FRESNO: United Security Bancshares (Nasdaq: UBFO) reported a 49.5% year-over-year decline in second-quarter net income, citing elevated student loan charge-offs and increased deposit costs. Net income fell to $2.2 million, or $0.13 per diluted share, from $4.3 million, or $0.25 per share, in the same quarter last year.
The bank recorded a $1.9 million provision for credit losses, up from $19,000 a year earlier, driven by continued stress in its student loan portfolio following the expiration of pandemic-related forbearance measures. Net interest margin edged higher to 4.35% from 4.28%, helped by lower borrowing costs, while net interest income before credit provisions rose 3% to $11.9 million.
Noninterest income halved to $758,000, primarily due to the absence of last year’s $573,000 gain on life insurance proceeds and increased TruPS-related losses. Noninterest expenses rose nearly 11% to $7.7 million, pressured by higher payroll, group insurance, and OREO expenses.
Return on average assets dropped to 0.73% from 1.45%, while return on average equity fell to 6.46% from 13.79% in the prior-year quarter. Despite the earnings decline, the company maintained its quarterly dividend of $0.12 per share.
Chief Executive Dennis Woods acknowledged the credit headwinds but reaffirmed confidence in the bank’s overall reserve adequacy. UBFO said its new Fresno branch on Palm and Herndon is nearing completion, with operations expected to start in August.
As of June 30, total loans rose 2.0% to $947.3 million, while deposits edged down 0.2% to $1.06 billion. Shareholders’ equity climbed to $134.3 million, buoyed by retained earnings and improved unrealized investment losses.