LAS VEGAS, NV--(Marketwire - August 20, 2007) - The following is a shareholder letter from
Shearson (OTCBB: SFNN) CEO Michael Barron:
As your CEO and fellow shareholder I wanted to personally thank you for
your support during such difficult times in our industry. As many of you
know, the mortgage industry has been enduring severe financial pressure and
record numbers of borrowers and lenders are feeling the credit crunch.
Since January over 110 mortgage banking companies, many much larger than
Shearson, have gone out of business. Many others are still in trouble as
the sub-prime credit squeeze continues. National news coverage indicates
the concern all the way up to the President who recently addressed this in
his national press conference. We have also been affected by this
industry-wide issue and I would like to explain what Shearson has been
doing to survive when others have not.
In January 2007, just after we posted record profits for 2006 of $2.8
million, the sub-prime market began to come apart. Borrowers began to
default on their loans and lenders were forced to use their capital to
repurchase these loans. Once this began, other credit guidelines on
relatively safe loans such as "Alt A" began to tighten which began to
affect Shearson. We saw this beginning in March and soon realized our
banking operations would be affected and "bankable" loans were going to dry
up. This came after we had invested significant resources into our banking
infrastructure as we were poised to make 2007 our breakout year. Those
plans were quickly scratched as New Century, the nation's largest sub-prime
lender with a $3 billion market cap, went out of business. Others followed
(www.mortgageimplode.com). We made the decision to cut back our banking
operations and limit the scope of loan products we would carry on our
warehouse lines. We reduced our warehouse lines from over $50 million down
to $20 million. We lost about $50 million from our pipeline in Alt A loans
due to other investors going out of business and loan products no longer
existing. The industry's warehouse lenders felt the crunch also as their
clients began to file for bankruptcy. Their response was to tighten the
credit for warehouse lines by charging 2% up front to put loans on the
line. This made it uneconomic for us to bank and by May we cut our banking
staff in our Irvine facility to just a skeletal operation.
By making the cuts as quickly as we did, we were able to reduce our
expenses by 50% and I believe this is why we are still here today. We
stayed ahead of the revenue reduction which also declined by 50%. Our staff
has from time to time gone without a salary and in fact our employees have
actually loaned the company funds on a short-term basis from time to time
just to get through the interim cash flow issues associated with such a
crisis. We have had our head down saving the company. Although there are
many challenges ahead, we are in a better position to manage them now.
Shearson never had a portfolio of sub-prime loans and thus does not have
lingering repurchase issues. We have redirected our loan origination
resources into the loan resolution business and now have begun to refinance
loans for several major Wall Street investors who hold large portfolios of
loans. We have oriented our loan production to be strictly brokerage at
this time until the mortgage banking credit environment settles down. We
have maintained our approvals with warehouse lenders and investors and are
approved by over 100 different lenders today. Shearson is licensed in 22
states as we reduced this to just states we actually do business in
regularly. We are a retail production shop and not wholesale which improves
cash flow as we pay our agents when we get paid and no longer need to front
their commissions. We believe we have done what we should have to stabilize
the business and create an excellent opportunity to resolve loan problems
for others. There is always opportunity from adversity and we at Shearson
believe that opportunity is present in the current market.
We are planning to continue with our strategy of acquisition and we hope to
attract new investors into the stock as we continue to rebuild the company
and tell our story.
Sincerely,
Michael A. Barron
CEO
Contact Information: CONTACT:
Shearson Financial Network
Las Vegas, Nevada
Michael Barron
702-868-7922