SIERRA TAHOE BANCORP, which staked out a profitable niche by funding Small Business Administration loans in the 1980s, is now having funding problems of its own.

The two-bank holding company based in Truckee, Calif., is exploring several options to cure a looming liquidity crunch at the holding company level.

As a result of a regulatory clampdown late last year, Sierra Tahoe cannot receive dividends from its banking subsidiaries.

The holding company has enough cash to fund its operations - mostly salaries - through the second quarter of 1994, said David C. Broadley, chief financial officer.

"It's by no means a liquidity crisis," said one analyst familiar with the company.

Still, both Mr. Broadley and other sources said Sierra Tahoe is actively seeking capital despite its subsidiaries' being nearly in he "well-capitalized" category.

The liquidity problem aside, Sierra Tahoe is profitable despite California's bad economy. But the operational problems that led to the dividend restrictions illustrate the pitfalls of SBA lending by small banks.

In these relationships, which are more than half of Sierra Tahoe's business, there are always documentation problems that only get worse in times of large volume.

Sierra Tahoe didn't have up-to-date financial statements for many of its SBA borrowers, and the regulators for that despite its profitability and relatively low loan losses.

Sierra Tahoe hoped by now to be aggressively expanding its young presence in Reno, Nev. Those expansion plans have been curtailed.

Sierra Tahoe, with $231 million of assets, owns Truckee River Bank in Truckee and Sierra Bank of Nevada across the border in Reno.

To ensure that the holding company has enough cash, the company has applied for a $600,000 loan leveraged against its employee stock ownership plan, Mr. Broadley said.

Lack of Financial Statements

Beyond that, the company is considering a broader capital-raising effort to ensure enough capital to grow the Nevada bank, a three-year-old subsidiary. One source said the company is working with Friedman, Billings & Ramsey Inc., a Washington, D.C.-based investment firm specializing in raising capital for financial institutions.

The easiest way for the company to receive dividends from its banks again is to come out from under memorandums of understanding with state and federal regulators.

Mr. Broadley said Truckee River Bank finished a Federal Deposit Insurance Corp. exam three weeks ago, adding that management is "hopeful" the regulators will note the improvements in the past year.

Sierra Tahoe's problems stem from its SBA program. Truckee River Bank is the country's fifth-largest originator of SBA loans and services a $350 million portfolio of SBA loans it originated and sold to investors over the years.

Mr. Broadley said the regulators expressed concern over the lack of financial statements on file from its SBA borrowers.

Both Units Profitable

The lack of financial statements led to a high number of regulator-classified assets, Mr. Broadley said, but without subsequent loan losses.

In the first nine months of the year, the company had total chargeoffs of $527,000, or 0.44% of total loans. Nonperforming loans at Truckee River Bank are about 2.9% of total assets, about average for banks its size in California.

And both subsidiaries are profitable. In the first half of the year, Truckee River Bank and Sierra Bank had returns on assets of 2% and 0.9%, respectively. CEO William T. FikeHeadquarters Truckee, Calif.Total assets $231.3 millionEquity $24.6 millionROA 0.90%ROE 9.10%

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