PORTLAND (AP) -Banknorth Group Inc. announced Monday it will acquire the parent of Boston Federal Savings Bank for $195 million in cash and stock.

The acquisition is part of Banknorth’s long-term strategy to buy smaller community banks in suburban Boston locations. BostonFed Bancorp Inc. has $1.7 billion in deposits and 16 branches throughout the Boston area, which will add to Banknorth’s 145 bank locations in Massachusetts.

In the past six months, Banknorth has completed acquisitions of CCBT Financial Companies Inc., Foxborough Savings Bank and First & Ocean Bancorp Inc., all of which were based in Massachusetts.

“The transaction is an excellent opportunity to expand Banknorth’s strong and growing franchise in the attractive communities surrounding Boston,” William J. Ryan, Banknorth president and chief executive officer, said in a statement.

Ryan added, “We have seen tremendous growth in our Massachusetts franchise and this transaction continues that trend.”

The acquisition, which has been approved by the directors of both banks, is expected to close in early 2005.

The merger prices BostonFed at $40.56 per share if shareholders elect for the stock plus cash distribution, based on Banknorth’s closing price of $32.64 last Friday.

In early trading Monday, the price of BostonFed stock was up more than $8, or more than 25 percent, per share.

Banknorth stock was down less than 1 percent in early trading.

Banknorth is the largest bank with headquarters in New England following Bank of America’s acquisition of FleetBoston Financial Corp., which was completed April 1.

Banknorth Group is a bank holding company whose banking subsidiaries include Peoples Heritage in Maine, Bank of New Hampshire, Banknorth Massachusetts, Banknorth Vermont, Banknorth Connecticut and Evergreen Bank in upstate New York.

AP-ES-06-21-04 1157EDT