Security Midwest Bancorp, Inc. Annual Report Summary

I’m putting together a simple guide to help you understand Security Midwest Bancorp’s latest annual report. My goal is to cut through the corporate talk so you can decide if this bank is the right fit for your portfolio.

1. What does this company do?

Security Midwest Bancorp is a community bank based in Springfield, Illinois, and the parent company of Security Federal Savings Bank. They make money primarily from the difference between the interest they pay to depositors and the interest they earn from loans. Beyond standard home mortgages and commercial real estate loans, they operate a specialized banking service for the cannabis industry, supporting state-licensed dispensaries and growers who often struggle to find traditional banking partners.

2. How did they perform this year?

2025 was a pivotal year. On July 31, the bank transitioned from a depositor-owned institution to a public company, raising approximately $14.2 million through an initial public offering (IPO). This capital is earmarked for increasing lending capacity and upgrading digital infrastructure.

As of December 31, 2025, the bank reported:

• Total Assets: $256.6 million, an increase of 12.4% over 2024.
• Total Loans: $119.1 million, up 4.1% from 2024.
• Total Deposits: $196.5 million, which serves as the primary funding source for their lending activities.
• Profit: $299,000, a figure influenced by the one-time costs associated with going public.

3. Major wins and challenges

The IPO significantly strengthened the bank’s capital ratio to 14.8%, well above the 8% regulatory requirement. They also saw a 26% increase in business loans, totaling $12.6 million.

The bank is currently in a "building" phase. They face stiff competition from larger regional banks and tech-focused lenders that often offer more advanced mobile banking tools. With a 2.19% share of the local deposit market, they lack the scale of larger competitors, which requires them to invest more heavily in the personalized service their clients expect.

4. Financial health

The bank maintains a stable foundation with $22.6 million in shareholder equity to protect against potential losses. They also have $45 million in borrowing capacity through the Federal Home Loan Bank and the Federal Reserve. Because of their size, the bank is sensitive to local economic shifts.

5. Key risks

• Concentration: Commercial real estate loans make up 45.7% of their portfolio. A downturn in local property values could impact the security of these loans.
• Cannabis Niche: While this segment generates high fees, it is subject to evolving federal banking laws. Expanding these services into Missouri introduces new legal and compliance requirements.
• Interest Rates: Approximately 32% of their loans have adjustable rates. While this can be beneficial if rates rise, it may increase the risk of borrower default if rates remain elevated.
• Competition: The bank lacks the wealth management services offered by larger institutions, which can make it difficult to attract high-net-worth clients.

6. Future outlook

As a newly public entity, the bank is focused on scaling. Management intends to deploy the $14.2 million in new capital to expand their lending portfolio. Their strategy involves steady growth in Illinois alongside the expansion of their cannabis banking program into Missouri to drive fee income.

Investor Takeaway: Because the company is newly public, there is limited historical data to analyze. When reviewing future quarterly updates, focus on whether they are successfully growing their local market share and whether their profit margins begin to expand as the one-time costs of the IPO fade.