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, 1999, 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, 1999      12,943,066



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 Market Risk					10

Part II Other Information					10

Signatures						11

<TABLE>

VERMONT FINANCIAL SERVICES CORP.
Consolidated Statements of Condition
March 31, 1999 and December 31, 1998
($ in thousands,except per share data)
(unaudited)
                                              <C>               <C>
                                             March 31,       December 31,
                                               1999             1998
                        
ASSETS 

Cash and Due from Banks                    $   69,017        $   63,346 
Interest Bearing Balances with Banks            2,332             1,661 
Federal Funds Sold                              2,551            56,186 
   Total Cash & Cash Equivalents               73,900           121,193 

Securities Available for Sale
  U.S. Treasury and U.S. Government
  Agencies                                    169,354           167,784 
  Mortgage Backed Securities                  217,247           223,910 
  State and Municipal                          10,307            10,318 
  Other                                       114,150           115,924 
    Total Securities Available for Sale       511,058           517,936 

Loans:
  Commercial                                  201,083           203,851 
  Commercial Real Estate                      306,377           285,028 
  Residential Real Estate                     752,244           760,445 
  Consumer                                    122,194           120,181 
    Total Loans                             1,381,898         1,369,505 
  Less:  Allowance for Loan Losses             17,243            16,699 
    Net Loans                               1,364,655         1,352,806 
Premises and Equipment                         40,256            41,571 
Real Estate Held for Investment                 1,339             1,251 
Other Real Estate Owned (OREO) - net of   
 reserve of $27 in 1999 and $28 in 1998         1,038             1,174 
Goodwill & Other Intangibles                   55,831            56,966 
Other Assets                                   48,701            49,527 
    Total Assets                           $2,096,778        $2,142,424 

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
  Demand                                   $  285,631        $  292,466 
  Savings, NOW & Money Market Accounts        981,758         1,002,478 
  Other Time:  Under $100,000                 394,268           404,611 
               Over  $100,000                  90,334            89,462 
  Total Deposits                            1,751,991         1,789,017 

Federal Funds Purchased and 
  Securities Sold
  Under Agreements to Repurchase               80,951            83,778 
Liabilities for Borrowed Money                 22,973            28,129 
Other Liabilities                              25,058            27,187 
    Total Liabilities                       1,880,973         1,928,111 
Stockholders' Equity
Common Stock - $1 Par Value
   Authorized 20,000,000 shares
   Issued :             1999 - 13,293,465
                        1998 - 13,293,465      13,293            13,293 
Preferred Stock - $1 Par Value
    Authorized 5,000,000 shares
Capital Surplus                               117,168           116,894 
Undivided Profits                              94,511            92,273 
Security Valuation Allowance                    1,255             2,651 
Treasury Stock,at cost - 1999 - 421,888
                         1998 - 438,547       (10,422)          (10,798)
    Total Stockholders' Equity                215,805           214,313 
Total Liabilities and Stockholders' Equity $2,096,778        $2,142,424 

Fully Diluted Tangible Book Value   
  per Share of Common Stock                    $12.39            $12.25

</TABLE>

<TABLE>

Vermont Financial Services Corp.
Consolidated Statements of Income
(unaudited)
(in thousands, except share and per share data)

                                                  Three Months Ended
                                               <C>                <C>
                                              March 31,         March 31,
                                                1999              1998

Interest Income:
Interest and Fees on Loans                   $   28,006         $   28,475 
Interest on Securities Available for Sale:
Taxable Interest Income                           7,523              8,056 
Tax Exempt Income                                   110                109 
Interest on Fed Funds Sold and Other 
  Short Term Investments                            210                435 
Total Interest Income                            35,849             37,075 
Interest Expense:
Interest on Deposits                             13,841             14,686 
Interest on Fed Funds Purchased, 
  Borrowed Money  and Securities
  Sold under Agreements to Repurchase             1,217              2,009 
Total Interest Expense                           15,058             16,695 
Net Interest Income                              20,791             20,380 
Less: Provision for Loan Losses                     825              1,125 
Net Interest Income After Provision 
  for Loan Losses                                19,966             19,255 

Other Operating Income

Securities Gains                                      0                147 
Trust Department Income                           1,740              1,625 
Service Charges on Deposit Accounts               2,960              3,400 
Credit Card Merchant Income                       1,045                878 
Other Loan Related Fee Income                       156                 52 
Other Noninterest Income                          2,803              2,791 
Total Other Operating Income                      8,704              8,893 
Other Operating Expense
Salaries and Wages                                7,483              7,482 
Pension and Other Employee Benefits               2,097              1,793 
Occupancy of Bank Premises, net                   1,902              1,892 
Furniture and Equipment                           2,284              2,114 
Goodwill Amortization                             1,128              1,129 
FDIC Assessment                                     132                132 
Credit Card Merchant Expense                        752                680 
OREO & Collection Expense/Losses, net               237                430 
Other Noninterest Expense                         5,318              5,334 
Total Other Operating Expense                    21,333             20,986 
Net Overhead                                    (12,629)           (12,093)

Income Before Income Taxes                        7,337              7,162 

Applicable Income Tax Expense                     2,913              2,883 

Net Income                                       $4,424             $4,279 

Average basic shares outstanding             12,859,947         13,258,670 
    Basic earnings per share                      $0.34              $0.32 

Average dilluted shares outstanding          13,033,714         13,360,320 
    Diluted earnings per share                    $0.34              $0.32 

</TABLE>


<TABLE>

VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
Condensed Statements of Cash Flows
(unaudited)
(in thousands)
 
                                              3 months ended March 31,
                    
                                              <C>                 <C>
                                              1999               1998
OPERATING ACTIVITIES
Net Income                                   $ 4,424            $ 4,279 
Adjustments to reconcile net income
 to net cash provided
 by operating activities:
    Provision for loan losses                    825              1,125 
    Provision for depreciation                 1,816              1,812 
    Amortization and accretion on securities      53                102 
    Deferred income taxes                       (666)               161 
    Security (gains)                               -               (147)
    Purchases of loans                          (658)                 -
    Proceeds  from sale of loans              52,440             60,468 
    Loans originated for sale                (59,518)           (62,461)
    Losses on OREO                                27                 15 
    Decrease (Increase) in interest 
     receivable and other assets               3,425               (518)
   (Increase) Decrease in real estate 
     held for investment                         (88)                12 
   (Decrease) Increase in interest payable
     and other liabilities                    (2,129)             2,298 
NET CASH (USED BY) PROVIDED BY OPERATING 
        OPERATING ACTIVITIES                     (49)             7,146 

INVESTING ACTIVITIES
   Proceeds from the sale of securities        2,060              1,730 
   Proceeds from the maturity of securities   37,011             71,973 
   Purchases of securities                   (34,440)           (18,741)
   Proceeds from sales of OREO                   261                413 
   Net (increase) decrease in loans           (5,090)            27,476 
  (Purchase) of premises and equipment          (501)            (1,903)
   NET CASH (USED BY) PROVIDED BY INVESTING
        ACTIVITIES                              (699)            80,948 

FINANCING ACTIVITIES
   Net (decrease) increase in deposits       (37,026)             5,779 
   Net (decrease)in short-term borrowings     (7,983)           (45,953)
   Issuance of common stock                      650                545 
   Cash dividends                             (2,186)            (1,987)
   NET CASH (USED BY) FINANCING ACTIVITIES   (46,545)           (41,616)

(DECREASE) INCREASE IN CASH AND CASH 
        EQUIVALENTS                          (47,293)            46,478 

Cash and cash equivalents at 
    beginning of period                      121,193             98,009 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $ 73,900           $144,487 

</TABLE>

Non-monetary Transactions:
     Transfer of loans to OREO for the periods ended  March 31, 1999
     and 1998 totaled $152 and $1,042, 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. 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 anyother interim period or the entire year.

2.	New Accounting Pronouncements

The FASB has 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. 
In addition, VFSC has adopted SFAS No. 134, "Accounting for Mortgage-Backed 
Securities Retained after the Securitization of Mortgage Loans held for 
Sale by a Mortgage Banking Enterprise".  This statement requires that 
after an enterprise securitizes a mortgage loan held for sale, it must 
then classify the resulting mortgage-backed security as a trading 
security.  This statement did not have a material impact on the financial 
statements of the Company.

3.	Acquisitions

On December 16, 1998, VFSC, Chittenden Corporation (NYSE: "CHZ"), and a 
wholly owned  subsidiary of Chittenden Corporation, entered into an 
Agreement and Plan of Merger (the Merger Agreement), pursuant to which 
VFSC will be merged with and into Chittenden Corporation (the Merger).  The 
Merger is structured to qualify as a pooling of interests for accounting 
purposes and as a tax-free exchange of 1.07 shares of Chittenden 
Corporation common stock for each share of VFSC common stock and is 
expected to close in the second quarter of 1999.  The completion of the 
Merger is subject to certain customary conditions, including without 
limitation the approval of the stockholders of each of VFSC and Chittenden 
Corporation and certain regulatory approvals.

<TABLE>

4.	Comprehensive Income
                                                 <C>              <C>

                                                 1999             1998
Net Income                                      $4,424            $4,279
Other comprehensive income, net of tax:
    Unrealized (losses) gains on investments
    Unrealized holding (loss) gain arising
    during the period net of income tax 
    (benefit) expense of $(768) and $61 for
    1999 and 1998, respectively.               (1,396)              113

    Less reclassification adjustment for gains 
    included in net income net of income tax 
    expense of 0 and $(51) for 1999 and 1998, 
    respectively.                                   0               (96)
Other comprehensive income                     (1,396)               17
Comprehensive income                           $3,028            $4,296

</TABLE>

5. Segment Information

Description of Reportable Segments

VFSC has two reportable segments, its two banking subsidiaries, Vermont 
National Bank (VNB) and United Bank (UB).  Each bank provides a wide 
range of loan, deposit and trust services to individuals, businesses, 
institutions and government entities located primarily in their respective 
market areas.  VNB operates 41 branches in Vermont and 16 branches in 
southern New Hampshire and is regulated by the OCC.  UB operates 7 branches 
in western Massachusetts and is regulated by the FDIC.  Each bank has a 
separate management team.  Financial reports for each are reviewed monthly 
by the Company's Chief Executive Officer and Board of Directors and are 
the basis for evaluating performance and allocating resources.

Measurement of Segment Profit or Loss and Segment Assets

The Company evaluates each bank's performance primarily based on growth of 
loans, deposits, net revenue, net income, operating efficiency and return 
on assets.  The accounting policies of each bank are the same as those 
described in Note 1 of VFSC's Annual Report (filed on Form 10-K) 
"Significant Accounting Policies".  Intersegment transactions are 
not material and are recorded approximately at cost.

The following tables summarize the significant items used by management 
to evaluate the performance of each segment over the three months 
ended March 31, 1999 and 1998.

<TABLE>

Three Months Ended March 31, 1999						(in thousands)
 
                                   <C>      <C>       <C>           <C>

Item                               VNB       UB     All Other    Consolidated
Net Revenue (before security
 gains)                         $26,596     $2,895      $4          $29,495
Net Income Before Taxes           6,441      1,220    (324)           7,337
Net Income After Taxes            3,939        747    (262)           4,424
Total Loans                   1,193,547    188,351       0        1,381,898
Total Deposits                1,507,613    245,017    (639)       1,751,991
Total Assets                 $1,809,590   $277,053 $10,135       $2,096,778

ROA                               0.88%      1.10%     N/A            0.85%
ROE                               8.79%     12.32%     N/A            8.37%
Efficiency Ratio                 72.68%     57.86%     N/A           72.33%


</TABLE>
<TABLE>

Three Months Ended March 31, 1998					           	(in thousands)

                                   <C>       <C>        <C>          <C>
Item                               VNB        UB    All Other   Consolidated
Net Revenue (before security
 gains)                         $25,880     $3,003     $243         $29,126
Net Income Before Taxes           6,012      1,403     (253)          7,162
Net Income After Taxes            3,683        810     (214)          4,279
Total Loans                   1,084,818    201,572        0       1,286,390
Total Deposits                1,460,431    233,094   (6,105)      1,687,420
Total Assets                  1,787,542   $262,421  $12,467      $2,062,430
ROA                               0.83%      1.28%      N/A           0.84%
ROE                               8.58%     14.35%      N/A           8.10%
Efficiency Ratio                 73.22%     51.28%      N/A          72.05%

</TABLE>

ITEM 2.

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

For the Three-Month Periods Ended March 31, 1999 and 1998

Overview

The three months ended March 31, 1999 resulted in net income of $4,424,000, 
or a 3% increase over  $4,279,000 in earnings for the same period of 1998. 
Diluted earnings per share for quarter ended March 31, were $0.34 and 
$0.32 for the first three months of 1999 and 1998, respectively. Diluted 
cash earnings per share (earnings before the effects of the amortization 
of goodwill) were $0.42 and $0.40 for the three months ended March 31, 
1999 and 1998, respectively.

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 $20.8 million for the first three months of 1999 
represented a $0.4 million increase from the same period in 1998. A 
$78.5 million increase in average earning assets more than offset a 
0.09% decrease in net interest margin to 4.46% from 4.55% during the 
first quarter of 1998. Most of the growth in average earning assets was 
due to $62.3 million, or 15%, increase in average commercial loans.

The provision for loan losses was $825,000 for the first quarter of 1999, 
a 27% decrease from the $1.1 million provision for the first quarter of 
1998. The lower provision reflects the lower level of net charged off 
loans , $281,000 in the first quarter of 1999 versus $1.6 million in the 
first quarter of 1998. It also reflects the lower levels of non performing 
assets discussed below.

Noninterest income, before securities gains, remained the same during the 
first quarter of 1999 compared to a year earlier as reduced service 
charges on deposits offset increases in other fee income categories.

Noninterest expense increased $0.3 million, or 2%, during the first quarter 
of 1999 as compared to the same period in 1998. Nearly all of this 
increase was due to increased employee benefit expense (largely medical).

Year 2000

The Project and VFSC's State of Readiness

Many of the world's computer systems (including those in non-information 
technology equipment and systems) currently record years in a two-digit 
format. If not addressed, such computer systems will be unable to 
properly interpret dates beyond the year 1999, which could lead to 
business disruptions (the "Year 2000" issue). The potential costs and 
uncertainties associated with the Year 2000 issue will depend on a number 
of factors, including software, hardware and the nature of the industry 
in which a company operates. Additionally, companies must coordinate with 
other entities with which they electronically interact. VFSC, like most 
financial service providers, is dependent on computer-generated 
information and processing and thus may be significantly affected by the 
Year 2000 issue. The Company began its Year 2000 remediation project in 
late 1996. The Year 2000 project has been structured following the 
guidance set forth in several statements that have been issued by the 
Federal Financial Institutions Examination Counsel ("FFIEC"). VFSC 
and the Banks are monitored in their Year 2000 efforts by various 
regulators, including the Federal Reserve Board, the Office of the 
Comptroller of the Currency , the FDIC and the Massachusetts Commissioner 
of Banks.	The overall project has five phases: awareness, assessment, 
renovation, validation and implementation. In the awareness phase, the 
Company defined the Year 2000 issue, communicated the Year 2000 issue to 
all employees and obtained executive level support and funding. In the 
assessment phase, the Company created a comprehensive Year 2000 plan 
which includes conducting an inventory of all systems which may be affected 
by the Year 2000 issue, including facilities and related non-information 
technology systems (embedded systems), such as vaults, alarms, elevators, 
telephone and electric power, computer systems, hardware, and services and 
products provided by third parties, and assessing the risk of 
non-compliance for each identified system. In the renovation phase, the 
Company renovates or fixes certain systems, while others are replaced or 
retired. In the validation phase, the Company conducts testing to ensure 
all systems, including renovated systems, are Year 2000 compliant for 
present and future dates. Finally, in the implementation phase, the 
Company places compliant systems in production. The Company's banking 
subsidiaries, VNB and UB, maintain separate computer systems. Both VNB 
and UB have completed the awareness and assessment phases. VNB has 
substantially completed the renovation and validation phases for all its 
mission critical systems and is currently in the implementation phase.  
UB has completed the renovation and validation phases of the project. 
	VNB and UB purchase the software for their mission critical systems 
from nationally recognized vendors, and although they service these 
applications, they do very little custom coding for those systems.  The 
Company considers its mission critical systems to be software used to 
maintain its general ledger, loan, deposit, item processing and ATM/EFT 
(Electronic Funds Transfer) applications. In order to perform the 
assessment of its systems, both VNB and UB have initiated communications 
with the appropriate vendors as to the Year 2000 readiness of their 
product(s) and continue to monitor vendor status. VNB and UB have 
initiated and will maintain communications with their suppliers, data
exchange partners and large customers to determine and monitor the status 
of their Year 2000 efforts.	

The renovation phase principally consists of the installation of the 
vendor identified Year 2000 compliant versions of the relevant systems 
and the validation of the functionality of the systems as well as forward 
date (dates in the next century) verification. As of March 31, 1999, 
Management estimates that approximately 95% of the overall project at VNB 
was completed. Forward date testing of VNB's systems was substantially 
complete at  that date, with the remainder of forward date testing and 
the validation of all internal and external data exchange interfaces to 
be completed by June 30, 1999. Validation of VNB's non-mission-critical 
systems will continue during 1999. Validation of UB's non-mission critical 
systems will likewise continue during 1999. As of March 31, 1999, 
management estimates that the overall project at UB was approximately 
91% complete.  VNB's schedule to date in addressing the Year 2000 issue 
meets the applicable regulatory guidelines. On February 19, 1999 UB 
entered into an agreement with the FDIC which specifies certain Year 
2000 compliance steps that must be completed in the near term.  The Company 
allocated additional resources to UB's Y2K project and as of March 
31, 1999 has completed all of the compliance steps specified in the 
agreement.  On April 26, 1999, the FDIC notified UB that the terms 
and conditions have been met and that the agreement has been terminated.

Costs
Management estimates the costs of its Year 2000 project to be $5.5 
million. As of March 31, 1999, $3.4 million has been expended. The 
total estimated expenditure for 1999 is $2.4 million and for 2000, is 
$0.9 million. The $3.4 million already incurred includes $2.7 in 
operating expense(s) and $0.7 million in capital expenditures. The 
$5.5 million estimated total cost of the project includes $0.9 million 
for capital expenditures, including upgrades of hardware and software 
for ATM machines and software for the retail delivery system of VNB 
(teller/platform automation), which were incurred primarily in 1998 and 
will be depreciated over three to five years, depending on useful life.
	 The Company is relying primarily on internal staff resources to 
complete its Year 2000 compliance project. The costs of the project 
will be funded from normal operating budgets and are not expected to 
have a material effect on the Company.

Risks
There are many risks associated with the Year 2000 issue, including the 
possibility of a failure of the Company's computer and non-information 
technology systems. Such failures could have a material adverse effect on 
the Company and may cause systems malfunctions, incorrect or incomplete 
transaction processing resulting in failed trade settlements, the 
inability to reconcile accounting books and records and disruptions of 
funding requirements. While the Company is attempting to mitigate the 
risks for systems under its control, the Company obtains most of the 
hardware and software from external vendors. In addition, even if the 
Company successfully remediates its Year 2000 issues, it can be 
materially and adversely affected by failures of third parties to remediate 
their own Year 2000 issues. The failure of third parties with which the 
Company has financial or operational relationships such as clearing 
organizations, regulatory agencies, other banks, borrowers, counterparties, 
vendors and utilities, to remediate their computer and non-information 
technology systems issues in a timely manner could result in a material 
financial risk to the Company.

The Company has undertaken to communicate with its commercial loan 
customers to assess their Year 2000 readiness. As of December 31, 1998 
the Company had completed its assessment of 100% of the target portfolio, 
which includes all commercial loans in excess of $250,000.
If the above mentioned risks are not remedied, the Company may experience 
business interruption or shutdown, financial loss, regulatory actions, 
damage to the Company's franchise and legal liability.

Contingency Plan
The Company has initiated contingency planning for its mission critical 
systems and processes, including a business impact analysis and risk 
assessment of these processes. A draft contingency plan (the "Plan") 
was completed by December 31, 1998. The Plan will be enhanced and then 
reviewed by senior management and is expected to be completed by June 
30, 1999. The Plan will be reviewed quarterly for the remainder of 1999 
to determine if any changes should be made to the Plan or any additional 
contingencies should be addressed by the Plan.

Asset Quality

Nonperforming assets totaled $9.4 million as of March 31, 1999, a $10.2  
million decrease from $19.6 million on March 31, 1998 and a $0.3  
million increase from $9.1 million at December 31, 1998.  As of 
March 31, 1999 nonperforming assets were 0.45% of total assets, down 
from 0.95% a year ago and up from 0.42% at December 31, 1998.

The allowance for loan losses was $17.2 million at March 31, 1999, down 
from $18.5 million a year ago and up  from $16.7 million at December 
31, 1998, reflecting the dissimilar levels of nonperforming assets at 
these points in time.  The allowance for loan losses was 207% of 
nonperforming loans and 184% of nonperforming assets as of March 31, 
1999.


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>

                                           March 31,1999  December 31, 1998
                                               <C>               <C>
Loans 90 days past due and still
  accruing interest                           $3,666               $2,069

Nonperforming assets:
     Nonaccrual loans                         $8,331               $7,904
     Other real estate owned                   1,038                1,175
Total nonperforming assets                    $9,369               $9,079

Nonperforming assets to period end 
 loans net of unearned income, plus 
 other real estate owned                        0.68%                0.66%

Allowance for loan losses                    $17,243              $16,699

</TABLE>


The following table details the Company's impaired loans as of
March 31, 1999:

	Total impaired loans	                                   $21,942
	Impaired loans with a specific valuation reserve	         5,158
	Impaired loans without a specific valuation reserve	     16,784
	Valuation reserve for impaired loans	                     1,859
	Average impaired loans	                                 $20,510

Financial Condition

Total assets were $2.1 billion as of March 31,1999, essentially 
unchanged from a year ago and at December 31,1998. Total loans of 
$1.4 billion were up $96 million, or 7%, from March 31, 1998 and were 
up $12 million from year end. Total deposits increased $ 65 million, 
or 4%, from a year ago, yet experienced a seasonal decline of $32 million 
from December 31, 1998.

Capital Resources

Stockholders' equity increased from $214 million at year end to $216 
million at March 31,1999. Equity as a percent of total assets increased 
from 10.0% at year end 1998 to 10.3% at March 31, 1999, while tangible 
stockholder's equity to total assets increased from 7.34% to 7.60%.  
These increases were primarily the result of the earnings retained 
by the Company and the $1.1 million reduction in goodwill and intangible 
assets.  Also, Tier I and Total Risk Based Capital ratios increased to 
12.04% and 13.29% from their year end levels of 11.78% and 13.03%, 
respectively.  The above ratios are in excess of all regulatory 
requirements and place the Company in the "well capitalized" regulatory 
classification.

Recent Developments

On December 16, 1998, VFSC, and Chittenden Corporation (NYSE: "CHZ"), 
and a wholly owned  subsidiary of Chittenden Corporation, entered into an 
Agreement and Plan of Merger (the Merger Agreement), pursuant to which 
VFSC will be merged with and into Chittenden Corporation (the Merger).  
The Merger is structured to qualify as a pooling of interests for 
accounting purposes and as a tax-free exchange of 1.07 shares of Chittenden 
Corporation common stock for each share of VFSC common stock and is 
expected to close in the second quarter of 1999.  The completion of the 
Merger is subject to certain customary conditions, including, without 
limitation, the approval of the stockholders of each of VFSC and Chittenden 
Corporation and certain regulatory approvals

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 for the year 
ended December 31, 1998. 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.


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 10, 1999	_____________________________________
                			John D. Hashagen, Jr.

Dated May 10, 1999	_____________________________________
                			Richard O. Madden