OTC: SBMW

•
general economic conditions, including any recessionary conditions and/or increases in unemployment, either nationally or in our market areas, that are worse than expected;

•
adverse changes in the financial services industry, securities and local real estate markets (including real estate values);

•
our ability to access cost-effective funding and to maintain adequate liquidity, primarily through deposits;

•
significant increases in our loan losses, including as a result of our inability to resolve classified and non-performing assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for credit losses;

•
credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for credit losses and provision for credit losses;

•
our ability to implement and change our business strategies, including our ability to attract and maintain deposits and our success in introducing new financial products;

•
competition among depository and other financial institutions, including with respect to our ability to charge overdraft fees;

•
inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans originated for holding in our portfolio;

•
monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board;

•
our success in increasing our commercial real estate and commercial and industrial lending;

•
our ability to maintain or improve our asset quality even as we increase our commercial real estate and commercial and industrial lending;

•
fluctuations in the demand for loans, deposits and non-banking services in our market area, including changes in consumer spending and savings habits;

•
technological changes that may be more difficult or expensive than expected;

•
changes in accounting and/or tax estimates;

•
risks related to a high concentration of loans secured by real estate located in our market area;

•
our ability to enter new markets successfully and capitalize on growth opportunities;

•
changes in laws or government regulations or policies affecting financial institutions and/or their holding companies, including changes in regulatory fees, capital requirements and insurance premiums;

•
changes in laws or government regulations or policies affecting the cannabis industry;

•
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

•
changes in our compensation and benefit plans, our ability to attract and retain key members of our senior management team and our ability to address staffing needs expeditiously in response to product demand or to implement our strategic plans;

•
loan delinquencies and changes in the underlying cash flows of our borrowers;

•
our ability to control costs and expenses, particularly those associated with operating as a public reporting company;

•
a failure or breach of our operational or security systems or infrastructure, including cyberattacks;

•
our ability to manage market risk, credit risk and operational risk;

•
the potential effects of new or increased tariffs and trade restrictions;

•
the ability of third-party service providers to perform their obligations to us; and

•
other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Security Midwest Bancorp, Inc. (“Security Midwest Bancorp” or the “Company” or “we”) was incorporated in September 2024 in the State of Maryland, and became the holding company for Security Bank (the “Bank”) upon the conversion of the Bank from the mutual form of organization to the stock form of organization (the “Conversion”). The Conversion was completed on July 31, 2025, on which date the Company sold 889,781 shares of common stock at a price of $10.00 per share.

The Company is a registered bank holding company subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Company conducts its operations primarily through its wholly owned subsidiary, the Bank. At December 31, 2025, the Company, on a consolidated basis, had total assets of $256.6 million, loans of $117.8 million, deposits of $196.5 million, and shareholders’ equity of $22.6 million. For the year ended December 31, 2025, we recognized net income of $299,000.

The Company’s principal office is located at 510 E. Monroe, Springfield, Illinois 62701, and its telephone number at this address is (217) 789-3500. Our website address is www.securitybk.com. Information on our website is not and should not be considered a part of this annual report.

Security Bank

Security Bank is a stock savings bank organized under the laws of the State of Illinois. Our principal business consists of attracting retail deposits from the general public and cannabis-related business ("CRB") customers and investing those deposits, together with funds generated from operations and borrowings, primarily in one- to four-family residential real estate loans, commercial real estate loans and commercial and industrial loans. We also invest in debt securities, such as mortgage-backed securities and collateralized mortgage obligations, municipal bonds and U.S. government and agency securities. We offer a variety of deposit accounts, including demand deposit accounts, savings accounts, money market accounts and certificate of deposit accounts. We have the capability to borrow from the Federal Home Loan Bank and Bankers Bank to support our operations.

Through our CRB Program, we provide deposit and cash-management services to cannabis organizations. We currently offer depository accounts to customers operating licensed cannabis businesses in the States of Illinois, Michigan, Ohio and Kentucky. We are also authorized to conduct such depository activities in the State of Missouri. We consider geographic expansion based on competitive matters and the needs of our current customers. In December 2022, we initiated lending to cannabis organizations and their associated real estate entities (secured by commercial real estate where the cannabis organization operates).

Security Bank is subject to comprehensive regulation and examination by the FDIC and the Illinois Division of Banking and is a member of the Federal Home Loan Bank system.

Market Area.

We operate three banking offices in Springfield, Illinois. Our current market area for cannabis-related deposits is the States of Illinois, Michigan, Ohio and Kentucky, while our primary market area for other deposits, as well as our primary lending market area is Sangamon County, Illinois (where our offices are located) and the contiguous counties. Our market area for cannabis-related deposits is expanding into the State of Missouri, where we are also authorized to conduct such depository activities. From time to time, we also originate loans to borrowers or secured by properties located in adjacent metropolitan markets. We are a community-oriented bank offering a variety of financial products and services to meet the needs of our customers. We believe that our community orientation and personal service distinguishes us from larger banks that operate in our market area. Our primary market area for our lending activities and our non-cannabis deposit gathering is diversified economically, with Springfield serving as the state capitol of Illinois and the metropolitan area serving as a regional economic base for the surrounding area. Economic sectors in the metropolitan area of Springfield include health care, education, trade and services, while the more rural sections of our market area contain a variety of agriculture and manufacturing-related employment.

Competition

We face competition within our market area both in making loans and attracting deposits. Our market area has a concentration of financial institutions that include large money center and regional banks, community banks and credit unions. We also face competition from savings institutions, mortgage banking firms, consumer finance companies and credit unions and, with respect to deposits, from money market funds, brokerage firms, mutual funds and insurance companies. We also compete with fintech and Internet banking companies. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. We face increasing competition with respect to our CRB activities.

As of June 30, 2025 (the latest date for which information is available), our market share of deposits represented 2.19% of FDIC-insured deposits in Sangamon County, ranking us 11th in market share of deposits out of 25 institutions then operating in Sangamon County. Our ability to compete in our primary market area does not depend on any existing relationships.

Lending Activities

General. Our primary business has traditionally been the origination of one- to four-family residential real estate loans, commercial real estate loans and commercial and industrial loans. We also originate a limited amount of multi-family residential real estate loans, construction and development loans, farmland loans and consumer loans.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. We had no loans held for sale at December 31, 2025 or 2024. As of December 31, 2025, undisbursed amounts committed on construction loans were $2.9 million.

2025

2024

Amount

Percent

Amount

Percent

(Dollars in thousands)

Real estate loans

One-to-four family

$

35,146

29.5

%

$

32,973

28.8

%

Multifamily

4,024

3.4

%

4,834

4.2

%

Commercial

54,409

45.7

%

53,885

47.1

%

Construction and development

4,064

3.4

%

2,962

2.6

%

Farmland

4,387

3.7

%

3,843

3.4

%

Other loans

Consumer

4,471

3.8

%

5,812

5.1

%

Commercial and industrial

12,555

10.5

%

10,044

8.8

%

Total loans

119,056

100.0

%

114,353

100.0

%

Less:

Allowance for credit losses

(1,034

)

(1,162

)

Deferred loan fees

(244

)

(201

)

Unearned dealer interest paid

39

58

Total loans receivable, net

$

117,817

$

113,048

Contractual Maturities. The following tables summarize the contractual maturities of our total loan portfolio at December 31, 2025. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ.

Real Estate

One-to-four

Construction and

Commercial

Family

Multifamily

Commercial

Development

Farmland

Consumer

& Industrial

Total

(In thousands)

Amounts due in:

One year or less

$

2,587

$

666

$

2,803

$

889

$

698

$

92

$

4,406

$

12,141

After one through

five years

9,339

1,930

35,568

1,275

2,046

2,797

5,702

58,657

After five through

15 years

7,712

137

9,775

1,900

802

1,541

857

22,724

More than 15 years

15,508

1,291

6,263

—

841

41

1,590

25,534

Total

$

35,146

$

4,024

$

54,409

$

4,064

$

4,387

$

4,471

$

12,555

$

119,056

The following table sets forth our fixed and adjustable-rate loans at December 31, 2025 that are contractually due after December 31, 2026.

Due after December 31, 2026

Fixed

Adjustable

Total

Real estate loans

One-to-four family

$

13,633

$

18,926

$

32,559

Multifamily

1,930

1,428

3,358

Commercial

39,992

11,614

51,606

Construction and development

3,175

—

3,175

Farmland

1,662

2,027

3,689

Other loans

Consumer

3,156

1,223

4,379

Commercial and industrial

4,680

3,469

8,149

Total

$

68,228

$

38,687

$

106,915

One- to Four-Family Residential Real Estate Lending. Our historical primary lending activity has been the origination of one- to four-family, owner-occupied, first and second residential mortgage loans, virtually all of which are secured by properties located in our market area. At December 31, 2025, one- to four-family residential real estate loans totaled $35.1 million, or 29.5% of our total loan portfolio. At December 31, 2025, we had $30.3 million of our one- to four-family residential real estate loans in the first lien position and $1.5 million in a junior lien position, although we currently will not take a junior lien position on a one- to four-family residential real estate loan where we also do not have the first lien position. We also have $3.3 million of home equity lines of credit. The average principal loan balance of our one- to four-family residential real estate loans was approximately $71,000 at December 31, 2025.

We currently offer one- to four-family residential real estate loans with terms of up to 30 years. In recent periods, we have sold a majority of the one- to four-family residential real estate loans we have originated, primarily to Freddie Mac. We originate fixed-rate and, to a lesser extent, adjustable-rate one- to four-family residential real estate loans, although we sell the majority of the fixed-rate one- to four-family residential real estate loans that we originate. One- to four-family residential real estate loans often remain outstanding for shorter periods than their contractual terms because borrowers have the right to refinance or prepay their loans. We generally limit the loan-to-value ratios of our mortgage loans without private mortgage insurance to 80% of the sales price or appraised value, whichever is lower. Loans where the borrower obtains private mortgage insurance may be made with loan-to-value ratios of up to 90%.

Our adjustable-rate one- to four-family residential real estate loans carry terms to maturity ranging from 10 to 30 years and generally have fixed rates for initial terms of three or five years, and adjust thereafter for periods of between one and five years, plus a margin, which in recent years has been tied to the one-year U.S. Treasury rate. The maximum amount by which the interest rate may be increased or decreased is generally 3% for the first adjustment period and 3% per adjustment period thereafter, with a lifetime interest rate cap of generally 6% over the initial interest rate of the loan and a floor of 3%.

Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates, because they periodically re-price, as interest rates increase the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by our maximum periodic and lifetime rate adjustments. Moreover, the interest rates on most of our adjustable-rate loans do not adjust for up to five years after origination. As a result, the effectiveness of adjustable-rate mortgage loans in compensating for changes in market interest rates generally may be limited.

We have not offered but may offer “interest only” mortgage loans on permanent one- to four-family residential real estate loans (where the borrower only pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also have not offered and will not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We have not offered “Alt-A” loans (i.e., loans that generally target borrowers with better credit scores who borrow with alternative documentation such as little or no verification of income).

We generally require title insurance on all of our one- to four-family residential real estate mortgage loans, and we also require that borrowers maintain fire and extended coverage casualty insurance (and, if appropriate, flood insurance) in an amount at least equal to the lesser of the loan balance or the replacement cost of the improvements. We do not conduct environmental testing on residential real estate mortgage loans unless specific concerns for hazards are identified by the appraiser used in connection with the origination of the loan. If we identify an environmental problem on land that will secure a loan, the environmental hazard must be remediated before the closing of the loan.

When underwriting residential real estate loans, we review and verify each loan applicant’s employment, income and credit history and, if applicable, our experience with the borrower. Our policy is to obtain credit reports and financial statements on all borrowers and guarantors. Generally, all properties securing real estate loans are appraised by independent appraisers. Appraisals are subsequently reviewed by our internal underwriting staff. All appraisals, whether for loans sold on the secondary market or retained, are input into Freddie Mac’s Uniform Collateral Data Portal for reasonableness prior to origination. In addition, subsequent to loan origination, our loan quality control process may utilize an independent third party to conduct appraisal reviews.

Our one- to four-family residential real estate loans also includes home equity lines of credit and home equity loans. Our home equity lines of credit and home equity loans are secured by either first mortgages or second mortgages on owner-occupied one- to four-family residences. At December 31, 2025, we had $3.3 million of outstanding home equity lines of credit and $1.5 million of outstanding home equity loans. At December 31, 2025, the unadvanced portion of home equity lines of credit totaled $3.3 million.

The underwriting standards utilized for home equity lines of credit include a title review, the recordation of a lien, a determination of the applicant’s ability to satisfy existing debt obligations and payments on the proposed loan, and the value of the collateral securing the loan. The loan-to-value ratio for our home equity lines of credit is generally limited to 80% when combined with the first security lien, if applicable. Our home equity lines of credit generally have a 10-year draw period and adjustable rates of interest, subject to a contractual floor, which are indexed to the prime rate as published in The Wall Street Journal.

Commercial Real Estate Lending. At December 31, 2025, we had $54.4 million in commercial real estate loans, representing 45.7% of our total loan portfolio.

We originate commercial real estate loans with rates that adjust after an initial fixed-rate period of generally one to five years. We also originate commercial real estate loans with fixed rates with terms of three or five years and a balloon payment due at the end of the term. Our commercial real estate loans generally have amortization terms of 15 to 20 years. The maximum loan-to-value ratio of our commercial real estate loans is generally 80%. Our commercial real estate loans are typically secured by residential rental properties, offices and warehouses, or other commercial properties. Our commercial real estate loans also include loans that were originated as construction loans and have since become permanent financing. The majority of our commercial real estate loans are owner-occupied. At December 31, 2025, the average principal loan balance of our outstanding commercial real estate loans was approximately $680,000, and the largest of such loans was a $4.0 million loan secured by commercial real estate used in the cannabis industry. This loan was performing in accordance with its terms at December 31, 2025.

Set forth below is information regarding our commercial real estate loans at December 31, 2025.

December 31, 2025

Number of Loans

Total

CRB Related

11

$

21,703,554

Office / retail

7

10,809,132

Retail

10

7,124,204

Religious Organizations

7

2,283,403

Office

5

1,842,228

Warehouse

1

1,800,000

Residential

7

806,581

Automotive

2

1,375,329

50

47,744,431

Other

30

6,664,998

80

$

54,409,429

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including project-level and global cash flows, credit history, and management expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). We generally seek a debt service ratio of at least 1.25x. Generally, commercial real estate loans are appraised by outside independent appraisers; however, if the value of the loan is less than $500,000, we may utilize third-party evaluations in lieu of formal appraisals, which are subsequently reviewed by our credit department.

Personal guarantees are generally obtained from the principals of commercial real estate loan borrowers, although this requirement may be waived in limited circumstances depending upon the loan-to-value ratio and the debt service ratio associated with the loan. We require property, casualty and title insurance and flood insurance if the property is in a flood

zone area. Commercial real estate loans entail greater credit risks compared to one- to four-family residential real estate loans because they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally depends, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate than residential properties, and we may require additional paydowns to enhance the loan-to-value position.

Commercial and Industrial Lending. At December 31, 2025, we had $12.6 million of commercial and industrial loans, representing 10.5% of our total loan portfolio. We offer regular lines of credit and revolving lines of credit to small businesses in our market area to finance short-term working capital needs such as accounts receivable and inventory with terms generally up to 12 months and that are due on demand and subject to annual automatic renewal or a renewal process. While many lines of credit are for small businesses and manufacturers, we have begun to develop relationships with professional organizations such as accountants, law firms and medical professionals. Our commercial lines of credit are typically variable rate tied to the prime rate as published in The Wall Street Journal. We generally obtain personal guarantees with respect to commercial and industrial lines of credit. At December 31, 2025, the average loan size of our commercial and industrial loans was approximately $192,000, and our largest outstanding commercial and industrial loan balance was a $1.5 million collateralized by the borrowers’ ownership interest in a medical practice. This loan was performing in accordance with its terms at December 31, 2025.

We typically originate commercial and industrial loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, the experience and stability of the borrower’s management team, earnings projections and the underlying assumptions, and the value and marketability of any collateral securing the loan. Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts generally of up to 80% of the value of the collateral securing the loan. Commercial and industrial loans are generally secured by a variety of collateral, primarily accounts receivable, inventory and equipment. As a result, the availability of funds for the repayment of commercial and industrial loans may substantially depend on the success of the business itself and the general economic environment in our market area. Therefore, commercial and industrial loans that we originate have greater credit risk than one- to four-family residential real estate loans or, generally, consumer loans. In addition, commercial and industrial loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, compared to residential real estate loans, and also generally require substantially greater evaluation and oversight efforts such as more frequent review of financial statements and the receipt of borrowing base certificates.

Loan Originations, Participations, Purchases and Sales

Most of our loan originations are generated by our loan personnel and from referrals from existing customers, real estate brokers, accountants and other professionals. All loans we originate are underwritten pursuant to our policies and procedures. While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon relative borrower demand and pricing levels established by competing banks, thrifts, credit unions, and mortgage-banking companies. Our volume of loan originations is influenced significantly by market interest rates and economic conditions, and, accordingly, the volume of our loan originations can vary from period to period. We generally do not sell any of the commercial and industrial or commercial real estate loans we originate, but we sell participation interests in loans, as described below.

We may purchase loan participations secured by properties primarily within the State of Illinois in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At December 31, 2025, the outstanding balances of our loan participations where we were not the lead lender totaled $10.2 million, or 8.5% of our loan portfolio, the majority of which were commercial real estate loans. All such loans were performing in accordance with their original repayment terms. On occasion, we also have sold participation interests in loans that exceeded our loans-to-one borrower legal lending limit and for risk diversification. However, at December 31, 2025, we had no loans for which we have sold participation interests. Historically, we have not purchased whole loans.

Loans to One Borrower. Pursuant to applicable law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 25% of Security Bank’s total capital plus general loan reserves. This amount was approximately $6.2 million as of December 31, 2025. Our current internal lending limit policy is 80% of our regulatory lending limit, equaling $5.0 million as of December 31, 2025. On the same date, we had no borrowers with outstanding balances in excess of this internal policy amount. At December 31, 2025, our largest credit

relationship totaled $4.5 million, consisting of two loans secured by commercial real estate, one unsecured loan and one loan secured by an automobile. At December 31, 2025, this loan relationship was performing in accordance with its current terms.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the board of directors. In the approval process for residential loans, we assess the borrower’s ability to repay the loan and the value of the property securing the loan. To assess the borrower’s ability to repay, we review the borrower’s income and expenses and employment and credit history. In the case of commercial real estate loans, we also review projected income, expenses and the viability of the project being financed. We generally require appraisals of all real property securing loans. Appraisals are performed by independent licensed appraisers who are approved by our board of directors. All real estate secured loans generally require fire, title and casualty insurance and, if warranted, flood insurance in amounts at least equal to the principal amount of the loan or the maximum amount available. Our loan approval policies and limits are also reviewed and approved annually by our board of directors. All loans we originate are subject to our underwriting guidelines.

Certain individual officers have loan approval authority that varies based on loan type with limits up to $250,000. The approval of the Officer’s Loan Committee, consisting of five officers at the level of vice president or above, is required for approval of secured loans above $500,000 and unsecured loans over $100,000, in either case in amounts up to $1.0 million. The approval of our Directors’ Loan Committee is required for all loans between $1.0 million and $2.0 million, while approval of the full board of directors is required for all loans in excess of $2.0 million up to and including our legal lending limit, and, notwithstanding the foregoing limits, for all loans related to CRB customers.

Delinquencies, Non-Performing Assets and Classified Assets

Delinquency Procedures. When a commercial or consumer loan is 10 days past due (15 days for a residential mortgage loan), we send the borrower a late notice. We generally also contact the borrower by phone if the delinquency is not corrected promptly after the notice has been sent. When the loan is 30 days past due, we mail the borrower a demand letter reminding the borrower of the delinquency, and attempt to contact the borrower personally to determine the reason for the delinquency in order to ensure that the borrower understands the terms of the loan and the importance of making payments on or before the due date. The account is monitored on a regular basis thereafter. If necessary, subsequent delinquency notices are issued at an additional 30 days past due. By the 90th day of delinquency, we will send the borrower a final demand for payment and may recommend foreclosure. At 120 days, we typically begin foreclosure proceedings for residential mortgage loans, although for commercial and consumer loans we may start the foreclosure process sooner than 120 days. Loans are charged off when we believe that the recovery of principal is improbable. A summary report of all loans 30 days or more past due is provided to the board of directors each month.

Past-Due Loans. The following table sets forth our loan delinquencies by type and amount at the dates indicated.

At December 31,

2025

2024

30-59

60-89

90 Days

30-59

60-89

90 Days

Days Past

Days Past

or More

Days Past

Days Past

or More

Due

Due

Past Due

Due

Due

Past Due

Real estate loans

One-to-four family

$

247

$

26

$

67

$

351

$

102

$

590

Multifamily

—

—

—

—

—

—

Commercial

—

—

—

—

—

130

Construction and development

—

—

—

—

—

—

Farmland

—

—

—

—

—

—

Other loans

Consumer

32

—

—

95

10

28

Commercial and industrial

—

—

—

102

—

188

Total

$

279

$

26

$

67

$

548

$

112

$

936

Non-Performing Loans. Loans greater than 10 days delinquent are reviewed on a weekly basis by our lending personnel and our Credit Risk Specialist. Our loan committees review classified and watch list credits on a monthly basis and on an as-needed basis by appropriate management personnel. Management determines that a loan is non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. When a borrower is determined to be experiencing financial difficulties, the measurement of the specific loan in

the calculation of the allowance for credit losses is based on present value of expected future cash flows, except that all collateral-dependent loans are evaluated based on the fair value of the collateral less estimated costs to sell. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. Loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of resolution. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

A loan is classified as modified for a borrower experiencing financial difficulties if, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider. This usually includes a modification of loan terms, such as a reduction of the interest rate to below market rates, capitalizing past due interest or extending the maturity date and possibly a partial forgiveness of the principal amount due. Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months.

Real Estate Owned. When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for credit losses, or, if the existing allowance is inadequate, charged to expense during the period in which we acquire the property. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell. We had no real estate owned at December 31, 2025 and 2024.

Non-Performing Assets. The following table sets forth information regarding our non-performing assets.

At December 31,

2025

2024

(Dollars in thousands)

Nonaccrual loans:

Real estate loans

One-to-four family

$

280

$

814

Multifamily

—

—

Commercial

—

130

Construction and development

—

—

Farmland

—

—

Other loans

Consumer

37

68

Commercial and industrial

—

220

Total

$

317

$

1,232

Ratios:

Total non-performing loans to total loans

0.27

%

1.08

%

Total non-performing assets to total assets

0.12

%

0.57

%

The Company had no loans greater than 90 days delinquent and accruing interest at December 31, 2025 and 2024.

Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the FDIC to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific allowance for credit losses is not warranted. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover losses that were both probable and reasonable to estimate. General allowances represent allowances which have been established to cover accrued losses associated with lending activities that were both probable and reasonable to estimate, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific allowances.

In connection with the filing of our periodic regulatory reports and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. Loans are listed on the “watch list” initially because of emerging financial weaknesses even though the loan is currently performing as agreed. Management reviews the status of each loan on our watch list on a monthly basis with our credit committee and on a quarterly basis with the full board of directors. If a loan deteriorates in asset quality, the classification is changed to “special mention,” “substandard,” “doubtful” or “loss” depending on the circumstances and the evaluation. Generally, loans 90 days or more past due are placed on nonaccrual status and classified “substandard.”

On the basis of this review of our loans, our classified and special mention loans at the dates indicated were as follows:

At December 31,

2025

2024

Classified assets:

Substandard loans

$

3,718

$

3,890

Doubtful loans

—

—

Loss loans

—

—

Total classified assets

$

3,718

$

3,890

Special mention assets

$

3,954

$

4,999

Foreclosed real estate and other repossessed assets

—

—

Allowance for Credit Losses

Analysis and Determination of the Allowance for Credit Losses. The allowance for credit losses represents management’s estimate of expected credit losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for credit losses is increased by the provision for credit losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for credit losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of a loan receivable is charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for credit losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

We perform a quarterly evaluation of the allowance for credit losses. Our determination of the adequacy of the allowance for credit losses is based on the assessment of the expected credit losses on loans over the expected life of the loans. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

In accordance with the provisions of the accounting standards under the Current Expected Credit Losses (“CECL”) approach, we estimate the allowance for credit losses balance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience of a defined peer group, by affiliate, paired with economic forecasts, provide the basis for the quantitatively modeled estimates of expected credit losses. We adjust our quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the qualitative factors.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. We use the average historical loss method to measure the quantitative portion of the allowance for credit losses over the forecast and reversion periods.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When we determine that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

We continue to monitor and modify our allowance for credit losses as conditions dictate. No assurances can be given that the level of allowance for credit losses will cover all of the expected losses on the loans or that future adjustments to the allowance for credit losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to determine the current level of the allowance for credit losses.

Allowance for Credit Losses. The following table sets forth activity in our allowance for credit losses on loans for the years indicated.

At or For the Year Ended

December 31,

2025

2024

(Dollars in thousands)

Allowance for credit losses at beginning of year

$

1,162

$

2,158

Provision for credit losses

5

32

Charge-offs:

Real estate loans

One-to-four family

(115

)

(12

)

Multifamily

—

—

Commercial

(44

)

(761

)

Construction and development

—

—

Farmland

—

—

Other loans

Consumer

(30

)

(10

)

Commercial and industrial

(7

)

(259

)

Total charge-offs

(196

)

(1,042

)

Recoveries:

Real estate loans

One-to-four family

—

8

Multifamily

—

—

Commercial

29

—

Construction and development

—

—

Farmland

—

—

Other loans

Consumer

1

2

Commercial and industrial

33

4

Total recoveries

63

14

Net charge-offs

(133

)

(1,028

)

Allowance for credit losses at end of year

$

1,034

$

1,162

Allowance for credit losses to non-performing loans

326.18

%

94.32

%

Allowance for credit losses to total loans outstanding

0.87

%

1.02

%

Net chargeoffs to average loans outstanding

0.12

%

-0.93

%

Allocation of Allowance for Credit Losses. The following table sets forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

At December 31,

2025

2024

Amount

Percent of

Allowance

to Total

Allowance

Percent of

Loans in

Category

to Total

Loans

Amount

Percent of

Allowance

to Total

Allowance

Percent of

Loans in

Category

to Total

Loans

Real estate loans

One-to-four family

$

312

30.2

%

29.5

%

$

471

40.5

%

28.8

%

Multifamily

7

0.7

%

3.4

%

10

0.9

%

4.2

%

Commercial

363

35.1

%

45.7

%

452

38.9

%

47.1

%

Construction and development

89

8.6

%

3.4

%

25

2.2

%

2.6

%

Farmland

6

0.6

%

3.7

%

7

0.6

%

3.4

%

Other loans

Consumer

88

8.5

%

3.8

%

90

7.7

%

5.1

%

Commercial and industrial

169

16.3

%

10.5

%

107

9.3

%

8.8

%

Total allocated allowance

$

1,034

100.0

%

100.0

%

$

1,162

100.0

%

100.0

%

Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for credit losses may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result. Furthermore, as an integral part of its examination process, the FDIC and the Illinois Division of Banking will periodically review our allowance for credit losses. As a result of such reviews, we may have to adjust our allowance for credit losses.

Investment Activities

General. Our board of directors is responsible for approving and overseeing our investment policy. The investment policy is reviewed at least annually by management and any changes to the policy are recommended to the board of directors and are subject to its approval. This policy dictates that investment decisions be made based on the safety of the investment, regulatory standards, liquidity requirements, potential returns and consistency with our interest rate risk management strategy. Our Investment and Finance Committee, which consists of our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Senior Vice President-Controller and Senior Vice President-Enterprise Risk, oversees our investing activities and strategies. All transactions are formally reviewed by the Capital Planning and Budget Committee of our board of directors at least quarterly.

Our current investment policy authorizes us to invest in debt securities issued by the United States Government, agencies of the United States Government or United States Government-sponsored enterprises. The policy also permits investments in mortgage-backed securities, including pass-through securities, issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, as well as investments in federal funds, deposits in other insured institutions and certain mutual funds. In addition, management is authorized to invest in investment grade state and municipal obligations, commercial paper and corporate debt obligations within regulatory parameters. We do not engage in any investment trading activities, nor do we purchase any mortgage derivative products, corporate junk bonds, and certain types of structured notes.

Generally accepted accounting principles require that, at the time of purchase, we designate a debt security as held-to-maturity, available-for-sale, or trading, depending on our ability and intent to hold such security. Debt securities designated as available for sale are reported at fair value, while debt securities designated as held to maturity are reported at amortized cost. All of our debt securities (other than certificates of deposit) are designated as available for sale.

One Year or Less

More than One Year

through Five Years

More than Five Years

through Ten Years

More than Ten Years

Totals

Weighted-

Weighted-

Weighted-

Weighted-

Weighted-

Amortized

Average

Amortized

Average

Amortized

Average

Amortized

Average

Amortized

Fair

Average

Cost

Yield

Cost

Yield

Cost

Yield

Cost

Yield

Cost

Value

Yield

(Dollars in thousands)

December 31, 2025

Available-for-sale

Municipal bonds,

taxable

$

—

0.00

%

$

5,214

1.77

%

$

2,186

1.78

%

$

—

0.00

%

$

7,400

$

6,680

1.77

%

Municipal bonds,

non-taxable

—

0.00

%

984

1.07

%

529

1.21

%

—

0.00

%

1,513

1,441

1.12

%

U.S. Government

agency securities

—

0.00

%

620

1.70

%

—

0.00

%

500

1.00

%

1,120

1,009

1.39

%

Residential mortgage-

backed securities

23

1.30

%

5,854

3.44

%

12,292

3.65

%

8,670

2.72

%

26,839

24,939

3.30

%

Collateralized mortgage

obligations

43

2.64

%

4,666

3.99

%

35,841

4.24

%

3,538

2.03

%

44,088

42,631

4.03

%

Total

$

66

2.17

%

$

17,338

2.89

%

$

50,848

3.96

%

$

12,708

2.46

%

$

80,960

$

76,700

3.49

%

For additional information regarding our investment securities portfolio, see Note 2 to the notes to consolidated financial statements.

Sources of Funds

General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We may also use borrowings, primarily Federal Home Loan Bank of Chicago advances, to supplement cash flow needs, as necessary. In addition, we receive funds from scheduled loan payments, loan prepayments, retained income and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Deposits. Our deposits are generated primarily from cannabis organizations, as well as residents, non-profit organizations and businesses within our market area. We offer a selection of deposit accounts, including savings accounts, demand deposit accounts, money market accounts and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. At December 31, 2025 we had no brokered deposits and at December 31, 2024, we had $10,000 of brokered deposits.

Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’ demands. Our ability to generate deposits is affected by the competitive market in which we operate, which includes numerous financial institutions of varying sizes offering a wide range of products. We believe that deposits, including those from CRBs, are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates.

The following table sets forth the distribution of total deposits by account type at the dates indicated. At December 31, 2025 and 2024, CRB-related deposits consisted solely of noninterest-bearing demand deposits.

At December 31,

2025

2024

Amount

Percent

Average Rate

Amount

Percent

Average Rate

Deposit type:

Non-interest bearing demand

$

69,092

35.2

%

0.00

%

$

72,602

36.4

%

0.00

%

Money market and demand

57,412

29.2

%

0.92

%

54,197

27.2

%

0.62

%

Savings

25,717

13.1

%

0.33

%

26,025

13.1

%

0.33

%

Certificates of deposit

44,284

22.5

%

3.82

%

46,548

23.3

%

3.89

%

$

196,505

100.0

%

1.17

%

$

199,372

100.0

%

1.12

%

As of December 31, 2025 and 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance), was $87.3 million and $82.5 million, respectively. In addition, as of December 31, 2025, the aggregate amount of all our uninsured certificates of deposit was $12.6 million. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.

At December 31, 2025, we had approximately 104 depositors with uninsured deposits, resulting in an average balance of uninsured deposits of approximately $840,000 per uninsured depositor. Total uninsured deposits as of December 31, 2025, consisted primarily of $53.0 million, or 60.7%, of noninterest-bearing demand deposits, $12.6 million, or 14.4%, of time deposits, and $21.8 million, or 24.9%, of interest-bearing deposits.

The following table sets forth the maturity of our uninsured certificates of deposit as of December 31, 2025.

At

December 31, 2025

Three months or less

$

1,266

Over three months through six months

4,212

Over six months through 12 months

6,605

Over 12 months

505

Total

$

12,588

Borrowings. We may obtain advances from the Federal Home Loan Bank of Chicago upon the security of our capital stock in the Federal Home Loan Bank of Chicago and certain of our mortgage loans. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. We had $35.0 million of advances from the Federal Home Loan Bank of Chicago outstanding at December 31, 2025, with a weighted-average interest rate of 4.02%, which were scheduled to mature in February 2026. At December 31, 2025, we had the ability to borrow approximately $31.6 million from the Federal Home Loan Bank of Chicago, and we also had the ability to borrow $3.0 million from a private bankers’ bank at that date.

Human Resources

As of December 31, 2025, we had 50 full-time employees and four part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.

The success of our business depends highly on our employees, who provide value to our customers and communities through their dedication to our business. We encourage and support the growth and development of our employees and, wherever possible, seek to fill open positions by promotion and transfer from within the organization. Continual learning and career development are advanced through internally developed training programs. We believe our ability to attract and retain employees is a key to our success and strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas.

Subsidiary Activities

Security Bank is the sole and wholly-owned subsidiary of Security Midwest Bancorp. Security Bank has two subsidiaries. SB Financial Services, Inc. is authorized to sell insurance and related products, and to engage in brokerage activities. Total assets of SB Financial Services, Inc. as of December 31, 2025 were $9,000. 510 Monroe Holdings, LLC, through its own subsidiaries, holds real estate owned through foreclosure or other proceedings. Total assets of 510 Monroe Holdings, LLC at December 31, 2025 were $729,000.

Regulation and Supervision

General. Security Bank is a savings bank organized under the laws of the State of Illinois. The lending, investment, and other business operations of Security Bank are governed by Illinois law and regulations, as well as applicable federal law and regulations, and Security Bank is prohibited from engaging in any operations not authorized by such laws and regulations. Security Bank is subject to extensive regulation, supervision and examination by the Illinois Division of Banking and the FDIC. This regulation and supervision establishes a comprehensive framework of activities in which an institution

may engage and is intended primarily for the protection of the FDIC’s deposit insurance fund and depositors, and not for the protection of security holders. Security Bank also is a member of and owns stock in the Federal Home Loan Bank of Chicago, which is one of the 11 regional banks in the Federal Home Loan Bank System.

Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; determine the adequacy of the allowance for credit losses for regulatory purposes; and establish the timing and amounts of insurance assessments and other fees. Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and other factors. The receipt of a less than satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution. A less than satisfactory rating may also prevent a financial institution, such as Security Bank or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Government agencies have the authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities, including our ability to acquire other financial institutions or expand our branch network.

As a bank holding company, Security Midwest Bancorp is required to comply with the rules and regulations of the Federal Reserve Board. It is required to file certain reports with the Federal Reserve Board and is subject to examination by and the enforcement authority of the Federal Reserve Board. Security Midwest Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Any change in applicable laws or regulations, whether by the Illinois Division of Banking, the FDIC, the Federal Reserve Board, the Illinois legislature or Congress, could have a material adverse impact on the operations and financial performance of Security Midwest Bancorp and Security Bank.

Set forth below is a brief description of material regulatory requirements that are or will be applicable to Security Bank and Security Midwest Bancorp. The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Security Bank and Security Midwest Bancorp.

Illinois Bank Regulation

Activity Powers. The Illinois Division of Banking regulates the internal organization of Security Bank, as well as our activities, including, deposit-taking, lending and investment. The basic authority for our activities is specified by Illinois law and by regulations, policies and directives issued by the Illinois Division of Banking. The FDIC also regulates many of the areas regulated by the Illinois Division of Banking, and federal law limits some of the authority that the Illinois Division of Banking grants to us.

Examination and Enforcement. The Illinois Division of Banking regularly examines state-chartered banks in such areas as reserves, loans, investments, management practices and other aspects of operations. Although the Illinois Division of Banking may accept the examinations and reports of the FDIC in lieu of its own examinations, the current practice is for the Illinois Division of Banking to conduct its own individual examinations. The Illinois Division of Banking may order any savings bank to discontinue any violation of law or unsafe or unsound business practice and may direct any director, trustee, officer, attorney or employee of a savings bank engaged in an objectionable activity, after the Illinois Division of Banking has ordered the activity to be terminated, to show cause at a hearing before the Illinois Division of Banking why such person should not be removed.

Loans-to-One Borrower Limitations. An Illinois-chartered savings bank generally may not make loans or extend credit to a single borrower and to entities related to the borrower in an aggregate amount that would exceed 25% of the savings bank’s total capital plus general loan loss reserves.

Loans to Security Bank’s Insiders. Illinois law provides that we may make loans to our executive officers and directors and greater than 10% stockholders in accordance with federal regulations, as discussed below.

Dividend Restrictions. Security Midwest Bancorp is a legal entity separate and distinct from its subsidiary, Security Bank. There are various legal and regulatory restrictions on the extent to which Security Bank can, among other things, finance or otherwise supply funds to Security Midwest Bancorp. Specifically, dividends from Security Bank will be a principal source of Security Midwest Bancorp’s cash funds and there are certain legal restrictions under Illinois law and regulations on the payment of dividends by state-chartered banks. The Illinois Division of Banking, the FDIC and the Federal Reserve Board also have authority to prohibit Security Midwest Bancorp and Security Bank from engaging in certain practices deemed to be unsafe and unsound. The payment of dividends could, depending upon the condition of Security Midwest Bancorp and Security Bank, be deemed to constitute an unsafe and unsound practice.

The Illinois Banking Code regulates the distribution of dividends by banks and states, in part, that dividends may be declared and paid only out of accumulated net earnings. In addition, we may not declare and pay dividends from the surplus funds that Illinois law requires that we maintain. Each year we will be required to set aside as surplus funds a sum equal to not less than 10% of our net earnings until the surplus funds equal 100% of our capital stock. We may invest surplus funds in the same manner as deposits, subject to certain exceptions. In addition, dividends may not be declared or paid if a bank is in default in payment of any assessment due to the FDIC.

Minimum Capital Requirements. Regulations of the Illinois Division of Banking impose on Illinois-chartered depository institutions, including Security Bank, minimum capital requirements similar to those imposed by the FDIC on insured state banks. See “—Federal Bank Regulation—Capital Requirements.”

Federal Bank Regulation

Capital Requirements. Federal regulations require FDIC-insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Security Bank exercised its AOCI opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential real estate loans, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements.

In assessing an institution’s capital adequacy, the FDIC takes into consideration, not only these numeric factors, but qualitative factors as well, including the bank’s exposure to interest rate risk. The FDIC has the authority to establish higher capital requirements for individual institutions where deemed necessary due to a determination that an institution’s capital level is, or is likely to become, inadequate in light of particular circumstances.

The federal banking agencies, including the FDIC, are required to establish for institutions with assets of less than $10 billion a “Community Bank Leverage Ratio” of between 8 to 10%. Institutions with capital meeting or exceeding the ratio and otherwise complying with the specified requirements (including off-balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing the alternative framework are considered to comply with the applicable regulatory capital requirements.

The community bank leverage ratio has been established at 9% Tier 1 capital to total average assets. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An institution that temporarily ceases to meet any qualifying criteria is provided a two-quarter grace period to again achieve compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable capital requirements. Security Bank does not currently use the community bank leverage ratio framework.

Standards for Safety and Soundness. As required by statute, the federal banking agencies adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement safety and soundness standards. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems, internal audit systems, credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. The agencies have also established standards for safeguarding customer information. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order and/or the imposition of civil money penalties.

Investment Activities. All FDIC-insured banks, including savings banks, are generally limited in their equity investment activities to equity investments of the type and in the amount authorized for national banks, notwithstanding state law, subject to certain exceptions. In addition, a state bank may engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if it meets all applicable capital requirements and it is determined by the FDIC that such activities or investments do not pose a significant risk to the Deposit Insurance Fund.

Interstate Banking and Branching. Federal law permits well capitalized and well managed holding companies to acquire banks in any state, subject to Federal Reserve Board approval, certain concentration limits and other specified conditions. Interstate mergers of banks are also authorized, subject to regulatory approval and other specified conditions. In addition, among other things, amendments made by the Dodd-Frank Act permit banks to establish de novo branches on an interstate basis provided that branching is authorized by the law of the host state for the banks chartered by that state.

Prompt Corrective Regulatory Action. Federal bank regulatory authorities are required to take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the regulations, a bank is deemed to be: (i) “well capitalized” if it has a total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based capital ratio of 8.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and a common equity Tier 1 ratio of 6.5% or more, and is not subject to any written capital order or directive; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a Tier 1 leveraged capital ratio of 4.0% or more and a common equity Tier 1 ratio of 4.5% or more, and does not meet the definition of “well capitalized”; (iii) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 6.0%, a Tier 1 leverage capital ratio that is less than 4.0%, or a common equity Tier 1 ratio of less than 4.5%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 4.0%, a Tier 1 leverage capital ratio that is less than 3.0%, or a common equity Tier 1 ratio of less than 3.0%; or (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

Security Bank was considered “well capitalized” for regulatory capital purposes as of December 31, 2025.

Federal law and regulations also specify circumstances under which a federal banking agency may reclassify a well-capitalized institution as adequately capitalized and may require an institution classified as less than well capitalized to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized).

The FDIC may order savings banks that have insufficient capital to take corrective actions. For example, a savings bank that is categorized as “undercapitalized” is subject to growth limitations and is required to submit a capital restoration plan, and a holding company that controls such a savings bank is required to guarantee that the savings bank complies with the restoration plan. A “significantly undercapitalized” savings bank may be subject to additional restrictions. Savings banks deemed by the FDIC to be “critically undercapitalized” would be subject to the appointment of a receiver or conservator.

Transactions with Affiliates and Regulation W of the Federal Reserve Board. Transactions between banks and their affiliates are governed by federal law. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank. In a holding company context, the parent bank holding company and any companies which are controlled by such parent holding company are affiliates of the bank (although subsidiaries of the bank itself, except financial subsidiaries, are generally not considered affiliates). Generally, Section 23A of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of such institution’s capital stock and surplus, and with all such transactions with all affiliates to an amount equal to 20.0% of such institution’s capital stock and surplus. Section 23B applies to “covered transactions” as well as to certain other transactions and requires that all such transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as those provided to a non-affiliate. The term “covered transaction” includes the making of loans to, purchase of assets from, and issuance of a guarantee to an affiliate, and other similar transactions. Section 23B transactions also include the provision of services and the sale of assets by a bank to an affiliate. In addition, loans or other extensions of credit by the financial institution to the affiliate are required to be collateralized in accordance with the requirements set forth in Section 23A of the Federal Reserve Act.

Loans to Insiders and Regulation O of the Federal Reserve Board. Sections 22(h) and (g) of the Federal Reserve Act and the Federal Reserve Board’s Regulation O place restrictions on loans to a bank’s insiders, i.e., executive officers, directors and principal stockholders. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% shareholder of a financial institution, and certain affiliated interests of these persons, together with all other outstanding loans to such person and affiliated interests, may not exceed specified limits. Section 22(h) of the Federal Reserve Act also requires that loans to directors, executive officers and principal stockholders be made on terms substantially the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans. In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.

Enforcement. The FDIC has extensive enforcement authority over insured state savings banks, including Security Bank. The enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations, breaches of fiduciary duty and unsafe or unsound practices.

Federal Insurance of Deposit Accounts. Security Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. Security Bank’s deposit accounts are insured by the FDIC, generally up to a maximum of $250,000 per depositor.

The FDIC imposes deposit insurance assessments against all insured depository institutions. An institution’s assessment rate depends upon the perceived risk of the institution to the Deposit Insurance Fund, with institutions deemed less risky paying lower rates. Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years. Assessment rates (inclusive of possible adjustments) currently range from 2.5 to 32 basis points of each institution’s total assets less tangible capital. The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking.

The FDIC has the authority to increase insurance assessments. A significant increase in insurance premiums would have an adverse effect on the operating expenses and results of operations of Security Bank. We cannot predict what deposit insurance assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of deposit insurance at Security Bank.

Brokered Deposits. Applicable law and FDIC regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution’s capital category is “well capitalized” or, upon application to and a waiver from the FDIC, “adequately capitalized.” Less-than-well-capitalized banks also are subject to restrictions on the interest rates that they may pay on deposits. The characterization of deposits as “brokered” may result in the imposition of higher deposit assessments on such deposits. As mandated by the Economic Growth Act, the FDIC’s brokered deposit regulations provide a limited exception for reciprocal deposits for banks that are well managed and well capitalized (or adequately capitalized and have obtained a waiver from the FDIC as mentioned above). Under the limited exception, qualified banks are able to exempt from treatment as “brokered” deposits up to $5 billion or 20% of the institution’s total liabilities in reciprocal deposits.

Privacy Regulations. Federal regulations generally require that Security Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter. In addition, Security Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. Security Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

Cyber Security. The federal banking agencies have adopted rules providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the rules require a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.

Community Reinvestment Act. Under the Community Reinvestment Act, or CRA, as implemented by federal regulations, a state nonmember bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FDIC, in connection with its examination of a state savings bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other financial institutions. The CRA requires a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Security Bank’s latest federal CRA rating was “Satisfactory.”

USA Patriot Act. Security Bank is subject to the USA PATRIOT Act, which gives federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. The USA PATRIOT Act contains provisions intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions impose affirmative obligations on a broad range of financial institutions, including banks and thrifts.

Other Regulations

Interest and other charges collected or contracted for by Security Bank are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to state and federal laws applicable to credit transactions, such as the:

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Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

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Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

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Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

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Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

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Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected; and

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Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws.

The deposit operations of Security Bank also are subject to, among others, the:

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Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

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Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and

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Electronic Fund Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Federal Reserve System

Under federal law and regulations, Security Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices. Regulation D, promulgated by the Federal Reserve Board, imposes reserve requirements on all depository institutions, including Security Bank, which maintain transaction accounts or non-personal time deposits. In 2020, due to a change in its approach to monetary policy due to COVID-19, the Federal Reserve Board implemented a final rule to amend Regulation D requirements and reduce reserve requirement ratios to zero. The Federal Reserve Board has indicated that it has no plans to re-impose reserve requirements, but may do so in the future if conditions warrant.

Federal Home Loan Bank System

Security Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. A Federal Home Loan Bank provides a central credit facility primarily for member institutions. Members of a Federal Home Loan Bank are required to acquire and hold shares of capital stock in the Federal Home Loan Bank. Security Bank was in compliance with this requirement at December 31, 2025. Based on redemption provisions of the Federal Home Loan Bank of Chicago, the stock has no quoted market value and is carried at cost. Security Bank reviews for impairment, based on the ultimate recoverability, the cost basis of the Federal Home Loan Bank of Chicago stock. As of December 31, 2025, no impairment had been recognized.

Holding Company Regulation

General. Security Midwest Bancorp is a bank holding company within the meaning of the Bank Holding Company Act of 1956. As such, Security Midwest Bancorp is registered with the Federal Reserve Board and be subject to the regulation, examination, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over Security Midwest Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

Permissible Activities. A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings association whose direct and indirect activities are limited to those permitted for bank holding companies.

A bank holding company that meets specified conditions, including being “well capitalized” and “well managed,” may opt to become a “financial holding company” and thereby engage in a broader array of financial activities than previously permitted. Such activities can include insurance underwriting and investment banking. A “financial holding company” may engage in a broader array of financial activities than permitted a typical bank holding company. Such activities can include insurance underwriting and investment banking. Security Midwest Bancorp has not elected “financial holding company” status.

Capital. Bank holding companies are subject to consolidated regulatory capital requirements, which have historically been similar to, though less stringent than, those of the FDIC for Security Bank. Federal legislation, however, required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. As a result, consolidated regulatory capital requirements identical to those applicable to the subsidiary banks generally apply to bank holding companies. However, the Federal Reserve Board has provided a “small bank holding company” exception to its consolidated capital requirements, and subsequent legislation and the related issuance of regulations by the Federal Reserve Board have increased the threshold for the exception to $3.0 billion of consolidated assets. Consequently, bank holding companies with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company regulatory capital requirements unless otherwise directed by the Federal Reserve Board. As a result, Security Midwest Bancorp will not be subject to the capital requirements until such time as its consolidated assets exceed $3.0 billion or unless otherwise directed by the Federal Reserve Board.

Source of Strength. The Federal Reserve Board has issued regulations requiring that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing financial, managerial and other support in times of an institution’s distress.

Dividends and Stock Repurchases. The Federal Reserve Board has issued a policy statement regarding the payment of dividends by holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition. Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

The regulatory guidance also states that a bank holding company should consult with Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the bank holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

There is a separate requirement that a bank holding company give the Federal Reserve Board prior written notice of any proposed purchase or redemption of then-outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.

These regulatory policies may affect the ability of Security Midwest Bancorp to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as Security Midwest Bancorp unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined under the Change in Bank

Control Act and its implementing regulations, means the power, directly or indirectly, to direct the management or policies of an insured depository institution, or the ownership, control, or holding with power to vote 25% or more of any class of voting stock. Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as is the case with Security Midwest Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

In addition, the Bank Holding Company Act prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the Federal Reserve Board. Among other circumstances, under the Bank Holding Company Act, a company has control of a bank or bank holding company if the company owns, controls or holds with power to vote 25% or more of a class of voting securities of the bank or bank holding company, controls in any manner the election of a majority of directors or trustees of the bank or bank holding company, or the Federal Reserve Board has determined, after notice and opportunity for hearing, that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company. The Federal Reserve Board has established presumptions of control under which the acquisition of control of 5% or more of a class of voting securities of a bank holding company, together with other factors enumerated by the Federal Reserve Board, could constitute the acquisition of control of a bank holding company for purposes of the Bank Holding Company Act.