 4,896,659  4,848,938 4,855,963  4,849,386 

Earnings Per Common Share (Based on
 Average Number of Common Shares 
 Outstanding for the Respective Period)
 Net Income --
      Primary and Fully Diluted       $ 0.92    $  0.83   $  1.84     $  1.64 


                   VERMONT FINANCIAL SERVICES CORP.
                Consolidated Statement of Cash Flows
                            (unaudited)

                                                    6 months ended June 30,
                                                    1997              1996
OPERATING ACTIVITIES                                    (in thousands)
Net Income                                          $  8,910      $  7,950 
Adjustments to reconcile net income
 to net cash provided by operating activities:
  Provision for loan losses                            1,450         1,800 
    Provision for depreciation                         2,002         1,510 
    Amortization and accretion on securities             278           538 
    Deferred income taxes                              1,160           698 
    Security (gains)                                      (6)           (8)
    Proceeds  from sale of loans                      32,184        34,067 
    Loans originated for sale                        (31,727)      (32,849)
    Losses on OREO                                        44           249 
    (Increase) in interest receivable
      and other assets                                (3,061)       (1,622)
    Decrease (Increase) in real estate
      held for investment                                 25           (46)
    Increase in interest payable and
      other liabilities                                  253           143 
     NET CASH PROVIDED BY OPERATING ACTIVITIES
      OPERATING ACTIVITIES                            11,512        12,430 

INVESTING ACTIVITIES
 Proceeds from the sale of the securities             14,092        10,403 
 Proceeds from the maturity of the securities         34,564        31,592 
 Purchases of securities                             (49,127)      (53,546)
 Proceeds from sales of OREO                             877         2,354 
 Purchases of loans                                        -        (1,060)
 Net cash and cash equivalents from Eastern Bancorp.  41,054             - 
 Net decrease (increase) in loans                     19,958        (4,759)
 Purchase of premises and equipment                   (3,511)       (1,964)
 NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES  57,907        (16,980)

FINANCING ACTIVITIES
 Net (decrease) increase in deposits                 (15,615)         2,735 
 Net (decrease) increase in short-term borrowings    (11,220)         7,743 
 Issuance of common stock                              1,129             82 
 Purchase of treasury stock                                -           (597)
 Cash dividends                                       (2,772)        (2,435)
 NET CASH PROVIDED BY FINANCING ACTIVITIES           (28,478)         7,528 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS      40,941          2,978 
Cash and cash equivalents at beginning of period      63,797         62,821 
CASH AND CASH EQUIVALENTS AT END OF PERIOD          $104,738       $ 65,799 

Non-monetary Transactions:
 Transfer of loans to OREO for the periods ended  June 30, 1997 and 1996
 totaled $654 and $1,690, respectively. In addition, cash payments totaling
 $26,913 were accrued (to be paid in July 1997) and 1,748,769 shares of
 common stock were issued in association with the merger with Eastern Bancorp. 



ITEM 2.

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

	For the Six-Month Periods Ended June 30, 1997 and 1996

Overview

     The first half of 1997 resulted in net income of $8,910,000, or $1.84 per
share, versus $7,950,000, or $1.64 per share, in the same period of 1996. 
Income before taxes improved by $1.0 million from 1996's first six months. 

     The annualized return on average total assets was 1.37% versus 1.29% and
the annualized return on average stockholders' equity was 14.36% versus 14.18%
for the first half of 1997 and 1996, respectively.

     On June 26, 1997 the Company acquired 100% of the common stock of Eastern
Bancorp, Inc., a thrift holding company with total assets of approximately $810
million, headquartered in Dover, NH.  Cash totaling $26,913 and 1,748,769 
shares of VFSC common stock were issued in association with this transaction.
This acquisition is being accounting for under the purchase method of accounting
and the results of operations for the period from June 27, 1997 through June 30,
1997 are included in the Company's net income for the second quarter.

     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.

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

Results of Operations

     Net interest income of $28.9 million for the first half of 1997 represented
a $0.7 million increase from the same period in 1996.  Net interest margin was
4.91% and net interest spread was 4.67% during the first six months of 1997, 
compared to 4.99% and 4.69%, respectively, during the same period in 1996.  A
61.7 million increase in average earning assets offset the impact of the
somewhat lower margin and spread.

     Noninterest income increased $1,980,000 primarily due to a $1,024,000
increase in trust department income, a $364,000 increase in credit card merchant
income and a $240,000 gain on the sale of $10,000,000 in adjustable rate 
residential mortgages.  The increase in trust department income is largely
due to the purchase of the Green Mountain Bank Trust Department in the third
quarter of 1996.

     Noninterest expense increased $2,114,000 largely due to a $1,125,000, or
10%, increase in salaries and benefits. This increase was due to the additional
staff associated with the purchase of the Green Mountain Bank Trust Department, 
expenses related to the Eastern merger, and normal salary adjustments for
existing staff.  Other noninterest expense increased $989,000, or 8.7%.

Asset Quality

     Nonperforming assets totaled $21.6 million as of June 30, 1997, an
increase from $11.8 million on June 30, 1996.  The acquisition of Eastern
Bancorp added $13.0 million of nonperforming assets to this total.  Excluding
the effect of the acquisition, Vermont Financial Services Corp.'s nonperforming
assets would have been $8.6 million, a 27% decrease from the $11.8 million of
nonperforming assets a year earlier.  As of June 30, 1997 nonperforming assets
were 1.00% of total assets, up from 0.94% a year ago, reflecting the higher
level of nonperforming assets at Eastern Bancorp.

     The allowance for loan losses was $21.4 million at June 30, 1997, up from
$14.5 million a year ago, reflecting the effect of the acquisition.  The
allowance for loan losses was 124% of nonperforming loans and 99% of
nonperforming assets as of June 30, 1997.

  The following table details the Company's impaired loans as of June 30, 1997:

             Total impaired loans	                               $31.0
	            Impaired loans with a specific valuation reserve      4.7
	            Valuation reserve for impaired loans                  1.6
	            Impaired loans without a specific valuation reserve  26.3
	            Average impaired loans                               29.9


Financial Condition

     The June 30, 1997 balance sheet, including the effects of the Eastern
Bancorp acquisition, shows total assets of $2.2 billion, total deposits of
$1.7 billion and total loans of $1.3 billion.  The Eastern Bancorp acquisition
added approximately $810 million to assets, $644 million to deposits and $459
million to loans.  Exclusive of the acquisition, Vermont Financial Services
Corp.'s assets grew 6.8%, deposits increased 2.8% and loans decreased 0.9%
between June 30, 1996 and June 30, 1997.  As of June 30, 1997 goodwill had
increased to approximately $60.8 million as a result of the Eastern Bancorp 
acquisition.  The amortization of this goodwill will create an after tax
non-cash charge to net income of approximately $1 million per quarter for the
next 15 years.

Capital Resources

     Stockholders' equity increased from $119.7 million at year end to $200.0
million at June 30, 1997.  Equity as a percent of total assets increased from
9.12% at year end 1996 to 9.28% at June 30, 1997.  This increase was primarily
the result of the earnings retained by the Company and the capital issued as
a result of the Eastern merger.  Also, due to the Eastern merger, the Tier I
and Total Risk Based Capital ratios decreased to 10.98% and 12.23% from their
year end levels of 13.92% and 15.17%, respectively.  The above ratios are in
excess of all regulatory requirements and place the Company in the 
"well capitalized" regulatory classification.

Recent Developments

     During 1997 the Company plans to upgrade Vermont National Bank's (VNB's)
check processing equipment at a cost of $1.7 million, upgrade VNB's signage at
a cost of $1.0 million and upgrade VNB's credit card software at a cost of $0.5 
million.  No further additions to premises and equipment are expected to exceed
$0.5 million.  All additions will be funded through the operation of the
Company.

     The Company's financial statements for 1997 will be affected by rules and
regulations which have been announced but are not yet effective.  The Financial
Accounting Standards Board (FASB)  has announced the following Financial 
Accounting Standards (SFAS) that are effective for financial statements for
periods ending after December 15, 1997:

      	Standard	            Title
	      SFAS 128	            "Earnings Per Share"

	      SFAS 129	            "Disclosure of Information about Capital Structure"

     Management expects the financial statement effect(s) of the above
standards to be insignificant.

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 May 30, 1997 the Company held a special meeting of stockholders for
the purpose of voting on a proposal to approved and adopt the merger with
Eastern Bancorp, Inc.  Of the 4,625,160 shares outstanding and entitled to vote
at the meeting 3,410,580 or 74% were represented at the meeting.  3,388,950
shares voted for, 4,208 share voted against and 17,422 shares abstained from
voting for this proposal.

ITEM 5.  OTHER INFORMATION

						   NONE


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     During the second quarter of 1997 the Company filed a Form 8-K dated
April 23, 1997 reporting a change in the Company's Certifying Accountants
from Coopers & Lybrand L.L.P. to KPMG Peat Marwick LLP.


			                               VERMONT FINANCIAL SERVICES CORP.

Dated August 12, 1997             /s/_____________________________
			                                  John D. Hashagen, Jr.

Dated August 12, 1997	            /s _____________________________
		                                  	Richard O. Madden