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 March 31, 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 April 30, 1998  13,283,204 
 


 
 
 
 
 
 
 
 
 
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 
 
Part II Other Information					8 
 
 		Signatures						9 
 


 
VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES




<TABLE>
Consolidated Balance Sheets

March 31, 1998 and December 31, 1997
( in thousands,except per share data)
(unaudited)
                                              <C>                  <C>

                                             March 31,           December 31,

ASSETS                                          1998                 1997 

Cash and Due from Banks                      $   95,375           $  95,495 
Interest Bearing Balances with Banks             11,113                  44 
Federal Funds Sold and Securities Purchased 
    Under Agreements to Resell                   37,999               2,470 
    Total Cash & Cash Equivalents               144,487              98,009 
Securities Available for Sale 
  U.S. Treasury and U.S. Government Agencies    239,697             295,775 
  Mortgage Backed Securities                    187,342             199,122 
  State and Municipal                             9,999               9,987 
  Other                                          35,721              22,765 
    Total Securities Available for Sale         472,759             527,649 

Loans:
  Commercial                                    172,160             166,418 
  Commercial Real Estate                        258,047             273,089 
  Residential Real Estate                       752,208             765,634 
  Consumer                                      103,975             109,360 
    Total Loans                               1,286,390           1,314,501 
  Less:  Allowance for Loan Losses               18,482              18,943 
    Net Loans                                 1,267,908           1,295,558 
Premises and Equipment                           43,852              46,620 
Real Estate Held for Investment                   1,286               1,298 
Other Real Estate Owned (OREO) - net of 
 reserve of $0 in 1998 and $12 in 1997            3,408               2,794 
Goodwill & Other Intangibles                     60,549              61,729 
Other Assets                                     68,181              63,795 
    Total Assets                             $2,062,430          $2,097,452 

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
  Demand                                       $247,103            $228,935 
  Savings, NOW & Money Market Accounts          913,874             915,937 
  Other Time:  Under $100,000                   461,384             472,437 
               Over  $100,000                    69,590              68,863 
    Total Deposits                            1,691,951           1,686,172 
Federal Funds Purchased and Securities Sold
  Under Agreements to Repurchase                 76,627              87,818 
Liabilities for Borrowed Money                   52,137              86,899 
Other Liabilities                                25,265              22,967 
    Total Liabilities                         1,845,980           1,883,856 
Stockholders' Equity
Common Stock - $1 Par Value
   Authorized 20,000,000 shares
   Issued :               1998 - 13,276,025
                          1997 - 13,243,357      13,276              13,243 
Preferred Stock - $1 Par Value
    Authorized 5,000,000 shares
Capital Surplus                                 117,151             116,640 
Undivided Profits                                83,855              81,562 
Security Valuation Allowance                      2,169               2,152 
Treasury Stock,at cost - 1998 - 55
                         1997 - 52                   (1)                 (1)
    Total Stockholders' Equity                  216,450             213,596 
    Total Liabilities and Stockholders'
           Equity                            $2,062,430          $2,097,452 
Diluted Tangible Book Value   
   per Share of Common Stock                     $11.75              $11.48

 


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<TABLE>
Vermont Financial Services Corp.
Consolidated Statements of Income
(in thousands, except share data)
(unaudited)
                                                <C>                  <C>

                                                      Three Months Ended
                                               March 31,            March 31,
                                                 1998                  1997

Interest Income
Interest and Fees on Loans                      $28,197             $19,341 
Interest on Securities Available for Sale:
  Taxable Interest Income                         8,056               4,433 
  Tax Exempt Interest Income                        109                 151 
Interest on Federal Funds Sold                      435                  66 
                  Total Interest Income          36,797              23,991 
Interest Expense
Interest on Deposits                             14,686               8,968 

Interest on Federal Funds Purchased,
Borrowed Money and Securities Sold
under Agreements to Repurchase                    2,009               1,124 
       Total Interest Expense                    16,695              10,092 
       Net Interest Income                       20,102              13,899 
Less:  Provision for Loan Losses                  1,125                 750 
Net Interest Income After Provision for
   Loan Losses                                   18,977              13,149 
Other Operating Income
Securities Gains (Losses)                           147                   6 
Trust Department Income                           1,625               1,390 
Service Charges on Deposit Accounts               3,400               1,508 
Credit Card Merchant Income                         878                 850 
Other Noninterest Income                          3,072               1,926 
       Total Other Operating Income               9,122               5,680 
Other Operating Expense
Salaries and Wages                                7,482               4,824 
Pension and Other Employee Benefits               1,793               1,495 
Occupancy of Bank Premises, net                   1,892                 992 
Furniture and Equipment                           2,114               1,109 
Goodwill Amortization                             1,129                 171 
FDIC Assessment                                     132                  32 
Credit Card Merchant Expense                        680                 557 
OREO & Collection Expense/Losses, net               430                 290 
Other Noninterest Expense                         5,285               2,909 
      Total Other Operating Expense              20,937              12,379 
Net Overhead                                    (11,593)             (6,612)
Income Before Income Taxes                        7,162               6,450 
Applicable Income Tax Expense                     2,883               2,050 
Net Income                                       $4,279              $4,400 

Average shares outstanding                   13,258,670           9,449,858 
Basic earnings per share                          $0.32               $0.46 

Average diluted shares outstanding           13,360,320           9,603,886 
Diluted Earnings per share                        $0.32               $0.46 



</TABLE>
<TABLE>
VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
                                                 <C>                <C> 
                                                 3 months ended March 31,
                                                 1998                 1997

OPERATING ACTIVITIES                                    (in thousands)
Net Income                                      $4,279              $4,400 
Adjustments to reconcile net income to
   net cash provided by operating activities:
    Provision for loan losses                    1,125                 750 
    Provision for depreciation                   1,812                 867 
    Amortization and accretion on securities       102                 104 
    Deferred income taxes                          161                 354 
    Security (gains)                              (147)                 (6)
    Proceeds  from sale of loans                60,468              21,215 
    Loans originated for sale                  (62,461)            (22,583)
    Losses on OREO                                  15                  18 
    (Increase) in interest receivable
       and other assets                           (518)               (972)
    Decrease in real estate held for investment     12                  12 
    Increase (Decrease) in interest payable
       and other liabilities                     2,298                (154)
     NET CASH PROVIDED BY OPERATING ACTIVITIES
        OPERATING ACTIVITIES                     7,146               4,005 

INVESTING ACTIVITIES
     Proceeds from the sale of the
       securities                                1,730              14,092 
     Proceeds from the maturity of the
       securities                               71,973               9,920 
     Purchases of securities                   (18,741)            (20,485)
     Proceeds from sales of OREO                   413                 564 
     Net decrease in loans                      27,476              21,179 
     Purchase of premises and equipment         (1,903)               (266)
     NET CASH PROVIDED BY INVESTING
        ACTIVITIES                              80,948              25,004 
FINANCING ACTIVITIES
    Net increase (decrease) increase in
        deposits                                 5,779             (17,768)
    Net (decrease) in short-term borrowings    (45,953)            (14,311)
    Issuance of common stock                       545                 689 
    Cash dividends                              (1,987)             (1,382)
    NET CASH (USED BY) FINANCING 
         ACTIVITIES                            (41,616)            (32,772)
INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS                                 46,478              (3,763)
Cash and cash equivalents at beginning of
    period                                      98,009              63,797 
CASH AND CASH EQUIVALENTS AT END OF PERIOD    $144,487             $60,034 

Non-monetary Transactions:
     Transfer of loans to OREO for the periods ended  March 31, 1998
     and 1997 totaled $1,042 and $513, respectively.


 
				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.  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. 
 
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. 
	 
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 a stock 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 three months 
ended March 31, 1998 and 1997: 
                                               <C>                  <C> 
                                               1998                 1997

Net Income                                    $4,279               $4,400
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 $61 and $(1,207)
    for 1998 and 1997, respectively.             113               (2,215)
       Less reclassification adjustment for
       gains included in net income net of 
       income tax expense of $(51) and $(2)
       for 1998 and 1997, respectively.          (96)                  (4)
Other comprehensive income                        17               (2,219)
Comprehensive income                          $4,296               $2,181 

 
ITEM 2. 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 
 
For the Three-Month Periods Ended March 31, 1998 and 1997 
 
Overview 
 
The first quarter of 1998 resulted in net income of $4.3 million, or $0.32
per share, versus $4.5 million , or $0.46 per share, in the same period of
1997.  The first quarter financial results were negatively impacted by 
approximately $0.9 million of pre-tax expenses associated with last year's
acquisition of Eastern Bancorp, Inc. and with the integration of its 
subsidiary, Vermont Federal Bank (VFB), into Vermont Financial Services 
Corp's main banking subsidiary, Vermont National Bank (VNB).  
 
The annualized return on average total assets was 0.84% versus 1.38% and the
annualized return on average stockholders' equity was 8.10% versus 14.97%
for the first quarter of 1998 and 1997, respectively.  
 
Results of Operations 
 
Net interest income of $20.1 million for the first three months of 1998
represented a $6.2 million increase from the same period in 1997. This was 
entirely due to the earning assets and financial resources acquired from 
Eastern Bancorp, Inc. (Eastern). Net interest margin was 4.51% and net 
interest spread was 4.52% during the first quarter of 1998, compared to 
4.83% and 4.67%, respectively, during the same period in 1997. The lower
margin and spread are also reflective of the mix of average earning assets
and interest-bearing liabilities purchased from Eastern. 
 
Noninterest income, net of securities gains, increased $3.3 million primarily
due to a $1.9 million increase in deposit service charges, a $ 0.2 million 
increase in trust department income and a $1.1 million increase in other 
noninterest income.  The increase in other noninterest income is largely 
due to a $0.4 million increase in gains on sold mortgages and a $0.3 
million increase in ATM related fee income. The increase in deposit service
charges and ATM fees is the result of activity associated with the former 
VFB customers. 
 
Noninterest expense increased $8.6 million in the first quarter of 1998 
compared to the same period in 1997. This fluctuation is due to increases in
staff expenses, occupancy and equipment expense, goodwill amortization and 
other noninterest expense of $3.0 million, $1.9 million, $1.1 million and 
$2.4 million, respectively. The increased expenses were caused by the
addition of the former VFB operations into VNB. Included throughout these
increases are $0.9 million in integration related expenses associated with 
the merger with Eastern. These expenses were additional compensation costs
and outside services incurred to resolve operational and back office problems
associated with the integration of VFB into VNB. Merger related expenses 
from the integration of Eastern are not expected to be a significant 
factor in future qaurters.  
 
Asset Quality  
 
Nonperforming assets totaled $19.6 million as of March 31, 1998, an increase
from $8.5 million on March 31, 1997 and a decrease of $0.2 million from 
December 31,1997.  The acquisition of Eastern Bancorp added $13.0 million 
of nonperforming assets to this total.  As of March 31, 1998 nonperforming 
assets were 0.95% of total assets, up from 0.66% a year ago and 0.94% at 
year end. 
 
The allowance for loan losses was $18.5 million at March 31, 1998, up from 
$8.5 million a year ago, reflecting the effect of the acquisition, and down 
from $18.9 million at December 31, 1997.  The allowance for loan losses was 
114% of nonperforming loans and 94% of nonperforming assets as of March 
31, 1998, as compared with 176% and 163%, respectively, at March 31, 1997 
and 111% and 65%, respectively, at year end. 


</TABLE>
<TABLE>
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: 
                                              <C>             <C>
                                             March 31,      December 31, 
                                               1998            1997

Loans 90 days past due and still
 accruing interest                             $3,460         $6,055 

Nonperforming assets:
     Nonaccrual loans                         $16,206        $17,006
     Other real estate owned                    3,408          2,794
Total nonperforming assets                    $19,614        $19,800 
Nonperforming assets to period end
   loans net of unearned income, plus
   other real estate owned                       1.52%          1.50% 
Allowance for loan losses                     $18,482        $18,943 
 

The following table details the Company's impaired loans
as of  March 31, 1998: 
 
                                                           
	Total impaired loans	                                  $31,322 
	Impaired loans with a specific valuation reserve	        5,803 
	Valuation reserve for impaired loans	                    2,352 
	Impaired loans without a specific valuation reserve	    25,519 
	Average impaired loans	                                 32,311 
 
 
Financial Condition 
 
The March 31, 1998 consolidated balance sheet shows total assets of $2.1 
billion, total deposits of $1.7 billion and total loans of $1.3 billion.  
The Eastern Bancorp acquisition accounted for an approximate $810 million 
addition to assets, $644 million addition to deposits and $459 million 
addition to loans.  Exclusive of the acquisition, Vermont Financial Services 
Corp.'s assets and deposits remained unchanged, while loans decreased 0.1% 
between March 31, 1997 and March 31, 1998.  As of March 31, 1998, goodwill 
had increased to approximately $60.5 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. 
 
Compared to balances at December 31, 1997, assets decreased $35.1 million (2%), 
loans decreased $28.1 million (3%), while deposits increased $9.7 million 
(1%). During the same period, securities available for sale decreased 
$54.9 million, which enabled a $46.0 million reduction in borrowings. 
While refinances of residential mortgages and loan portfolio sales have 
reduced the loan portfolio, recently the Company has been successful in 
acquiring new commercial loan customers, especially in the New Hampshire 
market. The growth in deposits is believed to indicate success in the 
Company's marketing strategy for deposit growth. 
 
Capital Resources 
 
Stockholders' equity increased from $213.6 million at year end to $216.5 
million at March 31, 1998. Tangible equity as a percent of total assets 
increased from 7.46% at year end 1997 to 7.79% at March 31, 1998.  This 
increase was a result of the earnings retained by the Company. Tier I and 
Total Risk Based Capital ratios increased to 12.74% and 14.00% 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 
 
	During 1998 the Company plans a major renovation to its branch operations 
in Chittenden County, Vermont at a total cost of $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 the operating activities of the Company. 

	 
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 
 
  NONE 

ITEM 5.  OTHER INFORMATION 
 
		NONE 
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K 
 
		NONE 
 
 
VERMONT FINANCIAL SERVICES CORP. 
 
Dated May 11, 1998	/s/__________________________________ 
               				John D. Hashagen, Jr. 
 
Dated May 11, 1998	/s/__________________________________ 
				               Richard O. Madden
	
 



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