United Security Bancshares Reports 35.5% Decrease in Net Income for Q1 2025

United Security Bancshares reported a net income of $2.7 million, or $0.16 per share, for the first quarter of 2025, a decrease of 35.5% from the $4.2 million, or $0.24 per share, recorded in the same period of 2024. The decline in profitability was primarily attributed to a significant increase in the provision for credit losses, which rose to $2.3 million from $173,000 a year earlier, largely due to charge-offs in the student loan portfolio. Total interest income increased by 2.7% to $15.3 million, driven by higher interest and fees on loans, which rose to $13.9 million, reflecting a $890,000 interest payment related to a nonaccrual loan payoff.

The company's total assets decreased to $1.19 billion as of March 31, 2025, down from $1.21 billion at the end of 2024. This decline was accompanied by a 2.97% drop in total deposits, which fell to $1.03 billion, compared to $1.06 billion at the end of the previous year. The decrease in deposits was primarily due to reductions in interest-bearing accounts, particularly in NOW and money market accounts. The loan portfolio also contracted slightly, with net loans totaling $905.3 million, down from $912.4 million at the end of 2024.

In terms of operational developments, the company experienced an increase in other real estate owned (OREO) balances, which rose to $7.9 million from $4.6 million, following the transfer of nonaccrual loans totaling $3.3 million to OREO. The company maintained a focus on managing credit risk and liquidity, with a loan-to-deposit ratio of 89.7% as of March 31, 2025, compared to 87.8% at the end of 2024. The company also reported an increase in noninterest expenses, which rose by 12.9% to $7.6 million, driven by higher salaries, employee benefits, and consulting expenses.

Looking ahead, United Security Bancshares remains focused on maintaining adequate liquidity and managing credit risk while pursuing growth opportunities. The company is closely monitoring economic conditions, particularly in California's Central Valley, where agricultural performance can significantly impact local business activity and, consequently, the bank's loan portfolio. Management is committed to evaluating its strategic business plan in response to changing market conditions, with an emphasis on enhancing revenue sources and retaining deposit customers.