Stellar Bancorp, Inc.

We believe that our facilities are in good condition and adequate to meet our operating needs for the present and immediately foreseeable future.

• The pendency of the Merger with Prosperity could adversely affect our business, financial results, operations and/or the market price of our common stock.
• While the merger is in effect, we are subject to restrictions on our business activities.
• The Merger Agreement contains provisions that could make it difficult or a third-party to acquire us prior to the competition of the Merger.
• A lawsuit may be filed against us and/or Prosperity challenging the transactions contemplated by the Merger Agreement. An adverse ruling in any such lawsuit may delay or prevent the Merger from being completed.
• We have incurred, and will continue to incur, direct and indirect costs as a result of the pending transaction with Prosperity.
• Negative developments affecting the banking industry, “contagion effects,” and resulting media coverage, have eroded customer confidence in the banking system.
• Challenging market conditions and economic trends have adversely affected the banking industry.
• Inflationary pressures and rising prices may affect our results of operations and financial condition.
• The Company’s business is concentrated in and largely dependent upon the growth and welfare of its market.
• We face strong competition to attract and retain customers from other companies that offer banking services.
• The Company could be adversely impacted by geopolitical events, wars, natural disasters, pandemics and other catastrophes.
• Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations.
• Climate change, and related legislative and regulatory initiatives, have the potential to disrupt our business and adversely impact the operations and creditworthiness of our customers.
• Significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial conditions.
• The Company faces risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies and priorities.
• The CFPB has reshaped the consumer financial laws through rulemaking and enforcement of the prohibitions against unfair, deceptive and abusive business practices. Compliance with such initiatives may impact the business operations of depository institutions offering consumer financial products or services, including the Company.
• Our ability to retain bankers and recruit additional successful bankers is critical to the success of our business strategy and any failure to do so could impair our customer relationships and adversely affect our business and results of operations.
• Our results of operations may be adversely affected by labor shortages, turnover and labor cost increases.
• We are dependent on our executive officers and other key individuals to continue the implementation of our long-term business strategy and the loss of one or more of these key individuals could curtail our growth and adversely affect our business, financial condition, results of operations and prospects.
• Our strategic growth plan could expose the Company to financial, execution and operational risks.
• If the goodwill that we have recorded in connection with business acquisitions becomes impaired, it could require charges to earnings.
• As a significant percentage of our loan portfolio is comprised of real estate loans, including commercial real estate and construction, land development and other land loan portfolios, which expose us to credit risks that may be greater than the risks related to other types of loans.
• A large portion of our loan portfolio is comprised of commercial and industrial loans secured by receivables, inventory, equipment or other commercial collateral.
• The small- to medium-sized businesses that the Company lends to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan.
• If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings may be affected.
• Our SBA lending program is dependent upon the federal government and a failure to originate SBA loans in compliance with SBA guidelines could result in losses on the guaranteed portion of our SBA loans.
• We may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices.
• A protracted government shutdown may result in reduced loan originations and related gains on sales and could negatively affect our financial condition and results of operations.
• The Company is subject to liquidity risk.
• If our deposits from governments and municipalities were to significantly decline within a short period of time, this could negatively impact our liquidity and earnings.
• We may need to raise additional capital in the future, and such capital may not be available when needed or at all.
• The Company is subject to interest rate risk.
• We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
• The Company depends on information technology and telecommunications, including third-party service providers.
• We could be adversely impacted by fraudulent activity, breaches of our information security and cybersecurity attacks.
• We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology.
• The development and use of AI presents risks and challenges that may adversely impact the Company’s business.
• The Company is subject to laws regarding the privacy, information security and protection of personal information.
• The Company could be adversely impacted by employee errors and customer or employee fraud.
• The Company depends on the accuracy and completeness of information provided by its borrowers and counterparties.
• The Company may be subject to environmental liabilities in connection with the properties we own and the foreclosure of real estate assets securing our loan portfolio.
• The Company is subject to claims and litigation pertaining to intellectual property in addition to other litigation in the ordinary course of business.
• We are subject to heightened regulatory requirements as our total assets exceed $10 billion.
• Negative public opinion regarding the Company or its failure to maintain the Company’s or the Bank’s reputation in the communities served could adversely impact business.
• Risks Related to Regulation of the Company’s Industry
• The Company operates in a highly regulated environment.
• State and federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which the Company is or becomes subject as a result of such examinations may adversely affect the Company.
• Many of the Company’s new activities and expansion plans may require regulatory approval, and failure to obtain them may restrict our growth.
• The Company faces a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
• Failure to comply with economic and trade sanctions or with applicable anti‑corruption laws could have a material adverse impact our business, financial condition and results of operations.
• The Company is subject to numerous federal and state lending laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material sanctions and penalties.
• Increases in FDIC deposit insurance premiums could adversely affect our earnings.
• The Federal Reserve may require the Company to commit capital resources to support the Bank.
• We may be materially and adversely affected by the soundness, creditworthiness and liquidity of other financial institutions.
• The Company could be adversely impacted by monetary policies and regulations of the Federal Reserve.
• The Company has made loans to and accepted deposits from related parties.
• The market price of Company’s common stock may be volatile and fluctuate significantly, which could cause the value of an investment in the Company's common stock to decline.
• The holders of the Company’s debt obligations have priority over its common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest.
• Future sales and issuances of the Company’s common stock or rights to purchase common stock could result in additional dilution of the percentage ownership of its shareholders.
• The Company may issue shares of preferred stock in the future, which could make it difficult for another company to acquire it or could otherwise adversely affect the rights of the holders of the Company’s common stock, which could depress the price of the Company’s common stock.
• The Company is dependent upon the Bank for cash flow, and the Bank's ability to make cash distributions is restricted, which could impact the Company's ability to satisfy its obligations.
• The Company’s corporate governance documents and certain corporate and banking provisions of Texas law applicable to it could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition and other actions.
• The Company’s bylaws include an exclusive forum provision, which could limit a shareholder’s ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers or other employees.