Item
1.01 ENTRY INTO A MARTERIAL DEFINITIVE AGREEMENT
Subordinated Note
Offering
On September 24,
2021, Sierra Bancorp, a California corporation (the
“Company”)(NASDAQ: BSRR), and parent company of Bank of the Sierra,
entered into Subordinated Note Purchase Agreements (the “Note
Purchase Agreement”) pursuant to which the Company issued and sold
$50 million in aggregate principal amount of its 3.25%
Fixed-to-Floating Rate Subordinated Notes due 2031 (the “Notes”) to
certain investors. The Notes were rated BBB- by Kroll Bond Rating
Agency. The Notes were offered and sold by the Company in a private
placement transaction in reliance on exemptions from the
registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”), pursuant to Section 4(a)(2) of the
Securities Act and Regulation D thereunder. The Company intends to
use the net proceeds from the offering for general corporate
purposes.
The Notes will mature on October 1,
2031. From and including September 24, 2021, to, but excluding,
October 1, 2026 or the date of earlier redemption, the Company will
pay interest on the Notes semi-annually in arrears on April 1 and
October 1 of each year, commencing on April 1, 2022, at a fixed
interest rate of 3.25% per annum. From and including October 1,
2026, to, but excluding, the maturity date or the date of earlier
redemption (the “Floating Rate Period”) the Company will pay
interest on the Notes at a floating interest rate. The floating
interest rate will be reset quarterly, and the interest rate for
any Floating Rate Period shall be equal to the then-current
Three-Month Term SOFR (as defined in the Notes) plus 253.5 basis
points for each quarterly interest period during the Floating Rate
Period. Interest payable on the Notes during the Floating Rate
Period will be paid quarterly in arrears on January 1, April 1,
July 1 and October 1, of each year, commencing on January 1, 2027.
Notwithstanding the foregoing, in the event that the benchmark rate
is less than zero, the benchmark rate shall be deemed to be
zero.
The Company may, at its option,
redeem the Notes (i) in whole or in part beginning with the
interest payment date of October 1, 2026, and on any interest
payment date thereafter, or (ii) in whole, but not in part, upon
the occurrence of a “Tier 2 Capital Event,” a “Tax Event,” or
“Investment Company Event” (each as defined in the Notes). The
redemption price for any redemption is 100% of the principal amount
of the Notes, plus accrued, but unpaid interest thereon to, but
excluding, the date of redemption. Any redemption of the Notes will
be subject to the receipt of any and all required federal and state
regulatory approvals, including the approval of the Board of
Governors of the Federal Reserve System to the extent then required
under applicable laws or regulations.
There is no right of acceleration of
maturity of the Notes in the case of default in the payment of
principal of, or interest on, the Notes or in the performance of
any other obligation of the Company under the Notes. The Notes
provide that holders of the Notes may accelerate payment of
indebtedness only upon the Company’s bankruptcy, insolvency,
reorganization, receivership or other similar
proceedings.
The Notes are general unsecured,
subordinated obligations of the Company and rank junior to all of
its existing and future Senior Indebtedness (as defined in the
Notes), including all of its general creditors. The Notes will be
equal in right of payment with any of the Company’s existing and
future subordinated indebtedness, and will be senior to the
Company’s obligations relating to any junior subordinated debt
securities issued to the Company’s subsidiary trusts. In addition,
the Notes are effectively subordinated to all secured indebtedness
of the Company to the extent of the value of the collateral
securing such indebtedness.
The foregoing descriptions of the
Notes and the Note Purchase Agreement does not purport to be
complete and are each qualified in their entirety by reference to
the full text of the forms of such agreements, which are attached
as Exhibits 4.1 and 10.1, respectively, and incorporated herein by
reference.
