Gerald Soloway - CEO Bob Blowes - EVP & CFO Martin Reid - President

Geoffrey Kwan - RBC Capital Markets Aren Hoffman - National Bank Graham Ryding - TD Securities Patrick Kuczynski - Industrial Alliance Marc Charbin - Laurentian Bank Securities Jeff Fenwick - Cormark Securities

Thank you. Good morning, shareholders, ladies and gentlemen.

I'm delighted to report to you on Home Capital's strong results and dividend increase for the third quarter of 2014. The net income by increased to $73.8 million which is up 11% year-over-year and to $217.2 million for the first nine months of 2014, up 15.7% year-over-year.

The diluted earnings per share were $1.05 for the quarter, an increase of 10.5% year-over-year and $3.09 year-to-date, an increase of 15.3% year-over-year. And the net interest income on the non-securitized portfolio continued its increasing trend reaching $107.9 million in the quarter and $315.6 million year-to-date, up 13.5% and 15.1% from the comparable periods in 2013, reflecting strong and consistent growth in their traditional portfolio.

And the total net interest income before provisions increased to $117.6 million for the quarter and $343.1 million year-to-date, both up 10.3% from the comparable period in 2013. Our return on equity was strong at 22% for the quarter and 22.7% for the first nine months of 2014 and the Board of Directors approved a dividend increase of $0.02 a share to $0.20 per quarter.

It equates to $0.80 per year which is up 43% year-over-year. It was another very good quarter for Home in all aspects of our business.

The quality and volume of business in the third quarter signals a strong momentum for Home's business for the remainder of the year and beyond. The leading contributor to Home's results was strong mortgage originations.

The total of all mortgage originations in the quarter reached $2.55 billion, an increase of 9.6% from the $2.33 billion last quarter and 28.1% from the $1.99 billion in the same quarter last year, so very good originations growth. Year-to-date mortgage originations of $6.56 billion again is an increase of 31% from the $5.01 billion last year.

The increase in mortgage originations over 2013 reflects the continued strong demand for the company's insured and uninsured residential lending products. Securitization income which is primarily gains on sale was $5.7 million for quarter and $21.9 million year-to-date compared to $4.9 million and $6.9 million in the comparable period of 2013 and $7.5 million last quarter.

These results are up year-over-year but the third quarter results are $1.8 million less than the second quarter. As a brief comment, securitization income by its nature is not as predictable as net interest income.

The variability in this income is due to fluctuations in the timing and the rate of Accelerator loan originations and renewals and due to changes in spreads earned on these assets in an extremely competitive market. As you know, we are building this business from a fairly low level of originations in 2011 through 2013 and although net gains do fluctuate quarter-to-quarter, the business is thriving and healthy and we anticipate good growth and generally increasing contributions to net income in future quarters.

We're delighted with the volume from the traditional uninsured residential mortgage originations which increased by 35.3% to $1.78 billion from the $1.31 billion the same quarter of 2013, but it also increased 16% from the $1.53 billion in Q2 of 2014. Just as a work of guidance, traditionally the third quarter is usually the strongest quarter of the year and as you recall, last year the housing market got delayed during the first quarter because of the very inclement weather and so the volume really picked up once the snow started to disappear and the second and third quarters were extremely strong but when you look at the year-over-year numbers you really get a feeling of how the well the business is doing.

So the year-over-year traditional uninsured business and the originations increased some 23.6%, a very significant increase to $4.38 billion from $3.5 billion last year. This portfolio continues to be the core of our growth of assets and earnings strength and the outlook for that is very good.

The commercial mortgage advances including store and apartment advances were $85.2 million for the quarter and $235.8 million year-to-date. This is compared to $58 million and $151 million in the comparable periods of 2013.

So good increase quarter-over-quarter, year-over-year and in addition, last quarter we did some $78.5 million in originations. This quarter some $85 million so there's a good increase quarter-over-quarter in addition to year-over-year in comparable quarter-over-quarter last year.

We intend this portfolio will continue to grow and usually is not affected by seasonal factors to the same extent that the residential portfolio is. So, we see good growth in the commercial portfolio in the coming quarters.

The consumer retail credit portfolio which includes loans to purchase durable household goods such as water heaters and larger ticket home improvement items, reached $384.4 million at the end of Q3. It's up some 7.2% from the $359 million at the end of last quarter and up 17% from the $328 million one year ago.

Now as previously reported, we expect the closing of a sale by a major customer of Home of a $240 million portion of the retail credit portfolio. As a result, the client will pay off their water loans to Home Trust which will result in a fourth quarter gain in excess of $30 million.

Now this is of course subject to the approval by the Competition Bureau, a matter over which we have I'm sad to report, absolutely no control. It is one of those sales that it's good if it goes through.

It gives us a real nice bump for the bottom line, and if it doesn't go from a purely Home point of view we're happy with the client and the quality of the loans and we're happy them staying on the books. But the client has been a very good client and they wish to sell and we wish them well and for their sakes we hope the sale goes through.

We'll keep you posted when that occurs. Total deposits reached $14 billion during the quarter, up 2% from last quarter and 17.5% from year-over-year.

Now during the quarter we were able to deploy more of our accumulated cash into lending assets and still fully comply with all the liquidity and other regulatory requirements. Deposits as you are quite aware, we've had a strong initiative to raise deposits directly from the public, and total deposits raised through the company's deposit diversification initiatives including Oaken Financial which is direct to the public, a high interest savings accounts which we offer to stockbrokers accounts and institutional deposits now total some $2.07 billion which is an increase of $263 million or 14.5% over the second quarter of this year and 374% increase from a year ago, but it is a program that's only in its second year and we're delighted with the process and the ability to attract deposits directly from the public.

We're still fully utilizing all our deposit broker networks and we're very appreciative of all that they have done, but we feel that it adds to strength of the company to have a strong direct deposit initiative and that initiative we see continuing to grow. The Oaken Financial is rapidly becoming a recognized alternative direct-to-consumer deposit brand in Canada.

It is attracting Canadians who are seeking to manage their savings independently by offering attractive GIC and saving account rates. In May 2014, we launched Oaken On-line banking and a significant percentage of Oaken's customers now frequently are logging on to check their balances, our interest rates and are enjoying the ability to move their balances and their money between Oaken and other banks.

We're pleased to report that we're a new recipient of those funds. And early next year, we plan to open two new ground-level branches, one in Toronto and one in Calgary, to accommodate Oaken's growing number of customers.

We will keep you posted on the progress of the branches and those initiatives. Now, during the last quarter expenses grew somewhat faster than revenue.

The company has invested in a number of key personnel which is enhancing both our operating groups and control functions. In addition, we have invested heavily in technology that will support the direct deposit lending and control teams in the coming years.

Our new online presence demands additional customer service and security capabilities and we're supporting these as we ramp up our direct-to-consumer activities. We believe that the companies will grow into these new expenses and we see those as moderating in future quarters.

Home is enjoying success in all of its products and service categories delivering sector leading returns to all our shareholders while we continue to strengthen our customer service and business security capabilities and as a result of this continued and consistent positive results, the Board of the Directors approved an increase in the quarterly dividend from $0.18 to $0.20. This is the 20th increase in the quarterly dividend over the past 10 years.

The outlook for the fourth quarter and beyond remains very strong, we continue to enjoy solid, steady growth in all aspects of our business. Canada has experienced continuous, modest economic improvement which has contributed to a very stable housing market.

We continue to see strong demand for all our products and we believe we will continue to deliver solid results in terms of growth, high returns and increased dividends in future quarters. Those are my prepared remarks and I think I'll turn it over to Mike, the operator, who will open it up now for questions.

The first question I had was just taking a look at the traditional, the non-prime side of your business, I mean you had very good originations. It seems like you continue to take market share and my question is just trying to understand what might be the factors that would drive the NIM to be lower and where you might feel pressure, you know kind of all else equal?

I know obviously that taking better quality credits will have a bit of an impact on that but outside of that what would be the factors? Is it kind of less rational pricing from competitions?

Is it potentially sensitivity by consumers on rates?

Well one of the ways we can get the increase in volume is we’ve a much safer and sounder book. You can see the non-performing if you plotted over the last six or eight quarters, it continues to go down.

We really had for us, pretty much an all-time record of lowness of non-performing loans in the quarter. I don't know, 26 basis points is very modest write-offs.

This is partly as a result of the changes in the regulatory regime. There were loans that were possible to do up to 80% before that since B20 came in to being because of the lack of proof of income or other issues the most a company can do is 65%.

Well at 65% there's more competitors, you can't charge the same rate as if you did 75%. We had very good experience with say doing 75% with that customer but the rules are the rules and we're quite comfortable with that, but the spread has to come in a little bit because people have alternatives.

At 65% there is all the privates, there is the credit unions, there are number of competitors so those with cleaner credits are able to shop and get multiple bidding and we would rather do the deal with someone with a solid credit at 65% which is in a decent residential area where the credit is good, the property is good. There may be a little bit of lack of proof of income so the most we can do is 65%, but we know that's a solid citizen and he's going to be able to graduate to an A-mortgage or a CMHC mortgage after a couple years.

And we'd rather take the business and do it at a slightly lower spread than not do it at all because it's causing us very few concerns, very few headaches, they perform very well and maybe this is going to be the future on a going forward. We're finding an increasing number of people that might have gone to the banks because our service levels.

Even people who only need 65%, they may be able to get it a little cheaper. They may get it at 50 or 75 basis points cheaper at a bank but the time and energy doesn't allow them to do it and we're trying to attract those customers.

We would be happy to do their business for a year or two and if in that time they can get the proper financial statements from their business pull all their income together in a way that's better documented so that they do then qualify for either an insured loan or a bank loan on the uninsured scale. Then by all means we like to have them in that bridge period for a few years.

So I think this will be an ongoing breakup of the portfolio. You will see a higher quality, less write-offs, less arrears and a slightly lesser spread, but we think we can still continue to enjoy terrific returns and it's a terrific business and so the spreads are a little less.

That's the reality.

Okay I know you talked a little bit earlier on the Accelerator side and I know that you are in the process of ramping that up. I'm just trying to understand in the quarter because it seemed a little bit softer than what I would have expected given how the housing market activity was in the quarter.

Like is it or was it a reaction to kind of the spread that you were getting on the gain on sale or was it just there was a lot more competition? I'm just trying to get a sense of what happened in the quarter and how to think about going forward.

Yes, no nothing happened. I think on the portion of the market that was insured, first home buyers -- when the statistics come out that kind of demand decreased a little bit.

There is pretty keen competitive nature out there because any product that is 100% guaranteed by the government if it is underwritten properly had a lot of appeal to financial institutions and we see that that's something that we can continue to build on. It may not, it's not runaway growth because it's a very competitive market.

So we've ramped it up to one level. We will reassess all the people and with our processes, how we can do it more economically and there's no doubt that the spreads on that product have come in a bit, but we see it as a good solid business that will continue to contribute to the bottom line on a quarter-over-quarter basis.

And what we'll also start to get which is in some of the old -- it's still a little ways off -- but both next year and the year after we'll start to see more renewals of old insured product that we put on the books and usually you can get a renewal much easier than a new origination. As long as you offer the client the competitive rate and you service them well most clients if they do a little bit of shopping and you've offered them the competitive rate are usually happy to renew with you.

And we've had good success on the renewals. So that will add to our volumes in addition to the new people coming in.

Okay and just one tacking on to that last question, the last part of my question is do you have any sort of sensitivity around where the spread is on the gain on sale? In other words, if it gets to a certain level you guys wouldn't be as active on the prime insured or do you kind of relatively agnostic around where the spread is?

We have a lot of passion to try to get as good a spread as we can but it's one of those things -- it's a little bit like life's ups and downs. You just face it head on and do the best you can.

Clearly, that with low interest rates and being insured and on a zero loss factor, it's attractive to a lot of institutions and so whether they keep it on their books or whether they do it as part of their business, it's a very, very attractive business and it's with people who have been in it a long time and we're in there competing against the banks. So I don't see us pulling out, even if the spreads came down for a quarter or two, we would persevere and continue with the business.

We really like the business. We know that life and business has its ups and downs and it can change from quarter-to-quarter.

But it was only if you believe that interest rates will never rise, nothing will change, then we wouldn't be it, but we have a strong group and we don't see any signs that it won't make money. It's just the amount of money it makes.

So with that in mind, we'll persevere and we will be permanently in the business. And I think that this quarter was a little bit -- the spreads got -- as I explained, the spreads got squeezed a little bit.

The quality was good, everything was fine and that will happen from quarter-to-quarter.

I just have two questions here. The first one is near the end of your prepared remarks you talked about that you were saying that there's a stable real estate market.

I am just wondering how you can say that the real estate market is being stable given the massive surge in Toronto real estate prices over the last five years?

Well I think it's been masked by higher down payments. We’ve this discussion quarter-over-quarter and so we'll put in the third quarter installment to our ongoing discussion.

We see that the market is -- people have substantial down payments. They have capacity to buy the units.

The markets in the major cities across Canada are all supported by a small portion of off-shore buyers who predominately in our experience are all cash or borrowing. They're not coming -- we're not seeing them borrowing from us unless they have international banking relationships that they can go to one of the chartered banks but a lot of people from out of the country pay cash and they're a buyer.

We just find it stable; we find that people can buy. They can sell.

They're not highly levered. They're putting more cash down.

Now I don't say that there's not a group of people at the bottom end of the spectacle who are having trouble getting into the market but there is a group of individuals in Canada who are buying houses, can afford them, are putting good down payments and we find it stable.

So it's stable in the sense that it's very safe and there is very little downside risk that you see. You see a gradually rising stable market with very good credit quality etcetera, etcetera.

Yes it doesn't mean -- I'm not telling people run out and buy a house. It's guaranteed to go up.

The market at any time and I have said this for the last five years, it could adjust 5% to 10%. The market could suddenly get a bit soft.

The market could get spooked by international events. It could get spooked by the first hint of rising interest rates but my -- I'm just giving you my perspective.

I think the Head of the Federal Reserve, Janet Yellen, in the United States will be very -- just my prediction -- will be very cautious in how she raises rates. I think the Governor of the Bank of Canada will be very cautious.

And I don't think the first, if they're thinking of -- to slowly raise the rates, the market will adjust to that. Prices may not go up for a period of time.

They may come off a little bit but I see the credit quality in the people who are owning the houses a little bit of instability internationally, a little bit of a rising interest rates. I don't see them all rushing to their exits and selling their houses and/or trying to sell their houses.

I don't see anything on the horizon analogous to what happened in the United States. The quality of the mortgage market in Canada really is quite strong and with nobody gets a mortgage that's not insured unless they produce 80%.

They can't get over 80% and I don't know, are the average residential mortgage on our books non-insured is probably under 70% so you've got to have a 30% drop overall in our portfolio before we see a big bump or a big hit. And the comment of the Americans, I kind of giggle to myself, for five years since 2008 the Americans have believed -- six years, the time flies -- the six years since their 2008 crunch they believe what happened to them will happen here in Canada.

Well, what happened to their banking system didn't happen in Canada. The great, great unemployment spike and great economic problems that happened in the States did not happen here.

There are basic fundamental differences in the fact that interest is not tax deductible as it is in the States. CMAC insurance products need 5%.

Uninsured need 20%. There is a lot of safeguards and CMAC has brought out four sets of changes over the last year which I think have further strengthened the market so I see it as stable.

I just don't see it as a shaky market but I guess if you -- okay go ahead, Aren.

Well doesn't the fact that interest rate -- interest is not tax deductible in Canada should be a reason for Canadian prices to be lower than the U.S., not double the price on average than it is in the U.S.? I just don't understand that argument when you say we don't have that--

I don't know if you've been to the major cities but I have a son who lives in New York and I went looking with him at condos and I've got to tell you it makes Toronto prices look like absolute bargain sales. Any of the major cities and we were recently visiting on the West Coast in San Francisco and we met friends and we looked at prices, not that we were interested in buying but we were talking about prices and showed us a few examples.

In the major cities across the States prices are no bargain compared to Canada. If you get out in Wichita, Kansas sure, nothing against Wichita, I've been there, it's a nice city.

I'm not knocking it but the prices are pretty stable. You can spread out the city in four directions for as many miles as you want.

It's a long -- you know, you go out of town there's lots of vacant land. The major cities in the United States are all hemmed in usually by geographic, like New York has water, San Francisco where they're on a coast which is water so the ability to spread is very limited and so there's intensification and when there's intensification prices go up but it doesn't mean that they're unstable.

Okay, then one final question here, this is a question on the most recent Normal Course. Normal Course Issuer Bid press release dated September 11th, 2014, I noticed in the prior year Home Capital purchased only 10,000 shares over the entire year at an average price of $47.30 per share.

As per the press release, does that mean Home Capital believes the stock is fully valued and does not represent a good use of its available funds?

Well we were in quite a strong growth mode. We were keeping our capital dry.

The price was good. You will see that when we -- you know, it's all public and in the third quarter we purchased in the $50 range we purchased 12,000 shares, we'll continue.

When we look at the available cash we've always felt to put all the surplus cash into dividends which everybody gets the benefit, it's another tool that management has but the fact that we're not heavy buyers is not a reflection on our valuation of the stock. It's who benefits the most and we think any time we can give a $0.02 increase we get everybody benefitting where we buy a few thousand more shares you don't necessarily get everyone benefiting.

So it's whether you want to help everybody or just a few and it goes on.

Well your most recent quarter in your report talks about how you have very good liquidity so I don't really see liquidity being an issue. It sounds like you have a very strong capital base and that doesn't seem to be a concern.

We're very miserly concerning our capital and spending it and we like to keep our powder dry. We over the past year we must have looked at three or four situations where we might buy something as a bolt-on to the business.

It's nice to have the capital then without having to go raise it. We don't have anything now.

I don't want anybody to read anything into this but we're always on the prowl if there's something that we could bolt on that we could manage efficiently, it's nice to be able to write the check and not go to the bankers hat in hand and so the fact we have a little extra cash around it's not a bad thing. It's not bad for a homeowner, it's not bad for a company and philosophically we like the fact that we have next to no debt and have surplus capital.

We just like operating that way.

Maybe I could just touch on your expenses, what sort of time line are you expecting them to remain somewhat elevated next year and is it primarily to do with your build out of the direct deposit channel or is it also the insured mortgage initiative that you're going through?

Well it was of several areas. We probably will end in most of -- we had on Internet security we spent money, probably that will pretty much end by the end of the year not that we won't need it on an ongoing basis but that was something as we had access to the public you -- in layman terminology you want to make sure that nobody can break in or you can get it as bulletproof as you possibly can and still have it accessible to the public, so that costs some money.

There was some R&D tax consulting which sort of came through in the quarter that was an expense. There was the increased development on Accelerator which is the insured mortgage product.

We spent some extra money on deposits. We added some people.

It was just generally I think you'll find that next year the expenses will be back to a more traditional level but there was a bit of a ramp-up this year and it was all -- it didn't affect but you saw we got results out of the volume. We got results out of the deposit taking, like it was producing results but those extra mortgages don't have a chance if they come on during the quarter.

You only get a month, maybe a month or two weeks or interest out of it. You don't get the benefit for the full quarter but you've spent the -- you've had to pay the money a quarter or two ahead of when you actually start earning the money so we're not upset about it.

We're not concerned about it. It's just I wanted to get it out and the expenses were there and they're all for a good purpose.

As I've said many times, we do not tolerate, the management at Home doesn't tolerate having a Vice President of nonsense. You know, everybody, we've got 800 employees.

They all come to work. We really do feel they do a terrific job.

You saw by the increase in volume in mortgages and deposits and all the areas that people do work hard and highly motivated so sometimes when you're building for growth you -- the expenses come ahead of the growth so you can accommodate it efficiently and carefully and the growth comes afterwards so I can't be that accurate but I think it will really normalize next year again.

On your Accelerator product you seem to be originating in the last couple quarters around d500 million, $600 million. Where do you think is a reasonable expectation for this product looking out over the next year or two during seasonality?

What we'll see is the next, the fourth and first quarters are the two quietest quarters but we can see $2.5 billion a year on this program quite easily, we've sort of looked at it. We're not there at this moment but we could see averaging $200 million a month with the relationships we have with the systems we have, with the people we have and so we could see that ramping up a bit in the next year or so.

Whether it's a competitive market and as I said earlier, if somebody wants market share they could always discount. All the banks do it.

And then just lastly, you increased the dividend again this quarter following a dividend increase last quarter. What was your thought process there in sort of this sequential increase or as opposed to possibly doing a larger increase last quarter?

Well in all our business endeavors philosophically we really like to go swimming by putting a toe in the water first and then to go step by step. We're not big ones to jump into a pool or jump into -- and so the way we've built the business is really step by step.

We felt we had announced very clearly last quarter we were moving towards a goal of approximately 20% of earnings, 20%, 22% over time of earnings to be for dividends, the quarter went well. We were pleased with all the progress on originations.

We're pleased with what that means in future income so we felt very comfortable giving it another bump. We'll be looking at it again in the New Year depending on how things are going.

There won't be a dividend increase every quarter but we do want to continue to move towards the guidance in the 22%, 22%, where previously our guidance was more like 15%. So we see these dividends as sort of a permanent part of our operating mode and we're delighted to be able to bring it up for everybody.

We always get positive feedback from the shareholders on the dividend and it's not a big dividend compared to some other institutions, but it steadily increases and we like to acknowledge that as circumstances change. We could look at changing the guidance and when we do that we'll, if there is a change in guidance over the 20%, 22%, we will advise everybody about that.

I really have one question looking on the balance sheet loan. Quebec seems to have declined by roughly $200 million.

Could you give more color on what you see there? Is it an attractive market for you still and whether there might be some Quebec business off balance sheet?

Well, the off balance sheet is the insured product and we're quite comfortable with the insured product in Quebec. There was clearly a slowdown and a dip in the Quebec market up till the elections which I think were in May, May or June of this past year and really we had seen a slowdown in originations and a slowing of the housing market.

There was the uncertainty of how the provincial election would turn out and it put a chill into the marketplace. The general market there has not been as robust as some of the other parts of the country and we have an office there and we're happy to do business but it has not been -- we don't think it's fully recovered from the shock of the last election.

We continue to support it and we'll continue to look to what we might do and as we've seen signs of an improving market there. We'll be happy to try to ramp it up a little more but in this quarter there was fairly specific -- there were still headwinds from the last election.

So it's a good market and we like it but there were some local conditions.

So is most of the growth or has it still got coming from Ontario and probably Calgary?

Well, Toronto will -- no, no we like all the provinces. The Maritimes have been good to us and all of the western provinces are good, like we see it pretty uniform across the country and well probably be putting more energy into the other provinces outside Ontario.

We don't -- we think of where we got it, where we got the relationships and we've got work to do to build it in the rest of the country.

On just lastly, in terms of the tax credits is that going to continue into Q4 2015 with the online banking initiative?

We continue to spend on technology so there will be tax credits in the future. Some of the tax credits which we have been recognizing through 2014 related to work that was done, technology work that was done through 2012 and 2013 and as we have become more proficient at tracking advances in technology and the costs associated with them and the filing of tax credit claims.

We have been able to get closer to identifying the work and recording it at the date sort of identifying the work and recording the credits as they happen so there was a bit of a catch up in 2014. I think you'll see continued benefits but not at the same level as we had through 2014.

Call it $1.8 billion in traditional originations this quarter, how much would be represented by -- you know, you're a classic business of over 3% net interest margins and how much would be represented by this new lower margin, lower risk business of call it below 3% margin?

Well the total originations was 2.55%, 1.8%, as you mentioned is the traditional uninsured full-spread mortgages. I'm just doing this quickly so 1.8% was full spread, 0.522% was of the insured product.

Okay I've got it right here in front of me, there is a table. I've got a table, okay.

So 1.8% to 1.78% was classic, 5.22% was Accelerator. There was multi-unit $140 million.

There was $85 million of commercial. There was $28 million of store and apartment and, I don't know, some Visa, secured Visa and other things.

Yes I see that table. I am just digging into the traditional side.

So the (indiscernible) is the traditional and that's the one which we'll margin, but Bob Blowes will explain.

I don't think we want to go into a particular detail on the breakdown of the portfolio, the classic portfolio by strata by rate. That's a little bit more than what we would like to put into the market in terms of the competitive nature of it.

So I think we've probably got as much as we're going to say on that right now.

Okay and secondly, how much does a new branch cost to operate a year and how are you going to evaluate the success of those going forward?

Well as I said earlier, we're sort of a test and see how it works. The branches, the one here in Toronto is downstairs in the building we're in and it's about 1500 square feet and we're moving the people who do the deposit taking from upstairs in the building to downstairs.

We're going to have a bit more space but net cost there's not a big difference. We’ve several floors in the building now and they were very pleased to have us on the ground floor so the per floor rate for the ground floor was not that much more than the regular rate and the people are the same people we would need upstairs.

We don't see this to start with as a mortgage origination to the public. We do see it as a deposit taking initiative, if people come in and want a mortgage or want other services.

The people there will refer them in the same building and it's a somewhat similar setup in Calgary where the ground level office where also the upstairs office, if I might say, branch will be easily accessible. But we think that with the direct public accessibility with the growth that we've seen it will be easier for people to walk in, for new people to see it.

They'll have heard the name or seen the name but we just see good marketing potential. The one in Toronto is going to be on the path and through the buildings in Toronto and we think that will help to drive volume and awareness and it's an equally public spot, high traffic spot in Calgary.

So this is an experiment, we are not betting the quarter on it. We're not betting the house, better rent, same people with maybe adding a body or two, so I don't think it really affects our quarter-to-quarter.

That's not going to be any drag on earnings.

It's Martin here. It's really just leveraging our existing branches.

It's not to establish a new branch network .So as Gerry said, the Calgary is leveraging. We were moving to new space anyway for our mortgage people that are out there so we're just leveraging that to add a little bit of space for deposit so it's not the establishment of a branch network.

We're really focused on the eBanking approach to servicing deposits.

But it will be an important test for us and the Calgary one again is on the ground floor of a building which has high traffic. Downtown and as it is in Toronto, we'll see what comes out of those.

If we get the results we could be operating more. We will keep you posted.

So, Gerry, I just wanted to follow-up on Marc's question. He was asking about mix but I guess just driving ultimately towards NIM and where does that margin compression settle out?

Do you feel like you've got that mix fairly stable today or is there some room here for that that need to come in a little bit on your residential book?

I don't think it comes in, I think we priced it in to get the volume where it is. I think we seem to be in a pretty good spot between pricing, spread, volume, risk.

I think most of the shrinking that had taken place since the end of B20 to now is probably finished and Martin? I'll just ask Martin here.

Yes there is -- there may be a little bit more but not a lot. It's just largely settled in in terms of that whole adjustment from the B20 implementation through to where we're today.

And it could bump up a little bit. It would take very little to have it start creeping the other way.

Maybe we could talk a little bit about the personal banking. You referenced it in your comments at the beginning there.

You had a bit of growth in that over the last couple of quarters here and I know the NIM is quite rich in that segment so what are your plans there or your thinking? Is there room to push harder?

Have you been pushing harder I guess on the credit card product it looks like and what are your plans there?

Well, the credit card product we're delighted with how it's going. We are in the process of doing some white label for a few retailers we got, nothing has started yet but we've got two, we're in negotiations with two retailers.

We see a very good partnership there. We think that the credit card on the secured part and the unsecured As I said, we've added some personnel, some people with deep experience in the card business and we're not jumping in with headfirst into an unknown body of water.

We're walking in toe by toe and so far the results have been quite good and we think we'll get good growth and good spreads on increases in the card business.

Okay and then what about on the water heater front? I mean if that deal does close obviously you've get a nice check but what's the ability to or desire to backfill the $240 million there?

How quickly could you re-grow that?

We've been running like our hair is on fire so I think that the Group to their great credit since they have had notice that this company was withdrawing, they have gone out and signed three other companies who are now on the books sending in business and they're in various stages with four others so it would be a total of seven new entities, some bigger, some smaller will hopefully all be on the books by the end of the year when this group exits. Since the announcement of the exiting, since the announcement of the sale some of the employees of the company that's selling have left and joined up with other water heaters companies or HVAC companies in the heating and air conditioning and they have put a new focus on the sales.

What has happened is although the company sold, it's a lot of new competitors have sprung up and others who were in the business have had some very strong people join them and so we think that they won't make it all up in a year but within a year or two we think the portfolio will be back to its regular size. We've been working very hard to get new suppliers to send that, the HVAC products in.

So we have been working hard on it and we still have the $30 million plus that will come to us.

Okay thanks, everybody. Thanks for joining us.

We look forward to reporting to you in the New Year on the fourth quarter. Fourth quarter is looking good and the first month has gone down and the trend of third quarter has continued in volumes and business.

So life looks good and the results look good and speak to you again in the New Year. Thanks, bye.