FORM 10-Q

             SECURITIES AND EXCHANGE COMMISSION

                 Washington, D.C.  20549

  [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) 
          OF THE SECURITIES EXCHANGE ACT OF 1934

   
      For the Quarterly Period Ended September 30, 1996

                              OR

   [ ]  TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)  
            OF THE SECURITIES EXCHANGE ACT OF 1934

               COMMISSION FILE NUMBER:  0-16947


            PEOPLES HERITAGE FINANCIAL GROUP, INC.        
    (Exact name of Registrant as specified in its charter)


             Maine                           01-0137770      
 State or other jurisdiction of         (I.R.S. Employer
 incorporation or organization          Identification No.)


   One Portland Square, Portland, Maine            04112   
 (Address of principal executive offices)       (Zip Code)

                       (207) 761-8500                    
     (Registrant's telephone number, including area code)


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 requirements for the past 90 days.

Yes   X     No      

The number of shares outstanding of each of the Registrant's
classes of common stock as of November 1, 1996 is:


 Common stock, par value $.01 per share       22,734,434     
                (Class)                      (Outstanding)  


<PAGE>

                         INDEX

   PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES




PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements (unaudited).

           Consolidated Balance Sheets - September 30, 1996  
                and December 31, 1995.

           Consolidated Statements of Income - Three months 
           ended September 30, 1996 and 1995; nine months    
           ended September 30, 1996 and 1995.

           Consolidated Statements of Changes in             
           Shareholders' Equity - Nine months ended 
           September 30, 1996 and 1995.

           Consolidated Statements of Cash Flows -  Nine
           months ended September 30, 1996 and 1995.

           Notes to Consolidated Financial Statements.

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


PART II.  OTHER INFORMATION

  Item 1.  Legal proceedings.

  Item 2.  Changes in securities.

  Item 3.  Defaults upon senior securities.

  Item 4.  Submission of matters to a vote of security       
           holders.

  Item 5.  Other information.

  Item 6.  Exhibits and reports on Form 8-K.
<PAGE>
<TABLE>
        PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
       (In Thousands, Except Number of Shares and Per Share Data)
                              (Unaudited)                               
<CAPTION>
                                           September 30,  December 31,
                                               1996          1995        
<S>                                        <C>            <C>
Assets
Cash and due from banks                    $  211,162     $  190,436 
Federal funds sold                             41,000        100,255
Securities available for sale, 
  at market value                             758,920        766,648 
Loans held for sale, market value 
  $91,450 and $71,872, respectively            89,747         70,979

Loans and leases:
  Residential real estate mortgages         1,030,897        798,076
  Commercial real estate mortgages            813,559        797,686
  Commercial business loans and leases        430,794        408,592
  Consumer loans and leases                   904,006        774,229
                                            3,179,256      2,778,583
  Less:  Allowance for loan and 
    lease losses                               61,663         60,975
      Net loans and leases                  3,117,593      2,717,608
Bank premises and equipment                    57,302         56,021
Goodwill and other intangibles                 37,822         22,792
Mortgage servicing rights                      26,710         20,309
Other real estate and repossessed 
  assets owned                                 11,246         14,232
Deferred income taxes                          32,194         32,972
Interest and dividends receivable              29,799         30,726
Other assets                                   42,749         35,148 
                                           $4,456,244     $4,058,126
Liabilities and Shareholders' Equity
Deposits:
  Regular savings                          $  595,353     $  557,896
  Money market access accounts                503,681        490,575
  Certificates of deposit (including  
    certificates of $100 or more of 
    $173,646 and $116,472, respectively)    1,441,327      1,363,095
  NOW accounts                                357,435        351,481
  Demand deposits                             487,409        434,091
    Total deposits                          3,385,205      3,197,138
Federal funds purchased                        16,814          1,500
Securities sold under repurchase 
  agreements                                  182,114        180,957
Borrowings from Federal Home Loan 
  Bank of Boston                              413,938        252,446
Other borrowings                               19,838         22,029
Deferred income taxes                          11,222         12,577
Other liabilities                              50,102         36,554
    Total liabilities                       4,079,233      3,703,201

Shareholders' Equity:
Preferred stock (par value $0.01 per share, 
  5,000,000 shares authorized, none issued)       -0-            -0-
Common stock (par value $0.01 per share, 
  100,000,000 shares and 30,000,000 shares  
  authorized, respectively, 25,596,550
  shares issued)                                  256            256
Paid-in capital                               224,267        224,267
Retained earnings                             159,100        134,444
Net unrealized gain (loss) on securities 
  available for sale                             (704)         3,763
Treasury stock at cost (396,655 shares and
  524,062 shares, respectively)                (5,908)        (7,805)
Total shareholders' equity                    377,011        354,925
                                           $4,456,244     $4,058,126

See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

<TABLE>
       PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
  
                   CONSOLIDATED STATEMENTS OF INCOME
     (In Thousands, Except Number of Shares and Per Share Data)
                             (Unaudited)
<CAPTION>

                                 Three Months Ended        Nine Months Ended
                                    September 30,            September 30,     
                                  1996        1995         1996         1995   
<S>                              <C>        <C>         <C>          <C>
Interest and dividend income:
  Interest on loans and 
    leases (1)                  $72,715     $65,548     $211,937     $187,165
  Interest on mortgage-backed 
    investments                   4,706       3,262       12,213        9,420
  Interest on other investments   7,606      10,103       24,804       27,609
  Dividends on equity            
    securities                      479         485        1,391        1,474

    Total interest and
      dividend income            85,506      79,398      250,345      225,668

Interest expense:
  Interest on deposits           29,477      28,949       88,833       78,514
  Interest on borrowed funds      8,085       6,395       21,598       20,526
    Total interest expense       37,562      35,344      110,431       99,040
    Net interest income          47,944      44,054      139,914      126,628
Provision for loan losses           -0-       1,080          900        3,150
    Net interest income after 
      provision for loan  
      losses                     47,944      42,974      139,014      123,478

Noninterest income:
  Customer services               3,986       3,174       10,902        8,851
  Mortgage banking services       3,315       3,113        9,850        7,959
  Trust and investment
    advisory services             1,930       1,474        5,454        4,279
  Loan related services             549         590        1,455        1,442
  Net securities gains
    (losses)                        (1)          42          503         (107)
  Other noninterest income           25          33          305          662
                                  9,804       8,426       28,469       23,086

Noninterest expenses:
  Salaries and employee
    benefits                     18,388      17,721       54,019       49,998
  Occupancy                       2,923       2,552        9,322        7,855
  Data processing                 3,126       2,242        8,895        6,379
  Equipment                       2,204       1,786        6,195        4,899
  Advertising and marketing         901       1,091        2,900        3,440
  Deposit and other assessments   2,270         165        2,939        3,876
  Collection and carrying costs 
    of nonperforming assets         502         757        1,384        1,981
  Merger expenses                   -0-         658        5,105        1,258
  Other noninterest expenses      5,942       4,938       19,665       15,373
                                 36,256      31,910      110,424       95,059

Income before income tax         21,492      19,490       57,059       51,505
Income tax expense                7,300       6,701       20,118       17,445
    Net income                  $14,192     $12,789     $ 36,941     $ 34,060
Weighted average shares
  outstanding                25,191,163  25,009,519   25,163,246   24,573,433
Earnings per share              $  0.56     $  0.51      $  1.47     $   1.39

(1)  Interest on loans and leases includes interest on loans held for sale.

See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
                   PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  (In Thousands, Except Number of Shares and Per Share Data)
                                              (Unaudited)
<CAPTION>
                                                                      Net
                                       Par     Paid in   Retained  Unrealized   Treasury   
                                      Value    Capital   Earnings  Gain (loss)   Stock       Total  
<S>                                    <C>    <C>        <C>         <C>        <C>        <C>
Balances at December 31, 1994          $256   $224,267   $ 99,955    $(9,079)   $(10,960)  $304,439  

Treasury stock purchased (646,600 
shares at an average price of $12.84)    --         --         --         --      (8,301)    (8,301) 

Treasury stock issued for employee 
benefit plans (105,227 shares at 
an average price of $10.66)              --         --       (387)        --       1,508      1,121

Reissuance of treasury stock 
pursuant to acquisition 
(751,600 shares at $15.00)               --         --      1,710         --       9,564     11,274

Change in unrealized gains (losses)
on securities available for sale,
net of tax                               --         --         --      9,844          --      9,844   

Net income                               --         --     34,060         --          --     34,060
 
Cash dividends $0.37                     --         --     (8,034)        --          --     (8,034) 

Balances at September 30, 1995         $256   $224,267   $127,304   $    765    $ (8,189)  $344,403


Balances at December 31, 1995          $256   $224,267   $134,444   $  3,763    $ (7,805)  $354,925

Treasury stock issued for employee 
benefit plans (127,407 shares at 
an average price of $13.43)              --         --       (186)        --       1,897      1,711

Change in unrealized gains (losses)
on securities available for sale,
net of tax                               --         --         --     (4,467)         --     (4,467)

Net income                               --         --     36,941         --          --     36,941

Cash dividends $0.48                     --         --    (12,099)        --          --    (12,099)  

Balances at September 30, 1996         $256   $224,267   $159,100   $   (704)   $ (5,908)  $377,011


See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>

<TABLE>
         PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In Thousands)                      
                             (Unaudited)
                                              Nine Months Ended   
                                                 September 30,           
                                               1996          1995  
<S>                                        <C>           <C>
Cash flows from operating activities:
  Net income                               $   36,941    $   34,060
  Adjustments to reconcile net income 
    to net cash provided by operating 
    activities:
      Provision for loan losses                   900         3,150
      Provision for depreciation                5,442         4,712
      Provision for losses and writedowns 
        (credits) of other real estate owned      -0-          (983)
      Amortization of goodwill and other 
        intangibles                             3,200         1,614
      Amortization of servicing rights          3,001         2,802
      Net decrease in net deferred tax
        assets                                  1,816         3,481
      Net losses realized from sales
        of other real estate owned                243           838
      Net (gains) realized from sales
        of securities and consumer loans         (503)          (98)
      Net (gains) realized from sales of
        loans held for sale (a component       
        of mortgage banking services)          (5,150)       (3,052)
      Proceeds from sales of loans held
        for sale                              740,748       353,569      
     Residential loans originated and
        purchased for sale                   (754,366)     (403,575)
      Net increase in interest and 
      dividends receivable and 
        other assets                           (6,674)       (3,121)
      Net increase (decrease) in other 
        liabilities                            13,548        (3,060)  

Net cash provided (used) by 
  operating activities                     $   39,146    $   (9,663)

Cash flows from investing activities:
  Maturities of investment securities      $      -0-    $  124,266
  Purchases of investment securities              -0-      (113,368)
  Proceeds from sales of securities 
    available for sale                         31,385        11,066
  Proceeds from maturities and principal 
    repayments of securities available 
    for sale                                  356,961        75,640
  Purchases of securities available 
    for sale                                 (386,975)     (150,752)
  Net increase in loans and leases           (401,724)     (124,422)
  Purchase of mortgage servicing rights       (11,984)       (5,097)
  Sale of mortgage servicing rights             2,582           -0-
  Premiums paid on deposits purchased         (18,230)       (4,290)
  Net additions to premises and equipment      (6,723)      (10,684)
  Proceeds from sales of other real 
    estate owned                                3,670        10,826
  Net increase decrease in repossessed        
    assets owned                                  (88)          167

Net cash used by investing activities      $ (431,126)   $ (186,648)     
    

See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 
<TABLE>

         PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
                             (In Thousands)                      
                              (Unaudited)
<CAPTION>
                                               Nine Months Ended   
                                                 September 30,    
                                              1996          1995  
<S>                                        <C>           <C>
Cash flows from financing activities:             
  Net increase in deposits                 $  188,067    $  278,477      
  Net increase in securities sold
    under repurchase agreements                 1,157        19,526
  Advances from Federal Home Loan Bank 
      of Boston borrowings                    401,998       274,498
  Payments on Federal Home Loan Bank of
      Boston borrowings                      (240,506)     (361,000)
  Net increase (decrease) in other 
    borrowings                                 (2,191)       13,809
  Sale of treasury stock                        1,711         1,121
  Purchase of treasury stock                      -0-        (8,301)
  Issuance of treasury stock for
    acquisition                                   -0-        11,274
  Cash dividends paid to shareholders         (12,099)       (8,034)

Net cash provided by financing           
  activities                               $  338,137    $  221,370

Increase (decrease) in cash and cash 
  equivalents                              $  (53,843)   $   25,059
  Cash and cash equivalents at beginning 
    of period                                 289,191       220,103
  Cash and cash equivalents at end of 
    period                                 $  235,348    $  245,162

Supplemental disclosures of information:
  Interest paid on deposits and borrowings $  108,623    $   97,136
    Income taxes paid                          16,334         9,855
    Income tax refunds                            580         2,900

Noncash investing transactions:
  Loans transferred to other real estate
    owned                                       2,599         9,761
  Loans originated to finance the sales of
    other real estate owned                     1,720         4,801
  Increases (decreases) resulting from  
    SFAS No. 115:
      Securities available for sale             6,860        15,449
      Deferred income taxes - liabilities       2,393         5,605
      Net unrealized gain on securities
        available for sale                      4,467         9,844




See accompanying Notes to Consolidated Financial Statements.

</TABLE>


<PAGE>

  PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
                    September 30, 1996



Note 1  -  Basis of Presentation

The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X of the Securities and
Exchange Commission.  Accordingly, they do not include all
of the information and notes required by generally accepted
accounting principles for complete financial statements.  In
the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation
of the consolidated financial statements have been included. 
The results of operations and other data for the three and
nine months ended September 30, 1996 are not necessarily
indicative of results that may be expected for any other
interim period or the entire year ending December 31, 1996. 
Certain amounts in prior periods have been reclassified to
conform to the current presentation.  

On April 2, 1996, Peoples Heritage Financial Group, Inc.
(the "Company") acquired Bank of New Hampshire Corporation
("BNHC").  The acquisition was accounted for as a pooling of
interests and, accordingly, the financial information for
all prior periods presented has been restated to present the
combined financial condition and results of operations as if
the combination had been in effect for all periods
presented.

Subsequent to the acquisition of BNHC, the Company merged
its other New Hampshire-based banking subsidiary  -  The
First National Bank of Portsmouth ("Portsmouth")  -  into
Bank of New Hampshire ("BNH") under the pooling-of-interests
method of accounting.

On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-Lived
Assets to be Disposed of."  The implementation of this
Statement did not have a material effect on the Company's
results of operations or financial condition.

On January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation."  The Company has
elected to continue to follow the accounting under
Accounting Principal Board ("APB") Opinion No. 25.  SFAS No.
123 requires companies which elect to continue to follow APB
Opinion No. 25 to disclose in the notes to their financial
statements the pro forma net income and earnings per share
as if the value based method established under SFAS 123 had
been applied.

<PAGE>
             PEOPLES HERITAGE FINANCIAL GROUP, INC. AND      
                           SUBSIDIARIES
                        PART I  -  ITEM 2         



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

General
Peoples Heritage Financial Group, Inc. (the "Company") is a
multi-bank holding company which is incorporated under the
laws of the State of Maine and headquartered in Portland,
Maine.  The Company's direct subsidiaries, both of which are
wholly-owned, are Peoples Heritage Bank (the "Bank") and
Bank of New Hampshire Corporation ("BNHC"), which wholly
owns the Bank of New Hampshire ("BNH").

The Bank conducts business from its headquarters in
Portland, Maine and 61 additional offices located throughout
the State of Maine.  At September 30, 1996, the Bank had
total assets of $2.7 billion and total shareholder's equity
of $174.4 million.

BNH conducts business from its headquarters in Manchester,
New Hampshire and 43 additional offices located throughout
the State of New Hampshire.  At September 30, 1996, BNH had
total assets of $1.8 billion and total shareholder's equity
of $133.8 million.

On February 16, 1996, five branch offices and $160.9 million
in related deposits located in New Hampshire were acquired
by Portsmouth from Fleet Bank NH (the "Branch Acquisition"). 
In addition to various assets related to the acquired
branches, approximately $216.4 million of loans were
purchased in connection with this transaction, which
consisted primarily of $178.6 million of single-family
residential loans.  

On July 1, 1995, Bankcore, Inc. ("Bankcore"), the New
Hampshire-based holding company for North Conway Bank, was
acquired and North Conway Bank was merged into Portsmouth. 
At the time of acquisition, Bankcore had $132.8 million in
total assets and shareholders' equity of $17.8 million.  The
Bankcore acquisition was treated as a purchase for
accounting purposes and, accordingly, the Company's
financial statements reflect the acquisition from the time
of purchase only.  As a result of the transaction, $3.4
million of goodwill was created, which is being amortized
over 15 years.

On June 15, 1995, the Company purchased all the branches and
associated deposits, as well as certain loans, of Fleet Bank
of Maine located in Aroostook County, Maine.  Five of the
seven branches purchased were merged with and into existing
branches of the Bank.  The purchase resulted in the transfer
of $46.1 million in deposits and $17.1 million in loans.


<PAGE>

Results of Operations
The Company reported net income of $14.2 million and $36.9
million for the three and nine months ended September 30,
1996, respectively, compared with $12.8 million and $34.1
million for the comparable period in 1995.  The results for
the three and nine month periods in 1996 were impacted by a
one-time after-tax Savings Association Insurance Fund
("SAIF") assessment of $1.2 million.  The results for the
nine month period ended September 30, 1996 were also 
impacted by after-tax merger related expenses associated
with BNHC of $3.9 million.  Excluding both SAIF assessment
expenses and the BNHC merger related expenses, the Company
would have reported net income of $15.4 million and $42.1
million for the three and nine months ended September 30,
1996, respectively.  The improved results in 1996 were
primarily attributable to the improvement in net interest
income as a result of an increase in earning assets and
increased noninterest income, which were offset in part by
higher noninterest expenses.

Net Interest Income

The following tables set forth, for the periods indicated,
information regarding (i) the total dollar amount of
interest income of the Company from interest-earning assets
and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities
and the resultant average cost; (iii) net interest income;
(iv) interest rate spread; and (v) net interest margin.  For
purposes of the tables and the following discussion, (i)
income from interest-earning assets and net interest income
is presented on a fully-taxable equivalent basis primarily
by adjusting income and yields earned on tax-exempt interest
received on loans to qualifying borrowers and on certain of
the Company's equity securities to make them equivalent to
income and yields earned on fully-taxable investments,
assuming a federal income tax rate of 35% and (ii)
nonaccrual loans have been included in the appropriate
average balance loan category, but unpaid interest on
nonaccrual loans has not been included for purposes of
determining interest income.  Information is based on
average daily balances during the indicated periods. 
<PAGE>
<TABLE>
<CAPTION>                                      Three Months Ended              Three Months Ended    
                                               September 30, 1996              September 30, 1995    
                                          Average             Yield/(1)   Average            Yield/(1)
                                          Balance   Interest   Rate       Balance   Interest  Rate    
                                                              (Dollars in Thousands)
<S>                                      <C>         <C>        <C>      <C>         <C>      <C>               
Loans and leases (2):
  Residential real estate mortgages      $1,117,953  $22,105    7.91%    $  880,267  $17,941   8.15%
  Commercial real estate mortgages          820,851   20,127    9.75        769,090   19,643  10.13
  Commercial loans and leases               428,292   10,236    9.51        393,401    9,954  10.04
  Consumer loans and leases                 867,533   20,422    9.36        756,285   18,200   9.55
    Total loans and leases                3,234,629   72,890    8.96      2,799,043   65,738   9.32
Investment securities (3)                   799,857   12,668    6.30        813,607   12,671   6.18
Federal funds sold                           16,129      186    4.59         88,397    1,300   5.83
    Total earning assets                  4,050,615   85,744    8.42      3,701,047   79,709   8.54
Nonearning assets                           343,924                         251,927
    Total assets                         $4,394,539                      $3,952,974

Interest-bearing deposits:
  Regular savings                           599,793    4,089    2.71        586,688    4,195   2.84
  NOW accounts                              357,741    1,086    1.21        339,118    1,201   1.41
  Money market access accounts              502,154    4,521    3.58        442,830    4,285   3.84
  Certificates of deposit                 1,403,091   19,781    5.50      1,351,530   19,268   5.66
    Total interest-bearing deposits       2,889,779   29,477    4.06      2,720,166   28,949   4.22
Borrowed funds                              602,873    8,085    5.34        446,055    6,397   5.69
    Total interest bearing liabilities    3,492,652   37,562    4.28      3,166,221   35,346   4.43
Demand deposits                             463,251                         400,987
Other liabilities (3)                        65,805                          50,847
Shareholders' equity (3)                    372,831                         334,919
    Total liabilities and shareholders'
      equity                             $4,394,539                      $3,952,974

Net earning assets                       $  557,963                      $  534,826

Net interest income (fully-taxable 
  equivalent)                                         48,182                           44,363         
Less: fully-taxable equivalent adjustments              (238)                            (309)         
   Net interest income                               $47,944                           44,054
Net interest rate spread (fully-taxable
  equivalent)                                                   4.14%                          4.11%
Net interest margin (fully-taxable equivalent)                  4.73%                          4.76%



(1)  Annualized.
(2)  Loans and leases includes loans available for sale.
(3)  Excludes effect of unrealized gains or losses on investment securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                               Nine Months Ended               Nine Months Ended     
                                               September 30, 1996              September 30, 1995    
                                          Average             Yield/(1)   Average            Yield/(1)
                                          Balance   Interest   Rate       Balance   Interest  Rate    
                                                          (Dollars in Thousands)
<S>                                      <C>         <C>        <C>      <C>         <C>       <C>         
Loans and leases (2):
  Residential real estate mortgages      $1,067,562  $ 63,836   7.97%    $  838,858  $ 51,418   8.17%
  Commercial real estate mortgages          819,274    60,058   9.79        753,468    55,854   9.91
  Commercial loans and leases               419,256    30,333   9.66        363,017    27,393  10.09
  Consumer loans and leases                 826,286    58,179   9.41        742,871    53,022   9.54
    Total loans and leases                3,132,378   212,406   9.06      2,698,214   187,687   9.30
Investment securities (3)                   776,392    36,707   6.32        763,157    35,204   6.17
Federal funds sold                           50,019     1,872   5.00         80,869     3,608   5.97
    Total earning assets                  3,958,789   250,985   8.47      3,542,240   226,499   8.55
Nonearning assets                           281,821                         254,297
    Total assets                         $4,240,610                      $3,796,537

Interest-bearing deposits:
  Regular savings                           590,270    12,082   2.73        596,117    12,706   2.85
  NOW accounts                              352,814     3,263   1.24        322,742     3,486   1.44
  Money market access accounts              503,374    13,621   3.61        390,736    10,642   3.64
  Certificates of deposit                 1,433,043    59,867   5.58      1,279,669    51,680   5.40
    Total interest-bearing deposits       2,879,501    88,833   4.12      2,589,264    78,514   4.05
Borrowed funds                              546,887    21,598   5.28        478,781    20,526   5.73
    Total interest bearing liabilities    3,426,388   110,431   4.31      3,068,045    99,040   4.32
Demand deposits                             427,250                         358,441
Other liabilities (3)                        21,897                          47,496
Shareholders' equity (3)                    365,075                         322,555
    Total liabilities and shareholders'
      equity                             $4,240,610                      $3,796,537

Net earning assets                       $  532,401                      $  474,195

Net interest income (fully-taxable 
  equivalent)                                         140,554                         127,459         
Less: fully-taxable equivalent adjustments               (640)                           (528)         
   Net interest income                               $139,914                        $126,628
Net interest rate spread (fully-taxable
  equivalent)                                                   4.16%                          4.23%
Net interest margin (fully-taxable equivalent)                  4.74%                          4.81%



(1)  Annualized.
(2)  Loans and leases includes loans available for sale.
(3)  Excludes effect of unrealized gains or losses on investment securities.
</TABLE>
<PAGE>
Net interest income on a fully-taxable equivalent basis
increased by $3.8 million and $13.1 million for the three
and nine months ended September 30, 1996, respectively,
compared with the same periods in 1995.  The increase was
attributable to an increase in the level of net earning
assets, which was offset somewhat by a decrease in the
Company's net interest margin.

Interest income earned on loans and leases increased by $7.1
million and $24.7 million, or 10.9% and 13.2%, for the three
and nine months ended September 30, 1996, respectively, as
compared with the same respective periods in 1995.  These
increases in interest income on loans were attributable to
loan growth from purchases and acquisitions as well as
internal loan growth, which were offset somewhat by a
decrease in the weighted average yield on loans.  The
weighted average yield on loans decreased in 1996 due to an
increase in the percentage of lower yielding residential
mortgage loans relative to other loan portfolios, as well as
increased competition for both consumer and commercial
loans.

Interest expense on deposits increased by $528 thousand and
$10.3 million, or 1.8% and 13.1%, for the three and nine
months ended September 30, 1996, respectively, as compared
with the same respective periods in 1995.  These increases
in interest expense paid on deposits were primarily
attributable to deposit growth from purchases and
acquisitions during the second half of 1995 and the first
quarter of 1996.  Total average interest-bearing deposits
increased by $169.6 million and $290.2 million, or 6.2% and
11.2%, for the three and nine months ended September 30,
1996, respectively, as compared with the same respective
periods in 1995.  The weighted average rate paid on
interest-bearing deposits decreased from 4.22% for the three
months ended September 30, 1995 to 4.06% for the three
months ended September 30, 1996.  The weighted average rate
paid on interest-bearing deposits increased from 4.05% for
the nine months ended September 30, 1995 to 4.12% for the
nine months ended September 30, 1996.

Interest expense on borrowed funds increased by $1.7 million
and $1.1 million, or 26.4% and 5.2%, for the three and nine
months ended September 30, 1996, respectively, as compared
with the same respective periods in 1995.  The increases
were primarily attributable to an increase in the average
outstanding balances of borrowed funds, which was offset in
part by a decrease in the weighted average rate paid.  The
outstanding average balances on borrowed funds increased by
$156.8 million and $68.1 million, or 35.2% and 14.2%,
respectively, as compared with the same respective periods
in 1995.  The weighted average rate paid decreased from
5.69% and 5.73% for the three and nine months ended
September 30, 1995, respectively, to 5.34% and 5.28% for the
same respective periods in 1996.

The Company's net interest rate spread increased from 4.11%
for the three months ended September 30, 1995 to 4.14% for
the three months ended September 30, 1996.  The increase was
attributable to a decrease in the yield on interest-bearing
liabilities and an increase in the yield on investment
securities, which were offset in part by a decrease in the
yield on loans and leases.
<PAGE>
For the nine months ended September 30, 1996, the Company's
net interest rate spread decreased to 4.16% as compared with
4.23% for the nine months ended September 30, 1995.  This
decrease was attributable to increased rates on interest-
bearing deposits and a decreased rate on loans and leases,
which were offset in part by higher yields on investment
securities and lower rates on borrowed funds.

The net interest margin decreased from 4.76% for the three
months ended September 30, 1995 to 4.73% for the three
months ended September 30, 1996.  This decrease was
primarily attributable to an increase in the percentage of
interest-bearing liabilities as a percentage of earning
assets, which was offset in part by an increase in the net
interest rate spread.

The net interest margin decreased from 4.81% for the nine
months ended September 30, 1995 to 4.74% for the nine months
ended September 30, 1996.  This decrease was primarily
attributable to the decreased net interest rate spread.

Provision for Loan Losses  

The provision for loan losses of $-0- and $900 thousand for
the three and nine months ended September 30, 1996 decreased
$1.1 million and $2.3 million compared to the same
respective periods in 1995.  The lower provisions resulted
from management's ongoing evaluation of the adequacy of the
allowance for loan losses after taking into account recent
trends in nonperforming loans, delinquent loans and net loan
chargeoffs, as well as other asset quality factors.  See
"Financial Condition - Nonperforming Assets" below.

Although management utilizes its judgment in providing for
possible losses, there can be no assurance that the Company
will not have to increase its provisions for loan and lease
losses in the future as a result of changing markets for
real estate and economic conditions in the Company's primary
market area, future changes in nonperforming assets or for
other reasons, which would affect the Company's results of
operations.  In addition, various regulatory agencies, as an
integral part of their examination process, periodically
review the Company's allowance for loan and lease losses. 
Such agencies may require the Company to recognize changes
to the allowance for loan and lease losses based on their
judgments about information available to them at the time of
the examination.

Noninterest Income

Noninterest income increased $1.4 million, or 16.4%, for the
three months ended September 30, 1996 compared with the same
period in 1995, and increased $5.4 million, or 23.3%, for
the nine months ended September 30, 1996 compared with the
same period in 1995.  The more significant changes to the
components of noninterest income are more fully described
below.

<PAGE>



The following table sets forth certain information relating
to mortgage banking services income for the periods
indicated:
<TABLE>
<CAPTION>
                         At or for the          At or for the 
                      Three Months Ended      Nine Months Ended
                         September 30,           September 30,    
                       1996        1995        1996        1995   
                                   (In Thousands)
<S>                 <C>         <C>         <C>         <C>
Residential mortgages
  serviced for 
  investors at end  
  of period         $2,953,213  $2,476,389  $2,953,213  $2,476,389

Residential mortgage
  sales income      $    2,068  $    1,477  $    5,151  $    3,027
Residential mortgage
  servicing income       1,247       1,636       4,699       4,932
    Total           $    3,315  $    3,113  $    9,850  $    7,959
</TABLE>
The Company's portfolio of residential mortgages serviced
for investors increased by $476.8 million, net of
amortization and prepayments, or 19.3%, from September 30,
1995 to September 30, 1996.  The Company's portfolio of
mortgages serviced for others continues to increase as a
result of its strategy to originate and sell primarily fixed
rate residential mortgages to the secondary market while
retaining the rights to service these loans for the
investors purchasing them.  In addition, the outstanding
amount of residential mortgages serviced for investors is
impacted, from time to time, by the purchase and sale of
mortgage servicing rights for portfolios of residential
mortgage loans.

Residential mortgage sales income increased $589 thousand,
or 39.9%, and $2.1 million, or 70.2%, for the three and nine
months ended September 30, 1996, respectively, as compared
with the same periods in 1995.  The increase in residential
sales income reflects the lower interest rate environment
that existed during most of the nine month period ended
September 30, 1996 as compared with the same period in 1995,
which resulted in an increase in direct originations by the
subsidiary banks of the Company as well as an increase in
the volume of loans originated indirectly through the Bank's
correspondent network.  Residential real estate mortgage
originations from correspondent lenders increased $31.1
million, or 22.6%, and $199.0 million, or 85.4%, for the
three and nine months ended September 30, 1996,
respectively, compared with the same periods in 1995.

Residential mortgage servicing income decreased $389
thousand and $233 thousand, or 23.8% and 4.7% for the three
and nine months ended September 30, 1996, respectively, as
compared with the same periods in 1995.  During the three
months ended September 30, 1996 the Company reclassified the
amortization expense of the CMT floors (discussed below) to
residential mortgage servicing income from other non-
interest expenses, which resulted in a $356 thousand
decrease in mortgage servicing income in the three and nine
months ended September 30, 1996 as compared with the same
respective periods in 1995.  In addition, the Company
accelerated the amortization of the carrying value of the
CMT floors by $200 thousand during the three months ended
<PAGE>
September 30, 1996 to reflect the underlying market value of
the CMT floors.  Excluding the CMT floor amortization
expense recorded in 1996 as an offset to mortgage servicing
income, mortgage servicing income would have been $1.8
million and $5.3 million for the three and nine months ended
September 30, 1996, respectively, or $167 thousand and $323
thousand greater than the same respective periods in 1995. 
The core increases in mortgage servicing income relate to
the increase in the size of the portfolio of residential
mortgages serviced for others.  Residential mortgage
servicing income has lagged increases in the portfolio of
mortgages serviced for investors as a result of the impact
of the Company's adoption of Statement of Financial
Accounting Standards ("SFAS") No. 122 in 1995, which
effectively accelerates mortgage servicing income into the
current period as a component of capitalized mortgage
servicing rights.  The mortgage servicing rights that have
been created as a result of the adoption of SFAS No. 122 are
amortized and recorded as an offset to mortgage servicing
income.  

In order to mitigate the prepayment risk associated with
mortgage servicing rights and protect economic value, the
Company has purchased constant maturity treasury floors
("CMT").  The value of a CMT is inversely related to
movements in interest rates.  As interest rates decline, the
value of a CMT floor increases.  Market interest rate
movements also influence the behavior of borrowers, which
impacts the value of mortgage servicing rights as a result
of an increase or decrease on mortgage loan prepayment
speeds.  The value of mortgage servicing rights generally
increases as market interest rates increase and decreases as
market interest rates decrease.  While not accorded hedge
accounting treatment due to the uncertainty of strict
correlation, in the event that interest rates fall, any
resulting increase in the value of the CMTs are intended to
offset, in part, the prospective impairment to mortgage
servicing rights.  The CMT floors are included in other
assets on the Company's balance sheet at September 30, 1996
at amortized cost of $406 thousand.

The following table shows the composition of net gains
(losses ) on the sales of securities for the periods
indicated:
<TABLE>
<CAPTION>
                    Three Months Ended   Nine Months Ended 
                      September 30,        September 30,   
                      1996      1995       1996      1995  
                                (In Thousands)   
<S>                  <C>      <C>         <C>       <C>
Securities losses    $  (1)   $  42       $ (10)    $(188)
Securities gains       -0-      -0-         513        81
                        (1)      42       $ 503     $(107)
</TABLE>
The generation of mortgage sales income and the recognition
of net gains on the sales of securities are dependent on
market and economic conditions and, accordingly, there can
be no assurance that the income and net gains reported in
prior periods can be achieved in the future or that there
will not be significant inter-period variations in the
results from such activities.
<PAGE>
Customer services income increased $812 thousand, or 25.6%,
and $2.1 million, or 23.2%, for the three and nine months
ended September 30, 1996, respectively, as compared with the
same periods in 1995.  The increase in customer services
income reflects the Company's focus on increasing the number
and volume of transaction accounts, the increased use of and
fees generated by ATM machines and the increased volume
associated with the Branch Acquisition, the purchase of
Bankcore and the purchase of all of the branches of Fleet
Bank of Maine located in Aroostook County.

Trust and investment advisory services income increased $456
thousand, or 30.9%, and $1.2 million, or 27.5%, for the
three and nine months ended September 30, 1996,
respectively, as compared with the same periods in 1995. 
The increase in trust and investment advisory income in 1996
as compared with 1995 reflects primarily the growth of the
trust department at the Bank, which was started during the
first quarter of 1995, as well as increased fee based income
from the sale of mutual fund and annuity products.

Noninterest Expenses

Total noninterest expenses increased $4.3 million, or 13.6%,
and $15.4 million, or 16.2%, for the three and nine months
ended September 30, 1996, respectively, as compared with the
same periods in 1995.  Excluding merger expenses and the
one-time assessment of all SAIF-insured deposits to
recapitalize the SAIF, total noninterest expenses increased
$3.2 million, or 9.2%, and $9.7 million, or 10.3%, for the
three and nine months ended September 30, 1996,
respectively, as compared with the same periods in 1995.

Salaries and employee benefits increased $667 thousand, or
3.8%, and $4.0 million, or 8.0%, for the three and nine
months ended September 30, 1996, respectively, as compared
with the same periods in 1995.  These increases were
principally the result of the employment of additional
employees in connection with the expansion of the retail
franchise, increased mortgage banking activities and trust
services, as well as normal salary and wage increases.

Occupancy expenses increased $371 thousand, or 14.5%, and
$1.5 million, or 18.7%, for the three and nine months ended
September 30, 1996, respectively, compared with the same
periods in 1995.  These increases were primarily
attributable to the expansion of the Company's branch
network, which resulted in higher rent, depreciation,
utilities and maintenance expenses.

Data processing expenses increased $884 thousand, or 39.4%,
and $2.5 million, or 39.4%, for the three and nine months
ended September 30, 1996, respectively, as compared with the
same periods in 1995.  The increases in data processing
expenses were primarily attributable to BNH, which in 1995
processed checks in-house as opposed to outsourcing check
processing in 1996.  Consequently, the cost to outsource
check processing is included in data processing in 1996,
with no equivalent charge in 1995.  In addition to the
above, the increase in transaction accounts, a larger retail
delivery system, the expanded mortgage banking operation and
expanded operational capabilities to support new product
offerings and services are the other factors accounting for
<PAGE>
the increase in data processing costs in 1996 as compared
with 1995.  Effective July 1, 1996, the computer systems and
other back office functions of BNH were merged with those of
the Bank.

Equipment expenses increased $418 thousand, or 23.4%, and
$1.3 million, or 26.5%, for the three and nine months ended
September 30, 1996, respectively, as compared with the same
periods in 1995.  The increases in equipment expenses were
primarily attributable to increased investment in
alternative delivery systems, office automation equipment
and a larger branch network.

Deposit and other assessment expenses of $2.3 million and
$2.9 million for the three and nine months ended September
30, 1996, respectively, include a Congressionally mandated
one-time SAIF assessment of all SAIF-insured deposits, which
amounted to $1.9 million in the case of the Company. 
Excluding the one-time SAIF assessment, deposit and other
assessment expenses increased $253 thousand for the three
months ended September 30, 1996 as compared with the same
period in 1995 and decreased by $2.8 million for the nine
months ended September 30, 1996 as compared with the same
period in 1995.  Included in the three month period ended
September 30, 1995 was a refund of pre-paid deposit premiums
due to a retroactive adjustment of the Bank Insurance Fund
("BIF") deposit premium rate.  The decrease in deposit
premium expense for the nine month period ended September
30, 1996 (excluding the one-time SAIF assessment) was
directly attributable to the reduction in deposit insurance
premiums paid by the Bank and BNH to the BIF from $0.23 per
$100.00 of deposits to $0.04 per $100.00 of deposits in
June, 1995 and then to the minimum annual amount of $2,000
starting January, 1996.  During this period the Company
continued to pay $0.23 per $100.00 of deposits for the
approximately 11% of its deposits that are insured by the
SAIF.

Merger expenses of $5.1 million for the nine month period in
1996 related to the acquisition of BNHC by the Company. 
Significant BNHC related merger expenses included employee
severance costs, professional fees, branch consolidation
costs and operational consolidation costs.  Merger expenses
during the three and nine month periods in 1995 related to
the acquisition of Bankcore by the Company.

Other categories of noninterest expenses include collection
and carrying costs of nonperforming assets, which decreased
$597 thousand for the nine months ended September 30, 1996,
as compared to the same period in 1995, and advertising and
marketing expenses, which decreased $540 thousand for the
nine months ended September 30, 1996, as compared with the
same period in 1995.

Other noninterest expenses increased $1.0 million, or 20.3%,
and $4.3 million, or 27.9%, for the three and nine months
ended September 30, 1996, respectively, compared with the
same respective periods in 1995.

<PAGE>

The following table sets forth information relating to other
noninterest expenses during the periods indicated:
<TABLE>
<CAPTION>
                    Three Months Ended   Nine Months Ended 
                       September 30,       September 30,   
                      1996      1995       1996      1995  
                                (In Thousands)
<S>                 <C>       <C>        <C>       <C>
Telephone           $   921   $   601    $ 2,436   $ 1,702
Office supplies         755       666      2,109     1,900
Amortization of 
  deposit premiums      742        93      1,900       198
Postage and freight     625       605      2,113     1,863
Amortization of       
  goodwill              508       507      1,524     1,416
Other                 2,391     2,466      9,583     8,294
                    $ 5,942   $ 4,938    $19,665   $15,373
</TABLE>
The increase in amortization of deposit premiums was
attributable to the Branch Acquisition.

Income Tax Expense

Income tax expense was $7.3 million and $6.7 million for the
three months ended September 30, 1996 and 1995,
respectively, which amounted to effective income tax rates
of 34.0% and 34.4%, respectively.  Income tax expense was
$20.1 million and $17.4 million for the nine months ended
September 30, 1996 and 1995, respectively, which amounted to
effective income tax rates of 35.3% and 33.9%, respectively.



Financial Condition
Set forth below is a discussion of the material changes in
the Company's financial condition from December 31, 1995 to
September 30, 1996.

Securities Available for Sale

Securities available for sale decreased $7.7 million, or
1.0%.  Securities available for sale are reported at fair
value, with unrealized gains and losses reported as a
separate component of shareholders' equity (net of related
taxes).  At September 30, 1996, $704 thousand of net
unrealized loss (net of related taxes) was included in
shareholders' equity.  A summary of the carrying values of
securities available for sale follows:
<TABLE>
<CAPTION>
                                September 30,   December 31,
                                    1996           1995    
                                      (In Thousands)
<S>                               <C>             <C>
U.S. Government obligations and                            
  obligations of U.S. Government
  agencies and corporations       $408,514        $526,576
Other bonds and notes               29,953          16,531
Mortgage-backed securities         288,925         195,823
    Total debt securities          727,392         738,930
Equity securities                   31,528          27,718
    Total securities 
      available for sale          $758,920        $766,648
</TABLE>
<PAGE>
Loans Held for Sale

Loans held for sale, all of which were residential mortgage
loans, increased $18.8 million.  The outstanding dollar
amount of loans held for sale can vary greatly from period
to period as a result of mortgage origination levels, timing
and delivery of loan sales, changes in market interest rates
and asset/liability management strategies.  The change in
loans held for sale from December 31, 1995 to September 30,
1996 was primarily attributable to timing and delivery of
loan sales.  

Loans and Leases

Total loans and leases held for investment increased $400.7
million, or 14.4%, for the nine months ended September 30,
1996.  The increase was primarily attributable to $216.4
million of loans acquired through the Branch Acquisition, as
well as internal loan growth in the consumer and residential
loan portfolios.  

Residential real estate mortgages increased $232.8 million,
or 29.2%, for the nine months ended September 30, 1996. 
This increase was primarily attributable to $177.6 million
of residential mortgage loans that were acquired in
conjunction with the Branch Acquisition.  In addition, the
increase reflects a decision by the Company to retain a
portfolio of 15 year fixed rate residential mortgages and
certain adjustable rate residential mortgages.  While the
Company generally originates fixed rate residential
mortgages for sale in the secondary market, the Company
will, from time to time, retain a portion of originated
fixed rate residential mortgages in its loan portfolio.

Commercial real estate mortgages increased $15.9 million, or
2.0%, for the nine months ended September 30, 1996.  This
increase was attributable to $23.0 million of commercial
mortgage loans that were acquired in conjunction with the
Branch Acquisition.  The Company's business plan is to
continue to lend within its geographic markets to sound
commercial businesses which collateralize their borrowings
with commercial real estate properties.

Commercial business loans and leases increased $22.2
million, or 5.4%, for the nine months ended September 30,
1996.  This increase was consistent with the Company's
strategy to focus on lending to sound small and medium-sized
business customers within its geographic market.  The
Company acquired $5.9 million in commercial business loans
in conjunction with the Branch Acquisition.

Consumer loans increased $129.8 million, or 16.8%, for the
nine months ended September 30, 1996.  The growth in
consumer loans was concentrated in home equity loans,
automobile loans and educational loans.  The Company
acquired $11.6 million in consumer loans in conjunction with
the Branch Acquisition.


<PAGE>
<TABLE>
Nonperforming Assets
The following table sets forth information regarding nonperforming assets at the dates indicated:
<CAPTION>                                            
                                            September 30,      June 30,     March 31,   December 31,   
                                                1996             1996         1996          1995    
                                                               (Dollars in Thousands)
<S>                                           <C>              <C>           <C>           <C>                  
Residential real estate loans:
  Nonaccrual loans                            $ 3,901          $ 5,032       $ 6,089       $ 5,713     
  Accruing loans which are 90 days overdue      3,528            2,238         3,800         3,728     
    Total                                       7,429            7,270         9,889         9,441     
                                       
Commercial real estate mortgages:
  Nonaccrual loans                             16,233           15,628        16,917        17,029     
  Accruing loans which are 90 days overdue        -0-              -0-           128           -0-     
  Troubled debt restructurings                  1,691            1,878         1,793         3,186     
    Total                                      17,924           17,506        18,838        20,215     
 
Commercial business loans and leases:
  Nonaccrual loans                              7,688            7,567         5,631         6,735     
  Accruing loans which are 90 days overdue        -0-              -0-           111            25     
  Troubled debt restructurings                    614            1,114         1,349         1,859     
    Total                                       8,302            8,681         7,091         8,619     
       
Consumer loans and leases:
  Nonaccrual loans                              4,505            4,368         4,099         3,586     
  Accruing loans which are 90 days overdue      1,595              602         1,051           659     
    Total                                       6,100            4,970         5,150         4,245     
                
Total nonperforming loans:
  Nonaccrual loans                             32,327           32,595        32,736        33,063     
  Accruing loans which are 90 days overdue      5,123            2,840         5,090         4,412     
  Troubled debt restructurings                  2,305            2,992         3,142         5,045     
    Total                                      39,755           38,427        40,968        42,520     
     
Other nonperforming assets:
  Other real estate owned, net of related 
    reserves                                    9,674           10,033        11,089        12,679     
  Repossessions, net of related reserves        1,572            1,316         1,865         1,553     
    Total other nonperforming assets           11,246           11,349        12,954        14,232     
     
Total nonperforming assets                    $51,001          $49,776       $53,922       $56,752     
     
Total nonperforming loans as a percentage
  of total loans (1)                             1.25%            1.23%         1.36%         1.53%  
Total nonperforming assets as a percentage 
  of total assets                                1.14%            1.14%         1.27%         1.40%  
Total nonperforming assets as a percentage
  of total loans (1) and total other         
  nonperforming assets                           1.60%            1.59%         1.67%         2.03%   

(1) Exclusive of loans held for sale.
</TABLE>
<PAGE>

It is the policy of the Company to place all commercial real
estate loans and commercial business loans which are 90 days
or more past due, unless secured by sufficient cash or other
assets immediately convertible to cash, on nonaccrual
status.  All such loans 90 days or more past due, whether on
nonaccrual status or not, are considered as nonperforming
loans.  Residential real estate loans and consumer loans are
placed on nonaccrual and nonperforming status generally when
they are 90 days or more past due or when in management's
judgment the collectibility of interest and/or principal is
doubtful.

It is also the policy of the Company to place on nonaccrual
and nonperforming status loans currently performing in
accordance with their terms but which in management's
judgment are likely to present future principal and/or
interest repayment problems and thus ultimately could be
classified as nonperforming.  At September 30, 1996, $8.1
million of commercial real estate and commercial business
loans and leases, or 30.7%, of total nonperforming
commercial real estate and commercial business loans, were
on nonaccrual status and thus disclosed as nonperforming
loans even though they were less than 90 days past due.

Effective January 1, 1995, the Company adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures."  These statements
require changes in both the disclosure and impairment
measurement of nonperforming loans.  Certain loans which had
previously been reported as nonperforming and certain in-
substance foreclosures are currently required to be
disclosed as impaired loans.  At adoption, the Company
reclassified $2.2 million of in-substance foreclosures and
related reserves of $96 thousand to loans and the allowance
for loan losses, respectively.  Prior year balances were not
reclassified, as management deemed the amounts to be
immaterial.

Restructured accruing loans entered into subsequent to the
adoption of these statements are reported as impaired loans. 
In the year subsequent to restructure, these loans may be
removed from impaired loan status provided that the loan
bears a market rate of interest at the time of restructure
and is performing under the restructured terms. 
Restructured, accruing loans entered into prior to the
adoption of these statements are not required to be reported
as impaired loans unless such loans are not performing in
accordance with the restructured terms.

Commercial business and commercial real estate loans are
considered impaired when it is probable that the Company
will not be able to collect all amounts due according to the
original contractual terms of the loan agreement.  The
amount of impairment for impaired loans is determined by the
difference between the present value of the expected cash
flows related to the loan, using the original contractual
interest rate, and its recorded value, or, in the case of
collateralized loans, the difference between the fair value
of the collateral and the recorded amount of the loan.  When
foreclosure is probable, impairment is measured based on the
fair value of the collateral.  The Company recognizes income
on impaired loans also classified as nonperforming on a cash
<PAGE>
basis when the ability to collect the principal balance is
not in doubt.

At September 30, 1996, total impaired loans were $27.9
million, of which $20.9 million had related allowances of
$5.2 million.  During the three months ended September 30,
1996, the income recognized related to impaired loans was
$381 thousand and the average balance of outstanding
impaired loans was $27.6 million.  During the nine months
ended September 30, 1996, the income recognized related to
impaired loans was $1.1 million and the average balance of
outstanding impaired loans was $28.4 million.

Real estate acquired by the Company as a result of
foreclosure or by deed-in-lieu of foreclosure generally is
classified as other real estate owned until it is sold. 
When property is acquired, it is recorded at the lower of
carrying or fair value less estimated selling costs at the
date of acquisition or classification and any writedown
resulting therefrom is charged to the allowance for loan
losses.  Interest accrual ceases on the date of acquisition
and all costs incurred from that date in maintaining the
property and subsequent reductions in value are expensed.

Nonperforming assets at September 30, 1996 included $9.7
million of other real estate owned and $1.6 million of
repossessed assets, in each case net of related reserves.  

Potential Nonperforming Assets

At September 30, 1996, the Company had classified a total of
$78.9 million of commercial real estate loans and commercial
business loans and leases as substandard or lower on its
risk rating system, as compared to $91.1 million at December
31, 1995.  Included in this amount was the Company's $26.2
million of nonperforming commercial business and commercial
real estate loans.  In the opinion of management, the
remaining $52.7 million of commercial real estate loans and
commercial business loans and leases classified as
substandard or lower at September 30, 1996 evidence one or
more weaknesses or potential weaknesses and, depending on
the regional economy and other factors, may become
nonperforming assets in future periods.  These loans are net
of any previously established specific reserves which have
resulted in chargeoffs, but not general reserves which have
been established based on the Company's internal rating of
such loans and evaluation of the adequacy of its allowance
for loan losses.
<PAGE>
<TABLE>
Allowance for Loan Losses

The following table sets forth information regarding activity in the allowance for loan losses
for the three and nine months ended September 30, 1996 and 1995, as well as certain related
ratios:
<CAPTION>
                                            Three Months Ended           Nine Months Ended
                                               September 30,                September 30,     
                                            1996         1995            1996         1995    
                                                        (Dollars in Thousands)    
<S>                                      <C>          <C>             <C>          <C>                  
Average loans and leases outstanding 
  during the period                      $3,234,629   $2,799,043      $3,132,378   $2,698,214

Allowance at beginning of period         $   63,654   $   58,383      $   60,975   $   63,675
Chargeoffs:
  Residential real estate loans                 495          924           2,230        2,927
  Commercial real estate loans                1,658        1,355           3,705        7,905
  Commercial business loans and leases          249          383           1,782        1,619
  Consumer loans and leases                     722          722           2,417        1,961
    Total loans and leases charged off        3,124        3,384          10,134       14,412
Recoveries:
  Residential real estate loans                  93          155             410          330
  Commercial real estate loans                  591        1,705           3,820        3,583
  Commercial business loans and leases          245          527             756        1,755
  Consumer loans and leases                     204          127             626          512
    Total loans and leases recovered          1,133        2,514           5,612        6,180
  Net chargeoffs                              1,991          870           4,522        8,232
Additions charged to operating expenses         -0-        1,080             900        3,150
Additions due to purchase acquisition           -0-        2,314           4,310        2,314
Allowance at end of period               $   61,663   $   60,907      $   61,663   $   60,907

Ratio of net chargeoffs to average 
  loans and leases outstanding during 
  the period - annualized (1)                  .25%         0.12%          0.19%        0.41%

Ratio of allowance to total loans 
  and leases at end of period (2)             1.94%         2.21%          1.94%        2.21%

Ratio of allowance to nonperforming
  loans and leases at end of period          155.1%        126.3%         155.1%       126.3%




(1) Average loans and leases include portfolio loans and loans held for sale.
(2) Excludes loans held for sale.
</TABLE>
<PAGE>
The following table sets forth the manner in which the
Company's total allowance for loan losses was allocated by
type of loan at the dates indicated:
<TABLE>
<CAPTION>
                       September 30, 1996     December 31, 1995  
                              Allowance as           Allowance as
                               % of Total             % of Total   
                                Loans by               Loans by
                       Amount   Category      Amount   Category 
                               (Dollars in Thousands)
<S>                   <C>       <C>          <C>         <C>
Residential real
  estate loans        $ 7,407    0.72%       $10,118     1.27%    
Commercial real
  estate loans         33,566    4.13         31,673     3.97 
Commercial business
  loans and leases     11,427    2.65          9,491     2.32
Consumer loans
  and leases            9,263    1.02          9,693     1.25 
                      $61,663    1.94        $60,975     2.19

</TABLE>
Deposits and Borrowings

Total deposits increased by $188.1 million, or 5.9%, during
the nine months ended September 30, 1996.  This increase was
principally attributable to the $160.9 million of deposits
that were acquired in the Branch Acquisition, as described
above.  The increase in deposits resulted from an increase
in certificates of deposit of $78.2 million, or 5.7%, an
increase in regular savings of $37.5 million, or 6.7%, an
increase in money market accounts of $13.1 million, or 2.7%,
and a combined increase in NOW and demand deposits of $59.3
million, or 7.5%.  The changes in deposit balances
principally reflect the impact of the Branch Acquisition
completed during February, 1996, as well as the Company's
current strategy to emphasize relationship banking, cash
management services and core deposits.

Total borrowings increased by $175.8 million, or 38.5%, for
the nine months ended September 30, 1996.  The increase was
primarily attributable to a $161.5 million increase in
Federal Home Loan Bank borrowings.  The increase in Federal
Home Loan Bank borrowings was attributable to the Branch
Acquisition and loan growth.  At September 30, 1996, the
Company estimates its additional available borrowing
capacity from the Federal Home Loan Bank to be approximately
$548 million.

Shareholders' Equity

Total shareholders' equity increased by $22.1 million, or
6.2%, during the nine months ended September 30, 1996.  This
increase was the result of $36.9 million of net income and
$1.7 million of treasury stock sales related to various
employee benefit plans of the Company, the effects of which
were offset in part by cash dividends of $12.1 million and a
$4.5 million reduction in the net unrealized gain (net of
tax effect) in the market value of securities available for
sale.


<PAGE>
Regulatory Capital Requirements

At September 30, 1996, the Company and each of its banking
subsidiaries were in compliance with all applicable
regulatory capital requirements.

The following table sets forth the minimum regulatory
capital requirements and the actual capital ratios of the
Company and its banking subsidiaries at September 30, 1996:
<TABLE>
<CAPTION>
                                              Actual               
                            Required   The              The
                            Minimums   Bank    BNH    Company
<S>                            <C>    <C>     <C>      <C>
Risk-based capital ratios:
          Tier I               4%      9.59%  10.88%   12.14%
          Total                8      10.85   12.14    13.40
Tier I leverage
  capital ratios               3 (1)   6.61    6.31     7.84
</TABLE>
(1)  The federal banking agencies have indicated that the
most highly-rated institutions which meet certain criteria
will be subject to a 3% requirement and all other
institutions will be required to maintain an additional 1%
to 2% of capital.  The federal banking agencies have not
specified any requirements in this regard with respect to
the Company and its subsidiaries.

Liquidity and Capital Resources

The Company's liquidity decreased during the nine months
ended September 30, 1996.  Net cash, short term and
marketable assets amounted to $743.0 million, or 21.4% of
net deposits and short term liabilities at September 30,
1996.  This compares to a ratio of 26.5% at December 31,
1995.  Liquidity is considered adequate by the Company to
meet anticipated cash needs in the foreseeable future.

Asset and Liability Management

The Company analyzes the future impact on net interest
income as a result of changing interest rates based on
budget projections, including anticipated business activity,
anticipated changes in interest rates and other variables
which are adjusted periodically to reflect the interest rate
environment and other factors.  Based on this analysis and
the information and assumptions in effect at September 30,
1996, management of the Company estimates that a 100 to 200
basis point gradual change in interest rates would not
significantly affect the Company's annualized net interest
income.  This assessment is primarily based on management's
ability to exert some control with respect to the extent and
timing of the change in rates paid on the Company's
interest-bearing liabilities and, therefore, to manage the
effects somewhat of a negative or positive gap position on
net interest income.

The Company's methods for analyzing the effects of changes
in interest rates on its operations incorporate assumptions
concerning, among other things, the amortization and
prepayment of assets and liabilities.  Management believes
that these assumptions approximate actual experience and
considers them reasonable, although the actual amortization
and repayment of assets and liabilities may vary
substantially.

Prospective Acquisition of Family Bancorp

The Company, Peoples Heritage Merger Corp. ("PHMC"), a
newly-formed, wholly-owned subsidiary of the Company, and
Family Bancorp ("Family") have entered into an Agreement and
Plan of Merger, dated as of May 30, 1996, which provides,
among other things, for (i) the merger of Family with and
into PHMC (the "Family Merger") and (ii) the conversion of
each share of Family Common Stock outstanding immediately
prior to the Family Merger (other than any dissenting shares
under Massachusetts law and certain shares held by the
Company) into the right to receive 1.26 shares of Company
Common Stock, subject to possible adjustment under certain
circumstances, plus cash in lieu of any fractional share
interest.  At September 30, 1996, there were 4,309,709
shares of Family Common Stock outstanding.  At September 30,
1996, Family had total assets of $917.8 million and
shareholders' equity of $72.9 million.  Consummation of the
Family Merger is subject to, among other things, the receipt
of all necessary regulatory and shareholder approvals and
other customary conditions.  All necessary regulatory and
shareholder approvals have been obtained and, as a result of
legislation enacted into law on September 30, 1996, the
Company will not become a savings and loan holding company
subject to regulation by the Office of Thrift Supervision as
a result of its acquisition of Family.  The acquisition of
Family by the Company is expected to be completed by year
end 1996.

Issuer Tender Offer

The Company purchased, pursuant to the terms of an issuer
tender offer completed on October 7, 1996, 2,500,000 shares
of Common Stock at $24.00 per share.  The 2,500,000 shares
represent approximately 9.9% of the Company's then
outstanding Common Stock.  The tender offer was conducted by
the Company in connection with the proposed acquisition of
Family.  See "Prospective Acquisition of Family Bancorp"
above.

<PAGE>
Part II - Other Information

Item 1.  Legal Proceedings:

The Company is involved in routine legal proceedings
occurring in the ordinary course of business which in the
aggregate are believed by management to be immaterial to the
financial condition and results of operations of the
Company.

Item 2.  Changes in securities  -  not applicable.

Item 3.  Defaults upon senior securities  -  not applicable.

Item 4.  Submission of matters to a vote of security         
         holders  -  none.

Item 5.  Other Information.

Item 6.  Exhibits and reports on Form 8-K.

(a)  July 2, 1996, the Company filed a report on Form 8-K
regarding (i) supplemental financial information, including
restated supplemental consolidated financial statements, as
of December 31, 1995 and 1994 and for the three years ended
December 31, 1995 and (ii) supplemental financial
information, including restated supplemental consolidated
financial statements, as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995, in each case giving
retroactive effect to the acquisition of BNHC for all
periods presented.

(b)  August 23, 1996, the Company filed a report on Form 8-K
regarding the approval by shareholders of both the Company
and Family of the prospective acquisition of Family by the
Company.


<PAGE> 



                            SIGNATURES



     Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.








                           PEOPLES HERITAGE FINANCIAL GROUP, INC.




Date November 13, 1996     By:                                    
                                William J. Ryan
                                Chairman, President and
                                Chief Executive Officer




Date November 13, 1996      By:                                   
                                 Peter J. Verrill
                                 Executive Vice President,
                                 Chief Operating Officer and
                                 Chief Financial Officer
                                 (principal financial and
                                 accounting officer)








<PAGE>
                   


                            SIGNATURES



     Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.








                          PEOPLES HERITAGE FINANCIAL GROUP, INC.



                                 /s/ William J. Ryan
Date November 13, 1996      By:                                  
                                 William J. Ryan
                                 Chairman, President and
                                 Chief Executive Officer



                                 /s/ Peter J. Verrill
Date November 13, 1996      By:                                  
                                 Peter J. Verrill
                                 Executive Vice President,
                                 Chief Operating Officer and
                                 Chief Financial Officer
                                 (principal financial and
                                 accounting officer)













 



<PAGE>