* * * Sierra Cities Special Report * * *

On the block with a hoped sale date before October 1, 2000, this company joined Leasing News "list" due to its Second Quarter loss and the many rumors from reliable sources that the company is about to be sold. Chairman Tom Depping has told his employees there will be an announcement before September 30th.

Reportedly the man who originated the First Sierra concept was Bob Quinn, not Tom Depping. Bob Quinn approached Tom Depping in 1993 after Denrich was purchased by ATT Capital in December, 1992. Bob did not feel ATT was dedicated to their Private Label Program so he approached Tom Depping as an old friend and business acquaintance about forming a new company to do nothing but Private Label.

From that meeting in 1993 to April 1994, Tom Depping sold some movers and shakers in Houston (check the Board of Directors for names) to raise the capital to start First Sierra. When Bob Quinn left ATT in May, 1994, he and Tom along with Fred Van Etten, Pete Smith and Sandy Ho actually began the operations at First Sierra.

"SierraCities.com (NASDAQ:BTOB) has harnessed the power of the Internet to create a totally new way for small business owners to get the funding they need. The leader in online banking and financing, we've automated the funding process to offer quick and convenient access to loans, leases, and a full range of comprehensive banking services. Since 1994, SierraCities.com has funded over $2.5 billion in small business loans."

The above is http://www.sierracities.com/about_us.asp

The company was basically started by Thomas J. Depping. From 1991 to May 1994, Mr. Depping served as President of SunAmerica Financial Resources, the equipment leasing and financial division of SunAmerica, Inc. Sandy B. Ho, Executive Vice-President and Chief Financial Officer has been with the company since 1995. David L. Pederson joined in 1998 and is Executive Vice-President and Chief Financial Officer. The company has had many other vice-presidents, according to listings in past United Association of Equipment Leasing Membership Directories.

"Since inception, the Company's underwriting, customer service and collection staff had been located in its Jupiter, Florida office. In order to consolidate its operations and maximize administrative efficiencies, the Company relocated its operations center from Jupiter, Florida to its headquarters in Houston, Texas. It basically had a "private label" and "wholesale/retail" approach to equipment leasing." This information is from 8/13/99 security filings.

The company in 1999 was First Sierra Financial, Inc., Houston, Texas and on January 26,2000 "merged" and changed its name to SierraCities.com, Inc., a Delaware Corporation with corporate address in Houston, Texas.

HOUSTON--(BUSINESS WIRE)--July 3, 2000--SierraCities.com Inc. (Nasdaq:BTOB), an innovator of technology solutions for online B2B financing, today announced that it has withdrawn its recently approved application to become a bank holding company. In April, the Company announced that its application was approved by the board of governors of the Federal Reserve.

Thomas Depping, president and CEO, said, "Although our application with the Federal Reserve was approved in April, we have decided not to implement the banking strategy at this time as we are in the process of potentially splitting our technology and finance operations." On April 24, SierraCities.com announced that it retained Donaldson, Lufkin & Jenrette to advise on the potential division of the Company's technology and finance operations.

SierraCities reports $7.7 million loss for second quarter

"The Company reported a net loss of $7.7 million for the second quarter, including non-recurring pre-tax charges of $6.9 million. On an operating basis, the Company reported a loss of $3.4 million compared to net income of $252,000 in the second quarter of 1999. Second quarter operating results were largely impacted by reduced gains from asset sales resulting from a poor secondary asset market during the quarter. The asset sales completed during the quarter resulted in gains of $957,000 compared to $3.5 million in the second quarter of 1999.

"The Company incurred a one-time $6.0 million pre-tax charge in the second quarter related to the restructuring or elimination of underperforming operations." Sierra Cities Press Release

First Sierra changed its name this year to migrate from purchasing smaller leasing companies with the small leasing company methods and sales forces, from utilizing lease brokers then to inside salesmen to an internet aimed company, securizing leases and "selling off" or "brokering" leases to other funders in a lesser extent. The company changed its major direction in the last twelve months to become a "dot.com," if you will accept this idiom.

Sales were originally generated with the purchase of the smaller leasing company, who joined the parent with funds available often a lower rate and supposedly less rules and regulations than the small leasing companies funding sources. This type of sales generation series appeared to generate more sales, but in affect, these smaller leasing companies had discounted, brokered, or borrowed for most of their business and the asset was the management and sales niche of the smaller leasing company. The concept was for sales from the new company generated sales for the larger company and as long as new companies were being added, sales appeared to grow. In effect, many of the smaller companies sales diminished with the original principal leaving or the entrepreneurial spirit changing in the operation of gathering business.

As lease matured, or defaulted, or brought up heavy servicing problems, the concepts begins to collapse.

General Interlease Corporation (GIC) 6/96
( a Florida, Colonial Pacific Pegasus Lease Dealer )
Corporate Leasing Group 9/96
Lease Pro, Inc. 2/97
Heritage Credit Services, Inc. 5/97
Universal Fleet Leasing 5/97
Public Funding Corporation 6/97
Northcoast Capital Leasing Company 9/97
Financial Management Services dba Cascade Leasing 9/97
Heritage Credit Services of Oregon 11/97
All American Financial Services 11/97
Independent Capital Corporation (ICC) 3/98
Integrated Lease Management (ILM) 3/98
OMNI Leasing 4/98
Vendor Leasing Services 4/98
TFS, Inc. dba The Money Source 6/98
21st Century 6/98 Republic Group, Inc. ( Anaheim ) 7/98
Suffolk Street Group ( England ) 7/98
Brooker Montague Leasing Limited 8/98
Titan Finance Limited 10/98
Fifth Third Leasing 6/99
Capital Alliance Financial 12/99

Bruce Kropshot arranged the first three acquisitions as the investment banker. He would make no comment for the record or off the record.

Many of the principals of these companies are now either retired or started their business financial companies such as Charlie Lester, Don Zaretsky, Brent Hall ( son of Oren Hall ).

Some believe the company changed with the acquisition of Republic Group, Anaheim, California

All did not want to speak on the record for the fear of being sued for their opinion by Sierra Cities. If there is a sale, they may comment afterwards. Several did not take stock with the sale, but others did, so they would prefer to wait until the announcement.

Five possibilities:
1. Sell the finance division.
2. Sell the technology division.
3. Sell both the finance and technology divisions.
4. Enter into a joint venture with a stronger company that would relieve the need for securitization.
5. Keep doing business as usual.

These comments are from many of them and others in the industry:

"Bob Quinn was a Sr. VP and Chief Credit Officer who ran the Jupiter operations until he and Tom had a falling out when Tom moved the credit function to Houston in 1998. From that point on, he and Tom fought like cats and dogs until Bob was finally kicked out in early 1999. Pete Smith left First Sierra in late 1999 as did Charlie Lester. Peter Smith says he plans to join Bob in his new company that will be announced soon."

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"In my opinion", the acquisition of the Republic Group was the downfall of First Sierra. They took the "hard sell telemarketing techniques" of Republic Group and tried to make the other companies who had tried and profitable sales techniques adjust to the Republic Group methods. High yields, but questionable sales techniques."

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"I agree with **** since he does not want to be associated with the criminal element that Republic Group in California brought to First Sierra.... "
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"If you go back to their securitization issues and review all the conditions, reserves, letters of credit issued and factor in attorneys' & credit rating fees their cost of funds was much higher than expected in light of the losses encountered. Whether it was to the point where they had low spreads, no spreads or it was costing them money to do deals."
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Another theory is they paid too much for the operations they bought, which were little more than brokerage offices and continued to pay the officers of these firms high salaries, in addition to the cash and stock given for these operations."
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"I have heard they paid over $4MM for their deal with Intuit and the return was far, far less than that (6 figures). This internet move has been very costly and has not paid off; too early."
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"In 1999, it became obvious to many of us that First Sierra was headed for failure from both a financial and ethical standpoint."
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"I have it on good information that Sierra Cities management (namely their new president) has been talking with members of the investment community and telling them that Sierra Cities will be happy if they can produce 25% of their volume from Internet related activities within 5 years. Anyone following the development of this company is aware that they were throwing around numbers stating that 80% of volume was obtained as a result of automation initiatives. It is also rumored that their desire to "spin off" their technology side stems from the fact that their "web based" technology initiatives are producing about 15% of volume and using more than 75-80% of the company resources."
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Leasing News has attempted to obtain verification of our list, to learn any reaction or comment from various officers or spokesmen at Sierra Cities, but has been unsuccessful.

Kit Menkin