Breaking Down United Security Bancshares (UBFO) Financial Health: Key Insights for Investors

You're looking at United Security Bancshares (UBFO) and trying to filter the noise from the signal, especially with the latest third-quarter 2025 numbers. The direct takeaway is that while the bank is deftly managing its cost of funds, credit quality remains the primary near-term risk you need to watch. The bank posted a Q3 2025 net income of $4.0 million, translating to $0.23 in earnings per share (EPS), a modest 5.07% climb year-over-year. That growth is largely due to smart balance sheet management, specifically a significant 18.67% drop in interest expense. But here's the quick math: their noninterest income fell by a sharp 20.02%, and the year-to-date net income of $8.874 million is still being weighed down by elevated provisions for credit losses, largely in the student loan segment. The good news is total assets hit $1.24 billion, and the net interest margin (NIM)-the core profitability measure-improved to 4.35%, showing their lending engine is defintely running hotter. We need to dive into how to square that NIM strength with the ongoing credit risk, and what action you should take now.

Revenue Analysis

You're looking for a clear picture of how United Security Bancshares (UBFO) makes its money, and the data from 2025 shows a banking model heavily reliant on traditional lending, but with some concerning shifts in overall top-line growth. The direct takeaway is that while the core lending business is holding its own through higher rates, overall revenue is under pressure from a shrinking loan book and a sharp drop in non-interest income.

The company's revenue is overwhelmingly driven by its primary business: collecting interest on its loan portfolio and investment securities. This is what we call Net Interest Income (NII), which is the difference between the interest earned on assets (like loans) and the interest paid on liabilities (like deposits). For the nine months ending September 30, 2025, United Security Bancshares reported a total interest income of $45.913 million, a slight increase from the previous year, largely due to higher interest earned on deposits at other banks.

Primary Revenue Streams and Segment Contribution

The asset side of the balance sheet is where the revenue is generated, and commercial real estate is the biggest piece of the pie. It's a bank, so you expect a concentration, but the specific breakdown is important for risk assessment. Here is the loan portfolio composition as of September 30, 2025:

• Commercial Real Estate Loans: 44.56% of the total loan portfolio.
• Residential Mortgages: Significant contribution.
• Real Estate Construction and Development Loans: Significant contribution.
• Installment and Student Loans: Includes $28.8 million in student loans.

This heavy concentration in commercial real estate, especially within the San Joaquin Valley and surrounding California regions, is the engine of their interest income. You need to keep an eye on that regional economy; it's defintely a single point of failure.

Year-over-Year Revenue Trends: A Contraction

Honesty, the year-over-year revenue numbers are what should grab your attention. The Trailing Twelve Months (TTM) revenue for United Security Bancshares as of September 30, 2025, stood at $45.92 million. Here's the quick math on the trend:

A -12.50% decline in TTM revenue is a significant contraction, showing that the bank is still navigating a challenging interest rate environment that has slowed lending activity and increased the cost of funding. Even the Q3 2025 Interest Income saw a slight dip of 0.82% to $15.6 million, which signals a headwind in the core lending business.

The Noninterest Income Headwind

What this estimate hides is the volatility in Noninterest Income, which includes fees and other service charges. In Q3 2025, noninterest income dropped by a substantial 20.02% to $1.6 million. This is a big change. For Q1 2025, noninterest income was $1.4 million, which was actually up from the prior year, but that increase was mainly driven by a one-time gain of $270,000 on the fair value of junior subordinated debentures (TruPS). This kind of gain isn't sustainable, and its absence in Q3 highlights the challenge of consistently growing fee-based revenue. You can read more about the bank's long-term strategy here: Mission Statement, Vision, & Core Values of United Security Bancshares (UBFO).

The bank is doing better on Net Interest Margin (NIM), which is a positive sign for profitability from lending, but the overall revenue trend is still negative. The strategic action here is to watch for signs of loan portfolio growth acceleration in Q4 2025 to reverse that TTM revenue decline.

Profitability Metrics

You want to know if United Security Bancshares (UBFO) is making money efficiently, and honestly, the picture for 2025 is a mix of strategic wins and credit-risk headwinds. For a bank, the core profitability measure isn't a traditional gross margin; it's the Net Interest Margin (NIM), which tells you how well they manage the spread between what they earn on loans and what they pay on deposits.

The good news is that UBFO's core lending profitability remains strong. In the third quarter of 2025 (Q3 2025), the Net Interest Margin was a solid 4.35%. This is up from 4.20% in the same quarter last year, which shows they are defintely optimizing their funding costs and loan yields. But, for the nine months ended September 30, 2025, the bank's total net income was $8.874 million. That number is down from the prior year, mostly due to a major increase in the provision for credit losses earlier in the year.

Operational Efficiency and Margin Trends

When we look at the bank's operational efficiency, we're checking how much revenue is eaten up by non-interest expenses like salaries and rent. For Q3 2025, United Security Bancshares reported an efficiency ratio of 52.80%. This means that for every dollar of revenue, about 53 cents goes toward operating the bank. While this is a slight deterioration, it's still within a manageable range for a regional bank.

Here's the quick math on their Q3 2025 margins, which are a good proxy for the near-term trend:

• Net Profit Margin (Q3 2025): 23.26% (Net Income of $4.0 million on total revenue of $17.2 million).
• Pre-Tax, Pre-Provision Margin (Operating Proxy): 38.37% (This shows strong core profitability before loan loss provisions and taxes).
• Net Interest Margin (NIM): 4.35% (The lifeblood of a bank's income).

The trend is a bit choppy. Q3 2025 net income of $4.0 million was a modest 5.07% increase over Q3 2024. But to be fair, Q1 2025 net income took a big hit, falling 35.54% year-over-year to $2.7 million. That drop was driven by a surge in the provision for credit losses, especially in the student loan portfolio, so the Q3 rebound is a positive sign of stabilization.

Comparing UBFO to Industry Averages

To put UBFO's performance into context, we need to compare its key ratios to the broader Regional Bank industry. The industry's average Net Profit Margin sits at 25.3% as of November 2025. UBFO's Q3 2025 Net Profit Margin of 23.26% is just under that average, suggesting they are competitive but not an industry leader in net profitability right now.

A better comparison uses the bank-specific metrics, Return on Average Assets (ROAA) and Return on Average Equity (ROAE):

UBFO's ROAA of 1.29% and ROAE of 11.68% are both slightly above recent industry benchmarks. This tells me that while their Net Profit Margin is a little low, their core business model-the asset utilization and equity management-is working well. The key risk remains the provisioning for credit losses, which is a big variable right now, as you can see in their Mission Statement, Vision, & Core Values of United Security Bancshares (UBFO).

The next step is for the Investment Team to model the impact of a 10% increase in noninterest expense against the Q4 2025 NIM forecast by next Wednesday.

Debt vs. Equity Structure

When you look at United Security Bancshares (UBFO), the immediate takeaway is a highly conservative capital structure. They rely overwhelmingly on equity and customer deposits, not wholesale debt, to fund their operations. This is a sign of exceptional financial stability in the regional banking space.

The company's debt-to-equity (D/E) ratio sits at an extremely low 0.09 as of the third quarter of 2025. To put that in perspective, the average D/E ratio for the US Regional Banks industry is closer to 0.5. This means United Security Bancshares (UBFO) is using about five times less debt to finance its assets than its typical peer. That low leverage is defintely a risk mitigator in a volatile interest rate environment.

• Low D/E ratio: 0.09 vs. industry average of 0.5.
• Total Equity: Approximately $132.4 million in Q3 2025.
• Total Debt (Borrowings): Estimated at roughly $11.9 million in Q3 2025.

Here's the quick math: with an estimated total equity of approximately $132.4 million in Q3 2025, a D/E ratio of 0.09 implies total borrowings of only about $11.9 million. This debt is mostly composed of long-term instruments like junior subordinated debentures, not short-term commercial paper. The company's total deposits, which are its main liability, were $1.08 billion as of September 30, 2025, which is a much larger and more stable funding source than its actual debt.

Recent Debt Management and Financing Mix

The company is actively managing its small debt load. On July 1, 2025, United Security Bancshares (UBFO) executed a partial redemption of $3.0 million on its junior subordinated debentures (TruPS). This move reduces future interest expense and further cleans up the balance sheet, signaling a focus on deleveraging and capital efficiency. Plus, management noted that a decrease in interest expense in Q1 2025 was partly due to lower short-term borrowing costs, showing they are tactical about their minimal short-term needs.

The core of the company's financing strategy is simple: prioritize equity and deposits over debt. The shareholders' equity position improved by $7.0 million after dividends in Q3 2025, a clear sign that retained earnings-equity funding-is the primary engine for growth. They are well-capitalized, and because they are a smaller regional bank, they do not have a widely published credit rating from major agencies like S&P or Moody's, but their capital ratios speak for themselves.

This conservative approach means the company has plenty of financial flexibility, even if interest rates change or credit quality dips. It's a very safe funding model. For a deeper dive into who is investing in this low-risk structure, check out Exploring United Security Bancshares (UBFO) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You're looking for a clear picture of United Security Bancshares (UBFO)'s ability to cover its short-term obligations and maintain a stable capital base. The direct takeaway is that while the bank's traditional liquidity ratios are slightly below the 1.0 mark, its core banking operations-strong deposit base and positive cash flow per share-show solid operational liquidity.

Assessing United Security Bancshares (UBFO)'s Liquidity Positions

For a bank, the standard Current Ratio (current assets divided by current liabilities) and Quick Ratio are useful, but they need context. For the 2025 fiscal year, United Security Bancshares (UBFO) reported a Current Ratio of 0.94 and a Quick Ratio of 0.94. This means that for every dollar of short-term debt, the bank has 94 cents of assets that can be quickly converted to cash. Honestly, a ratio under 1.0 might raise an eyebrow for a manufacturing company, but for a bank, it's not a red flag because their primary assets (loans) and liabilities (deposits) are managed through a different regulatory framework (asset/liability management, or ALM). The Quick Ratio being identical to the Current Ratio just confirms that inventory, which banks don't really have, isn't a factor here.

Working capital trends are less of a focus for a bank, but we can look at the growth in the balance sheet. Total deposits, a key source of liquidity, increased to $1.08 billion as of the third quarter of 2025. Plus, total loans grew to $958.3 million in the same period. This growth in core business shows a strong ability to attract and retain funding, which is the real measure of a community bank's working capital strength. It's a healthy sign of market trust.

Cash Flow Statement Overview and Trends

The cash flow statement is where you see the real-world movement of money. For the full 2025 fiscal year, the bank's Cash Flow per share is estimated at $1.05. Here's the quick math on the major components based on the trends we see:

• Operating Cash Flow: This is the engine. It's driven by the bank's net income, which hit $4.0 million in Q3 2025. The trend is positive, showing the core business of lending and deposit-taking is generating cash.
• Investing Cash Flow: This is typically a net outflow for a growing bank, and it's no different here. The 3.22% increase in total loans to $958.3 million in Q3 2025 means the bank is using cash to fund new loans and expand its earning assets. That's a good use of cash.
• Financing Cash Flow: This tells us about debt and equity management. United Security Bancshares (UBFO) made a clean move in Q3 2025, executing a partial redemption of $3.0 million on its junior subordinated debentures (TruPS). This action reduces long-term debt and signals confidence in the bank's capital position.

What this estimate hides is the day-to-day fluctuation of deposits, but the net effect is a solid, positive flow from operations that funds growth and allows for debt reduction. You can dig deeper into the drivers of this performance by Exploring United Security Bancshares (UBFO) Investor Profile: Who's Buying and Why?

Potential Liquidity Concerns or Strengths

Overall, United Security Bancshares (UBFO) presents a picture of operational strength despite the sub-1.0 liquidity ratios. The bank is well-capitalized, and management remains optimistic about maintaining adequate capital levels. The biggest strength is the stability of its funding base, with deposits at $1.08 billion and the management's focus on reducing non-core debt. The one-liner here: The cash engine is running strong.

The only minor concern is the broader banking environment, but UBFO's solid credit quality, evidenced by a significantly reduced provision for credit losses in Q3 2025, mitigates that risk. The bank is defintely managing its balance sheet well.

To summarize the key liquidity metrics for a quick comparison:

Next Step: Review the bank's latest regulatory filings (Form 10-Q) to confirm the specific breakdown of cash from investing activities, particularly the net change in available-for-sale securities, which is a major liquidity buffer for banks.

Valuation Analysis

You want to know if United Security Bancshares (UBFO) is a buy right now, and the quick answer is that the market views it as fairly valued, leaning toward a slight undervaluation based on analyst targets. The stock is trading at a P/E ratio of around 14.40, which is reasonable for a regional bank, and analysts have a consensus 'Buy' rating with a near-term price target of $10.50.

When we look at the core valuation multiples for the 2025 fiscal year, United Security Bancshares (UBFO) presents a mixed, but mostly solid, picture. The Price-to-Earnings (P/E) ratio sits at approximately 14.40 as of November 2025. Here's the quick math: this P/E is slightly below the broader financial sector average, suggesting the market isn't pricing in massive growth, but it's defintely not a deep-value play either.

The Price-to-Book (P/B) ratio, which is crucial for a bank because it compares the stock price to the company's book value (assets minus liabilities), is around 1.27. This means the stock is trading at a premium of 27% over its net asset value, a healthy sign that investors trust the quality of the bank's assets and management. Also, you'll notice the Enterprise Value-to-EBITDA (EV/EBITDA) ratio is often not reported for banks. That's because interest income and expense are central to a bank's business model, making Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) a less meaningful measure for valuation.

• P/E Ratio (2025): 14.40
• P/B Ratio (2025): 1.27
• Analyst Consensus: Buy

Looking at the stock's movement, the last 12 months have shown modest appreciation, with the stock price increasing by just 0.53%. The stock has traded in a 52-week range between a low of $7.32 and a high of $10.49. With the stock closing near $9.97 as of November 21, 2025, it's closer to the top of its annual range. This tells me that recent positive financial results, like the reported 5.07% increase in net income for Q3 2025, are already baked into the current price. It's trading strong.

For income investors, United Security Bancshares (UBFO) offers a compelling dividend profile. The trailing dividend yield is approximately 4.97%, which is quite attractive in the current rate environment. The company consistently pays a quarterly cash dividend of $0.12 per share, as declared on September 23, 2025. This steady payout shows a commitment to returning capital to shareholders, which is what you want to see from a mature, regional bank.

The analyst community is generally bullish. The consensus rating is a 'Buy,' with a price target of $10.50. What this estimate hides, however, is the potential for regional banking volatility, but still, the target suggests a small, immediate upside from the current price. If you want to dig deeper into who is actually driving this demand, you should check out Exploring United Security Bancshares (UBFO) Investor Profile: Who's Buying and Why?

Your next step: Compare the 1.27 P/B ratio to its closest regional bank peers to confirm if this premium is justified by higher Return on Equity (ROE) figures. That comparison will clarify if the stock is truly undervalued or simply fairly priced within its peer group.

Risk Factors

You're looking at United Security Bancshares (UBFO) and seeing a solid regional bank, but as a seasoned analyst, I focus on where the cracks might appear. The near-term risks for UBFO are defintely concentrated in two areas: credit quality and portfolio concentration. The financial data from the first three quarters of 2025 makes this clear.

The most immediate operational risk is the surge in their provision for credit losses (PCL), which is essentially the money set aside for loans that might go bad. In Q1 2025, the PCL exploded to $2.3 million, a massive jump from just $173,000 in the same quarter of 2024. Here's the quick math: that single factor contributed significantly to the 35.54% decline in net income for the quarter, which came in at $2.7 million.

The core of this credit risk is a specific niche: the medical student loan segment.

• Credit Quality Deterioration: The spike in PCL to $2.3 million signals stress in the loan book.
• Niche Loan Exposure: Management specifically highlighted challenges in the medical student loan segment. This portfolio segment holds $28.8 million in student loans as of September 30, 2025.
• Cost Inflation: Noninterest expense also rose by 12.85% to $7.6 million in Q1 2025, driven by higher salaries and data processing costs, squeezing the bottom line further.

The bank's primary external and market risk is its heavy reliance on a single asset class and a specific geography, which is typical for a community bank.

As of September 30, 2025, commercial real estate (CRE) loans made up the largest segment of the total loan portfolio, sitting at 44.56%. This is a classic concentration risk. If the commercial real estate market in their core operating area-the San Joaquin Valley and surrounding California counties-sees a significant downturn, the impact on UBFO's asset quality and capital ratios will be substantial. A high-for-longer interest rate environment, a key market condition in 2025, will keep pressure on these interest-sensitive CRE borrowers.

What this estimate hides is that the bank's local knowledge is also a strength, but in a true market correction, that advantage can be quickly overwhelmed.

The good news is that management appears to be mitigating the credit risk by maintaining an adequate buffer. The allowance for credit losses was 1.66% of the loan portfolio at the end of Q1 2025, which they consider sufficient to cover expected losses. This is the primary defense against the PCL surge.

For a deeper dive on who is betting on this regional focus, you should check out Exploring United Security Bancshares (UBFO) Investor Profile: Who's Buying and Why?

Here is a quick snapshot of the key financial risks based on the 2025 data:

Finally, like all banks, United Security Bancshares faces the external regulatory risk of increased scrutiny on third-party technology dependencies and non-bank financial institution (NBFI) exposures, which is a major focus for regulators in 2025. This will mean higher compliance costs and a need for greater operational resilience.

Growth Opportunities

You want a clear map of where United Security Bancshares (UBFO) is headed, and the path is simple: it's all about focused lending and efficient capital management. The core takeaway is that the bank is doubling down on its regional strengths in California's Central Valley and optimizing its balance sheet, which should push full-year earnings higher than the trailing twelve months.

Here's the quick math: with the actual Q1-Q3 2025 Earnings Per Share (EPS) at $0.51 and Q3 EPS coming in at $0.23, a reasonable projection for the full 2025 fiscal year EPS lands near $0.74. This is a solid, conservative estimate built on actual performance, not just analyst hype. The trailing twelve months (TTM) revenue is already a robust $52.64 million.

The bank is a trend-aware realist, concentrating its efforts where it has a clear advantage.

• Commercial Real Estate (CRE) Focus: This segment remains the largest growth driver, comprising 44.56% of the total loan portfolio as of September 30, 2025. Management anticipates continued loan portfolio expansion in both CRE and construction, directly benefiting from regional economic demand in the San Joaquin Valley and Santa Clara County.
• Niche Lending: They are leveraging a niche market with a medical and pharmacy student loan portfolio, which stood at $28.8 million as of Q3 2025. This specialized lending provides portfolio diversification and higher yield potential.
• Deposit Strength: Total deposits grew to $1.08 billion in Q3 2025, a sign of strong customer retention and core deposit growth, which provides a stable funding base for future lending.

What this estimate hides is the potential for further margin expansion. The net interest margin (NIM) improved to 4.35% in Q3 2025 from the prior year, thanks to a strategic initiative to reduce interest expense. They cut interest expense by 18.67% to $3.2 million in Q3 2025, primarily from lower short-term borrowing costs. That's smart, precise balance sheet management.

The competitive advantages for United Security Bancshares (UBFO) are rooted in its community bank model and financial stability. They have a beta (a measure of stock volatility) of just 0.43, meaning the stock is significantly less volatile than the S&P 500-that's a huge plus for stability-seeking investors. Also, their local market knowledge and personalized customer relationships in their California operating areas are difficult for larger, national banks to replicate.

The dividend is also well-covered with a healthy payout ratio of 71.64%.

Here's a snapshot of the core financial health indicators from the 2025 fiscal year:

Your next step is to monitor the Q4 2025 earnings release, estimated for January 29, 2026, to see if the loan growth momentum and interest expense optimization hold up. For a deeper dive into the bank's current valuation, read our full analysis: Breaking Down United Security Bancshares (UBFO) Financial Health: Key Insights for Investors.