UBFO's Q4 Earnings Rise Y/Y on Margin Expansion, Cost Cuts

Core Insights - United Security Bancshares reported a 35.7% year-over-year increase in earnings per share for Q4 2025, reaching 19 cents, while full-year earnings decreased by 16.9% to $12.3 million [1][3] Financial Performance - Net income for Q4 2025 was $3.4 million, a 36.8% increase from $2.5 million in the same quarter last year, driven by a reduction in credit loss provisions and lower borrowing costs [2] - Net interest income for Q4 rose 3.3% year-over-year to $12.2 million, with net interest margin expanding to 4.36% from 4.22% [4] - For the full year, net interest income before provisions for credit losses increased by 4.1% to $48.8 million, with the annual net interest margin improving to 4.41% [5] Noninterest Income and Expenses - Noninterest income surged over tenfold in Q4 to $1.3 million, primarily due to gains from the fair value and partial redemption of junior subordinated debentures [6] - Noninterest expenses rose 18.5% year-over-year to $8.8 million, largely due to merger-related costs and increased salaries, leading to a worsened efficiency ratio of 65.1% [7] Management Commentary - The CEO highlighted strong execution in Q4, emphasizing net income growth and margin expansion, attributing improvements to effective deposit cost control [8] Performance Drivers - Lower borrowing costs and deposit expenses helped mitigate declines in loan and investment income, while elevated provision expenses and rising costs pressured profitability [9] Credit Quality - The allowance for credit losses decreased to 1.62% of total loans, and non-performing assets fell to 1.12% of total assets, although net loan charge-offs more than doubled to $6.1 million [10] Strategic Developments - An all-stock merger agreement with Community West Bancshares was announced, expected to close in 2026, alongside a cash dividend declaration of 12 cents per share [11] - The company redeemed $6 million in TruPS, generating gains of $0.5 million for the year, enhancing capital flexibility [12]