Cervus Financial Group Inc.

Cervus Financial Group Inc.

June 05, 2006 08:57 ET

Cervus Updates Market Communication

TORONTO, ONTARIO--(CCNMatthews - June 5, 2006) - Cervus Financial Group Inc. ("Cervus" or the "Company") (TSX:CFG), to update stakeholders about recent activities, today made the following comments about the status of the Company:

- Overall, the Company's situation remains difficult and under pressure. Origination volumes continue to improve but liquidity is constrained, and work continues to arrange alternative financing arrangements.

- The Company is currently engaged in discussions with a number of parties, including the party who executed a non-binding letter of intent and subsequently withdrew, with the objective of completing the acquisition of the Company. There is no certainty that these discussions will result in a binding offer to acquire the Company.

- The Company is also in discussions with certain potential investors in respect of privatizing the Company and properly capitalizing it for independent operations in the future. There is no certainty that these discussions will result in a binding offer to privatize the Company.

- The Company's bank has augmented the agreement reached with the Company by sending a formal notice of the termination of its credit facilities and banking arrangements with the Company. However, the Company is working with its bank and a strategic partner on establishing an alternative arrangement that would permit the Company to carry on its business.

- The Company has also been in discussions with two financial services firms in respect of financial arrangements whereby the assets originated by the Company would be acquired as originated, thereby relaxing the requirement over the next two months to arrange alternative credit facilities. One of those discussions is no longer proceeding.

- Over the past three months, the Company's volume of mortgage originations has remained strong. In March, the Company ranked 10th in the Canadian mortgage broker market. In April and May, volumes were similarly robust.

- The Company's financial condition continues to be negatively impacted by spread compression. Gross spreads have improved. However, because of the Company's financial situation, Cervus has been unable to take advantage of the market improvement.

- On May 27th the Company's Board of Directors accepted the resignation submitted by Gary Bartholomew.

- The release by the TSX that the Company's public listing was under review by the TSX was accurate. However, the timing and the completeness of the release was unfortunate.

About Cervus

Cervus Financial Group Inc. is a Canadian financial services company created as an industry initiative with leading mortgage broker companies and fixed income investment banks to become a high-yield residential mortgage producer and the largest mortgage broker lender of conventional insured and insurable mortgages in Canada.

Cervus works on the basis of a "Customer for Life" model, where the borrower is the client of the mortgage broker and Cervus is effectively the "Back Office - Servicer" between borrowers and investors. Cervus has assembled an experienced management team and board of directors who are knowledgeable in banking, financial services and related businesses. Cervus is focused on funding and servicing insurable conventional and high ratio insured residential mortgages originated through mortgage brokers. Cervus is currently licensed under Ontario, Quebec, British Columbia and Alberta mortgage broker/lender legislation and is seeking similar regulatory approvals in other Canadian Provinces as required. Cervus' head office and Ontario operations centre is located in Toronto, with additional sales offices in Vancouver, Calgary and in Montreal. Cervus Financial Group Inc. conducts all lending operations through its wholly-owned subsidiary, Cervus Financial Corp.

Forward-looking (safe harbour) statement

Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement containing words such as "believes," "plans," "expects" or "intends" and other statements which are not historical facts contained in this release are forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.

Additional information about Cervus is available on SEDAR (www.sedar.com).

The TSX does not accept responsibility for the adequacy or accuracy of this release.

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