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UBFO's Q4 Earnings Rise Y/Y on Margin Expansion, Cost Cuts
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Shares of United Security Bancshares (UBFO - Free Report) have declined 1.6% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares to the S&P 500 index’s 1.1% growth over the same time frame. Over the past month, the stock has gained 3.8% compared with the S&P 500’s 0.9% growth.
For the fourth quarter of 2025, United Security Bancshares reported earnings of 19 cents per share, reflecting a year-over-year increase of 35.7% from 14 cents per share in the prior-year quarter.
Net income of $3.4 million marked a year-over-year increase of 36.8% from $2.5 million in the prior-year quarter. The improvement was driven by a $0.7 million reduction in the provision for credit losses, along with declines in short-term borrowing and deposit interest expenses.
Full-year 2025 earnings decreased 16.9% to $12.3 million, or 70 cents per share, compared to $14.8 million, or 85 cents per share in 2024. The decline was primarily attributed to higher credit loss provisions and elevated noninterest expenses, notably from merger-related costs.
United Security Bancshares Price, Consensus and EPS Surprise
Net interest income for the fourth quarter rose 3.3% year over year to $12.2 million. This increase was driven by higher interest income on overnight investments and lower funding costs, despite a slight decline in total interest income, which fell 1.6% to $14.9 million. Net interest margin expanded to 4.36% from 4.22% in the prior-year quarter, reflecting effective deposit cost management as the annualized average cost of deposits decreased to 0.99% from 1.11%.
On a full-year basis, net interest income before provision for credit losses climbed 4.1% to $48.8 million, aided by increased loan interest and reduced borrowing expenses. The annual net interest margin improved to 4.41% from 4.26% in 2024.
Noninterest Items and Operational Efficiency
Noninterest income surged over tenfold in the fourth quarter to $1.3 million from $0.1 million in the year-ago period. The dramatic increase was primarily driven by a $0.2 million gain related to the fair value and partial redemption of junior subordinated debentures (TruPS), compared to a $0.8 million loss a year earlier.
Noninterest expense rose 18.5% year over year to $8.8 million, largely due to $0.7 million in merger-related costs and a $0.7 million increase in salaries and employee benefits. The efficiency ratio worsened to 65.1% from 60.8%, indicating a decrease in operational efficiency amid rising costs.
Management Commentary
President and CEO Dennis Woods highlighted strong execution in the fourth quarter, emphasizing net income growth and net interest margin expansion. He attributed margin improvement to effective deposit cost control during a shifting rate environment. Woods also pointed to a healthy loan pipeline entering 2026 and a $69.4 million year-over-year increase in unfunded commitments as indicators of future lending momentum.
Drivers Behind Performance
Several factors contributed to the quarterly and annual earnings trends. On the positive side, lower borrowing costs and deposit expenses helped cushion declines in loan and investment income. The partial redemption of $6 million in TruPS during 2025 provided additional gains, offsetting market-driven valuation losses. Meanwhile, elevated provision expenses — particularly in the student loan portfolio — and rising compensation and merger costs exerted downward pressure on profitability.
Credit quality showed mixed trends. The allowance for credit losses decreased to 1.62% of total loans from 1.72% the prior year, and non-performing assets fell to 1.12% of total assets from 1.42%. However, net loan charge-offs for the year more than doubled to $6.1 million from $2.6 million in 2024.
Other Developments
A key development during the quarter was the announcement of an all-stock merger agreement with Community West Bancshares on Dec. 16, 2025. The transaction, expected to close in 2026, is intended to enhance scale and deliver expanded value to stakeholders. The company also declared a cash dividend of 12 cents per share on Dec. 16, 2025, which was paid on Jan. 13, 2026.
Additionally, United Security redeemed $6 million in TruPS across two partial redemptions in July and October 2025. These redemptions generated gains totaling $0.5 million for the year, improving capital flexibility and reducing funding costs.
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UBFO's Q4 Earnings Rise Y/Y on Margin Expansion, Cost Cuts
Shares of United Security Bancshares (UBFO - Free Report) have declined 1.6% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares to the S&P 500 index’s 1.1% growth over the same time frame. Over the past month, the stock has gained 3.8% compared with the S&P 500’s 0.9% growth.
For the fourth quarter of 2025, United Security Bancshares reported earnings of 19 cents per share, reflecting a year-over-year increase of 35.7% from 14 cents per share in the prior-year quarter.
Net income of $3.4 million marked a year-over-year increase of 36.8% from $2.5 million in the prior-year quarter. The improvement was driven by a $0.7 million reduction in the provision for credit losses, along with declines in short-term borrowing and deposit interest expenses.
Full-year 2025 earnings decreased 16.9% to $12.3 million, or 70 cents per share, compared to $14.8 million, or 85 cents per share in 2024. The decline was primarily attributed to higher credit loss provisions and elevated noninterest expenses, notably from merger-related costs.
United Security Bancshares Price, Consensus and EPS Surprise
United Security Bancshares price-consensus-eps-surprise-chart | United Security Bancshares Quote
Net Interest Income and Margins
Net interest income for the fourth quarter rose 3.3% year over year to $12.2 million. This increase was driven by higher interest income on overnight investments and lower funding costs, despite a slight decline in total interest income, which fell 1.6% to $14.9 million. Net interest margin expanded to 4.36% from 4.22% in the prior-year quarter, reflecting effective deposit cost management as the annualized average cost of deposits decreased to 0.99% from 1.11%.
On a full-year basis, net interest income before provision for credit losses climbed 4.1% to $48.8 million, aided by increased loan interest and reduced borrowing expenses. The annual net interest margin improved to 4.41% from 4.26% in 2024.
Noninterest Items and Operational Efficiency
Noninterest income surged over tenfold in the fourth quarter to $1.3 million from $0.1 million in the year-ago period. The dramatic increase was primarily driven by a $0.2 million gain related to the fair value and partial redemption of junior subordinated debentures (TruPS), compared to a $0.8 million loss a year earlier.
Noninterest expense rose 18.5% year over year to $8.8 million, largely due to $0.7 million in merger-related costs and a $0.7 million increase in salaries and employee benefits. The efficiency ratio worsened to 65.1% from 60.8%, indicating a decrease in operational efficiency amid rising costs.
Management Commentary
President and CEO Dennis Woods highlighted strong execution in the fourth quarter, emphasizing net income growth and net interest margin expansion. He attributed margin improvement to effective deposit cost control during a shifting rate environment. Woods also pointed to a healthy loan pipeline entering 2026 and a $69.4 million year-over-year increase in unfunded commitments as indicators of future lending momentum.
Drivers Behind Performance
Several factors contributed to the quarterly and annual earnings trends. On the positive side, lower borrowing costs and deposit expenses helped cushion declines in loan and investment income. The partial redemption of $6 million in TruPS during 2025 provided additional gains, offsetting market-driven valuation losses. Meanwhile, elevated provision expenses — particularly in the student loan portfolio — and rising compensation and merger costs exerted downward pressure on profitability.
Credit quality showed mixed trends. The allowance for credit losses decreased to 1.62% of total loans from 1.72% the prior year, and non-performing assets fell to 1.12% of total assets from 1.42%. However, net loan charge-offs for the year more than doubled to $6.1 million from $2.6 million in 2024.
Other Developments
A key development during the quarter was the announcement of an all-stock merger agreement with Community West Bancshares on Dec. 16, 2025. The transaction, expected to close in 2026, is intended to enhance scale and deliver expanded value to stakeholders. The company also declared a cash dividend of 12 cents per share on Dec. 16, 2025, which was paid on Jan. 13, 2026.
Additionally, United Security redeemed $6 million in TruPS across two partial redemptions in July and October 2025. These redemptions generated gains totaling $0.5 million for the year, improving capital flexibility and reducing funding costs.