Financial Performance - Net income for Q3 2025 rose 5.07% to $4.0 million, compared to $3.8 million in Q3 2024[134] - Year-to-date net income for the nine months ended September 30, 2025, was $8.9 million, down from $12.3 million for the same period in 2024[140] - Noninterest income fell 20.02% to $1.6 million in Q3 2025, down from $2.0 million in Q3 2024, primarily due to a decrease in fair value gains on junior subordinated debentures[134] - Noninterest income for the nine months ended September 30, 2025, decreased by $852,000 to $3.7 million compared to the same period in 2024[158] Loan and Deposit Growth - Total loans increased 3.22% to $958.3 million as of September 30, 2025, from $928.5 million at December 31, 2024[134] - Total deposits grew 1.73% to $1.08 billion as of September 30, 2025, compared to $1.06 billion at December 31, 2024[134] - Total loans outstanding at the end of the period were $958.3 million at September 30, 2025, down from $975.2 million at September 30, 2024[207] - Total deposits reached $1.08 billion at September 30, 2025, marking an increase of $18.3 million, or 1.73%, from December 31, 2024[178] Interest Income and Margin - Net interest margin increased to 4.35% for Q3 2025, up from 4.20% in Q3 2024[134] - Total interest income decreased by $129,000, or 0.82%, for the three months ended September 30, 2025, compared to the same period in 2024[150] - The net interest margin for the three months ended September 30, 2025, was 4.35%, compared to 4.20% for the same period in 2024[142] - The Company's net interest margin increased to 4.42% for the nine months ended September 30, 2025, compared to 4.27% for the same period in 2024[154] Expenses and Efficiency - Noninterest expense increased 4.09% to $7.4 million in Q3 2025, compared to $7.1 million in Q3 2024, driven by higher technology and employee benefit expenses[134] - Salaries and employee benefits increased by $977,000, or 9.38%, for the nine months ended September 30, 2025, compared to the same period in 2024[160] - Data processing expenses increased by 57.22% to $1.22 million for the nine months ended September 30, 2025, compared to the same period in 2024[160] Asset Quality - Total nonperforming assets decreased by $3.1 million, or 18.03%, from $17,201,000 to $14,106,000[195] - Nonaccrual loans decreased by $6.5 million, or 53.31%, from $12,198,000 to $5,699,000[196] - The allowance for credit losses to nonperforming loans increased to 259.59% as of September 30, 2025, from 127.16% on December 31, 2024[195] - The allowance for credit losses was 1.69% of total loans at September 30, 2025, unchanged from September 30, 2024[208] Capital and Dividends - The Bank's Tier 1 Leverage Ratio was 12.11% at September 30, 2025, compared to 12.35% at the same date in 2024[216] - The Company and the Bank meet all capital adequacy requirements and are expected to continue doing so for the foreseeable future[219] - The Holding Company has authorized a stock repurchase of up to $3.0 million, representing 2.18% of total shareholders' equity of $137.4 million[221] - A cash dividend of $0.12 per share was declared on September 23, 2025, totaling approximately $2.1 million transferred from retained earnings[223]

Core Viewpoint - United Security Bancshares demonstrated a positive earnings response for Q3 2025, with a notable increase in net income and net interest margin, despite some declines in total interest income and noninterest income [1][3][4]. Financial Performance - Earnings per share (EPS) for Q3 2025 was reported at 23 cents, an increase from 22 cents in the same quarter last year [2]. - Total interest income slightly declined by 0.8% to $15.6 million from $15.8 million year-over-year, while net interest income rose by 5.1% to $12.4 million, up from $11.8 million [3]. - Net income increased by 5.1% to $4 million from $3.8 million in the prior year [3]. Key Business Metrics - Net interest margin improved to 4.35% from 4.20% year-over-year, driven by reduced costs of deposits and short-term borrowings [4]. - The cost of funds decreased to 1.1% from 1.4%, contributing to improved profitability [4]. - Return on average assets (ROAA) rose to 1.3% from 1.2%, and return on average equity (ROAE) increased to 11.7% from 11.6% [4]. Income Sources - Loan interest and fees fell by 0.9% year-over-year to $14.3 million, while noninterest income decreased by 20% to $1.6 million, primarily due to lower gains from fair value adjustments of junior subordinated debentures [5]. - Non-interest expenses increased by 4.1% to $7.4 million, reflecting higher technology, salary, and benefits costs [5]. Management Insights - The CEO expressed optimism regarding loan growth and the bank's equity position, noting a $7 million increase in shareholder equity after dividends [6]. - A decrease in student loan charge-offs was observed, indicating an improving credit environment [6]. Performance Drivers - Quarterly profitability improvements were attributed to lower short-term borrowing costs and a reduction in credit loss provisions, which fell to $1 million from $1.6 million year-over-year [7]. - A $0.2 million gain from a $3 million partial redemption of TruPS contributed positively to noninterest income [7]. Broader Developments - Net interest income benefited from increased earnings from overnight investments at the Federal Reserve and reduced funding costs [8]. - Average loan rates dipped slightly to 5.92% from 6.04%, but this was offset by a decrease in liability costs [8]. Other Notable Events - The company completed a $3 million partial redemption of its TruPS, reducing the contractual balance to $9 million [9]. - A cash dividend of 12 cents per share was declared, payable on October 21, 2025 [9]. - Other real estate owned (OREO) increased to $7.9 million from $4.6 million at year-end 2024, mainly due to foreclosures, although total nonperforming assets decreased to $14.1 million from $17.2 million [10].

Executive Summary & Highlights [3rd Quarter 2025 Financial Results Overview](index=1&type=section&id=3rd%20Quarter%202025%20Financial%20Results%20Overview) United Security Bancshares reported increased net income and EPS for Q3 2025 compared to Q3 2024, driven by strong loan growth and improved shareholders' equity, despite ongoing student loan charge-offs which decreased in magnitude this quarter Q3 2025 Financial Results Summary | Metric | Q3 2025 | Q3 2024 | Change | % Change | | :-------------------------------- | :------ | :------ | :------ | :------- | | Net Income | **$4.0 million** | **$3.8 million** | **+$0.2 million** | **+5.26%** | | Basic and Diluted EPS | **$0.23** | **$0.22** | **+$0.01** | **+4.55%** | - Loan growth of **$30.0 million** this quarter compared to the end of 2024[3](index=3&type=chunk) - Shareholders' equity improved by **$7.0 million** after dividends[3](index=3&type=chunk) - Magnitude of charge-offs in the student loan portfolio decreased this quarter compared to past few quarters[3](index=3&type=chunk) [Third Quarter 2025 Key Financial Highlights](index=1&type=section&id=Third%20Quarter%202025%20Key%20Financial%20Highlights) Key financial metrics for Q3 2025 showed improvements in net interest margin, return on assets, and return on equity, alongside decreases in the cost of deposits and interest expense. Total loans and deposits also increased Q3 2025 Key Financial Highlights Table | Metric | Q3 2025 | Q3 2024 | Change | | :----------------------------------- | :------ | :------ | :------- | | Net Interest Margin | **4.35%** | **4.20%** | **+0.15%** | | Annualized Average Cost of Deposits | **1.12%** | **1.18%** | **-0.06%** | | Net Income | **$4.0 million** | **$3.8 million** | **+5.07%** | | Loan Interest and Fees | **$14.3 million** | **$14.4 million** | **-0.94%** | | Interest Income | **$15.6 million** | **$15.8 million** | **-0.82%** | | Interest Expense | **$3.2 million** | **$3.9 million** | **-18.67%** | | Noninterest Income | **$1.6 million** | **$2.0 million** | **-20.02%** | | Provision for Credit Losses | **$948,000** | **$1.6 million** | **-$652,000** | | Noninterest Expense | **$7.4 million** | **$7.1 million** | **+4.09%** | | Annualized Return on Average Assets (ROAA) | **1.29%** | **1.24%** | **+0.05%** | | Annualized Return on Average Equity (ROAE) | **11.68%** | **11.63%** | **+0.05%** | | Total Loans, net of unearned fees | **$958.3 million** | **$928.5 million** (Dec 31, 2024) | **+3.22%** | | Total Deposits | **$1.08 billion** | **$1.06 billion** (Dec 31, 2024) | **+1.73%** | - Partial redemption of **$3.0 million** on Junior Subordinated Debentures (TruPS) on July 1, 2025, resulting in a gain of **$241,000**[3](index=3&type=chunk) Results of Operations [Quarter Ended September 30, 2025](index=2&type=section&id=Quarter%20Ended%20September%2030,%202025) For the third quarter of 2025, the Company reported an increase in net income and improved profitability ratios compared to the prior year, primarily driven by a decrease in the provision for credit losses and reduced short-term borrowing expenses, despite higher noninterest expenses and income tax provision [Net Income and Profitability Ratios (Q3 2025)](index=2&type=section&id=Net%20Income%20and%20Profitability%20Ratios%20(Q3%202025)) Net Income and Profitability Ratios Data | Metric | Q3 2025 | Q3 2024 | Q2 2025 | YoY Change | QoQ Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net Income | **$4.0 million** | **$3.8 million** | **$2.2 million** | **+5.07%** | **+81.82%** | | Basic and Diluted EPS | **$0.23** | **$0.22** | **$0.13** | **+$0.01** | **+$0.10** | | ROAE | **11.68%** | **11.63%** | - | **+0.05%** | - | | ROAA | **1.29%** | **1.24%** | - | **+0.05%** | - | - The increase in net income was primarily due to a **$610,000** decrease in the provision for credit losses and a **$717,000** decrease in short-term borrowing expense, partially offset by increases in noninterest expense (**$292,000**) and income tax provision (**$326,000**), and a decrease in loan and fee income (**$135,000**)[4](index=4&type=chunk) - A gain of **$241,000** related to the partial redemption of TruPS and a **$6,000** gain from changes in fair value of TruPS also contributed to the income increase[4](index=4&type=chunk) [Net Interest Income and Margin (Q3 2025)](index=2&type=section&id=Net%20Interest%20Income%20and%20Margin%20(Q3%202025)) Net Interest Income and Margin Data | Metric | Q3 2025 | Q3 2024 | YoY Change | Q2 2025 | QoQ Change | | :----------------------------------- | :------ | :------ | :--------- | :------ | :--------- | | Net Interest Income (before provision) | **$12.4 million** | **$11.8 million** | **+5.14%** | **$11.9 million** | **+$556,000** | | Net Interest Margin | **4.35%** | **4.20%** | **+0.15%** | - | - | | Annualized Average Cost of Deposits | **1.12%** | **1.18%** | **-0.06%** | - | - | | Annualized Average Cost of Funds | **1.13%** | **1.38%** | **-0.25%** | - | - | - The increase in net interest income was driven by increases in interest on overnight investments held at the Federal Reserve and decreases in interest expense on short-term borrowings and deposits, offset by decreases in loan-interest income and investment securities interest income[6](index=6&type=chunk) - Yields on interest-earning assets decreased from **5.60%** to **5.47%**, while the cost of interest-bearing liabilities decreased from **2.13%** to **1.81%**[6](index=6&type=chunk) [Noninterest Income (Q3 2025)](index=2&type=section&id=Noninterest%20Income%20(Q3%202025)) Noninterest Income Data | Metric | Q3 2025 | Q3 2024 | YoY Change | Q2 2025 | QoQ Change | | :----------------------------------- | :------ | :------ | :--------- | :------ | :--------- | | Total Noninterest Income | **$1.6 million** | **$2.0 million** | **-$405,000** | **$758,000** | **+$860,000** | | Gain on fair value of TruPS | **$247,000** | **$661,000** | **-$414,000** | **-$317,000** (loss) | **+$564,000** | - The decrease in noninterest income YoY was primarily due to a lower gain on the fair value of TruPS, while the QoQ increase was due to a shift from a loss to a gain on TruPS and an increase in customer service fees of **$121,000**[7](index=7&type=chunk) - Noninterest income for Q3 2025 also included a realized gain of **$241,000** from the partial redemption of **$3.0 million** of TruPS[7](index=7&type=chunk) [Noninterest Expense (Q3 2025)](index=2&type=section&id=Noninterest%20Expense%20(Q3%202025)) Noninterest Expense Data | Metric | Q3 2025 | Q3 2024 | YoY Change | Q2 2025 | QoQ Change | | :-------------------- | :------ | :------ | :--------- | :------ | :--------- | | Total Noninterest Expense | **$7.4 million** | **$7.1 million** | **+$292,000** | **$7.7 million** | **-$305,000** | - The YoY increase was partially due to increases of **$125,000** in other noninterest expense and **$93,000** in salaries and employee benefit expenses, offset by decreases in loan-related expenses of **$95,000**[8](index=8&type=chunk) - Salaries and employee benefits increased primarily due to increases of **$144,000** in employee salary expense and **$101,000** in group insurance costs[8](index=8&type=chunk) [Provision for Credit Losses (Q3 2025)](index=1&type=section&id=Provision%20for%20Credit%20Losses%20(Q3%202025)) Provision for Credit Losses Data | Metric | Q3 2025 | Q3 2024 | Change | | :-------------------------- | :------ | :------ | :------- | | Provision for Credit Losses | **$948,000** | **$1.6 million** | **-$652,000** | - The decreased credit provision was due to a decrease in charge-offs within the student loan portfolio[3](index=3&type=chunk) [Efficiency Ratio and Income Tax (Q3 2025)](index=3&type=section&id=Efficiency%20Ratio%20and%20Income%20Tax%20(Q3%202025)) Efficiency Ratio and Income Tax Data | Metric | Q3 2025 | Q3 2024 | Change | | :-------------------- | :------ | :------ | :------- | | Efficiency Ratio | **52.80%** | **52.47%** | **+0.33%** | | Income Tax Provision | **$1.6 million** | **$1.3 million** | **+$300,000** | | Effective Tax Rate | **28.86%** | **25.43%** | **+3.43%** | - The deterioration in the efficiency ratio was due to an increase in noninterest expense and a decrease in noninterest income, offset by an increase in net interest income[9](index=9&type=chunk) [Nine Months Ended September 30, 2025](index=3&type=section&id=Nine%20Months%20Ended%20September%2030,%202025) For the nine months ended September 30, 2025, net income decreased significantly compared to the prior year, primarily due to a substantial increase in the provision for credit losses, higher deposit interest expense, and increased noninterest expense, which outweighed reductions in short-term borrowing expense and income tax provision [Net Income and Profitability Ratios (9M 2025)](index=3&type=section&id=Net%20Income%20and%20Profitability%20Ratios%20(9M%202025)) Net Income and Profitability Ratios Data | Metric | 9M 2025 | 9M 2024 | Change | % Change | | :-------------------------------- | :------ | :------ | :------ | :------- | | Net Income | **$8.9 million** | **$12.3 million** | **-$3.4 million** | **-27.78%** | | Basic and Diluted EPS | **$0.51** | **$0.72** | **-$0.21** | **-29.17%** | | ROAE | **8.79%** | **12.95%** | **-4.16%** | - | | ROAA | **0.98%** | **1.36%** | **-0.38%** | - | - The decrease in net income was primarily the result of a **$3.4 million** increase in the provision for credit losses, a **$2.0 million** increase in deposit interest expense, and a **$1.9 million** increase in noninterest expense[11](index=11&type=chunk) - These negative impacts were partially offset by a **$3.3 million** decrease in short-term borrowing expense, a **$1.2 million** decrease in the income tax provision, an increase of **$59,000** on the fair value of TruPS, and an increase of **$516,000** in loan and fee income[11](index=11&type=chunk) [Net Interest Income and Margin (9M 2025)](index=3&type=section&id=Net%20Interest%20Income%20and%20Margin%20(9M%202025)) Net Interest Income and Margin Data | Metric | 9M 2025 | 9M 2024 | Change | % Change | | :----------------------------------- | :------ | :------ | :------ | :------- | | Net Interest Income (before provision) | **$36.6 million** | **$35.0 million** | **+$1.5 million** | **+4.37%** | | Net Interest Margin | **4.42%** | **4.27%** | **+0.15%** | - | | Annualized Average Cost of Deposits | **1.11%** | **0.91%** | **+0.20%** | - | | Annualized Average Cost of Funds | **1.12%** | **1.25%** | **-0.13%** | - | - The increase in net interest income was driven by increases in loan-interest income, increases in income on overnight deposits held at the Federal Reserve, and decreases in interest expense on short-term borrowings, offset by increases in interest expense on deposits[13](index=13&type=chunk) - Yields on interest-earning assets decreased slightly to **5.55%** from **5.56%**, while yields on interest-bearing liabilities decreased to **1.78%** from **1.97%**[13](index=13&type=chunk) [Noninterest Income (9M 2025)](index=3&type=section&id=Noninterest%20Income%20(9M%202025)) Noninterest Income Data | Metric | 9M 2025 | 9M 2024 | Change | | :-------------------- | :------ | :------ | :------- | | Total Noninterest Income | **$3.7 million** | **$4.6 million** | **-$852,000** | | Gain on fair value of TruPS | **$200,000** | **$141,000** | **+$59,000** | - The decrease in noninterest income was partially due to a **$573,000** gain on proceeds from life insurance realized during the nine months ended September 30, 2024, and a decrease in other noninterest income of **$342,000**[14](index=14&type=chunk) - Noninterest income also included a realized gain of **$241,000** related to the partial redemption of **$3.0 million** of the TruPS contractual balance[14](index=14&type=chunk) [Noninterest Expense (9M 2025)](index=3&type=section&id=Noninterest%20Expense%20(9M%202025)) Noninterest Expense Data | Metric | 9M 2025 | 9M 2024 | Change | | :-------------------- | :------ | :------ | :------- | | Total Noninterest Expense | **$22.8 million** | **$20.8 million** | **+$1.9 million** | - The increase was partially from increases of **$1.0 million** in salaries and employee benefit expenses, **$444,000** in data processing expenses, and **$323,000** in other noninterest expense[15](index=15&type=chunk) - Salaries and employee benefits increased primarily due to increases of **$554,000** in group insurance costs and **$342,000** in employee salaries[15](index=15&type=chunk) [Provision for Credit Losses (9M 2025)](index=4&type=section&id=Provision%20for%20Credit%20Losses%20(9M%202025)) Provision for Credit Losses Data | Metric | 9M 2025 | 9M 2024 | Change | | :-------------------------- | :------ | :------ | :------- | | Provision for Credit Losses | **$5.1 million** | **$1.8 million** | **+$3.3 million** | - The provisions recorded during 2025 and 2024 were primarily driven by deterioration within the student loan portfolio[22](index=22&type=chunk) [Efficiency Ratio and Income Tax (9M 2025)](index=3&type=section&id=Efficiency%20Ratio%20and%20Income%20Tax%20(9M%202025)) Efficiency Ratio and Income Tax Data | Metric | 9M 2025 | 9M 2024 | Change | | :-------------------- | :------ | :------ | :------- | | Efficiency Ratio | **56.36%** | **52.96%** | **+3.40%** | | Income Tax Provision | **$3.6 million** | **$4.8 million** | **-$1.2 million** | | Effective Tax Rate | **28.61%** | **27.88%** | **+0.73%** | - The deterioration in the efficiency ratio was due to increases in interest expense and noninterest expense and a decrease in noninterest income, offset by an increase in net interest income[16](index=16&type=chunk) Balance Sheet Review [Assets Review](index=4&type=section&id=Assets%20Review) Total assets increased by 1.97% since December 31, 2024, primarily driven by growth in gross loan balances, particularly real estate construction and agricultural loans, while investment securities decreased and OREO balances rose due to foreclosures Asset Categories Overview | Asset Category | Sep 30, 2025 | Dec 31, 2024 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Total Assets | **$1.236 billion** | **$1.212 billion** | **+$23.9 million** | **+1.97%** | | Gross Loan Balances | **+$30.1 million** | - | - | - | | Investment Securities | **-$16.4 million** | - | - | - | | Total Cash and Cash Equivalents | **+$10.6 million** | - | - | - | | OREO Balances | **$7.9 million** | **$4.6 million** | **+$3.3 million** | **+71.74%** | - Increases in gross loans included **$31.4 million** in real estate construction and development loans and **$22.7 million** in agricultural loans, offset by decreases in commercial and industrial loans and installment loans[18](index=18&type=chunk) - Declines in the investment portfolio were primarily due to calls on and maturities of corporate securities, partially offset by a decrease in unrealized losses[18](index=18&type=chunk) [Liabilities and Deposits Review](index=4&type=section&id=Liabilities%20and%20Deposits%20Review) Total deposits increased by 1.73% since December 31, 2024, driven by a significant rise in noninterest-bearing deposits, which offset a decrease in interest-bearing deposits. Core deposits also saw an increase Liabilities and Deposits Overview | Deposit Category | Sep 30, 2025 | Dec 31, 2024 | Change | % Change | | :----------------------- | :----------- | :----------- | :------- | :------- | | Total Deposits | **$1.08 billion** | **$1.06 billion** | **+$18.3 million** | **+1.73%** | | Noninterest-bearing Deposits | **$384.4 million** | **$360.2 million** | **+$24.2 million** | **+6.72%** | | Interest-bearing Deposits | **-$5.9 million** | - | - | - | | Core Deposits | **+$18.9 million** | - | - | - | - Brokered DDA accounts totaled **$100.3 million** at both September 30, 2025, and December 31, 2024, with an average rate of **4.53%** for Q3 2025[19](index=19&type=chunk) [Shareholders' Equity and Dividends](index=4&type=section&id=Shareholders'%20Equity%20and%20Dividends) Shareholders' equity increased by $7.0 million since December 31, 2024, primarily due to net income and a reduction in accumulated other comprehensive loss, partially offset by dividend payments. The Board declared a cash dividend of $0.12 per share Shareholders' Equity and Dividends Data | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :----------------------------------- | :----------- | :----------- | :------- | | Total Shareholders' Equity | **$137.4 million** | **$130.4 million** | **+$7.0 million** | | Accumulated Other Comprehensive Loss | **$10.6 million** | **$14.4 million** | **-$3.8 million** | - The increase in equity was the result of **$8.9 million** in net income and a **$3.8 million** decrease in accumulated other comprehensive loss, partially offset by **$6.3 million** in dividend payments[20](index=20&type=chunk) - A cash dividend of **$0.12** per share was declared on September 23, 2025, payable on October 21, 2025[21](index=21&type=chunk) Credit Quality [Provision for Credit Losses and Net Charge-offs](index=4&type=section&id=Provision%20for%20Credit%20Losses%20and%20Net%20Charge-offs) The Company recorded a significantly higher provision for credit losses and net loan charge-offs for the nine months ended September 30, 2025, compared to the prior year, primarily due to deterioration within the student loan portfolio Credit Losses and Net Charge-offs Data | Metric | 9M 2025 | 9M 2024 | Change | | :-------------------------- | :------ | :------ | :------- | | Provision for Credit Losses | **$5.1 million** | **$1.8 million** | **+$3.3 million** | | Net Loan Charge-offs | **$4.6 million** | **$1.2 million** | **+$3.4 million** | - The provisions and charge-offs were primarily driven by deterioration within the student loan portfolio[22](index=22&type=chunk) [Allowance for Credit Losses](index=4&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses as a percentage of the loan portfolio slightly decreased, but management deems it adequate to cover potential losses Allowance for Credit Losses Data | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :-------------------------------- | :----------- | :----------- | :------- | | Allowance for Credit Losses to Loan Portfolio | **1.69%** | **1.72%** | **-0.03%** | - Management considers the allowance for credit losses at September 30, 2025, to be adequate[23](index=23&type=chunk) [Non-performing Assets](index=5&type=section&id=Non-performing%20Assets) Non-performing assets decreased by $3.1 million, or 18.08%, since December 31, 2024, primarily due to a significant reduction in nonaccrual loans, partially offset by an increase in Other Real Estate Owned (OREO) from foreclosures Non-performing Assets Data | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Total Non-performing Assets | **$14.1 million** | **$17.2 million** | **-$3.1 million** | **-18.08%** | | Non-performing Assets to Total Assets | **1.14%** | **1.42%** | **-0.28%** | - | | Nonaccrual Loans | **-$6.5 million** | - | - | - | | OREO Balances | **+$3.3 million** | - | - | - | - The decrease in non-performing assets is primarily attributed to a decrease of **$6.5 million** in nonaccrual loans, partially offset by an increase of **$3.3 million** in OREO balances due to foreclosures[24](index=24&type=chunk) - A nonaccrual loan with a principal balance of **$3.2 million** was paid off, and nonaccrual interest of **$890,000** was recognized[24](index=24&type=chunk) Company Information [About United Security Bancshares](index=5&type=section&id=About%20United%20Security%20Bancshares) United Security Bancshares is the holding company for United Security Bank, established in 1987 and headquartered in Fresno, CA. It operates 13 full-service branch offices across various California cities and includes Commercial Real Estate Construction, Commercial Lending, and Consumer Lending departments - United Security Bancshares (NASDAQ: **UBFO**) is the holding company for United Security Bank, founded in **1987**[25](index=25&type=chunk) - Headquartered in Fresno, CA, with **13** full-service branch offices in various California locations[25](index=25&type=chunk) - Operates Commercial Real Estate Construction, Commercial Lending, and Consumer Lending departments[25](index=25&type=chunk) Forward-Looking Statements [Disclaimer and Risk Factors](index=5&type=section&id=Disclaimer%20and%20Risk%20Factors) This section contains forward-looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from expectations. Readers are advised not to place undue reliance on these statements and to review the Company's Form 10-K for a comprehensive discussion of risks - Forward-looking statements are based on management's current knowledge and beliefs and are not guarantees of future performance[26](index=26&type=chunk) - Actual results may differ materially due to various factors, including adverse economic conditions, geopolitical developments, regulatory changes, increased competition, credit quality, technological changes, and liquidity risks[27](index=27&type=chunk) - The Company does not undertake any obligation to publicly revise or update these statements, except as required by law, and directs readers to its Annual Report on Form 10-K for a more complete discussion of risks[29](index=29&type=chunk) Financial Statements & Data [Consolidated Balance Sheets (unaudited)](index=6&type=section&id=Consolidated%20Balance%20Sheets) The unaudited consolidated balance sheets present the Company's financial position as of September 30, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheet Summary | (In thousands) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------------------ | :----------- | :----------- | | **Assets** | | | | Cash and cash equivalents | **$66,767** | **$56,211** | | Total investment securities | **144,342** | **160,708** | | Net loans | **942,113** | **912,416** | | Total assets | **$1,235,620** | **$1,211,718** | | **Liabilities and Shareholders' Equity** | | | | Total deposits | **1,075,900** | **1,057,622** | | Junior subordinated debentures (TruPS) | **9,145** | **11,572** | | Total liabilities | **1,098,238** | **1,081,356** | | Total shareholders' equity | **137,382** | **130,362** | | Total liabilities and shareholders' equity | **$1,235,620** | **$1,211,718** | [Consolidated Statements of Income (unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Income) The unaudited consolidated statements of income provide a detailed breakdown of the Company's revenues and expenses for the three and nine months ended September 30, 2025, and 2024, showing net interest income, noninterest income/expense, and net income Consolidated Statements of Income Summary | (In thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total interest income | **$15,626** | **$15,755** | **$45,913** | **$45,605** | | Total interest expense | **3,207** | **3,943** | **9,337** | **10,559** | | Net Interest Income | **12,419** | **11,812** | **36,576** | **35,046** | | Provision for Credit Losses | **948** | **1,558** | **5,106** | **1,750** | | Total noninterest income | **1,618** | **2,023** | **3,739** | **4,591** | | Total noninterest expense | **7,434** | **7,142** | **22,778** | **20,849** | | Income Before Provision for Taxes | **5,655** | **5,135** | **12,431** | **17,038** | | Provision for Income Taxes | **1,632** | **1,306** | **3,557** | **4,751** | | Net Income | **$4,023** | **$3,829** | **$8,874** | **$12,287** | | Basic Net income per common share | **$0.23** | **$0.22** | **$0.51** | **$0.72** | | Diluted Net income per common share | **$0.23** | **$0.22** | **$0.51** | **$0.72** | [Average Balances and Rates (unaudited)](index=8&type=section&id=Average%20Balances%20and%20Rates) This table provides unaudited average balances for key assets and liabilities, along with the corresponding average interest rates, for the three and nine months ended September 30, 2025, and 2024, illustrating trends in interest-earning assets and interest-bearing liabilities Average Balances and Rates Data | (In thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | **Average Balances:** | | | | | | Loans | **$956,832** | **$949,207** | **$935,727** | **$921,454** | | Total interest-earning assets | **1,133,053** | **1,120,080** | **1,106,485** | **1,096,012** | | Total average assets | **$1,238,187** | **$1,231,282** | **$1,212,524** | **$1,206,657** | | Interest-bearing deposits | **$689,444** | **$678,334** | **$683,802** | **$624,699** | | Total interest-bearing liabilities | **701,272** | **735,502** | **699,661** | **714,580** | | Total equity | **136,703** | **130,929** | **135,007** | **126,757** | | **Average Rates:** | | | | | | Loans | **5.92%** | **6.04%** | **6.00%** | **6.01%** | | Total earning assets | **5.47%** | **5.60%** | **5.55%** | **5.56%** | | Interest-bearing deposits | **1.75%** | **1.80%** | **1.70%** | **1.42%** | | Total interest-bearing liabilities | **1.81%** | **2.13%** | **1.78%** | **1.97%** | | Net interest margin | **4.35%** | **4.20%** | **4.42%** | **4.27%** | [Condensed Consolidated Financials (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Financials) These condensed unaudited consolidated financial statements provide a quarterly view of the Company's balance sheet and income statement trends, allowing for sequential analysis of financial performance and position over recent periods Condensed Consolidated Financials Summary | (In thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | **Condensed - Consolidated Balance Sheets** | | | | | | | Total assets | **$1,235,620** | **$1,214,137** | **$1,191,791** | **$1,211,718** | **$1,255,376** | | Total deposits | **1,075,900** | **1,055,669** | **1,026,213** | **1,057,622** | **1,065,021** | | Total shareholders' equity | **137,382** | **134,254** | **132,876** | **130,362** | **132,856** | | **Condensed - Consolidated Statements of Income** | | | | | | | Total interest income | **$15,626** | **$15,004** | **$15,283** | **$15,146** | **$15,755** | | Net interest income | **12,419** | **11,863** | **12,296** | **11,804** | **11,812** | | Provision for credit losses | **948** | **1,858** | **2,300** | **1,213** | **1,558** | | Net income | **$4,023** | **$2,169** | **$2,682** | **$2,495** | **$3,829** | [Nonperforming Assets (unaudited)](index=10&type=section&id=Nonperforming%20Assets%20Data) This table provides a breakdown of nonperforming assets, including nonaccrual loans and other real estate owned, along with key ratios, as of September 30, 2025, and December 31, 2024 Nonperforming Assets Breakdown | (Dollars in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :----------- | :----------- | | Total nonaccrual loans | **$5,699** | **$12,198** | | Loans past due 90 days and still accruing | **555** | **421** | | Total nonperforming loans | **6,254** | **12,619** | | Other real estate owned | **7,852** | **4,582** | | Total nonperforming assets | **$14,106** | **$17,201** | | Nonperforming loans to total gross loans | **0.65%** | **1.36%** | | Nonperforming assets to total assets | **1.14%** | **1.42%** | | Allowance for credit losses to nonperforming loans | **259.59%** | **127.16%** | [Selected Financial Data (unaudited)](index=10&type=section&id=Selected%20Financial%20Data) This table presents key financial performance and balance sheet ratios, including profitability, efficiency, credit quality, and per-share metrics, for the three and nine months ended September 30, 2025, and 2024, and period-end data Selected Financial Data Table | Metric | Three months ended Sep 30, 2025 | Three months ended Sep 30, 2024 | Nine months ended Sep 30, 2025 | Nine months ended Sep 30, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Return on average assets | **1.29%** | **1.24%** | **0.98%** | **1.36%** | | Return on average equity | **11.68%** | **11.63%** | **8.79%** | **12.95%** | | Efficiency ratio | **52.80%** | **52.47%** | **56.36%** | **52.96%** | | Annualized net charge-offs to average loans | **0.26%** | **0.27%** | **0.66%** | **0.18%** | | | Sep 30, 2025 | Dec 31, 2024 | | | | Shares outstanding - period end | **17,557,427** | **17,364,894** | | | | Book value per share | **$7.82** | **$7.51** | | | | Tangible book value per share | **$7.57** | **$7.25** | | | | Loan-to-deposit ratio | **89.07%** | **87.79%** | | | | Allowance for credit losses to total loans | **1.69%** | **1.72%** | | | | Tier 1 capital to adjusted average assets (Company) | **12.42%** | **12.57%** | | |

Core Viewpoint - Zacks Investment Research has initiated coverage of United Security Bancshares (UBFO) with a Neutral recommendation, highlighting a balance between the bank's strong capital profile and stable dividend policy against pressures from weakening earnings and rising costs [1] Financial Performance - United Security Bancshares maintains a consistent dividend of 12 cents per share, payable quarterly, demonstrating financial discipline in a challenging environment where many smaller banks have cut or suspended payouts [2] - The bank's net income nearly halved year over year to $2.2 million in the second quarter of 2025, primarily due to sharply higher credit loss provisions and a 50% drop in non-interest income, raising concerns about the durability of core earnings [5] Credit Quality and Risk Management - The company's credit profile has improved, with non-performing assets declining, which reduces downside risk and reflects cautious underwriting standards [3] - The bank's diversified loan book, primarily tied to small- and mid-sized businesses in Central California, positions it as a lower-risk option compared to more cyclical sectors [3] Capital and Liquidity - Liquidity and capital strength are key pillars of resilience, with a Tier 1 capital ratio above regulatory thresholds and a high proportion of core, non-brokered deposits providing stability [4] - The bank's funding base reduces reliance on more expensive wholesale channels, indicating preparedness to weather external shocks [4] Operating Expenses and Market Position - Operating expenses rose 10.9% in the same period, adding pressure to margins amid deposit mix deterioration and rising funding costs [6] - Despite modest gains over the past year, the stock has lagged as investors weigh stability against earnings volatility, trading at a discount to broader peers [6] Overall Assessment - Strong capital and credit quality offer stability, but earnings volatility, rising costs, and margin pressure limit near-term upside potential [7]

PART I. Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, statements of changes in shareholders' equity, and cash flow statements, along with detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $49,091 | $56,211 | | Total investment securities | $150,423 | $160,708 | | Net loans | $931,364 | $912,416 | | Other real estate owned | $7,852 | $4,582 | | Total assets | $1,214,137 | $1,211,718 | | **Liabilities & Shareholders' Equity** | | | | Total deposits | $1,055,669 | $1,057,622 | | Total liabilities | $1,079,883 | $1,081,356 | | Total shareholders' equity | $134,254 | $130,362 | | Total liabilities and shareholders' equity | $1,214,137 | $1,211,718 | - **Net loans** increased by **$18.9 million** from December 31, 2024, to June 30, 2025, reflecting organic growth[8](index=8&type=chunk)[161](index=161&type=chunk) - **Other real estate owned (OREO)** increased by **$3.3 million** from December 31, 2024, to June 30, 2025, primarily due to the transfer of nonaccrual loans[8](index=8&type=chunk)[132](index=132&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement details the company's revenues, expenses, and net income over specified reporting periods | (In thousands, except shares and EPS) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $15,004 | $14,972 | $30,286 | $29,850 | | Total interest expense | $3,141 | $3,450 | $6,130 | $6,617 | | Net Interest Income | $11,863 | $11,522 | $24,156 | $23,233 | | Provision for credit losses | $1,858 | $19 | $4,158 | $192 | | Total noninterest income | $758 | $1,517 | $2,122 | $2,571 | | Total noninterest expense | $7,739 | $6,973 | $15,344 | $13,708 | | Net income | $2,169 | $4,297 | $4,851 | $8,458 | | Basic EPS | $0.13 | $0.25 | $0.28 | $0.49 | | Diluted EPS | $0.13 | $0.25 | $0.25 | $0.49 | - **Net income for the quarter ended June 30, 2025, decreased by 49.52% to $2.2 million**, compared to **$4.3 million** for the same period in 2024, primarily due to a significant increase in the **provision for credit losses**[9](index=9&type=chunk)[132](index=132&type=chunk) - The **provision for credit losses** increased substantially to **$1.9 million** for the three months ended June 30, 2025, from **$19k** in the prior year, and to **$4.2 million** for the six months ended June 30, 2025, from **$192k** in the prior year[9](index=9&type=chunk)[132](index=132&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income components, reflecting changes in equity not from net income | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $2,169 | $4,297 | $4,851 | $8,458 | | Unrealized gain (loss) on available-for-sale securities | $1,571 | $1,008 | $4,159 | $(61) | | Total other comprehensive income | $1,047 | $802 | $2,776 | $165 | | Comprehensive income | $3,216 | $5,099 | $7,627 | $8,623 | - **Comprehensive income decreased by 37.0%** for the three months ended June 30, 2025, and by **11.55%** for the six months ended June 30, 2025, compared to the respective prior-year periods[10](index=10&type=chunk) - **Unrealized gains on available-for-sale securities** significantly increased to **$4.2 million** for the six months ended June 30, 2025, from a loss of **$(61)k** in the prior year[10](index=10&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement tracks the changes in each component of shareholders' equity over the reporting period | (Dollars in thousands) | Balance June 30, 2025 | Balance June 30, 2024 | Balance December 31, 2024 | | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $61,727 | $60,938 | $61,267 | | Retained Earnings | $84,103 | $81,285 | $83,447 | | Accumulated Other Comprehensive (Loss) Income | $(11,576) | $(14,873) | $(14,352) | | Total Shareholders' Equity | $134,254 | $127,350 | $130,362 | - **Total shareholders' equity** increased to **$134.3 million** at June 30, 2025, from **$130.4 million** at December 31, 2024, driven by **net income** and **other comprehensive income**, partially offset by dividends[11](index=11&type=chunk)[12](index=12&type=chunk) - **Accumulated other comprehensive loss** improved to **$(11.6) million** at June 30, 2025, from **$(14.4) million** at December 31, 2024[11](index=11&type=chunk)[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows from operating, investing, and financing activities | (In thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net Income | $4,851 | $8,458 | | Net cash provided by operating activities | $11,720 | $9,752 | | Net cash used in investing activities | $(12,692) | $(10,748) | | Net cash used in financing activities | $(6,148) | $(1,031) | | Net change in cash and cash equivalents | $(7,120) | $(2,027) | | Cash and cash equivalents at end of period | $49,091 | $38,757 | - **Net cash provided by operating activities** increased by **$2.0 million** to **$11.7 million** for the six months ended June 30, 2025, compared to the same period in 2024[13](index=13&type=chunk) - **Net cash used in financing activities** significantly increased to **$(6.1) million** for the six months ended June 30, 2025, from **$(1.0) million** in the prior year, primarily due to higher dividends on common stock[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures that are integral to understanding the condensed consolidated financial statements [1. Organization and Summary of Significant Accounting and Reporting Policies](index=8&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20and%20Reporting%20Policies) This note describes the company's corporate structure and outlines the significant accounting policies applied in preparing the financial statements - **United Security Bancshares (Company)** is a bank holding company with wholly-owned subsidiaries **United Security Bank (Bank)** and **York Monterey Properties, Inc. (YMP)**[14](index=14&type=chunk) - The unaudited interim financial statements are prepared in accordance with **GAAP**, consistent with the accounting policies in the **2024 Annual Report on Form 10-K**[15](index=15&type=chunk) [2. Investment Securities](index=8&type=section&id=2.%20Investment%20Securities) This note details the composition, classification, and fair value of the company's investment securities portfolio | (In thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | U.S. Government agencies | $1,769 | $2,644 | | U.S. Government-sponsored entities and agencies collateralized by mortgage obligations | $76,285 | $78,881 | | Municipal bonds | $43,946 | $42,367 | | Corporate bonds | $25,041 | $33,490 | | Total securities available-for-sale | $147,041 | $157,382 | - **Total available-for-sale (AFS) securities** decreased by **$10.3 million** from December 31, 2024, to June 30, 2025[16](index=16&type=chunk) - The decline in fair value of **AFS securities** is attributed to changes in interest rates, not credit quality, and no allowance for credit losses was deemed necessary[20](index=20&type=chunk) - Proceeds from sales or calls of **AFS securities** for the six months ended June 30, 2025, totaled **$9.0 million**[17](index=17&type=chunk) [3. Loans](index=11&type=section&id=3.%20Loans) This note provides a comprehensive breakdown of the loan portfolio, including categories, credit quality, and allowance for credit losses | (In thousands) | June 30, 2025 | % of Loans | December 31, 2024 | % of Loans | | :--- | :--- | :--- | :--- | :--- | | Commercial and industrial | $52,479 | 5.54% | $63,715 | 6.86% | | Real estate mortgage | $670,917 | 70.82% | $666,694 | 71.81% | | Real estate construction and development | $126,300 | 13.33% | $111,145 | 11.97% | | Agricultural | $64,838 | 6.84% | $49,462 | 5.33% | | Installment and student loans | $32,795 | 3.47% | $37,446 | 4.04% | | Total loans | $947,329 | 100.00% | $928,462 | 100.00% | - **Total loans**, net of unearned fees, increased by **2.03%** to **$947.3 million** at June 30, 2025, from **$928.5 million** at December 31, 2024[30](index=30&type=chunk)[163](index=163&type=chunk) - **Agricultural loans** increased by **$15.4 million (31.09%)** and **real estate construction and development loans** increased by **$15.2 million (13.64%)** from December 31, 2024, to June 30, 2025[164](index=164&type=chunk) - **Total past due loans** decreased to **$7.3 million** at June 30, 2025, from **$15.8 million** at December 31, 2024[37](index=37&type=chunk)[38](index=38&type=chunk) - **Nonaccrual loans** decreased to **$5.7 million** at June 30, 2025, from **$12.2 million** at December 31, 2024, due to a loan payoff and transfer to **OREO**[39](index=39&type=chunk)[190](index=190&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Provision for credit losses (1) | $1,847 | $224 | $3,915 | $306 | | Charge-offs | $(1,317) | $(397) | $(4,146) | $(812) | | Recoveries | $79 | $45 | $150 | $171 | | Ending balance (Allowance for credit losses) | $15,965 | $15,323 | $15,965 | $15,323 | [4. Student Loans](index=22&type=section&id=4.%20Student%20Loans) This note specifically addresses the student loan portfolio, its principal amounts, reserves, and changes over time | (Dollars in thousands) | June 30, 2025 (Principal Amount) | December 31, 2024 (Principal Amount) | | :--- | :--- | :--- | | Student loans | $29,412 | $33,889 | | Reserves against student loan portfolio | $7,600 | $7,000 | | Substandard student loans | $274 | $421 | - The **student loan portfolio** decreased by **$4.477 million** from December 31, 2024, to June 30, 2025, due to paydowns, consolidations, and charge-offs[63](index=63&type=chunk)[169](index=169&type=chunk)[173](index=173&type=chunk) - Accrued interest receivable reversed due to charge-offs for the six months ended June 30, 2025, was **$292k**, compared to **$58k** in the prior year[70](index=70&type=chunk)[172](index=172&type=chunk) - **Student loans** have not been originated or purchased since 2019[63](index=63&type=chunk)[169](index=169&type=chunk) [5. Deposits](index=24&type=section&id=5.%20Deposits) This note details the composition of the company's deposit base, distinguishing between interest-bearing and noninterest-bearing accounts | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Noninterest-bearing deposits | $372,027 | $360,152 | | Interest-bearing deposits | $683,642 | $697,470 | | Total deposits | $1,055,669 | $1,057,622 | | Brokered demand deposit accounts | $100,300 | $100,300 | - **Total deposits** decreased slightly by **$2.0 million (0.18%)** from December 31, 2024, to June 30, 2025[72](index=72&type=chunk)[174](index=174&type=chunk) - **Noninterest-bearing deposits** increased by **$11.9 million**, while **interest-bearing deposits** decreased by **$13.8 million** during the six-month period[175](index=175&type=chunk) [6. Short-term Borrowings/Other Borrowings](index=24&type=section&id=6.%20Short-term%20Borrowings%2FOther%20Borrowings) This note outlines the company's short-term borrowing facilities, including available credit lines and outstanding balances | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unsecured credit lines (Credit limit) | $90,000 | $90,000 | | Federal Home Loan Bank (Credit limit) | $133,405 | $135,634 | | Federal Reserve Bank (Credit limit) | $503,607 | $499,069 | | Balance outstanding (all lines) | $0 | $0 | - The **Company** had no outstanding borrowings at June 30, 2025, or December 31, 2024[74](index=74&type=chunk)[161](index=161&type=chunk)[181](index=181&type=chunk) - **Total available lines of credit** amounted to **$727.0 million** at June 30, 2025[74](index=74&type=chunk)[181](index=181&type=chunk) [7. Leases](index=24&type=section&id=7.%20Leases) This note provides information on the company's operating and financing leases, including expenses and lease terms | (Dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating cash flows from operating leases | $396 | $368 | | ROU assets obtained in exchange for new operating lease liabilities | $0 | $2,314 | | Weighted-average remaining lease term (years) | 8.82 | 8.71 | | Weighted-average discount rate | 5.06% | 5.06% | - **Operating lease expenses** for the six months ended June 30, 2025, totaled **$394k**, an increase from **$363k** in the prior year[77](index=77&type=chunk) - The **Company** had **14 operating leases** and no financing leases as of June 30, 2025[76](index=76&type=chunk) [8. Supplemental Cash Flow Disclosures](index=25&type=section&id=8.%20Supplemental%20Cash%20Flow%20Disclosures) This note offers additional details on cash flow activities, such as cash paid for interest and income taxes, and non-cash transactions | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash paid for interest | $6,094 | $6,602 | | Cash paid for income taxes | $1,850 | $4,400 | | Unrealized gain (loss) on available-for-sale securities, net of tax | $2,930 | $(43) | | Unrealized (loss) gain on junior subordinated debentures, net of tax | $(166) | $194 | - **Cash paid for income taxes** decreased significantly to **$1.9 million** for the six months ended June 30, 2025, from **$4.4 million** in the prior year[79](index=79&type=chunk) - **Unrealized gain on available-for-sale securities, net of tax**, was **$2.9 million** for the six months ended June 30, 2025, a substantial improvement from a loss of **$(43)k** in the prior year[79](index=79&type=chunk) [9. Dividends on and Repurchase of Common Stock](index=25&type=section&id=9.%20Dividends%20on%20and%20Repurchase%20of%20Common%20Stock) This note reports on dividend declarations and any authorized or executed common stock repurchase programs - A **cash dividend of $0.12 per share** was declared on June 24, 2025, payable on July 22, 2025[80](index=80&type=chunk) - The **Company** has an **authorized stock repurchase program** of up to **$3.0 million**, representing **2.23%** of **total shareholders' equity** at June 30, 2025[81](index=81&type=chunk)[217](index=217&type=chunk) - No shares were repurchased during the three- and six-month periods ended June 30, 2025, and 2024[82](index=82&type=chunk) [10. Net Income per Common Share](index=26&type=section&id=10.%20Net%20Income%20per%20Common%20Share) This note details the calculation of basic and diluted earnings per common share for the reporting periods | (In thousands, except shares and EPS) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $2,169 | $4,297 | $4,851 | $8,458 | | Basic earnings per share | $0.13 | $0.25 | $0.28 | $0.49 | | Diluted earnings per share | $0.13 | $0.25 | $0.28 | $0.49 | | Weighted average common shares outstanding (Basic) | 17,235,873 | 17,186,266 | 17,232,825 | 17,178,566 | | Weighted average common shares outstanding (Diluted) | 17,260,392 | 17,187,266 | 17,261,463 | 17,179,559 | - **Basic and diluted EPS** decreased by approximately **48%** for the three months ended June 30, 2025, and by **42%** for the six months ended June 30, 2025, compared to the prior-year periods[83](index=83&type=chunk) [11. Taxes on Income](index=26&type=section&id=11.%20Taxes%20on%20Income) This note provides information on the provision for income taxes, effective tax rates, and deferred tax assets and liabilities | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Provision for income taxes | $855 | $1,750 | $1,925 | $3,446 | | Effective tax rate | 28.27% | 28.94% | 28.41% | 28.95% | - The **provision for income taxes** decreased by **$895k** for the quarter and **$1.5 million** for the six months ended June 30, 2025, compared to the prior-year periods[87](index=87&type=chunk) - The **effective tax rate** slightly decreased for both the three-month (**28.27% vs 28.94%**) and six-month (**28.41% vs 28.95%**) periods ended June 30, 2025, compared to 2024[87](index=87&type=chunk) - No valuation allowance was recorded for deferred tax assets at June 30, 2025, or December 31, 2024[85](index=85&type=chunk) [12. Junior Subordinated Debt/Trust Preferred Securities](index=26&type=section&id=12.%20Junior%20Subordinated%20Debt%2FTrust%20Preferred%20Securities) This note describes the company's junior subordinated debentures and related fair value measurements and interest rates - The contractual principal balance of **junior subordinated debentures (TruPS)** was **$12.0 million** at June 30, 2025, and December 31, 2024[88](index=88&type=chunk) - A partial redemption of **$3.0 million** of **TruPS** was made on July 1, 2025, reducing the contractual principal balance to **$9.0 million**[92](index=92&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Fair value calculation loss | $(410) | $(104) | $(282) | $(244) | | Other comprehensive income (loss) gain | $(93) | $121 | $(235) | $275 | | Recognized loss on fair value | $(317) | $(225) | $(48) | $(520) | - The rate paid on **TruPS** is **3-month SOFR plus 129 basis points**, adjusted quarterly[89](index=89&type=chunk) [13. Fair Value Measurements and Disclosure](index=27&type=section&id=13.%20Fair%20Value%20Measurements%20and%20Disclosure) This note explains the fair value hierarchy and provides disclosures regarding the measurement of financial instruments at fair value - The **fair value hierarchy** categorizes inputs into **Level 1 (quoted prices in active markets)**, **Level 2 (observable inputs)**, and **Level 3 (unobservable inputs)**[98](index=98&type=chunk) | (In thousands) | June 30, 2025 (Fair Value) | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Investment securities | $147,041 | $0 | $147,041 | $0 | | Marketable equity securities | $3,382 | $3,382 | $0 | $0 | | Loans, net | $901,983 | $0 | $0 | $901,983 | | Time deposits | $76,735 | $0 | $0 | $76,735 | | Junior subordinated debt | $11,831 | $0 | $0 | $11,831 | - **Junior subordinated debt** is classified as **Level 3** due to the subjective nature of inputs, credit concerns in capital markets, and inactivity in trust preferred markets[107](index=107&type=chunk) - There were no transfers between fair value measurement classifications during the six months ended June 30, 2025, or 2024[100](index=100&type=chunk) [14. Goodwill and Intangible Assets](index=31&type=section&id=14.%20Goodwill%20and%20Intangible%20Assets) This note reports on the carrying value of goodwill and intangible assets and assessments for impairment - **Goodwill** remained unchanged at **$4.5 million** at June 30, 2025, and December 31, 2024[112](index=112&type=chunk) - The **Company** concluded that **goodwill** was not impaired as of December 31, 2024, and no triggering events occurred through June 30, 2025[112](index=112&type=chunk) [15. Accumulated Other Comprehensive Income (Loss)](index=31&type=section&id=15.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note details the components of accumulated other comprehensive income or loss, including unrealized gains and losses | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net unrealized gain (loss) on available-for-sale securities | $(12,830) | $(15,760) | | Unfunded status of the supplemental retirement plans | $(135) | $(147) | | Net unrealized gain (loss) on junior subordinated debentures | $1,389 | $1,555 | | Accumulated other comprehensive loss | $(11,576) | $(14,352) | - The **accumulated other comprehensive loss** decreased to **$(11.6) million** at June 30, 2025, from **$(14.4) million** at December 31, 2024[113](index=113&type=chunk) - **Net unrealized gain (loss) on available-for-sale securities** improved by **$2.9 million** during the six months ended June 30, 2025[113](index=113&type=chunk) [16. Segment Information](index=31&type=section&id=16.%20Segment%20Information) This note provides financial information about the company's operating segments, if any, and geographic concentrations - The **Company** operates as a single reportable segment, primarily banking operations, with all operations being domestic[114](index=114&type=chunk) | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $32,408 | $32,421 | | Banking segment net income | $4,851 | $8,458 | | Banking segment assets | $1,214,137 | $1,211,718 | [17. Investment in York Monterey Properties](index=32&type=section&id=17.%20Investment%20in%20York%20Monterey%20Properties) This note details the company's investment in its subsidiary, York Monterey Properties, Inc., and related asset transfers - The **Bank's investment in York Monterey Properties, Inc. (YMP)** totaled **$8.0 million** at June 30, 2025, up from **$5.0 million** at December 31, 2024[118](index=118&type=chunk) - On January 14, 2025, **$3.3 million** in nonaccrual loans related to **YMP** were foreclosed and transferred to **Other Real Estate Owned (OREO)**[117](index=117&type=chunk) - At June 30, 2025, **$7.9 million** of the total investment in **YMP** was recognized within **OREO** on the consolidated balance sheets[118](index=118&type=chunk) [18. Commitments and Contingent Liabilities](index=32&type=section&id=18.%20Commitments%20and%20Contingent%20Liabilities) This note discloses off-balance sheet commitments, such as credit extensions and letters of credit, and potential legal liabilities | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commitments to extend credit | $221,842 | $204,033 | | Standby letters of credit | $28,424 | $29,174 | - **Commitments to extend credit** increased by **$17.8 million** from December 31, 2024, to June 30, 2025[120](index=120&type=chunk) - Unfunded commitments for investment in limited partnerships totaled **$2.2 million** at both June 30, 2025, and December 31, 2024[122](index=122&type=chunk) - Management believes that any liability from legal proceedings would not have a material adverse effect on the **Company's financial condition** or **results of operations**[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, analyzing key trends and drivers [Overview](index=33&type=section&id=Overview) This overview summarizes key financial highlights and significant changes in the company's performance and financial position - **Net interest margin** increased to **4.35%** for the quarter ended June 30, 2025, up from **4.28%** in the prior year[132](index=132&type=chunk) - **Net income for the quarter decreased 49.52% to $2.2 million**, primarily due to a **$1.8 million** increase in the **provision for credit losses**[132](index=132&type=chunk) - Annualized average cost of deposits increased to **1.11%** for the quarter ended June 30, 2025, from **0.79%** in the prior year[132](index=132&type=chunk) - **Total loans**, net of unearned fees, increased **2.03%** to **$947.3 million** at June 30, 2025, compared to **$928.5 million** at December 31, 2024[132](index=132&type=chunk) - **OREO balances** increased from **$4.6 million** at December 31, 2024, to **$7.9 million** at June 30, 2025, due to the transfer of nonaccrual loans[132](index=132&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, focusing on net interest income, noninterest income, and operating expenses | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income | $4.9M | $8.5M | | Annualized return on average assets (ROAA) | 0.82% | 1.42% | | Annualized return on average equity (ROAE) | 7.31% | 13.64% | | Net Interest Income | $24,156k | $23,233k | | Net Interest Margin | 4.46% | 4.31% | | Total noninterest income | $2,122k | $2,571k | | Total noninterest expense | $15,344k | $13,708k | | Effective tax rate | 28.41% | 28.95% | - **Net interest income** increased by **$923k (3.97%)** for the six months ended June 30, 2025, compared to the same period in 2024, driven by higher loan yields and lower short-term borrowing costs[149](index=149&type=chunk)[151](index=151&type=chunk) - **Noninterest income** decreased by **$449k (17.46%)** for the six months ended June 30, 2025, primarily due to a **$573k** gain on life insurance proceeds in 2024 that did not recur[155](index=155&type=chunk) - **Noninterest expense** increased by **$1.6 million (11.93%)** for the six months ended June 30, 2025, mainly due to increases in salaries and employee benefits and data processing expenses[157](index=157&type=chunk) [Financial Condition](index=43&type=section&id=Financial%20Condition) This section discusses the company's balance sheet, including assets, liabilities, equity, loan quality, and nonperforming assets | (In thousands) | June 30, 2025 | December 31, 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Total assets | $1,214,137 | $1,211,718 | $2,419 | | Net loans | $931,364 | $912,416 | $18,948 | | Investment securities | $150,423 | $160,708 | $(10,285) | | Total deposits | $1,055,669 | $1,057,622 | $(1,953) | | Nonperforming assets | $13,824 | $17,201 | $(3,377) | | Nonaccrual loans | $5,698 | $12,198 | $(6,500) | | Other real estate owned | $7,852 | $4,582 | $3,270 | | Allowance for credit losses to total loans | 1.68% | 1.72% | -0.04% | | Allowance for credit losses to nonperforming loans | 267.33% | 127.16% | 140.17% | - **Gross loans** increased by **$18.9 million (2.03%)** to **$947.3 million** at June 30, 2025, compared to December 31, 2024[163](index=163&type=chunk) - **Nonperforming assets** decreased by **$3.4 million (19.63%)** to **$13.8 million** at June 30, 2025, from **$17.2 million** at December 31, 2024[190](index=190&type=chunk) - **Net charge-offs** for the six months ended June 30, 2025, totaled **$4.0 million**, significantly higher than **$641k** in the prior year, primarily due to student loan charge-offs[199](index=199&type=chunk)[203](index=203&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations and maintain adequate capital levels - The **loan-to-deposit ratio** increased to **89.74%** at June 30, 2025, from **87.79%** at December 31, 2024[209](index=209&type=chunk) - The **Company** had **$727.0 million** in unused lines of credit with the **Federal Reserve Bank** and **FHLB** at June 30, 2025[210](index=210&type=chunk) - **Core deposits** comprised approximately **87.43%** of **total deposits** at June 30, 2025, providing a significant and stable funding source[179](index=179&type=chunk)[210](index=210&type=chunk) | Capital Ratios | June 30, 2025 | December 31, 2024 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Company Tier 1 capital to adjusted average assets (Leverage Ratio) | 12.83% | 12.57% | 9.00% | | Bank Tier 1 capital to adjusted average assets (Leverage Ratio) | 12.56% | 12.59% | 9.00% | - Both the **Company** and the **Bank** meet all capital adequacy requirements, with **Tier 1 Leverage Ratios** well above the **9.00%** minimum[213](index=213&type=chunk)[215](index=215&type=chunk) - A **cash dividend of $0.12 per share** was declared on June 24, 2025, and a partial redemption of **$3.0 million** of **TruPS** was made on July 1, 2025[218](index=218&type=chunk)[219](index=219&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable to smaller reporting companies, as stated in the report - This item is not applicable to smaller reporting companies[221](index=221&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. No material changes to internal control over financial reporting occurred during the quarter - **Disclosure controls and procedures** were effective at a reasonable assurance level as of June 30, 2025[223](index=223&type=chunk) - No changes were made to the **Company's internal control over financial reporting** during the quarter ended June 30, 2025, that materially affected or were reasonably likely to materially affect it[224](index=224&type=chunk) - **Controls and procedures** provide reasonable, not absolute, assurance that objectives will be met, acknowledging inherent limitations[225](index=225&type=chunk) PART II. Other Information This section includes additional disclosures such as legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings in the normal course of business, but management believes any resulting liability would not have a material adverse effect on its financial condition or results of operations - The **Company** is involved in various **legal proceedings** in the normal course of business[227](index=227&type=chunk) - Management believes that any **ultimate liability** from these proceedings would not be material to the **Company's financial position** or **results of operations**[227](index=227&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section is marked as 'N/A' in the report, indicating no new material risk factors for the quarter - This item is not applicable (N/A)[228](index=228&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any unregistered sales of equity securities and the application of their proceeds - No **unregistered sales of equity securities** and use of proceeds occurred during the quarter ended June 30, 2025[228](index=228&type=chunk) [Item 3. Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'N/A' in the report - This item is not applicable (N/A)[229](index=229&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'N/A' in the report - This item is not applicable (N/A)[229](index=229&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) This item is marked as 'N/A' in the report - This item is not applicable (N/A)[229](index=229&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, executive agreements, equity plans, and certifications required by SEC regulations - **Exhibits** include **Articles of Incorporation**, **Bylaws**, **Executive Salary Continuation Agreements**, **Employment Agreements**, **Stock Option Plans**, and **Equity Incentive Award Plans**[231](index=231&type=chunk) - **Computation of earnings per share** is provided in **Note 10 to the Consolidated Financial Statements**[231](index=231&type=chunk)[233](index=233&type=chunk) - **Interactive data files** are furnished pursuant to **Rule 405 of Regulation S-T**[232](index=232&type=chunk) - **Certifications of the Chief Executive Officer and Chief Financial Officer** are included pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[237](index=237&type=chunk) [Signatures](index=60&type=section&id=Signatures) The report is duly signed on August 7, 2025, by Dennis R. Woods, President and Chief Executive Officer, and David A. Kinross, Senior Vice President and Chief Financial Officer, as authorized representatives of United Security Bancshares - The report was signed on **August 7, 2025**[240](index=240&type=chunk) - Signed by **Dennis R. Woods, President and Chief Executive Officer**, and **David A. Kinross, Senior Vice President and Chief Financial Officer**[240](index=240&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Overall Performance (Q2 2025 vs Q2 2024)](index=1&type=section&id=Overall%20Performance%20(Q2%202025%20vs%20Q2%202024)) United Security Bancshares reported a significant decrease in net income for Q2 2025 compared to Q2 2024, primarily driven by elevated student loan charge-offs and a substantial increase in the provision for credit losses | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :----------------------- | :------ | :------ | :--------- | :--------- | | Net Income | $2.2M | $4.3M | $(2.1M) | -48.84% | | EPS (Basic & Diluted) | $0.13 | $0.25 | $(0.12) | -48.00% | - The primary cause for the decrease in net income was a **$1.9 million** provision for credit losses, mainly due to elevated student loan charge-offs following the expiration of pandemic-related payment forbearance programs[3](index=3&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Dennis Woods highlighted the impact of student loan charge-offs on credit loss provisions but affirmed the adequacy of the overall allowance. He also noted a strong equity position and ongoing investments in the branch network - Elevated student loan charge-offs, primarily due to the expiration of payment forbearance programs, led to a **$1.9 million provision for credit losses**[3](index=3&type=chunk) - The net interest margin for the quarter was **4.35%**, and the equity position remains strong at **$134.3 million**[3](index=3&type=chunk) - The company is investing in its branch network, with a new Fresno location nearing completion in August 2025 and renovations planned for two existing branches in Firebaugh and Caruthers[3](index=3&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Key financial highlights for Q2 2025 include an increased net interest margin, higher cost of deposits, and significant decreases in net income, ROAA, and ROAE, alongside an increased provision for credit losses and OREO balances | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------------- | :---------- | :---------- | :--------- | | Net Interest Margin | 4.35% | 4.28% | +0.07 pp | | Annualized Avg Cost of Deposits | 1.11% | 0.79% | +0.32 pp | | Net Income | $2.2M | $4.3M | -49.52% | | Interest & Fees on Loans | $13.8M | $13.6M | +1.39% | | Interest Income | $15.00M | $14.97M | +0.2% | | Interest Expense | $3.1M | $3.5M | -9.0% | | Noninterest Income | $758K | $1.5M | -50.0% | | Provision for Credit Losses | $1.9M | $19K | +9900% | | Noninterest Expense | $7.7M | $7.0M | +10.99% | | Annualized ROAA | 0.73% | 1.45% | -0.72 pp | | Annualized ROAE | 6.46% | 13.79% | -7.33 pp | | Total Loans (net of unearned fees) | $947.3M | $928.5M (Dec 31, 2024) | +2.03% | | Total Deposits | $1.056B | $1.058B (Dec 31, 2024) | -0.18% | | OREO Balances | $7.9M | $4.6M (Dec 31, 2024) | +71.74% | [Results of Operations](index=2&type=section&id=Results%20of%20Operations) [Quarter Ended June 30, 2025](index=2&type=section&id=Quarter%20Ended%20June%2030%2C%202025) For Q2 2025, net income significantly declined due to increased provision for credit losses, higher deposit interest expense, and increased noninterest expense, partially offset by reduced short-term borrowing expense and income tax provision | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :---------- | :---------- | :--------- | | Net Income | $2.2M | $4.3M | $(2.1M) | -49.52% | | EPS (Basic & Diluted) | $0.13 | $0.25 | $(0.12) | -48.00% | | ROAE | 6.46% | 13.79% | -7.33 pp | -53.15% | | ROAA | 0.73% | 1.45% | -0.72 pp | -49.66% | | Provision for Credit Losses | $1.9M | $19K | +$1.8M | +9473.68% | | Deposit Interest Expense | $2.868M | $1.857M | +$1.0M | +54.44% | | Noninterest Expense | $7.7M | $7.0M | +$766K | +10.94% | | Short-term Borrowing Expense | $273K | $1.593M | $(1.3M) | -82.86% | | Income Tax Provision | $855K | $1.8M | $(895K) | -49.72% | | Loan and Fee Income | $13.765M | $13.576M | +$189K | +1.39% | - The annualized average cost of deposits increased to **1.11%** from **0.79%** YoY, with average interest-bearing deposits increasing by **14.25%** to **$678.8 million**. Brokered deposits averaged **$100.0 million** at a **4.55%** rate[6](index=6&type=chunk) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :---------------------- | :---------- | :---------- | :---------- | :--------- | | Net Interest Income | $11.9M | $11.5M | +$341K | +2.96% | | Net Interest Margin | 4.35% | 4.28% | +0.07 pp | +1.64% | | Loan Yields | 5.92% | 6.00% | -0.08 pp | -1.33% | | Cost of Interest-Bearing Liabilities | 1.80% | 1.96% | -0.16 pp | -8.16% | | Noninterest Income Item | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total Noninterest Income | $758K | $1.5M | $(759K) | -50.0% | | Gain on Life Insurance Proceeds | $0 | $573K | $(573K) | -100% | | Loss on Fair Value of TruPS | $(317K) | $(225K) | $(92K) | +40.89% | | Noninterest Expense Item | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total Noninterest Expense | $7.7M | $7.0M | +$766K | +10.99% | | Salaries & Employee Benefits | $4.033M | $3.390M | +$643K | +18.97% | | Other Noninterest Expense | $954K | $727K | +$227K | +31.22% | | Professional Fees | $350K | $642K | $(292K) | -45.48% | - The efficiency ratio deteriorated to **61.34%** in Q2 2025 from **53.50%** in Q2 2024, driven by increased noninterest expense and decreased noninterest income, partially offset by increased net interest income[10](index=10&type=chunk) [Six Months Ended June 30, 2025](index=3&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025) For the first six months of 2025, net income decreased significantly year-over-year, primarily due to a substantial increase in the provision for credit losses and higher operating expenses, despite some offsets from reduced borrowing costs and tax provisions | Metric | H1 2025 | H1 2024 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :---------- | :---------- | :--------- | | Net Income | $4.9M | $8.5M | $(3.6M) | -42.65% | | EPS (Basic & Diluted) | $0.28 | $0.49 | $(0.21) | -42.86% | | ROAE | 7.31% | 13.64% | -6.33 pp | -46.41% | | ROAA | 0.82% | 1.42% | -0.60 pp | -42.25% | | Provision for Credit Losses | $4.2M | $192K | +$4.0M | +2083.33% | | Deposit Interest Expense | $5.6M | $3.6M | +$2.1M | +58.33% | | Noninterest Expense | $15.3M | $13.7M | +$1.6M | +11.68% | | Short-term Borrowing Expense | $481K | $3.036M | $(2.6M) | -85.14% | | Income Tax Provision | $1.9M | $3.4M | $(1.5M) | -44.12% | | Loan and Fee Income | $27.7M | $27.1M | +$651K | +2.40% | - The annualized average cost of deposits for the six months ended June 30, 2025, was **1.10%**, up from **0.75%** in the prior year period. Average interest-bearing deposits increased by **13.9%** to **$680.9 million**[13](index=13&type=chunk) | Metric | H1 2025 | H1 2024 | Change ($) | Change (%) | | :---------------------- | :---------- | :---------- | :---------- | :--------- | | Net Interest Income | $24.2M | $23.2M | +$923K | +3.97% | | Net Interest Margin | 4.46% | 4.31% | +0.15 pp | +3.48% | | Loan Yields | 6.05% | 5.99% | +0.06 pp | +1.00% | | Cost of Interest-Bearing Liabilities | 1.77% | 1.89% | -0.12 pp | -6.35% | | Noninterest Income Item | H1 2025 | H1 2024 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total Noninterest Income | $2.1M | $2.6M | $(449K) | -17.27% | | Gain on Life Insurance Proceeds | $0 | $573K | $(573K) | -100% | | Loss on Fair Value of TruPS | $(48K) | $(520K) | +$472K | -90.77% | | Noninterest Expense Item | H1 2025 | H1 2024 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total Noninterest Expense | $15.3M | $13.7M | +$1.6M | +11.68% | | Salaries & Employee Benefits | $7.959M | $6.888M | +$1.1M | +15.55% | | Data Processing Expenses | $806K | $309K | +$497K | +160.84% | | Occupancy Expense | $1.896M | $1.741M | +$155K | +8.90% | - The efficiency ratio for the six months ended June 30, 2025, increased to **58.52%** from **53.23%** in the prior year, reflecting higher noninterest expense and lower noninterest income, partially offset by increased net interest income[17](index=17&type=chunk) [Balance Sheet Review](index=4&type=section&id=Balance%20Sheet%20Review) [Assets](index=4&type=section&id=Assets) Total assets saw a slight increase, driven by growth in gross loans, particularly agricultural and real estate construction loans, while investment securities and cash equivalents decreased | Asset Category | June 30, 2025 | Dec 31, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------ | :------------ | :---------- | :--------- | | Total Assets | $1,214.1M | $1,211.7M | +$2.4M | +0.20% | | Gross Loan Balances | $949.3M | $930.2M | +$19.0M | +2.04% | | Investment Securities | $150.4M | $160.7M | $(10.3M) | -6.41% | | Cash and Cash Equivalents | $49.1M | $56.2M | $(7.1M) | -12.99% | | OREO Balances | $7.9M | $4.6M | +$3.3M | +71.74% | | Unfunded Loan Commitments | $221.8M | $204.0M | +$17.8M | +8.73% | - Increases in gross loans were primarily in agricultural loans (**+$15.4 million**), real estate construction and development loans (**+$15.2 million**), and real estate mortgage loans (**+$4.2 million**), offset by decreases in commercial and industrial loans and installment loans[19](index=19&type=chunk) [Liabilities (Deposits)](index=4&type=section&id=Liabilities%20(Deposits)) Total deposits slightly decreased, with a shift from interest-bearing to noninterest-bearing deposits. Brokered DDA accounts remained significant, and core deposits experienced a minor decline | Deposit Category | June 30, 2025 | Dec 31, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------ | :------------ | :---------- | :--------- | | Total Deposits | $1,055.7M | $1,057.6M | $(2.0M) | -0.18% | | Noninterest-Bearing Deposits | $372.0M | $360.2M | +$11.9M | +3.30% | | Interest-Bearing Deposits | $683.6M | $697.5M | $(13.8M) | -1.98% | | Brokered DDA Accounts | $100.3M | $100.3M | $0 | 0.00% | | Core Deposits | N/A | N/A | $(1.2M) | N/A | - NOW, money market, and savings accounts collectively decreased by **2.03%** to **$606.5 million**[20](index=20&type=chunk) [Shareholders' Equity](index=4&type=section&id=Shareholders%27%20Equity) Shareholders' equity increased due to net income and a reduction in accumulated other comprehensive loss, partially offset by dividend payments. The company remains well-capitalized | Metric | June 30, 2025 | Dec 31, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------ | :------------ | :---------- | :--------- | | Total Shareholders' Equity | $134.3M | $130.4M | +$3.9M | +2.99% | | Net Income | +$4.9M | N/A | N/A | N/A | | Accumulated Other Comprehensive Loss | $(11.6M) | $(14.4M) | +$2.8M | -19.44% | | Dividend Payments | $(4.2M) | N/A | N/A | N/A | | Book Value Per Share | $7.68 | $7.51 | +$0.17 | +2.26% | | Tangible Book Value Per Share | $7.43 | $7.25 | +$0.18 | +2.48% | | Tier 1 Capital to Adjusted Average Assets | 12.83% | 12.57% | +0.26 pp | +2.07% | - The decrease in accumulated other comprehensive loss was primarily due to a **$2.8 million** decrease in net unrealized losses on investment securities[21](index=21&type=chunk) - A cash dividend of **$0.12 per share** was declared on June 24, 2025, payable on July 22, 2025[22](index=22&type=chunk) [Credit Quality](index=4&type=section&id=Credit%20Quality) [Provision for Credit Losses & Net Charge-offs](index=4&type=section&id=Provision%20for%20Credit%20Losses%20%26%20Net%20Charge-offs) The company recorded a significantly higher provision for credit losses and net loan charge-offs for the first half of 2025, primarily driven by charge-offs within the student loan portfolio | Metric | H1 2025 | H1 2024 | Change ($) | Change (%) | | :------------------------------ | :---------- | :---------- | :---------- | :--------- | | Provision for Credit Losses | $4.2M | $192K | +$4.0M | +2083.33% | | Net Loan Charge-offs | $4.0M | $641K | +$3.4M | +530.42% | | Annualized Net Charge-offs to Average Loans | 0.87% | 0.14% | +0.73 pp | +521.43% | [Allowance for Credit Losses](index=4&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses slightly decreased as a percentage of the loan portfolio but significantly increased relative to nonperforming loans, indicating improved coverage | Metric | June 30, 2025 | Dec 31, 2024 | Change (pp) | | :------------------------------ | :------------ | :------------ | :---------- | | Allowance for Credit Losses to Total Loans | 1.68% | 1.72% | -0.04 pp | | Allowance for Credit Losses to Nonperforming Loans | 267.33% | 127.16% | +140.17 pp | - Management considers the allowance for credit losses at June 30, 2025, to be adequate[24](index=24&type=chunk) [Non-Performing Assets](index=4&type=section&id=Non-Performing%20Assets) Non-performing assets decreased significantly, primarily due to a reduction in nonaccrual loans, despite an increase in OREO balances from foreclosures | Metric | June 30, 2025 | Dec 31, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------ | :------------ | :---------- | :--------- | | Total Non-Performing Assets | $13.8M | $17.2M | $(3.4M) | -19.77% | | Non-Performing Assets to Total Assets | 1.14% | 1.42% | -0.28 pp | -19.72% | | Total Nonaccrual Loans | $5.7M | $12.2M | $(6.5M) | -53.28% | | Other Real Estate Owned (OREO) | $7.9M | $4.6M | +$3.3M | +71.74% | - The decrease in nonaccrual loans included a **$3.2 million** payoff of a nonaccrual loan and the transfer of **$3.3 million** in nonaccrual loans to OREO due to foreclosure[25](index=25&type=chunk) [Company Information](index=5&type=section&id=Company%20Information) [About United Security Bancshares](index=5&type=section&id=About%20United%20Security%20Bancshares) United Security Bancshares is the holding company for United Security Bank, operating 13 full-service branches in California and offering various lending services - United Security Bancshares (NASDAQ: UBFO) is the holding company for United Security Bank, founded in 1987 and headquartered in Fresno, CA[26](index=26&type=chunk) - The bank operates **13 full-service branch offices** across several California cities and includes Commercial Real Estate Construction, Commercial Lending, and Consumer Lending departments[26](index=26&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) The press release includes a non-GAAP financial measure, 'Core Net Income,' which management believes provides a more comparative view of operating results by excluding non-core items like the Fair Value Adjustment for TruPS - The company uses 'Core Net Income' as a non-GAAP measure, excluding non-core items such as the Fair Value Adjustment for TruPS, to provide a more comparative view of financial results[3](index=3&type=chunk)[27](index=27&type=chunk) | Metric | H1 2025 | H1 2024 | Change ($) | Change (%) | | :----------------------------------------- | :---------- | :---------- | :---------- | :--------- | | Net Income (GAAP) | $4,851K | $8,458K | $(3,607K) | -42.6% | | TruPS Fair Value Adjustment (1) | $(48K) | $(520K) | N/A | N/A | | Income Tax Effect | $14K | $154K | N/A | N/A | | Non-core items net of taxes | $(34K) | $(366K) | N/A | N/A | | Non-GAAP Core Net Income | $4,885K | $8,824K | $(3,939K) | -44.6% | [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, geopolitical developments, regulatory changes, competition, and operational risks, which could cause actual results to differ materially - Forward-looking statements are based on management's current knowledge and beliefs and are subject to risks and uncertainties, including adverse economic conditions, geopolitical developments, and interest rate policies[28](index=28&type=chunk)[29](index=29&type=chunk) - Other factors that could cause differences include changes in banking laws, increased competition, unanticipated deterioration in the loan portfolio, technological changes, and adverse developments in the financial services industry[29](index=29&type=chunk)[30](index=30&type=chunk) [Financial Tables (Unaudited)](index=7&type=section&id=Financial%20Tables%20(Unaudited)) [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a detailed breakdown of assets, liabilities, and shareholders' equity as of June 30, 2025, compared to December 31, 2024 | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $49,091 | $56,211 | | Total investment securities | 150,423 | 160,708 | | Net loans | 931,364 | 912,416 | | Other real estate owned (OREO) | 7,852 | 4,582 | | Total assets | $1,214,137 | $1,211,718 | | **Liabilities and Shareholders' Equity** | | | | Total deposits | 1,055,669 | 1,057,622 | | Junior subordinated debentures (TruPS) (at fair value) | 11,831 | 11,572 | | Total liabilities | 1,079,883 | 1,081,356 | | Total shareholders' equity | 134,254 | 130,362 | | Total liabilities and shareholders' equity | $1,214,137 | $1,211,718 | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income present the company's financial performance for the three and six months ended June 30, 2025, compared to the prior year periods, detailing interest income, interest expense, noninterest income, and expenses | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $15,004 | $14,972 | $30,286 | $29,850 | | Total interest expense | 3,141 | 3,450 | 6,130 | 6,617 | | Net Interest Income | 11,863 | 11,522 | 24,156 | 23,233 | | Provision for Credit Losses | 1,858 | 19 | 4,158 | 192 | | Total noninterest income | 758 | 1,517 | 2,122 | 2,571 | | Total noninterest expense | 7,739 | 6,973 | 15,344 | 13,708 | | Income Before Provision for Taxes | 3,024 | 6,047 | 6,776 | 11,904 | | Provision for Income Taxes | 855 | 1,750 | 1,925 | 3,446 | | Net Income | $2,169 | $4,297 | $4,851 | $8,458 | | Basic EPS | $0.13 | $0.25 | $0.28 | $0.49 | | Diluted EPS | $0.13 | $0.25 | $0.28 | $0.49 | [Average Balances and Rates](index=9&type=section&id=Average%20Balances%20and%20Rates) This table provides average balances for key assets and liabilities, along with average interest rates and net interest margin, for the three and six months ended June 30, 2025, and comparable prior periods | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Average Balances:** | | | | | | Loans (1) | $931,933 | $910,404 | $923,875 | $907,649 | | Total interest-earning assets | 1,094,964 | 1,082,749 | 1,091,855 | 1,084,069 | | Interest-bearing deposits | 678,779 | 594,138 | 680,934 | 597,587 | | Total interest-bearing liabilities | 699,313 | 709,071 | 698,843 | 704,004 | | Total average assets | $1,203,022 | $1,194,911 | $1,199,551 | $1,194,109 | | **Average Rates:** | | | | | | Loans (1) | 5.92 % | 6.00 % | 6.05 % | 5.99 % | | Total earning assets | 5.50 % | 5.56 % | 5.59 % | 5.54 % | | Interest bearing deposits | 1.70 % | 1.26 % | 1.67 % | 1.21 % | | Total interest-bearing liabilities | 1.80 % | 1.96 % | 1.77 % | 1.89 % | | Net interest margin (2) | 4.35 % | 4.28 % | 4.46 % | 4.31 % | [Condensed - Consolidated Balance Sheets](index=10&type=section&id=Condensed%20-%20Consolidated%20Balance%20Sheets) This condensed balance sheet provides a quarterly trend of key financial positions, including assets, liabilities, and equity, from June 30, 2024, to June 30, 2025 | (In thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $49,091 | $37,894 | $56,211 | $47,915 | $38,757 | | Investment securities | 150,423 | 160,534 | 160,708 | 168,835 | 166,316 | | Net loans | 931,364 | 905,297 | 912,416 | 958,628 | 934,090 | | Total assets | $1,214,137 | $1,191,791 | $1,211,718 | $1,255,376 | $1,219,822 | | Total deposits | 1,055,669 | 1,026,213 | 1,057,622 | 1,065,021 | 1,006,614 | | Total liabilities | 1,079,883 | 1,058,915 | 1,081,356 | 1,122,520 | 1,092,472 | | Total shareholders' equity | 134,254 | 132,876 | 130,362 | 132,856 | 127,350 | | Total liabilities and shareholder's equity | $1,214,137 | $1,191,791 | $1,211,718 | $1,255,376 | $1,219,822 | [Condensed - Consolidated Statements of Income](index=10&type=section&id=Condensed%20-%20Consolidated%20Statements%20of%20Income) This condensed income statement provides a quarterly trend of financial results, including net interest income, provision for credit losses, non-interest income, and net income, from Q2 2024 to Q2 2025 | (In thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest income | $15,004 | $15,283 | $15,146 | $15,755 | $14,972 | | Total interest expense | 3,141 | 2,987 | 3,342 | 3,943 | 3,450 | | Net interest income | 11,863 | 12,296 | 11,804 | 11,812 | 11,522 | | Provision for credit losses | 1,858 | 2,300 | 1,213 | 1,558 | 19 | | Total non-interest income | 758 | 1,360 | 120 | 2,023 | 1,517 | | Total non-interest expense | 7,739 | 7,604 | 7,430 | 7,142 | 6,973 | | Net income | $2,169 | $2,682 | $2,495 | $3,829 | $4,297 | [Nonperforming Assets](index=11&type=section&id=Nonperforming%20Assets) This table details the composition and trends of nonperforming assets, including nonaccrual loans and OREO, and their ratios to total loans and assets, as of June 30, 2025, and December 31, 2024 | (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total nonaccrual loans | $5,698 | $12,198 | | Loans past due 90 days and still accruing | 274 | 421 | | Total nonperforming loans | 5,972 | 12,619 | | Other real estate owned | 7,852 | 4,582 | | Total nonperforming assets | $13,824 | $17,201 | | Nonperforming loans to total gross loans | 0.63 % | 1.36 % | | Nonperforming assets to total assets | 1.14 % | 1.42 % | | Allowance for credit losses to nonperforming loans | 267.33 % | 127.16 % | [Selected Financial Data](index=11&type=section&id=Selected%20Financial%20Data) This table provides key financial ratios and per-share data for the six months ended June 30, 2025, and December 31, 2024, offering insights into profitability, efficiency, and capital adequacy | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Return on average assets | 0.82 % | 1.42 % | | Return on average equity | 7.31 % | 13.64 % | | Efficiency ratio (1) | 58.52 % | 53.23 % | | Annualized net charge-offs to average loans | 0.87 % | 0.14 % | | | June 30, 2025 | December 31, 2024 | | Shares outstanding - period end | 17,475,927 | 17,364,894 | | Book value per share | $7.68 | $7.51 | | Tangible book value per share | $7.43 | $7.25 | | Loan-to-deposit ratio | 89.74 % | 87.79 % | | Allowance for credit losses to total loans | 1.68 % | 1.72 % | | Tier 1 capital to adjusted average assets (leverage ratio): Company | 12.83 % | 12.57 % | | Tier 1 capital to adjusted average assets (leverage ratio): Bank | 12.56 % | 12.59 % | [Net Income before Non-Core Reconciliation](index=12&type=section&id=Net%20Income%20before%20Non-Core%20Reconciliation) This reconciliation table adjusts GAAP net income to a non-GAAP 'Core Net Income' by excluding the fair value adjustment for junior subordinated debentures (TruPS) and its related income tax effect, providing an alternative view of operating performance | (Dollars in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Net income | $4,851 | $8,458 | $(3,607) | (42.6)% | | Junior subordinated debentures (TruPS) fair value adjustment (1) | (48) | (520) | | | | Income tax effect | 14 | 154 | | | | Non-core items net of taxes | (34) | (366) | | | | Non-GAAP core net income | $4,885 | $8,824 | $(3,939) | (44.6)% |

[Cover Page Information](index=1&type=section&id=Cover%20Page%20Information) This section identifies UNITED SECURITY BANCSHARES, its Nasdaq symbol, filer classification, and outstanding common stock - The registrant is UNITED SECURITY BANCSHARES, trading under the symbol **UBFO** on Nasdaq[1](index=1&type=chunk)[2](index=2&type=chunk) - The Company is classified as a Non-accelerated filer and a Smaller reporting company[3](index=3&type=chunk) - As of April 30, 2025, there were **17,475,927 shares** of Common Stock, no par value, outstanding[4](index=4&type=chunk) - This is a Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended March 31, 2025[4](index=4&type=chunk) [PART I. Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Information) This part presents the Company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates | (In thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $ 1,191,791 | $ 1,211,718 | | Total liabilities | $ 1,058,915 | $ 1,081,356 | | Total shareholders' equity | $ 132,876 | $ 130,362 | - Total assets decreased by **$19.9 million (1.6%)** from December 31, 2024, to March 31, 2025[7](index=7&type=chunk) - Total liabilities decreased by **$22.4 million (2.1%)** from December 31, 2024, to March 31, 2025[7](index=7&type=chunk) - Shareholders' equity increased by **$2.5 million (1.9%)** from December 31, 2024, to March 31, 2025[7](index=7&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section details the Company's revenues, expenses, and net income for the three-month periods ended March 31, 2025, and 2024 | (In thousands, except shares and EPS) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total interest income | $ 15,283 | $ 14,879 | | Total interest expense | $ 2,987 | $ 3,165 | | Net Interest Income | $ 12,296 | $ 11,714 | | Provision for credit losses | $ 2,300 | $ 173 | | Total noninterest income | $ 1,360 | $ 1,053 | | Total noninterest expense | $ 7,604 | $ 6,738 | | Net income | $ 2,682 | $ 4,161 | | Basic EPS | $ 0.16 | $ 0.24 | | Diluted EPS | $ 0.16 | $ 0.24 | - Net income decreased by **35.5% to $2.7 million** for Q1 2025 compared to **$4.2 million** for Q1 2024, primarily due to a significant increase in provision for credit losses[8](index=8&type=chunk)[133](index=133&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the Company's comprehensive income, including net income and other comprehensive income components, for the specified periods | (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Income | $ 2,682 | $ 4,161 | | Unrealized gain (loss) on available-for-sale securities | $ 2,588 | $ (1,069) | | Total other comprehensive income (loss) | $ 1,729 | $ (637) | | Comprehensive income | $ 4,411 | $ 3,524 | - Comprehensive income increased by **25.2% to $4.4 million** for Q1 2025, driven by a significant unrealized gain on available-for-sale securities, despite a decrease in net income[10](index=10&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This section outlines the changes in shareholders' equity, reflecting the impact of net income, other comprehensive income, dividends, and stock-based compensation | (Dollars in thousands) | Balance December 31, 2024 | Other comprehensive income | Dividends payable | Stock-based compensation expense | Net income | Balance March 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total | $ 130,362 | $ 1,729 | $ (2,097) | $ 200 | $ 2,682 | $ 132,876 | - Shareholders' equity increased from **$130.4 million** at December 31, 2024, to **$132.9 million** at March 31, 2025, primarily due to net income and other comprehensive income, partially offset by dividends[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the Company's cash inflows and outflows from operating, investing, and financing activities for the three-month periods | (In thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $ 3,018 | $ 7,448 | | Net cash provided by investing activities | $ 4,159 | $ 4,386 | | Net cash used in financing activities | $ (25,494) | $ (9,614) | | Net change in cash and cash equivalents | $ (18,317) | $ 2,220 | | Cash and cash equivalents at end of period | $ 37,894 | $ 43,004 | - Net cash provided by operating activities decreased significantly from **$7.4 million** in Q1 2024 to **$3.0 million** in Q1 2025[13](index=13&type=chunk) - Net cash used in financing activities increased substantially from **$9.6 million** in Q1 2024 to **$25.5 million** in Q1 2025, leading to a net decrease in cash and cash equivalents[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for financial statements, covering accounting policies, investments, loans, deposits, borrowings, and fair value measurements [Note 1. Organization and Summary of Significant Accounting and Reporting Policies](index=8&type=section&id=Note%201.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20and%20Reporting%20Policies) This note describes the Company's organizational structure and outlines the significant accounting and reporting policies applied in the financial statements - The consolidated financial statements include United Security Bancshares and its wholly-owned subsidiary, United Security Bank[14](index=14&type=chunk) - Unaudited financial statements are prepared in accordance with GAAP for interim information, consistent with the 2024 Annual Report on Form 10-K[15](index=15&type=chunk) [Note 2. Investment Securities](index=8&type=section&id=Note%202.%20Investment%20Securities) This note provides details on the Company's investment securities portfolio, including amortized cost, fair value, and unrealized gains or losses | (In thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Amortized Cost | $ 176,938 | $ 179,753 | | Fair Value | $ 157,155 | $ 157,382 | | Gross Unrealized Losses | $ (19,837) | $ (22,409) | - Unrealized losses on available-for-sale securities are attributed to changes in interest rates and not credit quality, with no credit losses recorded for Q1 2025 or Q1 2024[24](index=24&type=chunk) - Approximately **$95.7 million** (amortized cost) of AFS securities were pledged as collateral at March 31, 2025[22](index=22&type=chunk) [Note 3. Loans](index=10&type=section&id=Note%203.%20Loans) This note provides a detailed breakdown of the Company'

Financial Performance - Net income for the quarter ended March 31, 2025, decreased 35.54% to $2.7 million, compared to $4.2 million for the same quarter in 2024[4] - Net income for the three months ended March 31, 2025, was $2,682 thousand, down 35.7% from $4,161 thousand for the same period in 2024[27] - Net income for Q1 2025 decreased to $2,682,000, down 35.5% from $4,161,000 in Q1 2024[36] - Noninterest income rose to $1,360 thousand in Q1 2025, up 29.1% from $1,053 thousand in Q1 2024[27] - Total non-interest income for Q1 2025 was $1,360,000, significantly higher than $120,000 in Q4 2024, showing a strong recovery in non-interest revenue[32] Interest and Loans - Net interest margin increased to 4.58% for the quarter ended March 31, 2025, compared to 4.35% for the same quarter in 2024[4] - The average interest rate on loans increased to 6.17% in Q1 2025, compared to 6.00% in Q1 2024[28] - Net interest income after provision for credit losses was $9,996 thousand for Q1 2025, compared to $11,541 thousand in Q1 2024, reflecting a decrease of 13.4%[27] - Total interest income for Q1 2025 was $15,283,000, an increase from $14,879,000 in Q1 2024, representing a growth of 2.7%[32] Credit Losses and Asset Quality - Provision for credit losses was $2.3 million for the quarter ended March 31, 2025, compared to $173,000 for the same quarter in 2024[17] - The provision for credit losses increased significantly to $2,300 thousand in Q1 2025, compared to only $173 thousand in Q1 2024[27] - The allowance for credit losses was $15,356 thousand as of March 31, 2025, down from $16,046 thousand at December 31, 2024[26] - The allowance for credit losses to nonperforming loans increased to 241.79% in Q1 2025 from 127.16% in Q4 2024, reflecting a stronger reserve position[33] - The company reported a net charge-off rate of 1.22% for Q1 2025, compared to 0.13% in Q1 2024, indicating increased credit risk[34] Expenses and Efficiency - Noninterest expense increased 12.85% to $7.6 million for the quarter ended March 31, 2025, compared to $6.7 million for the same quarter in 2024[9] - The efficiency ratio for the quarter ended March 31, 2025, increased to 55.90%, compared to 52.96% for the same quarter in 2024[10] - Total noninterest expense increased to $7,604 thousand in Q1 2025, compared to $6,738 thousand in Q1 2024, marking an increase of 12.8%[27] - The efficiency ratio for Q1 2025 was 55.90%, compared to 52.96% in Q1 2024, indicating increased operational costs relative to income[34] Deposits and Loans - Total deposits decreased 2.97% to $1.03 billion during the quarter ended March 31, 2025, compared to $1.06 billion at December 31, 2024[14] - Total deposits decreased to $1,026,213 thousand as of March 31, 2025, from $1,057,622 thousand at December 31, 2024, a reduction of about 3.0%[26] - Total loans, net of unearned fees, decreased 0.84% to $920.7 million, compared to $928.5 million at December 31, 2024[4] - The loan-to-deposit ratio as of March 31, 2025, was 89.71%, up from 87.79% in Q4 2024, suggesting a tighter liquidity position[34] Assets - Total assets decreased to $1,191,791 thousand as of March 31, 2025, from $1,211,718 thousand at December 31, 2024, representing a decline of approximately 1.6%[26] - Total assets as of March 31, 2025, were $1,191,791,000, a decrease from $1,206,404,000 as of March 31, 2024[31] - Non-performing assets decreased $3.0 million to $14.2 million between December 31, 2024, and March 31, 2025[19] - Nonperforming assets decreased to $14,203,000 in Q1 2025 from $17,201,000 in Q4 2024, indicating improved asset quality[33] Shareholders' Equity - Shareholders' equity at March 31, 2025, totaled $132.9 million, an increase of $2.5 million from $130.4 million at December 31, 2024[15]

Market Presence - United Security Bancshares operates primarily in Fresno, Madera, Kern, and Santa Clara Counties, with a total of 53 FDIC-insured financial institutions competing in these areas[28]. - As of June 30, 2024, the bank holds a 4.18% market share in Fresno County, ranking 9th, and an 8.48% market share in Madera County, ranking 5th[29]. - The bank's total market share across Fresno, Madera, Kern, and Santa Clara Counties is 0.53%, ranking 18th overall[29]. Banking Services - The bank offers a variety of commercial banking services, including real estate loans, commercial loans, and agricultural loans, with a focus on personalized service[19][20]. - United Security Bancshares has a high concentration of commercial real estate loans but does not engage in residential mortgage lending[22]. - The bank's competitive strategy includes offering competitive interest rates and a higher level of personalized service compared to larger competitors[26]. Technology and Customer Service - The bank has established Interactive Teller Machines (ITMs) at all branch locations and nine off-site ITMs to enhance customer service[14]. Financial Instruments - The bank's subsidiary, York Monterey Properties, Inc., was funded with a $250,000 cash investment and an additional $805,000 to manage real estate acquired through foreclosures[15]. - The bank's Trust Preferred Securities issued in 2007 amounted to $15 million, with a floating interest rate of 1.29% over the forward 3-month SOFR rate[16]. Regulatory Environment - The bank's operations are subject to complex regulations that can materially affect its business and financial results[30]. - The Dodd-Frank Act increased the minimum Tier 1 capital ratio from 4.00% to 6.00% of risk-weighted assets[32]. - The Dodd-Frank Act established a minimum non-risk-based leverage ratio set at 4.00%[34]. - The FDIC is required to increase the reserve ratio of the Deposit Insurance Fund to 1.35% of insured deposits[36]. - The Dodd-Frank Act broadened the base for FDIC insurance assessments, now based on average consolidated total assets less tangible equity capital[36]. - The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) with authority over depository institutions with $10 billion or more in assets[36]. - The Dodd-Frank Act prohibits excessive compensation for executives of depository institutions with assets over $1.0 billion[36]. - The Dodd-Frank Act allows national and state banks to establish branches in other states[36]. - The FRB's risk-based capital adequacy guidelines require bank holding companies to maintain minimum levels of capital based on risk-weighted assets[48]. - The FRB's policy regarding dividends states that a bank holding company should not pay cash dividends exceeding its net income for the past year[51]. Capital and Stock - The Company's common stock is listed on Nasdaq and is subject to Nasdaq standards for listed companies[53]. - As of December 31, 2024, the Company and the Bank were classified as "well capitalized" under applicable standards[57]. - The Bank owned 67,374 shares of the Federal Home Loan Bank of San Francisco capital stock valued at $6,737,400 as of December 31, 2024[71]. - The Bank owned 38,908 shares of Federal Reserve Bank of San Francisco stock with paid-in capital totaling $1,945,400 as of December 31, 2024[74]. - The FDIC insures deposits up to $250,000 per qualified account, with a risk-based assessment system categorizing banks into four risk categories[67]. - The FDIC's deposit insurance fund reserve ratio fell to 1.30% in 2020, prompting a restoration plan to achieve a minimum of 1.35% by September 30, 2028[68]. - The Company and the Bank adopted the community bank leverage ratio framework during 2020, maintaining a leverage ratio greater than 9%[57]. - The Bank is prohibited from paying dividends if it would become "undercapitalized" after such payments[61]. - The FDIC has the authority to terminate a depository institution's deposit insurance if its financial condition is deemed unsafe or unsound[69]. Compliance and Consumer Protection - The Company is subject to various federal and state consumer protection laws, which can result in significant liabilities if violated[75]. - The Federal Deposit Insurance Corporation Improvement Act requires prompt corrective action for banks falling below prescribed minimum capital ratios[59]. - The Bank received a CRA rating of "Satisfactory" as of its most recent examination, which is crucial for undertaking certain activities, including acquisitions[93]. - On October 24, 2023, the FRB and FDIC released a joint final rule to amend the CRA, promoting greater access to credit and adjusting to industry changes, with certain provisions delayed until January 1, 2026[94]. - The Anti-Money Laundering Act of 2020 represents significant changes to anti-money laundering laws, with its full impact yet to be determined as regulations are still being proposed[79]. - The AML Act expands federal AML laws to a broader range of industries, including cryptocurrency, and requires FinCEN to facilitate information sharing among law enforcement agencies[81]. - The Corporate Transparency Act mandates reporting of beneficial ownership information to a confidential FinCEN database, with compliance required by January 1, 2025[86]. - The AML Act enhances enforcement, increasing civil penalties for violations and allowing for whistleblower awards leading to fines or forfeitures of at least $50,000[84]. - The Bank is subject to federal statutory and regulatory provisions covering security procedures, management interlocks, and funds availability[101]. Mergers and Acquisitions - The FDIC is conducting a broader reevaluation of its bank merger review process, with proposed changes currently open for public comment until April 10, 2025[100]. - The Bank Merger Act allows the FDIC to review and approve proposed bank mergers, ensuring they do not harm competition or financial stability[99]. - In September 2024, the FDIC issued a final statement of policy for reviewing Bank Merger Act applications, establishing higher expectations for statutory factors[100]. Employee and Organizational Structure - The Company employed 114 full-time equivalent staff as of December 31, 2024[104]. - The Company offers a comprehensive benefits package including 100% matching contributions up to 4% of salary for retirement plans[106]. - The Company emphasizes competitive pay and performance-based incentive programs for employee retention and development[105]. - The Company has a focus on maintaining employee health and wellness through a comprehensive benefits package[106]. - The Company has faced increased competition from other financial institutions and non-bank financial services[26]. - The Company is subject to various risks including economic conditions, regulatory changes, and competition impacting its business operations[11]. - The Company cannot predict the future impact of potential changes to the Dodd-Frank Act and its regulations due to political dynamics[36].

Financial Performance - Net income for the year ended December 31, 2024, decreased 25.3% to $14.8 million, compared to $19.8 million for the year ended December 31, 2023[12]. - For the quarter ended December 31, 2024, net income was $2.5 million, a decrease of 53.8% compared to $5.4 million for the same quarter in 2023[4]. - Noninterest income for the quarter ended December 31, 2024, totaled $120,000, a decrease of $2.9 million from $3.0 million in the same quarter of 2023[8]. - The annualized return on average assets (ROAA) decreased to 0.81% for the quarter ended December 31, 2024, compared to 1.72% for the same quarter in 2023[5]. - Net income for the three months ended December 31, 2024, was $2,495,000, a decrease of 34.9% from $3,829,000 in the previous quarter[36]. - Basic net income per common share for the three months ended December 31, 2024, was $0.15, down from $0.22 in the previous quarter, reflecting a decrease of 31.8%[36]. - Non-GAAP core net income for the year ended December 31, 2024, was $15,216,000, a decrease of 22.4% from $19,601,000 in 2023[47]. Deposits and Loans - Total deposits increased 5.3% to $1.06 billion as of December 31, 2024, compared to $1.00 billion at the end of 2023[4]. - Total deposits increased by $53.1 million, or 5.3%, to $1.1 billion as of December 31, 2024, driven by a $96.2 million increase in interest-bearing deposits[21]. - Interest-bearing deposits increased by $96.2 million, while noninterest-bearing deposits decreased by 10.7% to $360.2 million[21]. - Core deposits decreased by $56.6 million, reflecting a decline in noninterest-bearing deposits and savings accounts[21]. - Total loans, net of unearned fees, increased 0.92% to $928.5 million as of December 31, 2024, compared to $920.0 million at the end of 2023[4]. - Average loans for the three months ended December 31, 2024, were $939,110,000, a slight increase from $935,637,000 in the same period last year[38]. Expenses and Efficiency - Noninterest expense for the year ended December 31, 2024, totaled $28.3 million, an increase of $2.3 million compared to $26.0 million for the year ended December 31, 2023[17]. - The efficiency ratio for the quarter ended December 31, 2024, increased to 60.79%, compared to 46.40% for the same quarter in 2023[10]. - Total noninterest expense increased to $7,430,000 for the three months ended December 31, 2024, compared to $7,142,000 in the previous quarter, marking an increase of 4.0%[36]. - Efficiency ratio for Q4 2024 was 60.79%, up from 46.40% in Q4 2023, indicating increased operational costs[45]. Assets and Equity - Shareholders' equity rose to $130.4 million, an increase of $7.8 million from $122.5 million at December 31, 2023, due to $14.8 million in net income[22]. - The total assets of the company were $1.211 billion as of December 31, 2024, compared to $1.211 billion at December 31, 2023[34]. - Total assets decreased to $1,211,718,000 in Q4 2024 from $1,211,045,000 in Q4 2023, a decline of 0.04%[41]. - Total equity increased to $132,920,000 as of December 31, 2024, compared to $117,520,000 a year earlier, reflecting a growth of 13.1%[38]. Credit Quality - The provision for credit losses was $3.0 million for the year ended December 31, 2024, compared to $1.5 million in 2023, primarily due to charge-offs in the student loan portfolio[25]. - Non-performing assets increased by $745,000 to $17.2 million, representing 1.42% of total assets as of December 31, 2024, up from 1.36% in 2023[27]. - The allowance for credit losses was 1.72% of the loan portfolio at December 31, 2024, compared to 1.70% at December 31, 2023[26]. - Nonperforming loans to total gross loans increased to 1.36% in Q4 2024 from 1.29% in Q4 2023[44]. - Provision for credit losses was $1,213,000 in Q4 2024, compared to $873,000 in Q4 2023, reflecting a significant increase[42].