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Item 1.01
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Entry into a Material Definitive Agreement.
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On June 1, 2020, Peoples Financial Services
Corp. (the “Company”) completed a private placement of $33,000,000 aggregate principal amount of 5.375% Fixed-to-Floating
Rate Subordinated Notes due 2030 (the “Notes”). The Notes are intended to qualify as Tier 2 capital for regulatory
purposes.
The offering of the Notes was consummated
pursuant to the terms of a Subordinated Note Purchase Agreement (the “Purchase Agreement”), dated June 1, 2020, among
the Company, as issuer, and certain institutional accredited investors, as the initial purchasers of the Notes. The Purchase Agreement
includes customary representations, warranties, and covenants. The representations, warranties, and covenants contained in the
Purchase Agreement were made only for purposes of the Purchase Agreement and as of specific dates, were solely for the benefit
of the parties to the Purchase Agreement, and are not representations of factual information to investors about the Company or
its subsidiaries.
From and including the date of issuance,
to but excluding June 1, 2025, or earlier redemption date, the Notes will bear interest at a fixed annual rate of 5.375%, payable
semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2020. Thereafter, from and including
June 1, 2025, to but excluding the maturity date, June 1, 2030, or earlier redemption date, the Notes will bear interest at a floating
annual rate equal to a benchmark rate, initially three-month LIBOR, plus 450 basis points, payable quarterly in arrears on March
1, June 1, September 1, and December 1 of each year, commencing on September 1, 2025. Notwithstanding the foregoing, if the benchmark
rate is less than 25 basis points, then the benchmark rate shall be deemed to be 25 basis points.
The Notes will be unsecured, subordinated
obligations of the Company and: (i) will rank junior in right of payment and upon the Company’s liquidation to any of the
Company’s existing and all future senior indebtedness, as more particularly defined in the Notes; (ii) will rank equal in
right of payment and upon the Company’s liquidation with any of the Company’s existing and all of its future indebtedness
the terms of which provide that such indebtedness ranks equally with the Notes; (iii) will rank senior in right of payment and
upon the Company’s liquidation to any of its future indebtedness the terms of which provide that such indebtedness ranks
junior in right of payment to note indebtedness such as the Notes; and (iv) will be effectively subordinated to the Company’s
future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and structurally subordinated
to the existing and future indebtedness and liabilities of the Company’s subsidiaries, including without limitation depositors
of Peoples Security Bank and Trust Company, liabilities to general creditors, and liabilities arising in the ordinary course of
business or otherwise.
The Company may, at its option,
beginning June 1, 2025, redeem the Notes, in whole or in part, from time to time, subject to obtaining the prior approval of
the Board of Governors of the Federal Reserve System (the “Federal Reserve”) to the extent such approval is then
required under the rules of the Federal Reserve, at a redemption price equal to 100% of the principal amount of the Notes
being redeemed plus accrued and unpaid interest to but excluding the redemption date. The Company may redeem the Notes at any
time, including prior to June 1, 2025, in whole, but not in part, subject to obtaining the prior approval of the Federal
Reserve to the extent such approval is then required under the rules of the Federal Reserve, if: (i) an amendment or change
(including any announced prospective amendment or change) in law occurs that could prevent the Company from deducting
interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the
Notes from being recognized as Tier 2 capital for regulatory purposes; or (iii) the Company is required to register as an
investment company under the Investment Company Act of 1940, as amended, in each case, at a redemption price equal to 100% of
the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date. The Notes will
not have the benefit of any sinking fund.
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 holders of the Notes may accelerate payment of indebtedness only upon certain events
of bankruptcy or insolvency involving the Company or any depository institution subsidiary of the Company.
The foregoing descriptions of the Purchase
Agreement and the Notes are each qualified in their entirety by reference to the full text of the Purchase Agreement and the form
of Note, respectively, copies of which are attached hereto as Exhibit 10.1 and Exhibit 4.1, respectively, and are incorporated
herein by reference.