HOMEQ Corporation Reports First Quarter Results

2012 First Quarter Results Compared to First Quarter 2011:

• Net income of $0.04 per share compared with net loss of $0.06 per share,
• Adjusted net income of $0.13 per share compared with $0.04 per share,
• Originations decreased 6% to $45 million,
• Mortgage portfolio of $1.2 billion increased 16%.

TORONTO, May 14, 2012 /CNW/ - HOMEQ Corporation [TSX: HEQ ("HOMEQ")], today announced its financial results for the three month period ended March 31, 2012.

HOMEQ's net income for Q1 2012 was $0.6 million or $0.04 per share compared to a net loss of $0.8 million or $0.06 per share in Q1 2011.  Adjusted net income in Q1 2012 was $1.9 million or $0.13 per share, in comparison to $0.6 million or $0.04 per share in 2011. The improvement is due in part to the $1.7 million premium paid to buy back debt in Q1 2011 to manage HOMEQ's liquidity requirements and Assets-to-Capital multiple.

"Despite the steady financial results, the business is experiencing competition from alternate products including low priced conventional mortgages and secured lines of credit offered by other banks and financial institutions," said Steven Ranson, President and CEO. Originations of $45 million in the quarter were 6% lower than in Q1 2011.

Growth in the portfolio of reverse mortgages has also created a challenge for the business. Due to the increase in the portfolio of reverse mortgages, HOMEQ's subsidiary, HomEquity Bank requires additional capital in order to satisfy the capital adequacy requirements established by its primary regulator, The Office of the Superintendent of Financial Institutions (OSFI). HomEquity Bank raised a total of $30 million in capital in the form of unsecured debentures qualifying as Tier 2 capital through 2010 and 2011. However, to support its current rate of growth, HomEquity Bank will require additional Tier 1 capital, including common equity in order to maintain its required capital ratios.

"HOMEQ is a "small-cap" entity and trading volumes for its common shares are low. HOMEQ believes that this often results in a share price that does not adequately reflect its core business and results of operations," continued Mr. Ranson. "During 2010 and 2011 the share price largely remained at or below book value, even with the support of its dividend.  HOMEQ chose not to raise the additional capital required from new equity issues as this action would have been dilutive to the book value per common share.  Similarly, future issues of common equity may not be available to HOMEQ on economically attractive terms."

Taking the above challenges into consideration, the Board of Directors of HOMEQ (the "Board") recently completed a strategic review process (the "Process") to explore alternative sources of capital and ownership that could provide a steadier and appropriately valued source of growth capital. During the Process HOMEQ's current financial position and future plans and prospects were carefully evaluated by a Special Committee of the Board (the "Special Committee"), comprised of independent directors, who received advice and assistance from HOMEQ's management and the Special Committee's financial and legal advisors.

An arrangement (the "Arrangement") in which Birch Hill Equity Partners ("Birch Hill") has committed to indirectly acquire all of the outstanding common shares of HOMEQ for cash at a price of $9.50 per common share was announced by HOMEQ on March 30, 2012.  The $9.50 per share price represents a 22% premium over the volume-weighted average price of the shares on the Toronto Stock Exchange for the 20 trading days prior to the announcement of the transaction and a 54% premium over the closing price of the common shares on December 21, 2011, the last trading day prior to the commencement of the auction process.

The Arrangement provides significant and immediate value and liquidity to HOMEQ shareholders and the Board recommends that shareholders vote FOR the Arrangement. In the Board's opinion, the Arrangement is also in the best interests of HOMEQ's other stakeholders and will preserve HOMEQ's ability to continue to assist current and future clients. Further details of the Arrangement can be found in the Management Information Circular, mailed to shareholders on May 4, 2012 and at www.homeq.ca.

First Quarter Financial Statements and Conference Call

The first quarter financial results are available on HOMEQ's website at www.homeq.ca and www.sedar.com.

HOMEQ will hold a conference call to discuss these financial results on May 15, 2012, at 9:00 am (Eastern).

Available on the call to answer questions will be Steven Ranson, President and Chief Executive Officer, and Gary Krikler, Senior Vice President and Chief Financial Officer.

To participate in the conference call, please dial 1-888-892-3255.

A live audio webcast (listen-only mode) of the conference call will be available at www.vcall.com and will be subsequently posted at www.homeq.ca.

An archived recording of the call will be available at 1-800-937-6305 (conference ID 406922).

Forward Looking Statements

Certain statements included herein constitute "forward-looking statements". All statements, other than statements of historical fact, included in this release that address future activities, events, developments or financial performance are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking words such as "may", "should", "will", "could", "expect", "intend", "plan", "estimate", "anticipate", "believe", "future" or "continue" or the negative thereof or similar variations. In particular, statements about the proposed Arrangement between Birch Hill and HOMEQ, including the expected timetable for completing the Transaction, the receipt of shareholder and regulatory approvals and any other statements regarding HOMEQ's future expectations, beliefs, goals or prospects are or involve forward-looking information. These forward-looking statements are based on certain assumptions and analyses made by HOMEQ and its management, in light of their experiences and their perception of historical trends, current conditions and expected future developments, as well as other factors they believe are appropriate in the circumstances. Shareholders are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties, assumptions and other factors, many of which are outside the control of Birch Hill and HOMEQ, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among other things, the parties' ability to consummate the Arrangement, the parties' ability to satisfy the conditions to the completion of the Arrangement, including that the receipt of Shareholder approval, court approval, or regulatory approval for the Arrangement may not be obtained, or may not be obtained on the terms expected or on the anticipated schedule, general economic and market factors (including changes in global, national or regional financial, credit, currency or securities markets), changes or developments in global, national or regional political conditions (including any act of terrorism or war), changes in government laws or regulations (including tax laws) and changes in GAAP or regulatory accounting requirements. Readers are cautioned that the foregoing lists are not exhaustive.

Such forward-looking statements should, therefore, be construed in light of such factors. If any of these risks or uncertainties were to materialize, or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein. All forward-looking statements attributable to HOMEQ, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth above. Readers are cautioned not to place undue reliance on forward-looking statements contained herein, which reflect the analyses of the management of Birch Hill or HOMEQ, as appropriate, only as of the date of this release.

For more information regarding these and other risks, readers should consult HOMEQ's reports on file with applicable securities regulatory authorities accessible online by going to SEDAR at www.sedar.com or by going to the HOMEQ website at www.homeq.ca. HOMEQ is under no obligation, and HOMEQ expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

About HOMEQ Corporation
HOMEQ's wholly owned subsidiary HomEquity Bank is the only national provider of reverse mortgages to homeowners aged 55 and over, Canada's fastest growing demographic segment.  HomEquity Bank originates and administers Canada's largest portfolio of reverse mortgages under the CHIP Home Income Plan brand.  As of March 31, 2012, the mortgage portfolio comprised approximately 9,100 reverse mortgages with an accrued value of $1.2 billion, secured by residential properties across Canada worth approximately $3.3 billion.  HomEquity Bank has been the main underwriter of reverse mortgages in Canada since its predecessor, Canadian Home Income Plan, pioneered the concept in 1986.

The Company's shares trade on the Toronto Stock Exchange under the symbol HEQ.  Additional information on HOMEQ, including annual and quarterly reports can be viewed at www.homeq.ca.

Shareholders

Georgeson Shareholder Communications Canada Inc.
1-866-656-4104
[email protected]

Media

Longview Communications

Joel Shaffer
416-649-8006

David Ryan
416-649-8007