Shares of United Security Bancshares (UBFO Quick QuoteUBFO - Free Report) have gained 4.5% since the company reported its earnings for the quarter ended Sept. 30, 2025. This compares to the S&P 500 index’s 0.9% growth over the same time frame. Over the past month, however, the stock has declined 4.5% compared with the S&P 500’s 1.1% growth, highlighting short-term volatility despite a positive earnings response.

For the third quarter of 2025, United Security Bancshares reported earnings per share (EPS) of 23 cents, up from 22 cents in the prior-year quarter.  

Total interest income declined slightly by 0.8% to $15.6 million from $15.8 million a year earlier, largely due to lower income from loan interest and investment securities. However, a notable 18.7% drop in interest expense — to $3.2 million from $3.9 million — helped lift net interest income by 5.1% to $12.4 million, up from $11.8 million in the third quarter of 2024.

Net income of $4 million denotes a 5.1% rise from $3.8 million in the same period last year.

United Security Bancshares Price, Consensus and EPS Surprise

United Security Bancshares price-consensus-eps-surprise-chart | United Security Bancshares Quote

Key Business Metrics Show Strength and Stability

United Security Bancshares' net interest margin rose to 4.35%, from 4.20% a year ago, due to reduced costs of deposits and short-term borrowings. The cost of funds improved to 1.1% from 1.4%, thanks to lower borrowing costs and declining rates on interest-bearing deposits. The company also improved its return on average assets (ROAA) to 1.3% from 1.2% and return on average equity (ROAE) to 11.7% from 11.6%.

Loan interest and fees fell slightly by 0.9% year over year to $14.3 million, while noninterest income declined 20% to $1.6 million. This decrease was primarily due to a lower gain from junior subordinated debentures (“TruPS”) fair value adjustments, which came in at $0.2 million this quarter versus $0.7 million a year ago. Meanwhile, non-interest expenses increased 4.1% to $7.4 million, reflecting higher technology, salary, and benefits costs.

Management Commentary: Focus on Loan Growth and Capital Strength

Dennis Woods, president and CEO, expressed optimism over the bank’s loan growth and equity position. He noted that shareholder equity improved by $7 million after accounting for dividend payments, and that while student loan charge-offs persisted, they decreased in magnitude, suggesting an improving credit environment.

Factors Driving Performance

The improvement in quarterly profitability was primarily driven by lower short-term borrowing costs and a reduction in credit loss provisions, which dropped to $1 million from $1.6 million in the prior-year quarter. The company also recognized a $0.2 million gain from a $3 million partial redemption of TruPS, contributing to noninterest income.

On a broader level, net interest income rose due to increased earnings from overnight investments held at the Federal Reserve, as well as reduced funding costs. Average rates on loans dipped slightly to 5.92% from 6.04%, but this was more than offset by the drop in liability costs, helping maintain the bank's net interest margin.

Other Developments

During the quarter, United Security Bancshares completed a $3 million partial redemption of its TruPS, reducing the contractual balance to $9 million. Additionally, the bank declared a 12 cents per share cash dividend, payable on Oct. 21, 2025, to shareholders of record as of Oct. 3, 2025.

Another key development involved a rise in other real estate owned (OREO) to $7.9 million from $4.6 million at year-end 2024, primarily due to a foreclosure on nonaccrual loans. Despite this, total nonperforming assets fell to $14.1 million, down from $17.2 million at year-end, as nonaccrual loans declined significantly by $6.5 million.