Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from Mark Fitzgibbon – Sandler O’Neill & Partners.
Mark Fitzgibbon – Sandler O’Neill & Partners
I wonder if you could help us think through sort of the timing and magnitude of potential cost synergies from the Chittenden deal. Maybe give us a little update on how you think those will play out in the coming quarters.
Philip Sherringham
As we stated initially when we announced the deal last year the cost savings will be I believe about $30 million. Those are the ones we announced and they will result primarily from back office consolidation which hasn’t occurred yet. At this point we haven’t really modified the basic envelope of the cost savings we will be getting from back office consolidation. When this occurs, it will occur when we are done converting, once again will occur some time towards the end of 2009.
In addition to this, as Paul mentioned in his comments, we are in the process of consolidating the Charters and we suspect that could yield additional cost savings but again we are still working on qualifying those.
Mark Fitzgibbon – Sandler O’Neill & Partners
Secondly, the spreads in the residential mortgage business have really started to widen out a bit. Is it conceivable you guys may slow down the pace of decline in that book and we could maybe expect it to stabilize or maybe even increase in the coming quarters?
Philip Sherringham
That is a very good question actually. The book that we have, as you know, is aging at this point and it is composed primarily of loans that were made in the 2000-2006 time frame when basically the spreads in the mortgage business were overall low. So in that sense that particular book is probably going to continue to be allowed to run out.
Having said that obviously as you point out spreads in the mortgage business have improved considerably and a lot of this we started recently a pilot program to originate jumbo mortgages throughout the franchise. At this point it is a $100 million pilot. We think the spreads in this business have improved to say the 120-150 basis point range at which point it is becoming palatable again for us to do that business. We are going to see what the response is to this and we will take it from there. But we are clearly sensitive to the issue.
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