SBMW 10-Q Quarterly Report June 30, 2025 | Alphaminr
Security Midwest Bancorp, Inc.
ALPHAMINR

SBMW 10-Q Quarter ended June 30, 2025

Balance Sheet
Cash Flow
Income Statement
SECURITY MIDWEST BANCORP, INC.
10-Q
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ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 000-56767

SECURITY MIDWEST BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland

99-4917712

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

510 E. Monroe

Springfield , Illinois

62701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: ( 217 ) 789-3500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of August 4, 2025, the registrant had 889,781 shares of common stock outstanding.

Table of Contents

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Income

2

Condensed Consolidated Statements of Comprehensive Income

3

Condensed Consolidated Statements of Equity

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

41

PART II.

OTHER INFORMATION

42

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Defaults Upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

Signatures

44

i

EXPLANATORY NOTE

Security Midwest Bancorp, Inc. (the “Company,” “we” or “us”) was incorporated on September 11, 2024, to serve as the bank holding company for Security Bank (“Security” or the “Bank”) upon the consummation of the Bank’s conversion from the mutual form of organization to the stock form of organization. As of June 30, 2025, the conversion had not yet been consummated, and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the financial statements and related notes and the other financial information contained in this report relate primarily to the Bank.

The unaudited, consolidated financial statements and other financial information contained in this report should be read in conjunction with the Bank’s audited, consolidated financial statements and related notes as of and for each of the years ended December 31, 2024 and 2023, contained in the Company’s definitive prospectus dated May 14, 2025, filed with the Securities and Exchange Commission.

ii

PART I—FINANCIA L INFORMATION

Item 1. Financi al Statements.

Security Bank, s.b. and Subsidiaries

Condensed Consoli dated Balance Sheets

June 30,

December 31,

Assets

2025

2024

(Unaudited)

Cash on hand

$

2,749,860

$

4,109,800

Due from banks

45,835,793

39,033,504

Federal funds sold

273,000

397,000

Cash and cash equivalents

48,858,653

43,540,304

Held-to-maturity securities

245,000

980,144

Available-for-sale securities

44,253,709

45,412,339

Loans receivable

112,840,528

114,210,342

Allowance for credit losses

( 1,149,087

)

( 1,162,211

)

Loans, net

111,691,441

113,048,131

Federal Home Loan Bank stock

697,500

697,500

Premises and equipment, net

2,884,042

2,909,534

Accrued interest receivable

649,059

710,199

Mortgage servicing rights, net

327,178

325,761

Deferred tax assets, net

2,400,094

2,965,633

Bank owned life insurance

2,272,018

2,237,215

Other assets

2,093,596

1,714,331

Total assets

$

216,372,290

$

214,541,091

Liabilities and Equity

Liabilities

Deposits

Demand

$

127,583,462

$

126,798,670

Savings

25,705,396

26,025,186

Time

42,190,482

46,548,168

Total deposits

195,479,340

199,372,024

Stock subscription proceeds in escrow

4,599,937

—

Advances from borrowers for taxes and insurance

406,881

356,424

Accrued expenses and other liabilities

370,122

861,159

Total liabilities

200,856,280

200,589,607

Equity

Retained earnings

19,423,418

18,672,325

Accumulated other comprehensive loss

( 3,907,408

)

( 4,720,841

)

Total equity

15,516,010

13,951,484

Total liabilities and equity

$

216,372,290

$

214,541,091

See Notes to Condensed Consolidated Financial Statements

1

Security Bank, s.b. and Subsidiaries

Condensed Consolidated Stat ements of Income

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2025

2024

2025

2024

Interest Income

Loans

$

1,835,976

$

1,603,064

$

3,631,427

$

3,161,123

Investment securities

295,811

351,021

605,088

693,974

Interest-bearing deposits and other

329,660

483,115

758,771

923,947

Total interest income

2,461,447

2,437,200

4,995,286

4,779,044

Interest Expense

Deposits

547,016

772,560

1,119,100

1,378,603

Federal Home Loan Bank advances

—

1

33

3,301

Total interest expense

547,016

772,561

1,119,133

1,381,904

Net Interest Income

1,914,431

1,664,639

3,876,153

3,397,140

Provision for Credit Losses

8,750

( 45,000

)

8,750

—

Net Interest Income After Provision for Credit Losses

1,905,681

1,709,639

3,867,403

3,397,140

Noninterest Income

Service fees on deposits

258,599

268,472

501,163

524,719

Debit card fees

102,550

103,906

196,055

208,629

Mortgage loan servicing fees, net

26,453

32,465

59,409

68,857

Gain on sale of loans

37,085

3,361

73,503

19,225

Other noninterest income

76,456

37,290

125,868

77,219

Total noninterest income

501,143

445,494

955,998

898,649

Noninterest Expense

Salaries and employee benefits

1,116,091

979,937

2,235,299

2,021,629

Occupancy and equipment

150,412

147,014

299,130

274,667

Data processing fees

145,610

142,988

296,268

277,841

FDIC insurance premiums

26,500

36,000

50,853

63,000

Advertising

50,623

41,090

93,833

64,007

Directors fees

24,099

23,150

48,199

49,150

Debit card expense

25,020

18,935

35,785

37,329

Professional fees

188,452

169,485

292,257

315,926

Telephone and internet

36,454

32,194

71,694

65,359

Other

175,144

195,191

362,606

386,964

Total noninterest expense

1,938,405

1,785,984

3,785,924

3,555,872

Income before income taxes

468,419

369,149

1,037,477

739,917

Provision for income taxes

118,871

102,893

286,384

203,358

Net Income

$

349,548

$

266,256

$

751,093

$

536,559

See Notes to Condensed Consolidated Financial Statements

2

Security Bank, s.b. and Subsidiaries

Condensed Consolidated Statements of Compre hensive Income

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2025

2024

2025

2024

Net income

$

349,548

$

266,256

$

751,093

$

536,559

Other comprehensive (loss) income:

Net unrealized gains (losses) on available-for-sale securities

53,310

300,899

1,137,670

( 181,594

)

Tax (expense) benefit

( 15,194

)

( 85,757

)

( 324,237

)

51,754

Other comprehensive income (loss)

38,116

215,142

813,433

( 129,840

)

Comprehensive income

$

387,664

$

481,398

$

1,564,526

$

406,719

See Notes to Condensed Consolidated Financial Statements

3

Security Bank, s.b. and Subsidiaries

Condensed Consoli dated Statements of Equity

(Unaudited)

Accumulated

Other

Retained

Comprehensive

Earnings

Income (Loss)

Total

Balance at April 1, 2025

$

19,073,870

$

( 3,945,524

)

$

15,128,346

Net income

349,548

—

349,548

Other comprehensive income

—

38,116

38,116

Balance at June 30, 2025

$

19,423,418

$

( 3,907,408

)

$

15,516,010

Balance at January 1, 2025

$

18,672,325

$

( 4,720,841

)

$

13,951,484

Net income

751,093

—

751,093

Other comprehensive income

—

813,433

813,433

Balance at June 30, 2025

$

19,423,418

$

( 3,907,408

)

$

15,516,010

Balance at April 1, 2024

$

18,259,645

$

( 4,881,240

)

$

13,378,405

Net income

266,256

—

266,256

Other comprehensive income

—

215,142

215,142

Balance at June 30, 2024

$

18,525,901

$

( 4,666,098

)

$

13,859,803

Balance at January 1, 2024

$

17,989,342

$

( 4,536,258

)

$

13,453,084

Net income

536,559

—

536,559

Other comprehensive loss

—

( 129,840

)

( 129,840

)

Balance at June 30, 2024

$

18,525,901

$

( 4,666,098

)

$

13,859,803

See Notes to Condensed Consolidated Financial Statements

4

Security Bank, s.b. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended

June 30,

2025

2024

Operating Activities

Net income

$

751,093

$

536,559

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

108,410

106,661

Amortization of premiums and discounts

143,625

148,928

Accretion of deferred loan origination fees, net

( 31,084

)

( 2,524

)

Amortization of mortgage servicing rights

26,181

17,269

Deferred income taxes

241,302

186,194

Provision for credit losses

8,750

—

Gain on sale of loans

( 73,503

)

( 19,225

)

Proceeds from sale of loans

3,725,288

1,088,147

Origination of loans held for sale

( 3,679,383

)

( 1,077,000

)

Increase in cash surrender value of life insurance

( 34,803

)

( 32,941

)

Changes in:

Accrued interest receivable

61,140

98,591

Other assets

( 374,765

)

( 1,383

)

Accrued expenses and other liabilities

( 500,787

)

( 303,125

)

Net cash provided by operating activities

371,464

746,151

Investing Activities

Proceeds from maturities of held-to-maturity securities

735,000

986,000

Proceeds from paydowns of mortgage-backed securities

1,242,819

1,019,630

Proceeds from calls and maturities of available-for-sale securities

910,000

—

Net change in loans

1,384,274

660,313

Purchase of premises and equipment

( 82,918

)

( 80,490

)

Net cash provided by investing activities

4,189,175

2,585,453

Financing Activities

Net (decrease) increase in deposit accounts

( 3,892,684

)

26,353,100

Repayment of FHLB advances

—

( 10,500,000

)

Proceeds from stock subscriptions in escrow

4,599,937

—

Net change in advances by borrowers for taxes and insurance

50,457

6,336

Net cash provided by financing activities

757,710

15,859,436

Increase in Cash and Cash Equivalents

5,318,349

19,191,040

Cash and Cash Equivalents, Beginning of Period

43,540,304

33,810,148

Cash and Cash Equivalents, End of Period

$

48,858,653

$

53,001,188

Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:

Interest on deposits and borrowings

$

1,139,088

$

1,427,017

Income taxes

—

—

Supplemental Disclosure of Noncash Investing Activities

Transfers from loans to real estate acquired through foreclosure

$

4,500

$

220,329

See Notes to Condensed Consolidated Financial Statements

5

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1: Nat ure of Operations and Summary of Significant Accounting Policies

Organization and Nature of Operations

Security Bank, s.b. (the “Bank”) is a state-chartered mutual savings bank engaged primarily in the business of making residential mortgage loans and accepting deposits. Its operations are conducted through its three offices located in Springfield, Illinois. The Bank faces competition from other financial institutions and is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

The Bank has two wholly owned subsidiaries: SB Financial Services, Inc. and 510 Monroe Holdings, LLC. SB Financial Services, Inc. sells insurance, on an agency basis, and related products, and also has a brokerage business. 510 Monroe Holdings, LLC was formed for the purpose of holding real estate acquired through foreclosure or other proceedings.

The consolidated financial statements included herein as of June 30, 2025, and for the interim three-and six month periods ended June 30, 2025 and 2024 are unaudited. The unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in the opinion of management, contains all normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations, changes in equity and cash flows as of and for the periods presented. Such adjustments are the only adjustments contained in the consolidated financial statements.

The accompanying unaudited, consolidated financial statements and related notes should be read in conjunction with the audited annual consolidated financial statements and the notes thereto included in the prospectus dated May 14, 2025, as filed by Security Midwest Bancorp, Inc. with the Securities and Exchange Commission on May 22, 2025.

Principles of Consolidation

The consolidated financial statements include the accounts of Security Bank, s.b. and its wholly owned subsidiaries, SB Financial Services, Inc. and 510 Monroe Holdings, LLC. All significant intercompany accounts, transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and fair values of financial instruments.

Investment Securities

Held-to-maturity securities consist of certificates of deposit that management has the intent and ability to hold to maturity. Held-to-maturity securities are carried at amortized cost. Investment securities classified and accounted for as available for sale may be sold prior to maturity for asset/liability management purposes or may be sold in response to changes in interest rates or changes in prepayment risk, and to increase regulatory capital or other similar factors. Available-for-sale securities are carried at fair value with any adjustments to fair value, after tax, reported in other comprehensive income (loss). The Bank had no securities held for trading purposes as of June 30, 2025 and December 31, 2024.

6

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities, identified as the call date as to premiums and the maturity date as to discounts. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Bank’s accounting treatment for a credit-related impairment, when the fair value of securities is below amortized cost, is set forth within this Note 1 at Allowance for Credit Losses .

The Bank recognized no credit-related impairments on debt securities during the six months ended June 30, 2025 and the year ended December 31, 2024 .

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net unrealized losses are recognized through a valuation allowance by charges to income. The Bank had no loans held for sale at June 30, 2025 and December 31, 2024 .

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for unearned income, charge-offs net of recoveries, the allowance for credit losses and any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan. For all loan portfolio segments except residential and consumer loans, the Bank promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Bank charges-off residential and consumer loans, or portions thereof, when management reasonably determines the amount of the loss. The Bank adheres to delinquency thresholds established by applicable regulatory guidance to determine the charge-off timeframe for these loans.

Loans at these delinquency thresholds for which the Bank can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Bank requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on collateral dependent loans in each loan class, the Bank records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal

7

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

balance of the loan. Loans restructured due to financial difficulties of the borrower recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

Allowance for Credit Losses

The allowance for credit losses is established as losses are estimated to have occurred through a provision for credit losses charged to income. Credit losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The Bank accounts for the allowance for credit losses in accordance with Accounting Standards Update (ASU) No. 2016-13 Financial Instruments—Credit Losses (Topic 326) . ASC 326 requires a “current expected credit loss” (CECL) methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broad range of information to estimate credit losses. ASC 326 requires an estimate of all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also applies to off-balance sheet credit exposures, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments.

Held-to-maturi ty securities

Expected credit losses on held-to-maturity securities are measured on a collective basis by security type. Accrued interest receivable on held-to-maturity securities totaled approximately $ 0 and $ 3,000 at June 30, 2025 and December 31, 2024 , respectively, and is included within accrued interest receivable on the balance sheet. This amount is excluded from the estimate of expected credit losses. The held-to-maturity securities portfolio consists solely of certificates of deposit in other financial institutions. The estimate of credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management concluded that no allowance for credit losses was required on held-to-maturity securities at June 30, 2025 and December 31, 2024.

Available-for-sale securities

For available for sale securities in an unrealized loss position, the Bank first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available-for-sale that do not meet the above criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Bank considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of tax. The Bank elected to use zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses. Management concluded that no allowance for credit losses was required on available-for-sale securities at June 30, 2025 and December 31, 2024.

8

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Accrued interest receivable on available-for-sale securities totaled approximately $ 166,000 and $ 180,000 at June 30, 2025 and December 31, 2024, respectively, and is included within accrued interest receivable on the balance sheet. This amount is excluded from the estimate of expected credit losses.

Loans

The allowance for credit losses (ACL) is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management’s determination of the adequacy of the ACL is based on the assessment of the expected credit losses on loans over the expected life of the loan. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged off and expected to be charged off. The Bank made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses. Accrued interest receivable on loans totaled approximately $ 477,000 and $ 521,000 at June 30, 2025 and December 31, 2024, respectively, and is included within accrued interest receivable on the balance sheet. Management estimates the ACL 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. The Bank adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the qualitative factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Bank uses the average historical loss method to measure the quantitative portion of the ACL over four-quarter forecast and four-quarter 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 management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for estimated selling costs as appropriate.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual borrower experiencing financial difficulties, or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Bank.

Unfunded Commitments

The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Bank. The ACL on unfunded commitments is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the related ACL methodology. The allowance for credit losses on unfunded commitments is included within accrued expenses and other liabilities on the consolidated balance sheets.

Income Taxes

The Bank accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes ). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Bank determines deferred income taxes using the liability (or balance sheet) method. Under this

9

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any.

A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

Note 2 Securities

The amortized cost and fair values, together with gross unrealized gains and losses of securities, are as follows:

Amortized Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Held-to-Maturity Securities:

June 30, 2025

Certificates of deposit

$

245,000

$

—

$

( 2,362

)

$

242,638

December 31, 2024

Certificates of deposit

$

980,144

$

—

$

( 11,737

)

$

968,407

Amortized Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Available-for-sale Securities:

June 30, 2025

Municipal bonds, taxable

$

7,640,576

$

—

$

( 939,324

)

$

6,701,252

Municipal bonds, non-taxable

1,782,989

—

( 96,657

)

1,686,332

U.S. Government treasuries

7,997,214

—

( 552,944

)

7,444,270

U.S. Government agencies

1,137,958

—

( 144,446

)

993,512

Residential mortgage-backed securities

16,728,569

27,545

( 2,219,533

)

14,536,581

Collateralized mortgage obligations

14,431,309

—

( 1,539,547

)

12,891,762

$

49,718,615

$

27,545

$

( 5,492,451

)

$

44,253,709

10

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Amortized Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Available-for-sale Securities:

December 31, 2024

Municipal bonds, taxable

$

8,021,120

$

—

$

( 1,108,722

)

$

6,912,398

Municipal bonds, non-taxable

2,338,983

—

( 118,010

)

2,220,973

U.S. Government treasuries

7,996,739

—

( 738,449

)

7,258,290

U.S. Government agencies

1,157,342

—

( 175,751

)

981,591

Residential mortgage-backed securities

17,444,497

—

( 2,564,667

)

14,879,830

Collateralized mortgage obligations

15,056,234

—

( 1,896,977

)

13,159,257

$

52,014,915

$

—

$

( 6,602,576

)

$

45,412,339

The amortized cost and fair value of securities at June 30, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:

Amortized

Fair

Cost

Value

June 30, 2025

Available-for-sale

Within one year

$

485,000

$

484,302

One to five years

12,008,464

11,161,201

Five to ten years

5,565,273

4,776,928

After ten years

500,000

402,935

18,558,737

16,825,366

Mortgage-backed securities

31,159,878

27,428,343

Totals

$

49,718,615

$

44,253,709

Amortized

Fair

Cost

Value

June 30, 2025

Held-to-maturity

Within one year

$

245,000

$

242,638

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately $ 12.5 million and $ 13.1 million at June 30, 2025 and December 31, 2024, respectively.

The Company had no sales of investment securities during the six months ended June 30, 2025 and 2024.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Based on evaluation of available evidence, including recent changes in market interest rates and information obtained from regulatory filings, management believes the declines in fair value for these securities are not attributable to credit related events.

11

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

The following table shows the number of securities and aggregate depreciation from the Bank’s amortized cost basis at June 30, 2025 and December 31, 2024.

June 30, 2025

December 31, 2024

Number of

Aggregate

Number of

Aggregate

Description of Securities

securities

depreciation

securities

depreciation

Available-for-sale Securities:

Municipal bonds, taxable

15

( 12.3

)%

16

( 13.8

)%

Municipal bonds, non-taxable

5

( 5.4

)%

7

( 5.0

)%

U.S. Government treasuries

2

( 6.9

)%

2

( 9.2

)%

U.S. Government agencies

4

( 12.7

)%

4

( 15.2

)%

Residential mortgage-backed securities

59

( 16.5

)%

61

( 14.7

)%

Collateralized mortgage obligations

14

( 10.7

)%

14

( 12.6

)%

Total

99

( 11.8

)%

104

( 12.5

)%

Should of any of these securities experience credit related impairment, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the credit-related impairment is identified.

The following tables show the Bank’s investments’ gross unrealized losses and fair value of the Bank’s investments with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2025 and December 31, 2024:

June 30, 2025

Less than 12 Months

12 Months or More

Total

Description of Securities

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Available-for-sale Securities:

Municipal bonds, taxable

$

—

$

—

$

6,701,252

$

( 939,324

)

$

6,701,252

$

( 939,324

)

Municipal bonds, non-taxable

—

—

1,686,332

( 96,657

)

1,686,332

( 96,657

)

U.S. Government treasuries

—

—

7,444,270

( 552,944

)

7,444,270

( 552,944

)

U.S. Government agencies

—

—

993,512

( 144,446

)

993,512

( 144,446

)

Residential mortgage-backed securities

—

—

11,198,670

( 2,219,533

)

11,198,670

( 2,219,533

)

Collateralized mortgage obligations

—

—

12,891,763

( 1,539,547

)

12,891,763

( 1,539,547

)

$

—

$

—

$

40,915,799

$

( 5,492,451

)

$

40,915,799

$

( 5,492,451

)

December 31, 2024

Less than 12 Months

12 Months or More

Total

Description of Securities

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Available-for-sale Securities:

Municipal bonds, taxable

$

—

$

—

$

6,912,398

$

( 1,108,722

)

$

6,912,398

$

( 1,108,722

)

Municipal bonds, non-taxable

—

—

2,220,973

( 118,010

)

2,220,973

( 118,010

)

U.S. Government treasuries

—

—

7,258,290

( 738,449

)

7,258,290

( 738,449

)

U.S. Government agencies

—

—

981,591

( 175,751

)

981,591

( 175,751

)

Residential mortgage-backed securities

1,528,223

( 38,095

)

13,351,607

( 2,526,572

)

14,879,830

( 2,564,667

)

Collateralized mortgage obligations

—

—

13,159,257

( 1,896,977

)

13,159,257

( 1,896,977

)

$

1,528,223

$

( 38,095

)

$

43,884,116

$

( 6,564,481

)

$

45,412,339

$

( 6,602,576

)

U. S. Government Treasuries, U.S. Government Agencies, and Municipal Bonds

Unrealized losses on these securities have not been recognized into income because the issuers' bonds are of high credit quality, values have only been impacted by changes in interest rates since the securities were purchased, and the Bank does not intend to sell the

12

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

investments and it is not more likely than not the Bank will be required to sell the investments before recovery of their amortized cost basis. The fair value is expected to recover as the bonds approach the maturity date.

Mortgage-backed Securities and Collateralized Mortgage Obligations

The unrealized losses on the Bank’s investment in residential mortgage-backed securities and collateralized mortgage obligations were caused by changes in interest rates and illiquidity. The Bank expects to recover the amortized cost basis over the term of the securities. The decline in market value is attributable to changes in interest rates and illiquidity, not credit quality, and the Bank does not intend to sell the investments and it is not more likely than not the Bank will be required to sell the investments before recovery of their amortized cost basis. The fair value is expected to recover as the securities approach the maturity date.

Certificates of Deposit

Unrealized losses on these certificates of deposit have not been recognized into income because the issuers of the certificates are of high credit quality, values have only been impacted by changes in interest rates since the certificates were purchased, and the Bank does not intend to sell the certificates and it is not more likely than not the Bank will be required to sell the certificates before recovery of their amortized cost basis. The fair value is expected to recover as the certificates approach the maturity date.

Note 3: Loans and Allowance for Credit Losses

Categories of loans include:

June 30,

December 31,

2025

2024

Real Estate Loans:

1-4 Family, including construction

$

32,646,935

$

32,972,685

Multifamily

4,555,916

4,833,934

Commercial

52,668,702

53,885,284

Construction and development

3,815,288

2,961,682

Farmland

4,050,803

3,843,489

Other Loans:

Consumer

5,110,535

5,812,120

Commercial and industrial

10,165,370

10,043,504

Total loans

113,013,549

114,352,698

Allowance for credit losses

( 1,149,087

)

( 1,162,211

)

Deferred loan fees, net

( 220,133

)

( 200,384

)

Unearned dealer interest

47,112

58,028

Net loans

$

111,691,441

$

113,048,131

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were approximately $ 68,998,000 and $ 69,596,000 at June 30, 2025 and December 31, 2024, respectively.

The Bank provides residential, commercial and consumer loans primarily to residents and businesses located in central Illinois. Such loans originated in other geographical areas amounted to approximately $ 18,784,000 and $ 17,973,000 , or approximately 16.6 % and 15.7 % of the gross loan balances at June 30, 2025 and December 31, 2024, respectively. A substantial portion of the Bank’s borrowers ability to honor their contracts is dependent on economic conditions and the specific economy in the respective geographic areas.

Risk characteristics of each loan portfolio segment are described as follows:

13

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Residential Real Estate

These loans include first liens and junior liens on 1-4 family residential real estate (both owner and non-owner occupied). One-to four family residential loans generally carry less risk than other loan types as they tend to be smaller balance loans, without concentrations, to a single borrower or group of borrowers. Repayment depends on the individual borrower’s capacity. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Bank’s market area.

Multifami ly Real Estate

These loans include loans on residential real estate secured by property with five or more units. Multifamily real estate loans generally involve a greater degree of credit risk than one-to-four family residential real estate loans due to the reliance on the successful operation of the project. The main risks are changes in the value of the collateral, ability of borrowers to collect rents, vacancy and changes in the tenants’ employment status. Management specifically considers unemployment and changes in real estate values in the Bank’s market area.

Commercial Real Estate

These loans consist of non-farm and non-residential real estate. Although terms vary, commercial real estate loans generally have amortization periods of 15 to 25 years, as well as balloon payments of two to five years , and terms which provide that the interest rates thereon may be adjusted annually at the Bank’s discretion, based on a designated index and the credit risk of the borrower. Commercial real estate loans generally have greater credit risks compared to one-to-four family residential real estate loans, as they usually involve larger loan balances secured by non-homogeneous or specific-use properties. Repayment of these loans typically relies on the successful operation of a business or the generation of lease income by the property and is therefore more sensitive to adverse conditions in the economy and real estate market.

Construction and Development Real Estate

These loans include construction loans for 1-4 family residential and commercial properties (both owner and non-owner occupied) and first liens on land. Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user. In the event that a loan is made on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. Construction loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs. Construction real estate loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index.

Farmland Real Estate

These loans include loans on farm ground and land known to be used or usable for agricultural purposes, such as crop or livestock production. Repayment of these loans typically relies on the successful operation of a business. This loan type is sensitive to adverse economic conditions.

Commercial and Industrial

The commercial and industrial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The Bank’s commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment, machinery and other business assets. Repayment is directly dependent on the successful operation of the borrower’s business and the borrower’s ability to convert the assets to operating revenue and possess greater risk than most other types of loans should the repayment capacity of the borrower not be adequate.

14

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Consumer Loans

These loans include vehicle loans, share loans and unsecured loans. Other loans consist of single-pay personal loans, including overdraft accounts and other small miscellaneous loans. Consumer loans tend to carry more risk than real estate loans; however, they tend to be smaller balance loans without concentrations to a single borrower or group of borrowers. Loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

The following tables present the activity in and balances of the allowance for credit losses by portfolio segment as of June 30, 2025 and 2024 and for the three and six months ended June 30, 2025 and 2024 and as of and for the year ended December 31, 2024:

Provision for

Three Months Ended

April 1,

(recovery of)

June 30,

June 30, 2025

2025

credit losses

Charge-offs

Recoveries

2025

Real Estate Loans:

1-4 Family, including construction

$

453,896

$

( 10,499

)

$

( 69

)

$

—

$

443,328

Multifamily

8,610

( 255

)

—

—

8,355

Commercial

433,234

( 36,139

)

( 3,269

)

23,863

417,689

Construction and development

37,663

53,526

—

—

91,189

Farmland

5,636

1,340

—

—

6,976

Other Loans:

Consumer

79,187

( 5,374

)

( 195

)

1,132

74,750

Commercial and industrial

107,634

( 2,599

)

—

1,765

106,800

Total allowance for credit losses
on loans

1,125,860

—

( 3,533

)

26,760

1,149,087

Allowance for credit losses on
unfunded comitments

23,950

8,750

—

—

32,700

Total allowance for credit losses

$

1,149,810

$

8,750

$

( 3,533

)

$

26,760

$

1,181,787

Provision for

Three Months Ended

April 1,

(recovery of)

June 30,

June 30, 2024

2024

credit losses

Charge-offs

Recoveries

2024

Real Estate Loans:

1-4 Family, including construction

$

537,662

$

( 22,345

)

$

( 12,155

)

$

4,324

$

507,486

Multifamily

12,306

( 450

)

—

—

11,856

Commercial

1,277,735

( 41,947

)

( 754,110

)

—

481,678

Construction and development

55,945

4,876

—

—

60,821

Farmland

7,641

( 760

)

—

—

6,881

Other Loans:

Consumer

110,181

6,490

—

300

116,971

Commercial and industrial

207,498

2,136

( 39,005

)

896

171,525

Total allowance for credit losses
on loans

2,208,968

( 52,000

)

( 805,270

)

5,520

1,357,218

Allowance for credit losses on
unfunded comitments

15,000

7,000

—

—

22,000

Total allowance for credit losses

$

2,223,968

$

( 45,000

)

$

( 805,270

)

$

5,520

$

1,379,218

15

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Provision for

Six Months Ended

January 1,

(recovery of)

June 30,

June 30, 2025

2025

credit losses

Charge-offs

Recoveries

2025

Real Estate Loans:

1-4 Family, including construction

$

471,164

$

( 14,962

)

$

( 12,874

)

$

—

$

443,328

Multifamily

10,150

( 1,795

)

—

—

8,355

Commercial

452,406

( 51,957

)

( 6,623

)

23,863

417,689

Construction and development

24,529

66,660

—

—

91,189

Farmland

6,838

138

—

—

6,976

Other Loans:

Consumer

90,013

12,235

( 28,630

)

1,132

74,750

Commercial and industrial

107,111

( 11,319

)

—

11,008

106,800

Total allowance for credit losses
on loans

1,162,211

( 1,000

)

( 48,127

)

36,003

1,149,087

Allowance for credit losses on
unfunded comitments

22,950

9,750

—

—

32,700

Total allowance for credit losses

$

1,185,161

$

8,750

$

( 48,127

)

$

36,003

$

1,181,787

Provision for

Six Months Ended

January 1,

(recovery of)

June 30,

June 30, 2024

2024

credit losses

Charge-offs

Recoveries

2024

Real Estate Loans:

1-4 Family, including construction

$

523,626

$

( 11,716

)

$

( 12,155

)

$

7,731

$

507,486

Multifamily

12,081

( 225

)

—

—

11,856

Commercial

1,245,891

( 10,103

)

( 754,110

)

—

481,678

Construction and development

48,539

12,282

—

—

60,821

Farmland

7,525

( 644

)

—

—

6,881

Other Loans:

Consumer

114,952

( 159

)

( 157

)

2,335

116,971

Commercial and industrial

205,569

4,065

( 39,005

)

896

171,525

Total allowance for credit losses
on loans

2,158,183

( 6,500

)

( 805,427

)

10,962

1,357,218

Allowance for credit losses on
unfunded comitments

15,500

6,500

—

—

22,000

Total allowance for credit losses

$

2,173,683

$

—

$

( 805,427

)

$

10,962

$

1,379,218

Provision for

January 1,

(recovery of)

December 31,

December 31, 2024

2024

credit losses

Charge-offs

Recoveries

2024

Real Estate Loans:

1-4 Family, including construction

$

523,626

$

( 47,968

)

$

( 12,225

)

$

7,731

$

471,164

Multifamily

12,081

( 1,931

)

—

—

10,150

Commercial

1,245,891

( 32,747

)

( 760,738

)

—

452,406

Construction and development

48,539

( 24,010

)

—

—

24,529

Farmland

7,525

( 687

)

—

—

6,838

Other Loans:

—

Consumer

114,952

( 17,153

)

( 10,121

)

2,335

90,013

Commercial and industrial

205,569

156,180

( 258,693

)

4,055

107,111

Total allowance for credit losses
on loans

2,158,183

31,684

( 1,041,777

)

14,121

1,162,211

Allowance for credit losses on
unfunded comitments

15,500

7,450

—

—

22,950

Total allowance for credit losses

$

2,173,683

$

39,134

$

( 1,041,777

)

$

14,121

$

1,185,161

16

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Information regarding the credit quality indicators most closely monitored, for other than residential real estate loans, by class as of June 30, 2025 and December 31, 2024, is as follows:

The Bank evaluates consumer and one-to-four family residential loans based on the delinquency status of each loan. Generally, the likelihood of loss for consumer and residential loans increases as the loan becomes more delinquent; therefore, management has established the delinquency status of consumer and residential loans as the primary credit quality indicator. In addition to monitoring delinquency status, certain substandard non-owner occupied one-to-four family residential loans are evaluated and categorized into the risk categories listed below based on relevant information about the ability of borrowers to service their debt.

The Bank categorizes all other loans into the following risk categories based on relevant information about the ability of borrowers to service their debt. During 2024, management revised the risk ratings by changing a risk rating of 5 from a pass rating to the special mention category; by changing a risk rating of 6 from special mention to a substandard rating; by changing a risk rating of 7 from substandard to a doubtful rating, and by changing a risk rating of 8 from doubtful to a loss rating.

Pass (risk rating 1 – 4) – A pass asset is well protected by the current worth and paying capacity of the obligator (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Pass assets also include certain assets considered watch, which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring.

Special Mention (risk rating 5) – A special mention asset has potential weaknesses that deserve management’s close attention. The asset may also be subject to a weak or speculative market or to economic conditions, which may, in the future, adversely affect the obligator. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard (risk rating 6) – A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt. These credits are inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged. These assets are characterized by the distinct possibility that the Bank will sustain some loss of principal and/or interest if the deficiencies are not corrected. It is not necessary for a loan to have an identifiable loss potential in order to receive this rating.

Doubtful (risk rating 7) – An asset that has all the weaknesses inherent in the substandard classification, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely likely, but it is not identified at this point due to pending factors.

Loss (risk rating 8) – An asset, or portion thereof, classified as loss is considered uncollectible and of such little value that its continuance on the Bank’s books as an asset is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. As such, it is not practical or desirable to defer the write-off.

17

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Information regarding the credit quality indicators most closely monitored for other than residential real estate and consumer loans by class as of June 30, 2025 and December 31, 2024, is as follows:

Amortized Cost Basis by Origination Year

2025

2024

2023

2022

2021

Prior

Total

June 30, 2025

Real Estate Loans:

Multifamily:

Risk Rating

Satisfactory

$

—

$

—

$

—

$

1,512,961

$

2,727,923

$

315,032

$

4,555,916

Special Mention

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

Total Multifamily Loans

$

—

$

—

$

—

$

1,512,961

$

2,727,923

$

315,032

$

4,555,916

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Commercial

Risk Rating

Satisfactory

$

418,126

$

16,143,540

$

16,543,165

$

4,736,067

$

1,958,979

$

7,718,998

$

47,518,875

Special Mention

—

177,746

191,306

1,083,186

606,621

649,854

2,708,713

Substandard

—

—

—

—

—

2,441,114

2,441,114

Doubtful

—

—

—

—

—

—

—

Total Commercial Loans

$

418,126

$

16,321,286

$

16,734,471

$

5,819,253

$

2,565,600

$

10,809,966

$

52,668,702

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Construction and development

Risk Rating

Satisfactory

$

1,924,707

$

239,765

$

1,302,322

$

—

$

—

$

319,837

$

3,786,631

Special Mention

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

28,657

28,657

Doubtful

—

—

—

—

—

—

—

Total Construction and
Development Loans

$

1,924,707

$

239,765

$

1,302,322

$

—

$

—

$

348,494

$

3,815,288

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Farmland

Risk Rating

Satisfactory

$

930,000

$

125,620

$

495,000

$

—

$

1,035,064

$

1,215,916

$

3,801,600

Special Mention

—

—

25,264

—

—

223,939

249,203

Substandard

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

Total Farmland Loans

$

930,000

$

125,620

$

520,264

$

—

$

1,035,064

$

1,439,855

$

4,050,803

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Other Loans:

Commercial and industrial

Risk Rating

Satisfactory

$

271,836

$

2,704,852

$

482,501

$

3,363,773

$

223,850

$

2,114,924

$

9,161,736

Special Mention

—

—

294,581

14,953

49,074

552,677

911,285

Substandard

—

—

—

—

29,016

63,333

92,349

Doubtful

—

—

—

—

—

—

—

Total Commercial and
Industrial Loans

$

271,836

$

2,704,852

$

777,082

$

3,378,726

$

301,940

$

2,730,934

$

10,165,370

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

6,623

$

6,623

18

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Amortized Cost Basis by Origination Year

2024

2023

2022

2021

2020

Prior

Total

December 31, 2024

Real Estate Loans:

Multifamily:

Risk Rating

Satisfactory

$

—

$

—

$

1,542,939

$

2,967,822

$

144,857

$

178,316

$

4,833,934

Special Mention

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

Total Multifamily Loans

$

—

$

—

$

1,542,939

$

2,967,822

$

144,857

$

178,316

$

4,833,934

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Commercial

Risk Rating

Satisfactory

$

15,934,535

$

16,581,498

$

4,852,500

$

2,587,014

$

1,247,805

$

6,906,401

$

48,109,753

Special Mention

370,529

314,475

1,099,050

737,039

148,124

522,179

3,191,396

Substandard

—

—

—

—

—

2,584,135

2,584,135

Doubtful

—

—

—

—

—

—

—

Total Commercial Loans

$

16,305,064

$

16,895,973

$

5,951,550

$

3,324,053

$

1,395,929

$

10,012,715

$

53,885,284

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

760,738

$

760,738

Construction and development

Risk Rating

Satisfactory

$

524,993

$

2,085,264

$

—

$

—

$

—

$

322,768

$

2,933,025

Special Mention

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

28,657

28,657

Doubtful

—

—

—

—

—

—

—

Total Construction and
Development Loans

$

524,993

$

2,085,264

$

—

$

—

$

—

$

351,425

$

2,961,682

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Farmland

Risk Rating

Satisfactory

$

127,058

$

495,000

$

—

$

1,078,411

$

688,696

$

1,203,422

$

3,592,587

Special Mention

—

26,963

—

—

223,939

—

250,902

Substandard

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

Total Farmland Loans

$

127,058

$

521,963

$

—

$

1,078,411

$

912,635

$

1,203,422

$

3,843,489

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Other Loans:

Commercial and industrial

Risk Rating

Satisfactory

$

2,065,485

$

674,123

$

3,538,144

$

279,893

$

1,326,814

$

1,553,549

$

9,438,008

Special Mention

—

220,223

—

72,057

18,324

74,459

385,063

Substandard

—

—

—

32,664

—

187,769

220,433

Doubtful

—

—

—

—

—

—

—

Total Commercial and
Industrial Loans

$

2,065,485

$

894,346

$

3,538,144

$

384,614

$

1,345,138

$

1,815,777

$

10,043,504

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

258,693

$

258,693

The Bank monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly.

19

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

The following table presents the amortized cost in residential and consumer loans based on payment activity:

Amortized Cost Basis by Origination Year

2025

2024

2023

2022

2021

Prior

Total

June 30, 2025

Real Estate Loans:

1-4 Family, including
construction

Risk Rating

Performing

$

2,044,569

$

3,335,848

$

3,856,153

$

3,534,618

$

7,037,158

$

12,418,398

$

32,226,744

Nonperforming

—

—

—

—

35,019

385,172

420,191

Total 1-4 Family Loans

$

2,044,569

$

3,335,848

$

3,856,153

$

3,534,618

$

7,072,177

$

12,803,570

$

32,646,935

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

12,874

$

12,874

Other Loans:

Consumer

Risk Rating

Performing

$

466,047

$

735,960

$

1,375,732

$

414,549

$

53,359

$

2,026,794

$

5,072,441

Nonperforming

—

—

—

—

—

38,094

38,094

Total Consumer Loans

$

466,047

$

735,960

$

1,375,732

$

414,549

$

53,359

$

2,064,888

$

5,110,535

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

28,630

$

28,630

Amortized Cost Basis by Origination Year

2024

2023

2022

2021

2020

Prior

Total

December 31, 2024

Real Estate Loans:

1-4 Family, including
construction

Risk Rating

Performing

$

3,700,956

$

3,983,417

$

4,002,872

$

7,329,773

$

2,507,017

$

10,634,470

$

32,158,505

Nonperforming

—

—

—

96,340

68,949

648,891

814,180

Total 1-4 Family Loans

$

3,700,956

$

3,983,417

$

4,002,872

$

7,426,113

$

2,575,966

$

11,283,361

$

32,972,685

Current period gross
charge-offs

$

—

$

—

$

—

$

—

$

—

$

12,225

$

12,225

Other Loans:

Consumer

Risk Rating

Performing

$

1,193,170

$

1,652,278

$

548,280

$

89,166

$

1,151,080

$

1,110,578

$

5,744,552

Nonperforming

—

—

—

—

—

67,568

67,568

Total Consumer Loans

$

1,193,170

$

1,652,278

$

548,280

$

89,166

$

1,151,080

$

1,178,146

$

5,812,120

Current period gross
charge-offs

$

—

$

—

$

—

$

325

$

—

$

9,796

$

10,121

The Bank evaluates the loan risk grading system definitions and allowance for credit losses methodology on an ongoing basis. No significant changes were made to either during the past year.

20

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

The following tables present the Bank’s loan portfolio aging analysis of the recorded investment in loans as of June 30, 2025 and December 31, 2024:

June 30, 2025

Greater Than

Total Loans >

30-59 Days

60-89 Days

90 Days

Total

Total Loans

90 Days &

Past Due

Past Due

Past Due

Past Due

Current

Receivable

Accruing

Real Estate Loans

1-4 Family, including
construction

$

18,295

$

122,399

$

683,573

$

824,267

$

31,822,668

$

32,646,935

$

23,488

Multifamily

—

—

—

—

4,555,916

4,555,916

—

Commercial

—

—

—

—

52,668,702

52,668,702

—

Construction and
development

—

—

—

—

3,815,288

3,815,288

—

Farmland

—

223,939

—

223,939

3,826,864

4,050,803

—

Other Loans:

Consumer

44,880

—

38,094

82,974

5,027,561

5,110,535

—

Commercial and
industrial

84,244

—

92,348

176,592

9,988,778

10,165,370

—

Total

$

147,419

$

346,338

$

814,015

$

1,307,772

$

111,705,777

$

113,013,549

$

23,488

December 31, 2024

Greater Than

Total Loans >

30-59 Days

60-89 Days

90 Days

Total

Total Loans

90 Days &

Past Due

Past Due

Past Due

Past Due

Current

Receivable

Accruing

Real Estate Loans

1-4 Family, including
construction

$

350,758

$

101,642

$

590,194

$

1,042,594

$

31,930,091

$

32,972,685

$

—

Multifamily

—

—

—

—

4,833,934

4,833,934

—

Commercial

—

—

129,732

129,732

53,755,552

53,885,284

—

Construction and
development

—

—

—

—

2,961,682

2,961,682

—

Farmland

—

—

—

—

3,843,489

3,843,489

—

Other Loans:

Consumer

94,771

9,703

28,435

132,909

5,679,211

5,812,120

—

Commercial and
industrial

101,905

—

187,769

289,674

9,753,830

10,043,504

—

Total

$

547,434

$

111,345

$

936,130

$

1,594,909

$

112,757,789

$

114,352,698

$

—

The following tables present collateral-dependent loans by classes of loan type:

June 30, 2025

Type of Collateral

Business

Allowance

Real

Assets and

for Credit

Estate

Other

Total

Losses

Real Estate Loans

1-4 Family, including construction

$

895,468

$

—

$

895,468

$

99,370

Multifamily

—

—

—

—

Commercial

2,441,114

—

2,441,114

1,397

Construction and development

28,657

—

28,657

—

Farmland

—

—

—

—

Other Loans:

Consumer

—

38,094

38,094

13,234

Commercial and industrial

—

92,349

92,349

32,664

Total

$

3,365,239

$

130,443

$

3,495,682

$

146,665

21

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024

Type of Collateral

Business

Allowance

Real

Assets and

for Credit

Estate

Other

Total

Losses

Real Estate Loans

1-4 Family, including construction

$

989,673

$

—

$

989,673

$

99,370

Multifamily

—

—

—

—

Commercial

2,584,135

—

2,584,135

1,397

Construction and development

28,657

—

28,657

—

Farmland

—

—

—

—

Other Loans:

Consumer

—

67,568

67,568

13,234

Commercial and industrial

—

220,433

220,433

32,664

Total

$

3,602,465

$

288,001

$

3,890,466

$

146,665

Non-performing loans as of June 30, 2025 and December 31, 2024, are as follows:

June 30, 2025

Nonaccrual

Nonaccrual

Total

Loans >

Total Non-

Interest

Loans

Loans

Nonaccrual

90 Days &

Performing

Income

Without ACL

With ACL

Loans

Accruing

Loans

Recognized

Real Estate Loans

1-4 Family, including construction

$

385,172

$

274,913

$

660,085

$

23,488

$

683,573

$

3,224

Multifamily

—

—

—

—

—

—

Commercial

—

—

—

—

—

—

Construction and development

—

—

—

—

—

—

Farmland

—

—

—

—

—

—

Other Loans:

Consumer

—

38,094

38,094

—

38,094

1,173

Commercial and industrial

63,333

29,016

92,349

—

92,349

640

Total nonaccrual

$

448,505

$

342,023

$

790,528

$

23,488

$

814,016

$

5,037

December 31, 2024

Nonaccrual

Nonaccrual

Total

Loans >

Total Non-

Interest

Loans

Loans

Nonaccrual

90 Days &

Performing

Income

Without ACL

With ACL

Loans

Accruing

Loans

Recognized

Real Estate Loans

1-4 Family, including construction

$

538,820

$

275,360

$

814,180

$

—

$

814,180

$

18,416

Multifamily

—

—

—

—

—

—

Commercial

129,732

—

129,732

—

129,732

—

Construction and development

—

—

—

—

—

—

Farmland

—

—

—

—

—

—

Other Loans:

Consumer

28,435

39,133

67,568

—

67,568

4,776

Commercial and industrial

187,769

32,664

220,433

—

220,433

3,526

Total nonaccrual

$

884,756

$

347,157

$

1,231,913

$

—

$

1,231,913

$

26,718

There were no significant loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2025 and the year ended December 31, 2024 .

22

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Note 4: Borrowings

The Bank had no borrowings outstanding as of June 30, 2025 and December 31, 2024.

Based on a pledge of collateral consisting of all shares of FHLB stock owned, approximately $ 22,116,000 of the Bank’s qualifying mortgage loans and investment securities with a fair value of approximately $ 12,479,000 as of June 30, 2025 , the Bank was eligible to borrow up to approximately $ 34,091,000 as of June 30, 2025.

Based on a pledge of collateral consisting of all shares of FHLB stock owned, approximately $ 22,342,000 of the Bank’s qualifying mortgage loans and investment securities with a fair value of approximately $ 12,692,000 as of December 31, 2024 , the Bank was eligible to borrow up to approximately $ 34,701,000 as of December 31, 2024.

The Bank has an unsecured federal funds purchase line of credit through the Bankers’ Bank with a maturity date of June 30, 2025 . The maximum amount of the established unsecured line is $ 3,000,000 at June 30, 2025 and December 31, 2024 . The line is subject to annual reviews and terms may be altered in the event of significant change in the financial condition of the Bank. Interest rates are variable. There were no funds advanced on this line as of June 30, 2025 and December 31, 2024 .

Note 5: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under U.S. GAAP reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2025, that the Bank met all capital adequacy requirements to which it is subject.

As of June 30, 2025, the most recent notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based capital, Tier I risk-based capital, common equity Tier I risk-based capital and Tier I leverage ratios as set forth in the table.

There are no conditions or events since that notification that management believes have changed the Bank’s category.

23

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

The Bank’s actual and required capital amounts and ratios are as follows:

Minimum Capital

Minimum to be Well

Actual

Requirement

Capitalized

June 30, 2025

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

Common equity Tier 1 capital to
risk-weighted assets

$

18,642

16.35

%

$

5,130

4.50

%

$

7,410

6.50

%

Tier 1 capital to risk-weighted assets

18,642

16.35

%

6,840

6.00

%

9,119

8.00

%

Total capital to risk-weighted assets

19,822

17.39

%

9,119

8.00

%

11,399

10.00

%

Tier 1 leverage to adjusted average assets

18,642

9.15

%

8,146

4.00

%

10,183

5.00

%

Minimum Capital

Minimum to be Well

Actual

Requirement

Capitalized

December 31, 2024

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

Common equity Tier 1 capital to
risk-weighted assets

$

18,104

15.73

%

$

5,178

4.50

%

$

7,479

6.50

%

Tier 1 capital to risk-weighted assets

18,104

15.73

%

6,904

6.00

%

9,205

8.00

%

Total capital to risk-weighted assets

19,386

16.85

%

9,205

8.00

%

11,506

10.00

%

Tier 1 leverage to adjusted average assets

18,104

8.07

%

8,969

4.00

%

11,211

5.00

%

Note 6: Disclosures about Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

24

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2025 and December 31, 2024.

Fair

Fair Value Measurements Using

Value

Level 1

Level 2

Level 3

June 30, 2025

Municipal bonds, taxable

$

6,701,252

$

—

$

6,701,252

$

—

Municipal bonds, non-taxable

1,686,332

—

1,686,332

—

U.S. Government treasuries

7,444,270

7,444,270

—

—

U.S. Government agencies

993,512

—

993,512

—

Residential mortgage-backed securities

14,536,581

—

14,536,581

—

Collateralized mortgage obligations

12,891,762

—

12,891,762

—

Fair

Fair Value Measurements Using

Value

Level 1

Level 2

Level 3

December 31, 2024

Municipal bonds, taxable

$

6,912,398

$

—

$

6,912,398

$

—

Municipal bonds, non-taxable

2,220,973

—

2,220,973

—

U.S. Government treasuries

7,258,290

7,258,290

—

—

U.S. Government agencies

981,591

—

981,591

—

Residential mortgage-backed securities

14,879,830

—

14,879,830

—

Collateralized mortgage obligations

13,159,257

—

13,159,257

—

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There are no liabilities measured at fair value on a recurring basis. There have been no significant changes in the valuation techniques during the six months ended June 30, 2025 and the year ended December 31, 2024.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 are not available, securities are classified within Level 3 of the hierarchy. The Bank had no Level 3 securities.

25

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Nonrecurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2025 and December 31, 2024:

Fair

Fair Value Measurements Using

Value

Level 1

Level 2

Level 3

June 30, 2025

Collateral dependent loans

$

1,404,709

$

—

$

—

$

1,404,709

December 31, 2024

Collateral dependent loans

$

1,413,047

$

—

$

—

$

1,413,047

The Bank’s nonrecurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs or specific reserves that are based on the observable market price or current estimated value of the collateral. These loans are reported at initial recognition of significant borrower distress and on an ongoing basis until recovery or charge-off.

The fair values of collateral dependent loans are generally determined using the sales comparison approach. Unobservable inputs consist primarily of adjustments for differences between sales of comparable properties.

The following table provides quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements at June 30, 2025 and December 31, 2024:

Range

Fair

Valuation

Unbservable

(Weighted-

Value

Technique

Inputs

Average)

June 30, 2025

Marketability

Collateral dependent loans

$

1,404,709

Appraisal

discount

10 %

December 31, 2024

Marketability

Collateral dependent loans

$

1,413,047

Appraisal

discount

10 %

26

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

The estimated fair values of the Bank’s financial instruments not carried at fair value on the consolidated balance sheets are as follows:

Carrying

Fair

Fair Value Measurements Using

Value

Value

Level 1

Level 2

Level 3

June 30, 2025

Financial assets:

Cash and cash equivalents

$

48,858,653

$

48,858,653

$

48,858,653

$

—

$

—

Held-to-maturity securities

245,000

242,638

—

242,638

—

Loans, net

111,691,441

108,012,000

—

—

108,012,000

FHLB Stock

697,500

697,500

—

697,500

—

Mortgage servicing rights, net

327,178

700,000

—

—

700,000

Bank owned life insurance

2,272,018

2,272,018

—

2,272,018

—

Accrued interest receivable

649,059

649,059

649,059

—

—

Financial liabilities:

Deposits

195,479,340

195,352,858

153,288,858

42,064,000

—

Advances by borrowers for

taxes and insurance

406,881

406,881

—

406,881

—

Accrued interest payable

44,486

44,486

44,486

—

—

Carrying

Fair

Fair Value Measurements Using

Value

Value

Level 1

Level 2

Level 3

December 31, 2024

Financial assets:

Cash and cash equivalents

$

43,540,304

$

43,540,304

$

43,540,304

$

—

$

—

Held-to-maturity securities

980,144

968,407

—

968,407

—

Loans, net

113,048,131

108,902,000

—

—

108,902,000

FHLB Stock

697,500

697,500

—

697,500

—

Mortgage servicing rights, net

325,761

713,494

—

—

713,494

Bank owned life insurance

2,237,215

2,237,215

—

2,237,215

—

Accrued interest receivable

710,199

710,199

710,199

—

—

Financial liabilities:

Deposits

199,372,024

199,177,656

152,823,856

46,353,800

—

Advances by borrowers for

taxes and insurance

356,424

356,424

—

356,424

—

Accrued interest payable

64,441

64,441

64,441

—

—

Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Bank’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristic of the financial instruments, or other factors. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.

27

Security Bank, s.b. and Subsidiaries

Notes to Consolidated Financial Statements

Note 7: Plan of Conversion and Change in Corporate Form

On September 9, 2024, the Board of Directors of the Bank adopted a plan of conversion (Plan). The Plan sets forth that the Bank proposes to convert into a stock savings bank structure with the establishment of a stock holding company (Security Midwest Bancorp, Inc.), as parent of the Bank. The Bank will convert to the stock form of ownership, followed by the issuance of all of the Bank’s outstanding stock to Security Midwest Bancorp, Inc. Pursuant to the Plan, the Bank will determine the total offering value and number of shares of common stock based upon an independent appraiser’s valuation. The stock will be priced at $ 10.00 per share. In addition, the Bank’s Board of Directors will adopt an employee stock ownership plan (ESOP) which will subscribe for up to approximately 8 % of the common stock sold in the offering.

Security Midwest Bancorp, Inc. is organized as a corporation under the laws of the State of Maryland and will own all of the outstanding common stock of the Bank upon completion of the conversion. The costs of issuing the common stock will be deferred and deducted from the sales proceeds of the offering. If the conversion is unsuccessful, all deferred costs will be charged to operations. The Bank had incurred deferred conversion costs totaling approximately $ 316,000 as of December 31, 2024 and $ 707,000 as of June 30, 2025.

Following completion of the conversion, the Bank intends to withdraw from the multi-employer defined benefit plan as disclosed in the prospectus. The withdrawal from the plan will require a payment by the Bank to the plan, estimated at $ 1.4 million. This payment will be recorded as a current period expense when paid.

At the completion of the conversion to stock form, the Bank will establish a liquidation account in the amount of retained earnings contained in the final prospectus. The liquidation account will be maintained for the benefit of eligible savings account holders who maintain deposit accounts in the Bank after conversion.

The conversion will be accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and equity unchanged as a result. Security Midwest Bancorp, Inc.is an emerging growth company, and, for as long as it continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies.” Security Midwest Bancorp, Inc. intends to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, its financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

On July 31, 2025, the Bank completed the conversion to stock form and is now the wholly owned subsidiary of Security Midwest Bancorp, Inc. Security Midwest Bancorp, Inc. sold 889,781 shares of common stock, which includes 62,285 shares sold to the Bank’s Employee Stock Ownership Plan, for gross offering proceeds (before deducting offering expenses) of approximately $ 8.9 million based on the offering price of $ 10.00 per share. The common stock of Security Midwest Bancorp, Inc. began quoting on the OTCQB Market on August 1, 2025 under the symbol "SBMW".

28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion and analysis reflects our financial information and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear beginning on page F-1 of this prospectus. You should read the information in this section in conjunction with the business and financial information regarding Security Bank provided in the prospectus dated May 14, 2025.

Critical Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use with respect to critical accounting policies are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our critical accounting policies:

Allowance for Credit Losses . The allowance for credit losses is the estimated amount considered necessary to cover expected, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for credit losses which is charged against income. In determining the allowance for credit losses, we make significant estimates and have identified this policy as one of our most critical accounting policies.

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 CECL, 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.

29

Deferred Tax Assets . We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Determining the proper valuation allowance for deferred taxes is critical in properly valuing the deferred tax asset and the related recognition of income tax expense or benefit. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.

Fair Value Measurements . The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology we utilize is presented in Note 1 herein.

Comparison of Financial Condition at June 30, 2025 and December 31, 2024

Total assets . Total assets were $216.4 million at June 30, 2025, an increase of $1.8 million, or 0.9%, from December 31, 2024. The increase was primarily comprised of an increase in cash and cash equivalents of $5.3 million, which was partially offset by a decrease in aggregate investment securities (available for sale and held to maturity) of $1.9 million and a decrease in loans, net of $1.4 million.

Cash and cash equivalents . Cash and cash equivalents increased by $5.3 million, or 12.2%, to $48.9 million at June 30, 2025 from December 31, 2024. The increase was due primarily to net proceeds received from maturities of investment securities, loan repayments and proceeds from stock subscription orders.

Investment securities . Investment securities, comprised of both available for sale and held to maturity securities, decreased $1.9 million, or 4.1%, to $44.5 million at June 30, 2025 from $46.4 million at December 31, 2024. The decrease was due primarily to maturities and repayments of investments totaling $2.9 million, partially offset by the effect of a $1.1 million decrease in the gross unrealized loss on securities available for sale during the six months ended June 30, 2025, to a total unrealized loss of $5.5 million at June 30, 2025 compared to $6.6 million at December 31, 2024. At June 30, 2025 and December 31, 2024, investment securities held to maturity consisted solely of certificates of deposit totaling $245,000 and $980,000, respectively. We have used the proceeds from repayments and maturities of securities primarily to maintain liquidity.

Gross loans . Gross loans decreased by $1.3 million, or 1.2%, to $113.0 million at June 30, 2025 compared to December 31, 2024. During the six months ended June 30, 2025, loan originations totaled $17.5 million, an increase of $7.6 million, or 76.8%, compared to the loan origination volume of $9.9 million for the six months ended June 30, 2024. Such amounts included loans originated for sale totaling $3.7 million for the six months ended June 30, 2025, compared to $1.1 million for the six months ended June 30, 2024. We did not have any loans held for sale at June 30, 2025 and December 31, 2024.

During the six months ended June 30, 2025, the decrease in our loan portfolio was primarily comprised of decreases in: residential one- to four-family residential real estate loans of $326,000, or 1.0% to $32.6 million at June 30, 2025; commercial real estate loans of $1.2 million, or 2.3% to $52.7 million at June 30, 2025; and consumer loans of $702,000, or 12.1% to $5.1 million at June 30, 2025, which were partially offset by an increase in construction and development loans of $854,000, or 28.8% to $3.8 million at June 30, 2025.

Our strategy is to grow our loan portfolio, with a focus on owner-occupied one- to four-family residential real estate loans and commercial loans (both commercial real estate and commercial and industrial).

30

Deposits . Deposits decreased by $3.9 million, or 2.0%, to $195.5 million at June 30, 2025 from $199.4 million at December 31, 2024. The decrease was primarily due to a decrease in certificates of deposit of $4.4 million, or 9.4%, to $42.2 million at June 30, 2025 from December 31, 2024, which was partially offset by an increase in demand deposits of $785,000, or 0.6%, to $127.6 million at June 30, 2025. The overall increase in core deposits (consisting of demand, both retail and commercial, and savings deposits), was $465,000, or 0.3%, to $153.3 million at June 30, 2025 compared to December 31, 2024.

At each of June 30, 2025 and December 31, 2024, we had a concentration of deposits from cannabis-related business (CRB) customers, comprised primarily of commercial demand accounts. These deposits totaled $59.6 million and $58.6 million at these respective dates.

During the six months ended June 30, 2025, we continued our strategy of pursuing growth in demand accounts and other lower cost core deposits, in part by enhancing the products and services we offer, including mobile banking capabilities, expanding our offering of CRB services into other states, and streamlining commercial banking services through enhanced cash management and treasury management services. We intend to continue our efforts to increase our core deposit base, with an emphasis on growth in consumer and business demand deposits.

Stock subscription proceeds in escrow. Stock subscriptions received totaled $4.6 million at June 30, 2025, as the Company was in the process of soliciting orders for sales of common stock at that date. The sale of common stock was initiated pursuant to the prospectus dated May 14, 2025. Upon successful completion of the common stock sales and issuance of the common stock, total proceeds from the sale, net of offering costs, will be recorded as a component of stockholders’ equity.

Borrowings . We had no outstanding advances from the Federal Home Loan Bank at either June 30, 2025 or December 31, 2024.

Equity . Equity increased $1.6 million, or 11.2%, to $15.5 million at June 30, 2025, compared to $13.9 million at December 31, 2024. The increase was due to net income of $751,000 during the six months ended June 30, 2025 combined with an $813,000 decrease in accumulated other comprehensive loss.

Comparison of Operating Results for the three months ended June 30, 2025 and 2024

General . Net income for the three months ended June 30, 2025 was $350,000, an increase of $83,000, or 31.3%, compared to the three months ended June 30, 2024. The increase in net income was primarily due to a $250,000 increase in net interest income and a $56,000 increase in noninterest income, which were partially offset by a $54,000 increase in the provision for credit losses, a $152,000 increase in noninterest expense and a $16,000 increase in income taxes.

Interest income . Interest income increased $24,000, or 1.0%, to $2.5 million for the three months ended June 30, 2025 from $2.4 million for the three months ended June 30, 2024. This increase was attributable to a $233,000, or 14.5%, increase in interest on loans, which was partially offset by a $55,000, or 15.7%, decrease in interest on investment securities and a $154,000, or 31.9%, decrease in interest on interest-bearing deposits and other assets. The increase in interest income on loans was primarily due to the increase in the yield earned on the loan portfolio.

The average yield on loans increased by 61 basis points to 6.54% for the three months ended June 30, 2025 from 5.93% for the three months ended June 30, 2024, while the average balance of loans increased by $4.2 million, or 3.9%, to $112.3 million during the three months ended June 30, 2025 compared to the average balance of $108.1 million for the three months ended June 30, 2024. The increase in the average yield was due to the increase in market interest rates period-to-period.

The average balance of investment securities decreased $5.0 million, or 9.1%, to $50.6 million for the three months ended June 30, 2025 from the three months ended June 30, 2024, while the average yield on investment securities decreased by 18 basis points to 2.34% for the three months ended June 30, 2025 from 2.52% for the three months ended June 30, 2024.

The average balance of interest-bearing deposits and other assets, comprised primarily of certificates of deposit in other financial institutions, overnight deposits and stock in the Federal Home Loan Bank, decreased $6.9 million, or 19.5%, to $28.6 million for the three months ended June 30, 2025, while the average yield decreased 84 basis points, to 4.61% for the three months ended June 30, 2025 from 5.45% for the three months ended June 30, 2024.

Interest Expense . Total interest expense decreased $225,000, or 29.1%, to $547,000 for the three months ended June 30, 2025, compared to $772,000 for the three months ended June 30, 2024. The decrease was wholly comprised of a decrease in interest expense on deposits. The decrease in interest expense on deposits was primarily due to a decrease of 52 basis points in the average cost of

31

deposits to 1.77% for the three months ended June 30, 2025 from 2.29% for the three months ended June 30, 2024 and a decrease of $11.8 million, or 8.8%, in the average balance of deposits, to $123.3 million for the three months ended June 30, 2025 from $135.1 million for the three months ended June 30, 2024.

Net Interest Income . Net interest income increased $249,000, or 15.0%, to $1.9 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The interest rate spread increased to 3.37% for the three months ended June 30, 2025 from 2.61% for the three months ended June 30, 2024. The net interest margin increased to 4.00% for the three months ended June 30, 2025 from 3.34% for the three months ended June 30, 2024, as net interest-earning assets increased during the quarter compared to the same period in 2024.

For the Three Months Ended June 30,

2025

2024

Average Outstanding Balance

Interest

Yield/
Rate

Average Outstanding Balance

Interest

Yield/
Rate

Interest-earning assets:

(Dollars in thousands)

Loans

$

112,327

$

1,836

6.54

%

$

108,100

$

1,603

5.93

%

Investment securities

50,635

296

2.34

%

55,677

351

2.52

%

Interest-bearing deposits and other

28,550

329

4.61

%

35,482

483

5.45

%

Total interest-earning assets

191,512

2,461

5.14

%

199,259

2,437

4.89

%

Non-interest-earning assets

8,410

7,300

Allowance for credit losses

(1,140

)

(1,615

)

Total assets

$

198,782

$

204,944

Interest-bearing liabilities:

Interest-bearing demand

$

54,930

125

0.91

%

$

62,058

215

1.39

%

Savings accounts

25,849

19

0.29

%

26,881

17

0.25

%

Certificates of deposit

42,515

403

3.79

%

46,181

540

4.68

%

Total deposits

123,294

547

1.77

%

135,120

772

2.29

%

Borrowings

—

—

0.00

%

—

—

0.00

%

Total interest-bearing liabilities

123,294

547

1.77

%

135,120

772

2.29

%

Non-interest-bearing deposits

59,026

55,332

Non-interest-bearing liabilities

1,095

1,478

Total liabilities

183,415

191,930

Equity

15,367

13,014

Total liabilities and equity

$

198,782

$

204,944

Net interest income

$

1,914

$

1,665

Net interest rate spread

3.37

%

2.61

%

Net interest-earning assets

$

68,218

$

64,139

Net interest margin

4.00

%

3.34

%

Average interest-earning assets
to interest-bearing liabilities

155.33

%

147.47

%

32

Three Months Ended June 30,

2025 vs. 2024

Total

Increase (decrease) due to

Increase

Volume

Rate

(Decrease)

(In thousands)

Interest-earning assets:

Loans

$

65

$

168

$

233

Investment securities

(30

)

(25

)

(55

)

Other interest-earning assets

(86

)

(68

)

(154

)

Total interest-earning assets

(51

)

75

24

Interest-bearing liabilities:

Interest-bearing demand

(23

)

(67

)

(90

)

Savings accounts

(1

)

3

2

Certificates of deposit

(41

)

(96

)

(137

)

Total deposits

(65

)

(160

)

(225

)

Borrowings

—

—

—

Total interest-bearing liabilities

(65

)

(160

)

(225

)

Change in net interest income

$

14

$

235

$

249

Provision for Credit Losses . Based on an analysis of the factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Allowance for Credit Losses,” we recorded a $9,000 provision for credit losses for the three months ended June 30, 2025, compared to a recovery of $45,000 recognized for the three months ended June 30, 2024. The allowance for credit losses was $1.1 million at June 30, 2025 and $1.4 million at June 30, 2024 and represented 1.02% of total loans at June 30, 2025 and 1.26% of total loans at June 30, 2024. Net charge-offs (recoveries) totaled $(23,000) and $800,000 during the three months ended June 30, 2025 and 2024, respectively. The loan charge-offs in 2024 included $754,000 on one $1.8 million loan secured by commercial real estate which was originated in 2017.

Management’s determination of the allowance balance at June 30, 2025 included consideration of the $1.3 million, or 1.1%, increase in loans outstanding during the three months ended June 30, 2025, along with decreases in nonperforming and delinquent loans. Total nonperforming loans were $814,000 at June 30, 2025, compared to $1.2 million at December 31, 2024. Total loans past due 30 days or greater were $1.3 million and $1.6 million at those respective dates. As a percentage of nonperforming loans, the allowance for credit losses was 141.2% at June 30, 2025 compared to 94.3% at December 31, 2024.

Our estimates and assumptions used in the determination of the adequacy of the allowance for credit losses could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Any such increase in future provisions that may be required may adversely impact our financial condition and results of operations.

Noninterest Income . Noninterest income information is as follows.

Three Months Ended
June 30,

Change

2025

2024

Amount

Percent

(Dollars in thousands)

Service fees on deposit accounts

$

259

$

269

$

(10

)

-3.7

%

Debit card fees

103

104

(1

)

-1.0

%

Mortgage loan servicing fees, net

26

32

(6

)

-18.8

%

Gain on sale of loans

37

3

34

1133.3

%

Other

76

37

39

105.4

%

Total noninterest income

$

501

$

445

$

56

12.6

%

The increase in gain on sale of loans was due to an increase in sales volume period over period. Other noninterest income increased due primarily to an increase in fees on cashless ATMs at certain CRB locations and fees on consumer loan referrals, partially offset by a decrease in late charges on loans. The decrease in service fees on deposits was due primarily to a decrease in maintenance fees and cash counting service fees from our CRB customers between the periods. This decrease was partially offset by an increase in the overall number of CRB accounts period over period, as we have focused on expanding our CRB relationship base to smaller customers.

33

Noninterest Expense . Noninterest expense information is as follows.

Three Months Ended
June 30,

Change

2025

2024

Amount

Percent

(Dollars in thousands)

Salaries and employee benefits

$

1,116

$

980

$

136

13.9

%

Occupancy and equipment

150

147

3

2.0

%

Data processing fees

146

143

3

2.1

%

FDIC insurance premiums

27

36

(9

)

-25.0

%

Advertising

51

41

10

24.4

%

Director fees

24

23

1

4.3

%

Debit card expense

25

19

6

31.6

%

Professional fees

188

170

18

10.6

%

Telephone and internet

36

32

4

12.5

%

Other

175

195

(20

)

-10.3

%

Total noninterest expense

$

1,938

$

1,786

$

152

8.5

%

The increase in salaries and employee benefits was due primarily to an increase in staffing levels and normal annual merit increases. The increase in professional fees was due primarily to an increase in audit fees, partially offset by a decrease in consulting fees. The decrease in other expense was due primarily to a nonrecurring expense in the 2024 period related to a customer appreciation event along with a decrease in charges for Federal Reserve processing and courier services, due to reduction in volume of courier services in 2025.

Income Taxes . Income taxes increased by $16,000 or 15.5%, to $119,000 for the three months ended June 30, 2025, compared to $103,000 for the three months ended June 30, 2024. The increase in the income tax provision for the three months ended June 30, 2025 was due primarily to a $99,000, or 26.9% increase in pretax income. The effective tax rates were 25.4% and 27.9% for the three months ended June 30, 2025 and 2024, respectively.

Comparison of Operating Results for the Six Months Ended June 30, 2025 and 2024

General . Net income for the six months ended June 30, 2025 was $751,000, an increase of $215,000, or 40.0%, compared to the six months ended June 30, 2024. The increase in net income was primarily due to a $479,000 increase in net interest income and a $57,000 increase in noninterest income, which were partially offset by a $9,000 increase in the provision for credit losses, a $230,000 increase in noninterest expense and an $83,000 increase in income taxes.

Interest income . Interest income increased $216,000, or 4.5%, to $5.0 million for the six months ended June 30, 2025 from $4.8 million for the six months ended June 30, 2024. This increase was attributable to a $470,000, or 14.9%, increase in interest on loans, which was partially offset by an $89,000, or 12.8%, decrease in interest on investment securities and a $165,000, or 17.9%, decrease in interest on interest-bearing deposits and other assets. The increase in interest income on loans was primarily due to the increase in the yield earned on the loan portfolio.

The average yield on loans increased by 64 basis points to 6.46% for the six months ended June 30, 2025 from 5.82% for the six months ended June 30, 2024, while the average balance of loans increased by $3.8 million, or 3.5%, to $112.4 million during the six months ended June 30, 2025 compared to the average balance for the six months ended June 30, 2024. The increase in the average yield was due to the increase in market interest rates period-to-period.

The average balance of investment securities decreased $4.9 million, or 8.7%, to $51.4 million for the six months ended June 30, 2025 for the six months ended June 30, 2024, while the average yield on investment securities decreased by 11 basis points to 2.36% for the six months ended June 30, 2025 from 2.47% for the six months ended June 30, 2024.

The average balance of interest-bearing deposits and other assets, comprised primarily of certificates of deposit in other financial institutions, overnight deposits and stock in the Federal Home Loan Bank, decreased $967,000, or 2.6%, to $36.8 million for the six months ended June 30, 2025, while the average yield decreased 77 basis points, to 4.13% for the six months ended June 30, 2025 from 4.90% for the six months ended June 30, 2024.

34

Interest Expense . Total interest expense decreased $263,000, or 19.0%, to $1.1 million for the six months ended June 30, 2025, compared to $1.4 million for the six months ended June 30, 2024. The decrease was substantially comprised of a decrease in interest expense on deposits. The decrease in interest expense on deposits was primarily due to a decrease of 45 basis points in the average cost of deposits to 1.80% for the six months ended June 30, 2025 from 2.25% for the six months ended June 30, 2024, partially offset by an increase of $1.7 million, or 1.4%, in the average balance of deposits, to $124.0 million for the six months ended June 30, 2025 from $122.3 million for the six months ended June 30, 2024.

Net Interest Income . Net interest income increased $479,000, or 14.1%, to $3.9 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The interest rate spread increased to 3.18% for the six months ended June 30, 2025 from 2.46% for the six months ended June 30, 2024. The net interest margin increased to 3.87% for the six months ended June 30, 2025 from 3.35% for the six months ended June 30, 2024.

For the Six Months Ended June 30,

2025

2024

Average Outstanding Balance

Interest

Yield/
Rate

Average Outstanding Balance

Interest

Yield/
Rate

Interest-earning assets:

(Dollars in thousands)

Loans

$

112,430

$

3,631

6.46

%

$

108,661

$

3,161

5.82

%

Investment securities

51,365

605

2.36

%

56,243

694

2.47

%

Interest-bearing deposits and other

36,755

759

4.13

%

37,722

924

4.90

%

Total interest-earning assets

200,550

4,995

4.98

%

202,626

4,779

4.72

%

Non-interest-earning assets

8,459

7,477

Allowance for credit losses

(1,150

)

(1,901

)

Total assets

$

207,859

$

208,202

Interest-bearing liabilities:

Interest-bearing demand

$

54,260

232

0.86

%

$

52,681

405

1.54

%

Savings accounts

25,936

38

0.29

%

28,023

36

0.26

%

Certificates of deposit

43,843

849

3.87

%

41,647

938

4.50

%

Total deposits

124,039

1,119

1.80

%

122,351

1,379

2.25

%

Borrowings

1

—

0.00

%

117

3

5.13

%

Total interest-bearing liabilities

124,040

1,119

1.80

%

122,468

1,382

2.26

%

Non-interest-bearing deposits

67,699

61,104

Non-interest-bearing liabilities

1,089

11,300

Total liabilities

192,828

194,872

Equity

15,031

13,330

Total liabilities and equity

$

207,859

$

208,202

Net interest income

$

3,876

$

3,397

Net interest rate spread

3.18

%

2.46

%

Net interest-earning assets

$

76,510

$

80,158

Net interest margin

3.87

%

3.35

%

Average interest-earning assets
to interest-bearing liabilities

161.68

%

165.45

%

35

Six Months Ended June 30,

2025 vs. 2024

Total

Increase (decrease) due to

Increase

Volume

Rate

(Decrease)

(In thousands)

Interest-earning assets:

Loans

$

113

$

357

$

470

Investment securities

(58

)

(31

)

(89

)

Other interest-earning assets

(23

)

(142

)

(165

)

Total interest-earning assets

32

184

216

Interest-bearing liabilities:

Interest-bearing demand

12

(185

)

(173

)

Savings accounts

(3

)

5

2

Certificates of deposit

47

(136

)

(89

)

Total deposits

56

(316

)

(260

)

Borrowings

(3

)

—

(3

)

Total interest-bearing liabilities

53

(316

)

(263

)

Change in net interest income

$

(21

)

$

500

$

479

Provision for Credit Losses . Based on an analysis of the factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Allowance for Credit Losses,” we recorded a $9,000 provision for credit losses for the six months ended June 30, 2025 compared to no provision for the six months ended June 30, 2024. The allowance for credit losses was $1.1 million at June 30, 2025 and $1.4 million at June 30, 2024 and represented 1.02% of total loans at June 30, 2025 and 1.26% of total loans at June 30, 2024. Net charge-offs (recoveries) totaled $(12,000) and $794,000 during the six months ended June 30, 2025 and 2024, respectively.

Management’s determination of the allowance balance at June 30, 2025 included consideration of the $1.3 million, or 1.1%, increase in loans outstanding during the six months ended June 30, 2025, along with decreases in nonperforming and delinquent loans. Total nonperforming loans were $814,000 at June 30, 2025, compared to $1.2 million at December 31, 2024. Total loans past due 30 days or greater were $1.3 million and $1.6 million at those respective dates. As a percentage of nonperforming loans, the allowance for credit losses was 141.2% at June 30, 2025 compared to 94.3% at December 31, 2024.

Our estimates and assumptions used in the determination of the adequacy of the allowance for credit losses could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Any such increase in future provisions that may be required may adversely impact our financial condition and results of operations.

Noninterest Income . Noninterest income information is as follows.

Six Months Ended
June 30,

Change

2025

2024

Amount

Percent

(Dollars in thousands)

Service fees on deposit accounts

$

501

$

525

$

(24

)

-4.6

%

Debit card fees

196

209

(13

)

-6.2

%

Mortgage loan servicing fees, net

59

69

(10

)

-14.5

%

Gain on sale of loans

74

19

55

289.5

%

Other

126

77

49

63.6

%

Total noninterest income

$

956

$

899

$

57

6.3

%

The increase in gain on sale of loans was due to an increase in sales volume period over period. Other noninterest income increased due primarily to an increase in fees on cashless ATMs at certain CRB locations and fees on consumer loans, partially offset by a decrease in late charges on loans. The decrease in service fees on deposits was due primarily to a decrease in maintenance fees and cash counting service fees from our CRB customers between the periods. This decrease was partially offset by an increase in the overall number of CRB accounts period over period, as we have focused on expanding our CRB relationship base to smaller customers.

36

Noninterest Expense . Noninterest expense information is as follows.

Six Months Ended
June 30,

Change

2025

2024

Amount

Percent

(Dollars in thousands)

Salaries and employee benefits

$

2,235

$

2,022

$

213

10.5

%

Occupancy and equipment

299

275

24

8.7

%

Data processing fees

296

278

18

6.5

%

FDIC insurance premiums

51

63

(12

)

-19.0

%

Advertising

94

64

30

46.9

%

Director fees

48

49

(1

)

-2.0

%

Debit card expense

36

37

(1

)

-2.7

%

Professional fees

292

316

(24

)

-7.6

%

Telephone and internet

72

65

7

10.8

%

Other

363

387

(24

)

-6.2

%

Total noninterest expense

$

3,786

$

3,556

$

230

6.5

%

The increase in salaries and employee benefits was due primarily to an increase in staffing levels and normal annual merit increases. The increase in advertising was due primarily to timing of advertising events and increase in business development expenses with the addition of a VP of Business Development. The decrease in other expense was due primarily to a nonrecurring expense in the 2024 period related to a customer appreciation event along with a decrease in charges for Federal Reserve processing and courier services, due to reduction in volume of courier services in 2025.

Income Taxes . Income taxes increased by $83,000, or 40.8%, to $286,000 for the six months ended June 30, 2025, compared to $203,000 for the six months ended June 30, 2024. The increase in the income tax provision for the six months ended June 30, 2025 was due primarily to a $298,000, or 40.2% increase in pretax income. The effective tax rates were 27.6% and 27.5% for the six months ended June 30, 2025 and 2024, respectively.

37

Item 3. Quantitative and Qualitati ve Disclosures About Market Risk.

Management of Market Risk

General . The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage the impact of changes in market interest rates on net interest income and capital. We have an Asset/Liability and Investment Committee that is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. The Committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

As part of our ongoing asset-liability management, we intend to use the following strategies to manage our interest rate risk:

i.
increase our commercial loan portfolio (commercial and industrial loans as well as commercial real estate loans) with shorter term, higher yielding loan products;
ii.
emphasize the marketing of our savings, money market and demand accounts;
iii.
continue to maintain a high level of cash and cash equivalents; and
iv.
invest in short- to medium-term to repricing and/or maturity securities depending on market interest rates.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest- bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by up to 400 basis points, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The table below sets forth, as of June 30, 2025, the calculation of the estimated changes in our net interest income that would result from the designated instantaneous changes in the United States Treasury yield curve.

At June 30, 2025

Change in Interest
Rates (basis

Net Interest Income

Year 1 Change

points) (1)

Year 1 Forecast

From Level

400

$

9,086

9.62%

300

8,922

7.64%

200

8,733

5.36%

100

8,540

3.03%

Level

8,289

—

(100)

7,868

-5.08%

(200)

7,332

-11.55%

(300)

6,601

-20.36%

(400)

6,107

-26.32%

(1)
Assumes an instantaneous uniform change in interest rates at all maturities.

38

The table above indicates that at June 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 5.36% increase in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced an 11.55% decrease in net interest income.

Net Economic Value . We also compute amounts by which the net present value of our assets and liabilities (economic value of equity, or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by up to 400 basis points, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table below sets forth, as of June 30, 2025, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

At June 30, 2025

Change in

EVE as a Percentage of Present Value
of Assets (3)

Interest
Rates (basis

Estimated Increase (Decrease) in EVE

EVE

Increase (Decrease)

points) (1)

Estimated EVE (2)

Amount

Percent

Ratio (4)

(basis points)

(Dollars in thousands)

400

$

51,759

$

3,994

8.36%

27.12

%

434

300

51,588

3,823

8.00%

26.42

%

364

200

50,999

3,234

6.77%

25.52

%

274

100

49,900

2,135

4.47%

24.37

%

159

Level

47,765

—

—

22.78

%

—

(100)

46,522

(1,243

)

-2.60%

21.70

%

(108

)

(200)

39,188

(8,577

)

-17.96%

17.92

%

(486

)

(300)

30,449

(17,316

)

-36.25%

13.67

%

(911

)

(400)

19,449

(28,316

)

-59.28%

8.60

%

(1,418

)

(1)
Assumes an immediate uniform change in interest rates at all maturities.
(2)
EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
(3)
Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.
(4)
EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at June 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 6.77% increase in EVE, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 17.96% decrease in EVE. At June 30, 2025, all estimated changes presented in the above tables were within the current policy limits established by the board of directors.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ. Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the tables.

39

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

Liquidity and Capital Resources

Liquidity Management . Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from sales, maturities and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Chicago. At June 30, 2025, we had the ability to borrow approximately $34.1 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. We had no borrowings outstanding at June 30, 2025.

The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We calculate our liquidity ratio as the sum of cash, short-term assets (generally securities with a remaining maturity of less than one year) and marketable assets divided by the sum of net deposits (generally time deposits of $250,000 or more and brokered deposits less than $250,000), short-term liabilities (generally borrowings with a remaining maturity of one year or less) and volatile liabilities (generally federal funds purchased, securities sold under agreements to repurchase, and time deposits of $250,000 or more). We seek to maintain a liquidity ratio of 20.0% or greater. We believe that we had enough sources of liquidity to satisfy our short and long-term liquidity needs as of June 30, 2025.

We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected deposit flows; (2) expected loan demand; (3) yields available on cash and cash equivalents and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in cash and cash equivalents and short- and intermediate-term securities.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2025, cash and cash equivalents totaled $48.9 million. Investment securities classified as available-for-sale, which provide an additional source of liquidity, totaled $44.3 million at June 30, 2025.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

For the six months ended June 30, 2025, cash flows from operating activities, investing activities and financing activities resulted in a net increase in cash and cash equivalents of $5.3 million. Net cash provided by operating activities amounted to $371,000, primarily due to proceeds from the sale of loans of $3.7 million and net income of $751,000. Net cash provided by investing activities amounted to $4.2 million, primarily due to the decrease in loans of $1.4 million and proceeds from maturities and paydowns or investment securities of $2.9 million. Net cash provided by financing activities amounted to $758,000, primarily due to stock subscription proceeds of $4.6 million, which were partially offset by a net decrease in deposits of $3.9 million.

For the six months ended June 30, 2024, cash flows from operating activities, investing activities and financing activities resulted in a net increase in cash and cash equivalents of $19.2 million. Net cash provided by operating activities amounted to $746,000, primarily due to the proceeds from the sale of loans of $1.1 million and net income of $537,000. Net cash provided by investing activities amounted to $2.6 million, primarily due to proceeds from maturities and paydowns on investment securities of $2.0 million, and a net decrease in gross loans of $660,000. Net cash used financing activities amounted to $15.9 million, primarily due to a net increase in deposits of $26.4 million, partially offset by a $10.5 million repayment of FHLB advances. For further information, see the statements of cash flows contained in the consolidated financial statements.

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We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. We had loan commitments of $10.2 million at June 30, 2025. Certificates of deposit due within one year of June 30, 2025, totaled $39.6 million, or 93.8% of our certificates of deposit, and 20.2% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital Management. At June 30, 2025 and December 31, 2024, Security Bank exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Federal Bank Regulation—Capital Requirements” and Note 5 of the Notes to the Consolidated Financial Statements.

Item 4. Controls and Procedures.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2025. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended June 30, 2025, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

We are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. At June 30, 2025, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

Item 1A. Ri sk Factors.

Not Applicable.

Item 2. Unregistered Sales of Equit y Securities and Use of Proceeds.

Not applicable

Item 3. Defaults Upo n Senior Securities.

Not applicable

Item 4. Mine Safe ty Disclosures.

Not applicable

Item 5. Other Information.

No t applicable

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Item 6. E xhibits.

Exhibit

Number

Description

31.1*

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .

32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

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SIGNA TURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SECURITY MIDWEST BANCORP, INC.

Date: August 8,2025

By:

/s/ Stephan P. Antonacci

Stephan P. Antonacci

President and Chief Executive Officer

Date: August 8,2025

By:

/s/ Brenda Minder

Brenda Minder

Executive Vice President and Chief Financial Officer

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TABLE OF CONTENTS
Part I FinanciaItem 1. Financial StatementsItem 1. FinanciNote 1: Nature Of Operations and Summary Of Significant Accounting PoliciesNote 1: NatNote 2 SecuritiesNote 3: Loans and Allowance For Credit LossesNote 4: BorrowingsNote 5: Regulatory MattersNote 6: Disclosures About Fair Value Of Assets and LiabilitiesNote 7: Plan Of Conversion and Change in Corporate FormItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 2. Management S Discussion and Analysis OfItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 3. Quantitative and QualitatiItem 4. Controls and ProceduresItem 4. ControlsPart II Other InformationPart II OtherItem 1. Legal ProceedingsItem 1. LegalItem 1A. Risk FactorsItem 1A. RiItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 2. Unregistered Sales Of EquitItem 3. Defaults Upon Senior SecuritiesItem 3. Defaults UpoItem 4. Mine Safety DisclosuresItem 4. Mine SafeItem 5. Other InformationItem 5. OtherItem 6. Exhibits

Exhibits

31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.