UNITED SECURITY BANCSHARES (UBFO)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 net income was $2.68M ($0.16 diluted EPS), down 35.5% YoY on higher credit loss provision, deposit interest expense, and noninterest expense; NIM improved to 4.58%, aided by an $890K interest payment from a nonaccrual payoff .
• Credit costs spiked: provision for credit losses rose to $2.30M (vs $173K YoY) with net loan charge-offs of $2.80M, largely tied to legacy medical student loans; nonperforming assets fell to 1.19% of assets as OREO increased following foreclosure .
• Deposits declined 2.97% sequentially to $1.03B, with continued use of $100M brokered deposits (avg rate 4.55%) to manage funding; cost of deposits rose to 1.09% (vs 0.72% YoY) .
• Non-GAAP core net income was $2.49M vs GAAP $2.68M due to a $270K gain on TRUPs fair value (non-core); efficiency ratio worsened to 55.90% (52.96% YoY) on higher OpEx .
• No formal forward guidance provided; the Board declared a $0.12 dividend payable April 22, 2025, and reiterated well-capitalized status; catalysts include NIM resilience vs deposit pricing pressure and clarity on student loan portfolio provisioning trajectory .

What Went Well and What Went Wrong

What Went Well

• Net interest margin improved to 4.58% (vs 4.35% YoY), with loan yields rising to 6.17% and lower costs on short-term borrowings/TRUPs; includes a one-time $890K interest payment from nonaccrual payoff supporting loan interest income .
• Nonperforming assets fell to $14.20M (1.19% of assets) driven by a $6.5M decrease in nonaccrual loans despite a $3.3M transfer to OREO, signaling progress on problem credits resolution .
• CEO tone highlighted operational steadiness and customer performance despite macro uncertainties: “We have maintained steady business operations and even improved our net interest margin to 4.58%.” .

What Went Wrong

• Credit costs surged: provision for credit losses of $2.30M and net charge-offs of $2.80M, primarily from student loan portfolio, pressured earnings and ROA/ROE YoY .
• Deposit interest expense increased $1.06M YoY and noninterest expense rose $866K YoY (notably salaries/benefits and data processing), worsening efficiency ratio to 55.90% .
• Deposits declined $31.4M QoQ to $1.03B; reliance on $100M brokered deposits (avg rate 4.55%) reflects funding pressure amid competitive pricing and runoff management .

Financial Results

Quarterly P&L and Profitability (oldest → newest)

YoY Comparison (Q1 2024 → Q1 2025)

KPIs and Balance Sheet (oldest → newest)

Non-GAAP

Guidance Changes

Note: Company reaffirmed well-capitalized status; Tier 1 leverage ratio reported at 12.84% (Company/Bank) in Q1 2025 vs 12.57% in Q4 2024, but these are reported metrics not forward guidance .

Earnings Call Themes & Trends

No Q1 2025 earnings call transcript was found; themes below reflect management’s press release commentary and prior quarter materials.

Management Commentary

• “Amid ongoing uncertainty in Washington, D.C., middle-class Americans continue to face economic challenges. Inflation remains elevated, interest rates are persistently high, and escalating tariff-related trade tensions may further burden household budgets. We remain hopeful these conditions will be short-lived. On a more encouraging note, our customers continue to perform well. We have maintained steady business operations and even improved our net interest margin to 4.58%.” — Dennis Woods, President & CEO .
• On medical student loans: “Between 2014 and 2018, we acquired approximately $75 million in medical student loans… While we may experience future charge-offs in this portfolio, we believe the overall allowance for credit losses is adequate.” .
• Dividend: $0.12 per share declared, payable April 22, 2025; company remains well-capitalized .

Q&A Highlights

• No Q1 2025 earnings call transcript available; therefore, no Q&A themes or clarifications to report [ListDocuments showed none for earnings-call-transcript].

Estimates Context

• Analyst coverage appears limited; S&P Global consensus for Q1 2025 EPS and revenue was unavailable.*
• Implication: With no published consensus, market reactions hinge on qualitative narrative (NIM resilience), credit cost trajectory, deposit funding mix, and capital/distribution policy rather than headline beats/misses .

*Values retrieved from S&P Global.

Key Takeaways for Investors

• Earnings pressure from credit costs is the primary headwind; YoY EPS down to $0.16 on higher provision ($2.30M) and net charge-offs ($2.80M), largely in legacy medical student loans .
• Core profitability is slightly below GAAP due to non-core TRUPs fair value gains; core net income was $2.49M vs GAAP $2.68M, underscoring sensitivity to SOFR-driven TRUPs marks .
• Positive margin dynamic: NIM at 4.58% with higher loan yields (6.17%) and reduced borrowing costs offsets part of OpEx/credit headwinds; watch sustainability absent one-time nonaccrual payoff benefit ($890K) .
• Funding mix remains a focus: deposits fell 2.97% QoQ to $1.03B; continued reliance on $100M brokered deposits (rate down to 4.55%) supports liquidity while potentially constraining margin if deposit competition intensifies .
• Asset quality actions progressing: nonaccruals declined and NPA ratio improved to 1.19% of assets, though OREO rose to $7.85M from foreclosure—monitor resolution timelines and additional student loan charge-offs .
• Operating expense inflation persists (salaries/benefits +$428K; data processing +$296K YoY) with efficiency at 55.90%; incremental cost discipline or revenue growth is needed to protect returns .
• Near-term trading lens: Mixed print with stronger NIM but heavier credit/OpEx; stock likely sensitive to any updates on student loan provisioning, deposit trends, and subsequent NIM trajectory; dividend continuity ($0.12) supports total return profile .