What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-12-09 compared with 2024-12-11 · 412 added, 390 removed, 1628 unchanged (33% of the section changed)

17 unchanged sentences

Timberland Bancorp, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Timberland Bancorp, Inc.

and Subsidiary (collectively, "the Company") as of September 30, 2025 and 2024, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended September 30, 2025, and the related notes (collectively, "the financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America (U.S.).

Adoption of New Accounting Standard

As described in Notes 1, 3, and 4 to the financial statements, the Company has changed its method of accounting for credit losses effective October 1, 2023 due to the adoption of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , including all related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We also have audited the Company's internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America (U.S.).

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

1 unchanged sentence

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

32 unchanged sentences

Certificates of deposit (“CDs”) held for investment, at cost 7,217 10,209

Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $ 60 at September 30, 2024 and $0 at September 30, 2023), (estimated fair value $ 166,007 and $ 253,766 )

Investment securities held to maturity, at amortized cost (net of allowance for credit losses ("ACL") of $ 36 and $ 60 ), (estimated fair value $ 132,334 and $ 166,007 )

136,861 172,097

4 unchanged sentences

Loans held for sale 1,127 —

Loans receivable, net of allowance for credit losses of $ 17,478 and $ 15,817

Loans receivable, net of ACL of $ 18,091 and $ 17,478

1,463,590 1,421,523

Premises and equipment, net 21,684 21,486

Other real estate owned (“OREO”) and other repossessed assets, net 221 —

Accrued interest receivable 7,393 6,990

30 unchanged sentences

Retained earnings 236,607 215,531

Accumulated other comprehensive income (loss) 20 ( 1,084 )

Accumulated other comprehensive (loss) income ( 298 ) 20

Total shareholders’ equity 262,614 245,413

21 unchanged sentences

Recapture of credit losses - investment securities ( 24 ) ( 32 ) —

Recapture of credit losses - unfunded commitments ( 71 ) — —

Provision for (recapture of) credit losses - unfunded commitments 105 ( 71 ) —

Total provision for credit losses - net 934 1,151 2,132

8 unchanged sentences

Escrow fees 96 71 109

Valuation recovery on loan servicing rights, net — — 119

Servicing income (loss) on loans sold 140 63 ( 4 )

Other, net 975 895 963

10 unchanged sentences

Premises and equipment 4,112 3,998 3,915

(Gain) loss on sales/dispositions of premises and equipment, net ( 2 ) ( 19 ) 13

Gain on sales/dispositions of premises and equipment, net — ( 2 ) ( 19 )

Advertising 761 761 786

Other real estate owned ("OREO") and other repossessed assets, net 5 1 ( 17 )

OREO and other repossessed assets, net 20 5 1

ATM and debit card interchange transaction fees 2,279 2,384 1,987

24 unchanged sentences

Net income $ 29,161 $ 24,283 $ 27,118

Other comprehensive income (loss)

Unrealized holding gain (loss) on investment securities available for sale, net of income taxes of $ 291 , $( 98 ), and $( 209 ), respectively

Other comprehensive (loss) income

Unrealized holding (loss) gain on investment securities available for sale, net of income taxes of $( 79 ), $ 291 , and $( 98 ), respectively

( 299 ) 1,095 ( 369 )

Reclassification adjustment for gain on sales of investment securities available for sale included in net income, net of income taxes of $( 5 ), $ 0 and $ 0 , respectively.

Change in other than temporary impairment ("OTTI") on investment securities held to maturity, net of income taxes:

Adjustments related to other factors for which OTTI was previously recognized, net of income taxes of $ 0 , $ 0 , and $ 0 , respectively

Accretion of OTTI on investment securities held to maturity, net of income taxes of $ 0 , $ 2 , and $ 1 , respectively

Total other comprehensive income (loss), net of income taxes 1,104 ( 367 ) ( 776 )

Total other comprehensive (loss) income, net of income taxes ( 318 ) 1,104 ( 367 )

Total comprehensive income $ 28,843 $ 25,387 $ 26,751

7 unchanged sentences

Comprehensive

Income (Loss)

(Loss) Income

Number of Shares Amount Retained

3 unchanged sentences

Other comprehensive loss — — — ( 367 ) ( 367 )

Repurchase of common stock ( 170,237 ) ( 4,583 ) — — ( 4,583 )

Repurchase of common stock, net of tax ( 185,399 ) ( 4,998 ) — — ( 4,998 )

Restricted stock grants, net 26,150 — — — —

Exercise of stock options 42,635 698 — — 698

4 unchanged sentences

Net income — — 24,283 — 24,283

Other comprehensive loss — — — ( 367 ) ( 367 )

Repurchase of common stock ( 185,399 ) ( 4,998 ) — — ( 4,998 )

Restricted stock grants 26,150 — — — — —

Other comprehensive income — — — 1,104 1,104

Repurchase of common stock, net of tax ( 218,976 ) ( 5,958 ) — — ( 5,958 )

Restricted stock grants, net 28,615 — — — —

Exercise of stock options 45,150 659 — — 659

2 unchanged sentences

Stock-based compensation expense — 390 — — 390

Adoption of ASU 2016-13, net of tax — — ( 488 ) — ( 488 )

Balance, September 30, 2024 7,960,127 $ 29,862 $ 215,531 $ 20 $ 245,413

Consolidated Statements of Shareholders’ Equity (continued)

(Dollars in Thousands, Except Per Share Amounts)

Timberland Bancorp, Inc.

and Subsidiary

Years Ended September 30, 2025, 2024 and 2023

Common Stock Accumulated

Comprehensive

Income (Loss)

(Loss) Income

Number of Shares Amount Retained

2 unchanged sentences

Net income — — 29,161 — 29,161

Other comprehensive income — — — 1,104 1,104

Other comprehensive loss — — — ( 318 ) ( 318 )

Repurchase of common stock, net of tax ( 179,966 ) ( 5,759 ) — — ( 5,759 )

4 unchanged sentences

Stock-based compensation expense — 537 — — 537

Adoption of ASU 2016-013, net of tax — — ( 488 ) — ( 488 )

Balance, September 30, 2025 7,889,571 $ 26,305 $ 236,607 $ ( 298 ) $ 262,614

13 unchanged sentences

Accretion of discount on purchased loans ( 104 ) ( 37 ) ( 75 )

Stock option compensation expense 390 320 246

Stock-based compensation expense 537 390 320

Gain on sales of investment securities, net ( 24 ) — ( 95 )

1 unchanged sentence

Change in fair value of investments in equity securities 2 ( 55 ) 24

Gain on sales of OREO and other repossessed assets, net — — ( 2 )

Accretion of discounts and premiums on securities ( 1,251 ) ( 1,051 ) ( 1,223 )

Gain on sales of loans, net ( 511 ) ( 322 ) ( 244 )

(Gain) loss on sales/dispositions of premises and equipment, net ( 2 ) ( 19 ) 13

Gain on sales/dispositions of premises and equipment, net — ( 2 ) ( 19 )

Provision for credit losses - net 934 1,151 2,132

2 unchanged sentences

Amortization of loan servicing rights 777 894 1,012

Valuation adjustment on loan servicing rights, net — — ( 119 )

BOLI net earnings ( 662 ) ( 645 ) ( 627 )

BOLI death benefit in excess of cash surrender value ( 1,040 ) — ( 79 )

Increase (decrease) in deferred loan origination fees 182 921 ( 822 )

Increase in deferred loan origination fees 103 182 921

Net change in accrued interest receivable and other assets, and other liabilities and accrued expenses 1,532 ( 3,780 ) ( 112 )

14 unchanged sentences

Purchase of premises and equipment ( 1,735 ) ( 1,309 ) ( 1,106 )

Proceeds from sales of OREO and other repossessed assets — — 159

Proceeds from sales/dispositions of premises and equipment — 8 —

10 unchanged sentences

Net increase (decrease) in deposits $ 68,967 $ 86,733 $ ( 71,241 )

Proceeds from (repayment of) FHLB borrowings ( 15,000 ) 35,000 ( 5,000 )

(Repayment of) proceeds from FHLB borrowings — ( 15,000 ) 35,000

Proceeds from exercise of stock options

Repurchase of common stock, net of taxes ( 5,958 ) ( 4,998 ) ( 4,583 )

1,665 659 698

Repurchase of common stock, net of tax ( 5,759 ) ( 5,958 ) ( 4,998 )

Payment of dividends

9 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities

Other comprehensive income (loss) related to investment securities $ 1,104 $ ( 367 ) $ ( 776 )

Loans transferred to OREO and other repossessed assets $ 221 $ — $ —

Other comprehensive (loss) income related to investment securities $ ( 318 ) $ 1,104 $ ( 367 )

Operating lease liabilities arising from recording of ROU assets $ 1,835 $ — $ 72

18 unchanged sentences

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for credit losses ("ACL"), the valuation of loan servicing rights, the valuation of assets acquired and liabilities assumed in acquisitions and the valuation of goodwill for potential impairment.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for credit losses ("ACL"), the valuation of assets acquired and liabilities assumed in acquisitions and the valuation of goodwill for potential impairment.

Certain prior year amounts have been reclassified to conform to the 2025 fiscal year presentation with no change to previously reported net income or shareholders’ equity.

Segment Reporting

The Company has one reportable operating segment which is defined as community banking in western Washington under the operating name “Timberland Bank.”

The Company's revenue is primarily derived from the business of banking.

Management has assigned certain responsibilities by business-line and evaluates financial performance on a Company-wide basis.

The Company's financial performance is monitored on a consolidated basis by the Company's Chief Executive Officer, President and Chief Financial Officer, which are considered the Company's chief operating decision makers ("CODMs") for financial oversight.

The primary measure of performance is consolidated net income.

Financial performance is reviewed monthly by the CODMs.

The presentation of financial performance is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of income.

All of the Company's operations are considered by management to be aggregated in one reportable operating segment.

Cash and Cash Equivalents and Cash Flows

3 unchanged sentences

Management believes that its risk of loss associated with such balances is minimal due to the financial strength of the FRB and the correspondent banks.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

CDs Held for Investment

4 unchanged sentences

The Company generally limits its purchases of CDs to a maximum of $250,000 (the FDIC insurance coverage limit) with any single financial institution.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Investment Securities

6 unchanged sentences

The Company considers many factors including recent events specific to the issuer or industry, and for securities, external credit ratings and recent downgrades.

Credit component losses are reported in allowance for credit losses in the income statement when the present value of expected future cash flows is less than the amortized cost.

Credit component losses are reported in provision for credit losses in the income statement when the present value of expected future cash flows is less than the amortized cost.

Noncredit component losses are recorded in other comprehensive income (loss) when the Company (1) does not intend to sell the security or (2) is not more likely than not to have to sell the security prior to the security’s anticipated recovery.

21 unchanged sentences

Mortgage loans and commercial business loans originated and intended for sale in the secondary market are stated in the aggregate at the lower of cost or estimated fair value.

Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Gains or losses on sales of loans are recognized at the time of sale.

The gain or loss is the difference between the net sales proceeds and the recorded value of the loans, including any remaining unamortized deferred loan origination fees.

Net unrealized losses, if any, are recognized through a valuation

Notes to Consolidated Financial Statements

2 unchanged sentences

September 30, 2025 and 2024

allowance by charges to income.

Gains or losses on sales of loans are recognized at the time of sale.

The gain or loss is the difference between the net sales proceeds and the recorded value of the loans, including any remaining unamortized deferred loan origination fees.

Loans Receivable

6 unchanged sentences

Loans are returned to accrual status when the loan is deemed current, and the collectability of principal and interest is no longer doubtful, or, in the case of one- to four-family loans, when the loan is less than 90 days delinquent.

The categories of non-accrual loans and impaired loans overlap, although they are not identical.

The categories of non-accrual loans and individually evaluated loans overlap, although they are not identical.

The Company charges fees for originating loans.

These fees, net of certain loan origination costs, are deferred and amortized to income on the level-yield basis over the loan term.

These fees, net of certain loan origination costs, are deferred and amortized to income on a level-yield basis over the loan term.

If the loan is repaid prior to maturity, the remaining unamortized deferred loan origination fee is recognized in income at the time of repayment.

Acquired Loans

Purchased loans, including loans acquired in business combinations, are recorded at their estimated fair value at the acquisition date.

Credit discounts are included in the determination of fair value;

therefore, an ACL is not recorded at the acquisition date.

Acquired loans are evaluated upon acquisition and classified as either purchased credit-impaired ("PCI") or purchased non-credit-impaired.

PCI loans reflect credit deterioration since origination such that it is probable at acquisition that the Company will be unable to collect all contractually required payments.

The excess of the cash flows expected to be collected over a PCI loan's carrying value is considered to be the accretable yield and is recognized as interest income over the estimated life of the PCI loan using the effective yield method.

The excess of the undiscounted contractual balances due over the cash flows expected to be collected is considered to be the nonaccretable difference.

The nonaccretable difference represents the Company's estimate of the credit losses expected to occur and would be considered in determining the estimated fair value of the loans as of the acquisition date.

Subsequent to the acquisition date, any increases in expected cash flows over those expected at the purchase date in excess of fair value are adjusted through a change to the accretable yield on a prospective basis.

Any subsequent decreases in expected cash flows attributable to credit deterioration are recognized by recording an ACL on loans.

PCI loans were insignificant as of September 30, 2024 and 2023.

For purchased non-credit-impaired loans, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the life of the loans.

Any subsequent deterioration in credit quality is recognized by recording an ACL on loans.

Allowance for Credit Losses

5 unchanged sentences

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded, limited by the amount that the fair value is less than the amortized cost basis.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Accrued interest receivable on investment securities available for sale is excluded from the estimate of expected credit losses.

Changes in the ACL on investment securities available for sale are recorded as provision for (recapture of) credit losses on the consolidated income statements.

Changes in the ACL on investment securities available for sale are recorded as provision for (recapture of) credit losses in the consolidated income statements.

Losses are charged against the ACL when it is believed the uncollectibility of an investment security available for sale is confirmed or when either of the criteria regarding intent or requirement to sell is met.

3 unchanged sentences

Accrued interest receivable on investment securities held to maturity is excluded from the estimate of expected credit losses.

Changes in the ACL on investment securities held to maturity are recorded as provision for (recapture of) credit losses in the consolidated income statements.

Changes in the ACL on investment securities held to maturity are recorded as provision for (recapture of) credit losses in the

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

consolidated income statements.

Losses are charged against the ACL when it is believed the uncollectibility of an investment security held to maturity is confirmed.

ACL on Loans - The Company adopted the new accounting standard for the ACL, commonly referred to as the current expected credit losses ("CECL") methodology, as of October 1, 2023.

All disclosures as of and for the year ended September 30, 2024 are presented in accordance with the new accounting standard.

All disclosures as of and for the years ended September 30, 2025 and 2024 are presented in accordance with the new accounting standard.

The comparative financial periods prior to the adoption of this new accounting standard are presented and disclosed under previously applicable GAAP's incurred loss methodology, which is not directly comparable to the new, CECL methodology.

See also, Note 4 - Loan Receivable and Allowance for Credit Losses.

See also, Note 4 - Loans Receivable and Allowance for Credit Losses.

As a result of implementing this new accounting standard, there was a one-time adjustment to the fiscal year 2024 opening allowance balance of $ 461,000 related to loans held for investment.

1 unchanged sentence

The Company has concluded that this policy results in the timely reversal of uncollectible interest.

The ACL is a estimate of the expected credit losses on financial assets measured at amortized cost.

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost.

The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics.

15 unchanged sentences

Loss factors are based on the Company's historical loss experiences with additional consideration and adjustments made for changes in economic conditions, changes in the amount and composition of the loan portfolio, delinquency rates, changes in collateral values, seasoning of the loan portfolio, duration of the current business cycle, a detailed analysis of individually evaluated loans and other factors as deemed appropriate.

Management also assesses the risk related to reasonable

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

and supportable forecasts that are used.

Management also assesses the risk related to reasonable and supportable forecasts that are used.

These factors are evaluated on a quarterly basis.

1 unchanged sentence

In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's ACL and may require the Company to make adjustments to the ACL based on their judgment about information available to them at the time of their examinations.

The ACL on loans totaled $ 17,478,000 at September 30, 2024.

The ACL on loans totaled $ 18,091,000 and $ 17,478,000 at September 30, 2025 and 2024, respectively.

ACL for Unfunded Loan Commitments - The Company maintains a separate ACL related to unfunded loan commitments.

Management estimates the amount of expected losses related to unfunded, off-balance sheet commitments over the contractual period in which exposure to credit risk from a contractual obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable.

Management estimates the amount of expected losses related to unfunded, off-balance sheet commitments over the contractual period in which there is exposure to credit risk from a contractual obligation to extend credit, unless the Company has determined that obligation is unconditionally cancellable.

The methodology for calculating the ACL on unfunded loan commitments is similar to the methodology for calculating the ACL on loans but also includes an estimate of the future utilization of the commitment as determined by historical utilization.

Credit risk associated with the unfunded commitments are consistent with the loss ratio for each loan segment within the ACL for loans.

Credit risk associated with the unfunded commitments is consistent with the loss ratio for each loan segment within the ACL for loans.

The ACL on unfunded commitments is recognized in other liabilities and accrued expenses in the consolidated balance sheets and is adjusted as a provision for (recapture of) credit losses on the consolidated income statements.

The ACL on unfunded loan commitments totaled $ 327,000 at September 30, 2024.

The ACL on unfunded loan commitments totaled $ 432,000 and $ 327,000 at September 30, 2025 and 2024, respectively.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Premises and Equipment

5 unchanged sentences

Gains and losses on dispositions are reflected in current earnings.

Impairment of Long-Lived Assets

Long-lived assets, consisting of premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the recorded amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the recorded amount of an asset to undiscounted future net cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the recorded amount of the assets exceeds the discounted recovery amount or estimated fair value of the assets.

No events or changes in circumstances have occurred during the years ended September 30, 2024 or 2023 that would cause management to re-evaluate the recoverability of the Company’s long-lived assets.

OREO and Other Repossessed Assets

1 unchanged sentence

These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell.

When the property is acquired, any excess of the loan balance over the estimated net realizable value is charged to the ACL for OREO.

When the property is acquired, any excess of the loan balance over the estimated net realizable value is charged to the ACL for loans.

The valuation of real estate is subjective in nature and may be adjusted in future periods because of changes in economic conditions.

5 unchanged sentences

Income from BOLI is recognized when earned.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Goodwill is initially recorded when the purchase price paid in a business combination exceeds the estimated fair value of the net identified tangible and intangible assets acquired and liabilities assumed.

2 unchanged sentences

For purposes of goodwill impairment testing, the services offered through the Bank and its subsidiary are managed as one strategic unit and represent the Company's only reporting unit.

The annual goodwill impairment test begins with a qualitative assessment of whether it is "more likely than not" that the reporting unit's fair value is less than its carrying amount.

If an entity concludes that it is not "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it need not perform a two-step impairment test.

If the Company's qualitative assessment concluded that it is "more likely than not" that the fair value of its reporting unit is less than its carrying amount, it must perform the two-step impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized, if any.

The first step of the goodwill impairment test compares the estimated fair value of the reporting unit with its carrying amount, or the book value, including goodwill.

If the estimated fair value of the reporting unit equals or exceeds its book value, goodwill is considered not impaired, and the second step of the impairment test is unnecessary.

The second step, if necessary, measures the amount of goodwill impairment loss to be recognized.

The reporting unit must determine fair value for all assets and liabilities, excluding goodwill.

The net of the assigned fair value of assets and liabilities is then compared to the book value of the reporting unit, and any excess book value becomes the implied fair value of goodwill.

If the carrying amount of the goodwill exceeds the newly calculated implied fair value of goodwill, an impairment loss is recognized in the amount required to write-down the goodwill to the implied fair value.

An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed.

The quantitative goodwill impairment test is used to identify the existence of impairment and the amount of impairment loss and compares the reporting unit's estimated fair value, including goodwill, to its carrying amount.

If the fair value exceeds the carrying amount, then goodwill is not considered impaired.

If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill allocated to the reporting unit.

Management's qualitative assessment takes into consideration macroeconomic conditions, industry and market considerations, cost or margin factors, financial performance and the share price of the Company's common stock.

10 unchanged sentences

Any change in these indicators could have a significant negative impact on the Company's financial condition, impact the goodwill impairment analysis or cause the Company to perform a goodwill impairment analysis more frequently than once per year.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

As of September 30, 2025, management believes that there were no events or changes in the circumstances since May 31, 2025 that would indicate a potential impairment of goodwill.

5 unchanged sentences

CDI is evaluated for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable, with any changes in estimated useful life accounted for prospectively over the revised remaining life.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Loan Servicing Rights

12 unchanged sentences

The Company has only identified leases classified as operating leases.

Operating leases are recorded as ROU assets and ROU liabilities within operating lease assets and operating lease liabilities, respectively, in the consolidated balance sheet.

ROU assets represent the Company's right to use an underlying asset for the lease term and ROU liabilities represent the Company's obligation to make lease payments arising from the lease.

Operating lease ROU assets and ROU liabilities are recognized at the lease agreement commencement date based on the present value of lease payments over the lease term.

Operating leases are recorded as ROU assets and lease liabilities within operating lease ROU assets and operating lease liabilities, respectively, in the consolidated balance sheet.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

Operating lease ROU assets and lease liabilities are recognized at the lease agreement commencement date based on the present value of lease payments over the lease term.

The lease term incorporates options to extend the lease when it is reasonably certain that the Company will exercise that option.

1 unchanged sentence

the Company uses the weighted average discount rate to estimate the present value of future lease payments in calculating the value of the ROU asset.

The operating lease ROU assets is further reduced by any lease pre-payments made and lease incentives.

The operating lease ROU asset is further reduced by any lease pre-payments made and lease incentives.

The leases may contain various provisions for increases in rental rates based either on changes in the published Consumer Price Index or a predetermined escalation schedule and such variable lease payments are recognized as lease expense as they are incurred.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company excludes operating leases with a term of twelve months or less from being capitalized as ROU assets and ROU liabilities.

The Company excludes operating leases with a term of twelve months or less from being capitalized as ROU assets and lease liabilities.

Impairment of Long-Lived Assets

Long-lived assets, consisting of premises and equipment, and lease ROU assets, are reviewed for impairment whenever events or changes in circumstances indicate that the recorded amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the recorded amount of an asset to undiscounted future net cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured by the

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

amount by which the recorded amount of the assets exceeds the discounted recovery amount or estimated fair value of the assets.

No events or changes in circumstances have occurred during the years ended September 30, 2025 or 2024 that would cause management to re-evaluate the recoverability of the Company’s long-lived assets.

Transfers of Financial Assets

7 unchanged sentences

Valuation allowances are established to reduce the net recorded amount of deferred tax assets if it is determined to be more likely than not that all or some portion of the potential deferred tax asset will not be realized.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

With respect to accounting for uncertainty in incomes taxes, a tax provision is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.

16 unchanged sentences

Related Party Transactions

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

The previous Board Chair of the Bank and Timberland Bancorp passed away during the year ended September 30, 2023.

He was a member of the law firm that provides general counsel to the Company.

Legal and other fees paid to this law firm during the period he served on the Board for the years ended September 30, 2023 and 2022 totaled $ 24,000 and $ 48,000 , respectively.

Legal and other fees paid to this law firm during the period he served on the Board for the year ended September 30, 2023 totaled $ 24,000 .

Recent Accounting Pronouncements

3 unchanged sentences

In addition, ASU 2016-13 required credit losses relating to available for sale debt securities to be recorded through an ACL rather than as a reduction of the carrying amount.

ASU 2016-13 also changed the accounting for Purchase Credit Impaired ("PCI") debt securities and loans.

ASU 2016-13 also changed the accounting for Purchased Credit Impaired ("PCI") debt securities and loans.

ASU 2016-13 retained many of the current disclosure requirements in GAAP and expanded certain disclosure requirements.

3 unchanged sentences

In addition, the prior policy for OTTI on investment securities held to maturity was replaced with an allowance approach.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

On October 1, 2023, the Company adopted this ASU.

9 unchanged sentences

For more information related to the implementation, see Note 3 - Investment Securities, Note 4 - Loans Receivable and Allowance for Credit Losses and Note 16 - Commitments and Contingent Liabilities.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other:

Simplifying the Test for Goodwill Impairment.

This ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test.

In computing the implied fair value of goodwill under Step 2, an entity has to perform procedures to determine the fair value of its assets and liabilities (including unrecognized assets and liabilities) at the impairment testing date following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity would then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value;

however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

ASU 2017-04 was effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

The adoption of ASU 2017-04 did not have a material impact on the Company's consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASU 2016-13):

Troubled Debt Restructurings and Vintage Disclosures.

The amendments eliminate the accounting guidance for trouble debt restructurings ("TDR") for creditors, require new disclosures for creditors for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty, and require public business entities to include current-period gross write-offs in the vintage disclosure tables.

The amendments eliminate the accounting guidance for trouble debt restructurings ("TDR") for creditors, require new disclosures for creditors for certain loan refinancing and restructurings when a borrower is experiencing financial difficulty, and require public business entities to include current-period gross write-offs in the vintage disclosure tables.

This ASU was effective upon adoption of ASU 2016-13.

5 unchanged sentences

The amendment requires on an annual basis a reconciliation broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

3 unchanged sentences

Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures.

The amendments in this ASU require disclosure, in notes to the

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

financial statements, of specified information about certain costs and expenses.

The amendments in this ASU require disclosure, in notes to the financial statements, of specified information about certain costs and expenses.

In conjunction with recent standards that enhanced the disaggregation of revenue and income tax information, the disaggregated expense information will enable investors to better understand the major components of an entity's income statement.

1 unchanged sentence

The Company expects this ASU to only impact its disclosure requirements and does not expect the adoption of the ASU to have a material impact on its business operations or the Company's consolidated financial statements.

In January 2025, the FASB issued ASU 2025-01, Income Statement (Subtopic 220-40):

Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures:

Clarifying the Effective Date.

The amendments in this ASU amend the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption of ASU 2025-01 is permitted.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company's financial position, results of operations or cash flows.

Note 2 - Restricted Assets

Federal Reserve regulations require that the Bank maintain certain minimum reserve balances on hand or on deposit with the FRB, based on a percentage of transaction account deposits.

In response to the COVID-19 pandemic, the Federal Reserve reduced the reserve requirement ratio to zero percent, effective March 26, 2020.

Currently, the FRB has not announced plans to re-impose a reserve requirement;

however, the FRB may adjust reserve requirement ratios at its sole discretion.

Federal Reserve regulations require the Bank to maintain certain minimum reserve balances on hand or on deposit with the FRB, based on a percentage of transaction account deposits.

The Federal Reserve reduced the reserve requirement ratio to zero percent, effective March 26, 2020 and has not announced any plans to reinstate it;

however, it retains the discretion to adjust reserve requirement ratios at any time.

Notes to Consolidated Financial Statements

30 unchanged sentences

Available for Sale

government securities $ 3,934 $ 6 $ ( 1 ) $ 3,939

government agencies 68,297 545 ( 524 ) 68,318

32 unchanged sentences

804 ( 6 ) 1 20,447 ( 974 ) 19 21,251 ( 980 )

Municipal securities — — — 1,740 ( 47 ) 1 1,740 ( 47 )

Bank issued trust preferred securities — — — 477 ( 18 ) 1 477 ( 18 )

1 unchanged sentence

Available for Sale

government securities $ 1,962 $ ( 1 ) 1 $ — $ — — $ 1,962 $ ( 1 )

government agencies 11,368 ( 117 ) 4 25,751 ( 407 ) 23 37,119 ( 524 )

$ 13,330 $ ( 118 ) 5 $ 25,751 $ ( 407 ) 23 $ 39,081 $ ( 525 )

$ 10,635 $ ( 308 ) 3 $ 30,809 $ ( 1,053 ) 27 $ 41,444 $ ( 1,361 )

Notes to Consolidated Financial Statements

4 unchanged sentences

During the year ended September 30, 2024, the Company recorded a $ 2,000 net realized loss on 14 held to maturity investment securities, all of which had been recognized previously as a credit loss.

During the year ended September 30, 2022, the Company recorded a $ 1,000 net realized gain on 16 held to maturity investment securities, all of which had been recognized previously as a credit loss.

During the year ended September 30, 2023, the Company recorded an $ 11,000 net realized loss on 14 held to maturity investment securities, all of which had been recognized previously as a credit loss.

During the year ended September 30, 2025, the Company recorded a $ 24,000 realized gain on sale of six available for sale investment securities .

There were no realized gains or losses on available for sale securities for the year ended September 30, 2024.

During the year ended September 30, 2023, the Company recorded a $ 95,000 realized gain on sale of two available for sale investment securities.

There were no realized gains or losses on available for sale investment securities for the year ended September 30, 2022.

The recorded amount of investment securities pledged as collateral for public fund deposits, federal treasury tax and loan deposits and FHLB collateral totaled $ 195,934,000 and $ 208,810,000 at September 30, 2025 and 2024, respectively.

12 unchanged sentences

Available for Sale Investment Securities

The Company assesses each available for sale investment security that is an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors.

The Company did not record an ACL on any available for sale investment securities at September 30, 2024 or upon adoption of ASU 2016-13 on October 1, 2023.

The Company assesses each available for sale investment security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors.

The Company did not record an ACL on any available for sale investment securities at September 30, 2025 and 2024 or upon adoption of ASU 2016-13 on October 1, 2023.

As of both dates, the Company considered the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value.

12 unchanged sentences

The calculation is completed on a quarterly basis using the default studies provided by an industry leading source.

At September 30, 2024, the ACL on the held to maturity securities portfolio totaled $ 60,000 .

At September 30, 2025 and 2024, the ACL on the held to maturity securities portfolio totaled $ 36,000 and $ 60,000 , respectively.

Notes to Consolidated Financial Statements

2 unchanged sentences

September 30, 2025 and 2024

The following table sets forth information for the year ended September 30, 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):

The following tables set forth information for the years ended September 30, 2025 and 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):

Year Ended September 30, 2025

Held to Maturity Beginning Allowance Provision for (Recapture of ) Credit Losses Ending Allowance

Private label residential $ 55 $ ( 20 ) $ 35

Bank issued trust preferred securities 5 ( 4 ) 1

Total $ 60 $ ( 24 ) $ 36

Year Ended September 30, 2024

Held to Maturity Beginning Allowance Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of ) Credit Losses Ending Allowance

4 unchanged sentences

Changes in the ACL are recorded through the provision for (recapture of) credit losses on the consolidated income statements.

Accrued interest receivable on held to maturity investment securities totaled $ 455,000 at September 30, 2024 and is included in accrued interest receivable on the consolidated balance sheet.

Accrued interest receivable on held to maturity investment securities totaled $ 316,000 and $ 455,000 at September 30, 2025 and 2024, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

This amount is excluded from the estimate of expected credit losses.

1 unchanged sentence

When held to maturity debt securities are placed on non-accrual status, unpaid interest credited to income is reversed.

The Company had $ 51,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at September 30, 2024.

The Company had $ 35,000 and $ 51,000 of private label mortgage-backed held to maturity investment securities in non-accrual status at September 30, 2025 and 2024, respectively.

The Company monitors the credit quality of debt securities held to maturity using credit ratings from Moody's, S&P and Fitch.

The Company monitors the credit ratings on a quarterly basis.

The following table sets forth the Company's held to maturity investment securities at September 30, 2024 by credit quality indicator (dollars in thousands):

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

The following tables set forth the Company's held to maturity investment securities at September 30, 2025 and 2024 by credit quality indicator (dollars in thousands):

Credit Ratings

8 unchanged sentences

Total held to maturity $ 131,441 $ — $ 5,420 $ 136,861

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Credit Ratings

As of September 30, 2024 AAA/AA/A BBB/BB/B Unrated Total

Held to Maturity

Treasury and U.S.

government agency securities $ 92,312 $ — $ — $ 92,312

government agencies 49,481 — — 49,481

Private label securities 16,277 — 12,202 28,479

Municipal securities 1,230 — 100 1,330

Bank issued trust preferred securities — — 495 495

Total held to maturity $ 159,300 $ — $ 12,797 $ 172,097

Prior to adopting ASU 2016-13, the Company bifurcated OTTI into (1) amounts related to credit losses which are recognized through earnings and (2) amounts related to all other factors which are recognized as a component of other comprehensive income (loss).

7 unchanged sentences

Subtractions:

Net realized gain (losses) previously recorded

as credit losses

Net realized losses previously recorded as credit losses

( 4 ) ( 2 ) ( 11 )

30 unchanged sentences

1,575,498 1,514,304

Undisbursed portion of construction loans in process 69,878 103,194

Undisbursed portion of construction loans in process ("LIP") 88,289 69,878

Deferred loan origination fees, net 5,528 5,425

45 unchanged sentences

The Company currently originates the following types of construction loans:

custom construction loans, owner/builder construction loans, speculative construction loans, commercial real estate construction loans, multi-family construction loans and land development loans.

custom , owner/builder, speculative, commercial real estate, multi-family and land development.

Construction lending affords the Company the opportunity to achieve higher interest rates and fees with shorter terms to maturity than does its single-family permanent mortgage lending.

2 unchanged sentences

If the estimated cost of construction proves to be inaccurate, the Company may be required to advance funds beyond the amount originally committed to complete the project.

If the estimate of value upon completion proves to be inaccurate, the Company may be confronted with a project whose value is insufficient to assure full repayment, and the Company may incur a loss.

Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors.

Loans to construct homes for which no purchaser has been

If the estimate of value upon completion proves to be inaccurate, the Company may be confronted with a project whose value is insufficient to assure

Notes to Consolidated Financial Statements

2 unchanged sentences

September 30, 2025 and 2024

identified carry more risk, because the payoff for the loan depends on the builder’s ability to sell the property prior to the time that the construction loan is due.

full repayment, and the Company may incur a loss.

Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors.

Loans to construct homes for which no purchaser has been identified carry more risk, because the payoff for the loan depends on the builder’s ability to sell the property prior to the time that the construction loan is due.

The Company attempts to mitigate these risks by adhering to its underwriting policies, disbursement procedures and monitoring practices.

Construction Lending – Custom and Owner/Builder:

Custom construction and owner/builder construction loans are originated to home owners and are typically refinanced into permanent loans at the completion of construction.

Custom and owner/builder construction loans are originated to home owners and are typically refinanced into permanent loans at the completion of construction.

Construction Lending – Speculative One- To Four-Family:

24 unchanged sentences

Commercial Business Lending:

The Company originates commercial business loans which, excluding SBA PPP loans, are generally secured by business equipment, accounts receivable, inventory and/or other property.

The Company originates commercial business loans which are generally secured by business equipment, accounts receivable, inventory and/or other property.

The Company also generally obtains personal guarantees from the business owners based on a review of personal financial statements.

3 unchanged sentences

Accordingly, the repayment of a commercial business loan depends primarily on the credit-worthiness of the borrower (and any guarantors), while the liquidation of collateral is a secondary and potentially insufficient source of repayment.

The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of the borrowers and the guarantors.

The Company attempts to mitigate

Notes to Consolidated Financial Statements

2 unchanged sentences

September 30, 2025 and 2024

these risks by adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of the borrowers and the guarantors.

Credit Quality Indicators

15 unchanged sentences

Loans in this classification have the weaknesses of substandard loans with the additional characteristic that the weaknesses make the collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.

At September 30, 2024, one loan was classified as doubtful.

At September 30, 2023, there were no loans classified as doubtful.

At September 30, 2025 and 2024, one loan was classified as doubtful.

Loans in this classification are considered uncollectible and of such little value that continuance as an asset is not warranted.

10 unchanged sentences

Pass $ 10,885 $ 25,692 $ 79,193 $ 102,942 $ 45,274 $ 47,078 $ — $ 311,064

Watch — 1,796 — — — — — 1,796

Special Mention — — — 4,846 — — — 4,846

Substandard — — 1,781 — — — — 1,781

1 unchanged sentence

Pass $ 16,305 $ 13,129 $ 40,004 $ 39,064 $ 22,489 $ 62,516 $ 1,334 $ 194,841

Watch — — — — — 3,264 — 3,264

Substandard — — — — 9,662 — — 9,662

Total multi-family $ 16,305 $ 13,129 $ 40,004 $ 39,064 $ 32,151 $ 65,780 $ 1,334 $ 207,767

8 unchanged sentences

Watch — 3,875 5,367 1,855 1,232 — — 12,329

Substandard — — — 553 — — — 553

Total construction-customer & owner/builder $ 32,733 $ 37,660 $ 5,927 $ 2,408 $ 1,990 $ — $ — $ 80,718

1 unchanged sentence

Pass $ 6,375 $ 16 $ 44 $ — $ — $ — $ — $ 6,435

Watch — — 488 — — — — 488

Total construction-speculative one-to four-family $ 6,375 $ 16 $ 532 $ — $ — $ — $ — $ 6,923

13 unchanged sentences

Pass $ — $ 358 $ 1,629 $ — $ — $ — $ — $ 1,987

Watch $ — $ — $ 11,549 $ — $ — $ — $ — $ 11,549

Substandard — — — 11,549 — — — 11,549

Total construction-land development $ — $ 358 $ 1,629 $ 11,549 $ — $ — $ — $ 13,536

2 unchanged sentences

Total land $ 11,667 $ 9,393 $ 3,741 $ 6,103 $ 1,951 $ 2,794 $ 303 $ 35,952

Home equity and second mortgage

Pass $ 2,528 $ 5,154 $ 3,574 $ 1,556 $ 237 $ 2,112 $ 34,649 $ 49,810

Watch — — — — — 10 — 10

Substandard — — — — — 57 602 659

Total home equity $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,178 $ 32,384 $ 47,913

Total home equity and second mortgage $ 2,528 $ 5,154 $ 3,574 $ 1,556 $ 237 $ 2,179 $ 35,251 $ 50,479

Other consumer

1 unchanged sentence

Watch — — — — — 7 — 7

Substandard — — — — — — 22 22

Total other consumer $ 565 $ 459 $ 390 $ 82 $ 48 $ 430 $ 60 $ 2,034

3 unchanged sentences

Watch — — — — 649 — — 649

Special Mention — — — 187 304 201 — 692

Substandard — — 159 140 — 790 — 1,089

2 unchanged sentences

Current period gross write-offs $ — $ — $ — $ 241 $ — $ — $ — $ 241

Pass $ — $ — $ — $ 224 $ 36 $ — $ — $ 260

Total SBA PPP $ — $ — $ — $ 224 $ 36 $ — $ — $ 260

Notes to Consolidated Financial Statements

4 unchanged sentences

Type 2025 2024 2023 2022 2021 Prior Revolving Loans Total Loans Receivable

Pass $ — $ — $ — $ — $ 58 $ — $ — $ 58

Total SBA PPP $ — $ — $ — $ — $ 58 $ — $ — $ 58

Total loans receivable, gross (net of construction LIP)

6 unchanged sentences

Current period gross charge-off $ 4 $ 1 $ — $ 241 $ — $ — $ 1 $ 247

Allowance for Credit Losses

During the year ended September 30, 2024, the ACL on loans increased $ 1,661,000 due primarily to a provision for credit losses on loans of $ 1,254,000 and a $ 461,000 upward adjustment related to the adoption of ASU 2016-13.

The provision for credit losses on loans recognized during the year ended September 30, 2024 was primarily due to growth in balances of collectively evaluated loans.

The following table sets forth information for the year ended September 30, 2024 regarding activity in the ACL by portfolio segment (dollars in thousands):

Allowance Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of) Credit Losses Charge-

offs Recoveries Ending

Mortgage loans:

The following table sets forth the Company's loan portfolio at September 30, 2024 by risk attribute and year of origination as well as current period gross charge-offs (dollars in thousands):

Term Loans Amortized Cost Basis by Origination Fiscal Year

Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable

One-to four-family

Multi-family 1,156 ( 120 ) 272 — — 1,308

Commercial 7,209 ( 494 ) 219 — — 6,934

Construction – custom and owner/builder 750 542 36 — — 1,328

Pass $ 12,941 $ 66,671 $ 113,834 $ 48,120 $ 19,053 $ 36,659 $ — $ 297,278

Watch — 1,796 — — — — — 1,796

Substandard — — — — — 49 — 49

Total one- to four-family $ 12,941 $ 68,467 $ 113,834 $ 48,120 $ 19,053 $ 36,708 $ — $ 299,123

Pass $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350

Total multi-family $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350

Commercial real estate

Pass $ 23,758 $ 73,005 $ 126,939 $ 91,035 $ 55,498 $ 194,273 $ 8,799 $ 573,307

Watch — 944 — — 4,201 10,548 — 15,693

Special Mention — — — — — 4,401 — 4,401

Substandard — — — — — 5,818 — 5,818

Total commercial real estate $ 23,758 $ 73,949 $ 126,939 $ 91,035 $ 59,699 $ 215,040 $ 8,799 $ 599,219

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Term Loans Amortized Cost Basis by Origination Fiscal Year

Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable

Construction-custom & owner/builder

Pass $ 38,303 $ 29,159 $ 778 $ — $ — $ — $ — $ 68,240

Watch 221 3,239 5,848 2,861 429 436 — 13,034

Total construction-customer & owner/builder $ 38,524 $ 32,398 $ 6,626 $ 2,861 $ 429 $ 436 $ — $ 81,274

Construction-speculative one-to four-family

Pass $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451

Total construction-speculative one-to four-family $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451

Construction-commercial

Pass $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812

Total construction-commercial $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812

Construction-multi-family

Pass $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757

Total construction-multi-family $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757

Construction-land development

Land 406 318 69 — — 793

Consumer loans:

Pass $ 1,673 $ 2,807 $ — $ — $ — $ — $ — $ 4,480

Watch — — 11,549 — — — — 11,549

Total construction-land development $ 1,673 $ 2,807 $ 11,549 $ — $ — $ — $ — $ 16,029

Pass $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 1,954 $ 458 $ 28,885

Watch — — — — — 481 — 481

Total land $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 2,435 $ 458 $ 29,366

Home equity and second mortgage

Other 53 ( 7 ) 2 ( 9 ) — 39

Commercial business loans 1,967 484 277 ( 92 ) 4 2,640

$ 15,817 $ 461 $ 1,254 $ ( 101 ) $ 47 $ 17,478

Pass $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,097 $ 31,766 $ 47,214

Substandard — — — — — 81 618 699

Total home equity and second mortgage $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,178 $ 32,384 $ 47,913

Notes to Consolidated Financial Statements

2 unchanged sentences

September 30, 2025 and 2024

The following table sets forth information for the year ended September 30, 2023 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):

Allowance Provision for (Recapture of) Loan Losses Charge-

Term Loans Amortized Cost Basis by Origination Fiscal Year

Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable

Other consumer

Pass $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 501 $ 71 $ 3,063

Watch — — — — — 65 1 66

Total other consumer $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 566 $ 72 $ 3,129

Current period gross write-offs $ 6 $ 1 $ — $ — $ — $ — $ 2 $ 9

Commercial business

Pass $ 16,129 $ 19,910 $ 35,117 $ 8,588 $ 7,589 $ 4,775 $ 43,444 $ 135,552

Watch — — 202 36 696 6 180 1,120

Substandard — 1,352 — — — 517 — 1,869

Doubtful — 202 — — — — — 202

Total commercial business $ 16,129 $ 21,464 $ 35,319 $ 8,624 $ 8,285 $ 5,298 $ 43,624 $ 138,743

Current period gross write-offs $ — $ 79 $ — $ — $ — $ 13 $ — $ 92

Pass $ — $ — $ — $ 224 $ 36 $ — $ — $ 260

Total SBA PPP $ — $ — $ — $ 224 $ 36 $ — $ — $ 260

Total loans receivable, gross (net of construction LIP)

Pass $ 135,424 $ 259,907 $ 326,617 $ 185,424 $ 110,552 $ 284,018 $ 85,707 $ 1,387,649

Watch 221 5,979 17,599 2,897 5,326 11,536 181 43,739

Special Mention — — — — — 4,401 — 4,401

Substandard — 1,352 — — — 6,465 618 8,435

Doubtful — 202 — — — — — 202

Total loans receivable $ 135,645 $ 267,440 $ 344,216 $ 188,321 $ 115,878 $ 306,420 $ 86,506 $ 1,444,426

Current period gross charge-off $ 6 $ 80 $ — $ — $ — $ 13 $ 2 $ 101

Allowance for Credit Losses

During the year ended September 30, 2025, the ACL on loans increased $ 613,000 due primarily to a provision for credit losses on loans of $ 853,000 , partially offset by net charge-offs of $ 240,000 .

The provision for credit losses on loans recognized during the year ended September 30, 2025 was primarily due to growth in balances of collectively evaluated loans.

During the year ended September 30, 2024, the ACL on loans increased $ 1,661,000 primarily due to a provision for credit losses on loans of $ 1,254,000 and a $ 461,000 upward adjustment related to the adoption of ASU 2016-13.

The provision for credit losses on loans recognized during the year ended September 30, 2024 was primarily due to growth in the balances of collectively evaluated loans.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

The following table sets forth information for the year ended September 30, 2025 regarding activity in the ACL by portfolio segment (dollars in thousands):

Allowance Provision for (Recapture of) Credit Losses Charge-

offs Recoveries Ending

14 unchanged sentences

$ 17,478 $ 853 $ ( 247 ) $ 7 $ 18,091

The following table sets forth the information for the year ended September 30, 2022 regarding activity in the allowance for loan losses by portfolio (dollars in thousands):

Allowance Provision for (Recapture of) Loan Losses Charge-

The following table sets forth information for the year ended September 30, 2024 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):

Allowance Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of) Credit Losses Charge-

offs Recoveries Ending

4 unchanged sentences

Construction – custom and owner/ builder

750 542 36 — — 1,328

Construction – speculative one- to four-family

148 ( 16 ) ( 4 ) — — 128

Construction – commercial 316 176 45 — — 537

11 unchanged sentences

September 30, 2025 and 2024

The following table presents information on loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at September 30, 2023 (dollars in thousands) prior to the adoption of ASU 2016-13:

Allowance for Loan Losses Recorded Investment in Loans

Evaluated for

Impairment Collectively

Evaluated for

Impairment Total Individually

Evaluated for

Impairment Collectively

Evaluated for

Impairment Total

The following table sets forth the information for the year ended September 30, 2023 regarding activity in the allowance for loan losses by portfolio (dollars in thousands):

Allowance Provision for (Recapture of) Loan Losses Charge-

offs Recoveries Ending

Mortgage loans:

One- to four-family $ 1,658 $ 759 $ — $ — $ 2,417

$ — $ 2,417 $ 2,417 $ 368 $ 252,859 $ 253,227

— 1,156 1,156 — 127,176 127,176

— 7,209 7,209 2,973 565,292 568,265

Multi-family 855 301 — — 1,156

Commercial 6,682 527 — — 7,209

Construction – custom and owner/builder 675 75 — — 750

— 750 750 — 73,239 73,239

Construction – speculative one- to four-family 130 18 — — 148

— 148 148 — 9,361 9,361

Construction – commercial 343 ( 27 ) — — 316

— 316 316 — 26,030 26,030

Construction – multi-family 447 155 — — 602

— 602 602 — 45,890 45,890

Construction – land development 233 41 — — 274

— 274 274 — 16,129 16,129

— 406 406 — 26,726 26,726

Land 397 9 — — 406

Consumer loans:

Home equity and second mortgage 440 79 — — 519

— 519 519 382 37,899 38,281

— 53 53 — 2,772 2,772

Other 42 14 ( 4 ) 1 53

Commercial business loans 1,801 181 ( 15 ) — 1,967

SBA PPP loans — — — — 466 466

Total $ 123 $ 15,694 $ 15,817 $ 4,009 $ 1,319,355 $ 1,323,364

$ 13,703 $ 2,132 $ ( 19 ) $ 1 $ 15,817

Non-Accrual Loans

89 unchanged sentences

September 30, 2025 and 2024

The following table presents an analysis of loans by credit quality indicator and portfolio segment at September 30, 2023 (dollars in thousands):

Pass Watch Special Mention Substandard Total

At September 30, 2024, the Company had $ 1,825,000 of non-accrual loans with an ACL of $ 506,000 and $ 2,060,000 of non-accrual loans with no ACL.

The following table is a summary of the amortized cost of collateral dependent non-accrual loans as of September 30, 2024 (in thousands):

Recorded Investment Related ACL

Mortgage loans:

One- to four- family $ 49 $ —

Multi-family 127,176 — — — 127,176

Commercial 1,158 —

Construction – custom and owner / builder 68,181 5,058 — — 73,239

Construction – speculative one- to four-family 9,361 — — — 9,361

Construction – commercial 25,063 967 — — 26,030

Construction – multi-family 45,890 — — — 45,890

Construction – land development 16,129 — — — 16,129

Land 26,226 500 — — 26,726

Consumer loans:

Home equity and second mortgage 618 —

Other 2,716 56 — — 2,772

Commercial business loans 2,060 506

SBA PPP loans 466 — — — 466

$ 1,299,220 $ 17,758 $ — $ 6,386 $ 1,323,364

Total $ 3,885 $ 506

Impaired Loans

43 unchanged sentences

$ 4,009 $ 4,102 $ 123 $ 4,349 $ 213 $ 172

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

The following table is a summary of information related to impaired loans by portfolio segment as of and for the year ended September 30, 2022 (dollars in thousands):

September 30, 2022 For the Year Ended September 30, 2022

Investment Unpaid Principal

Balance (Loan

Charge Off) Related

Allowance Average

Investment Interest

Recognized Cash Basis

With no related allowance recorded:

Mortgage loans:

One- to four-family $ 388 $ 432 $ — $ 470 $ 31 $ 31

Commercial 2,988 2,988 — 3,041 152 123

Land 450 450 — 492 — —

Consumer loans:

Home equity and second mortgage 394 394 — 436 6 5

Other 3 3 — 7 — —

Commercial business loans 59 108 — 121 — —

4,282 4,375 — 4,567 189 159

With an allowance recorded:

Consumer loans:

Home equity and second mortgage — — — 145 — —

Commercial business loans 250 250 127 268 — —

250 250 127 413 — —

Mortgage loans:

One- to four-family 388 432 — 470 31 31

Commercial 2,988 2,988 — 3,041 152 123

Land 450 450 — 492 — —

Consumer loans:

Home equity and second mortgage 394 394 — 581 6 5

Other 3 3 — 7 — —

Commercial business loans 309 358 127 389 — —

$ 4,532 $ 4,625 $ 127 $ 4,980 $ 189 $ 159

Loan Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or any combination of these.

When principal forgiveness is provided, the amount of the forgiveness is charged-off against the ACL for loans.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL for loans is adjusted by the same amount.

The ACL on modified loans is measured using the same credit loss estimation methods used to determine the ACL of all other loans held for investment.

These methods incorporate the post-modification of loan terms, as well as defaults and charge-offs associated with historical modified loans.

Notes to Consolidated Financial Statements

2 unchanged sentences

September 30, 2025 and 2024

On October 1, 2023, the Company adopted ASU No.

2022-02, Financial Instruments - Credit Losses (ASU 2016-13).

This ASU eliminated the accounting guidance for TDR loans for creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty.

No loans to borrowers experiencing financial difficulty were modified in the years ended September 30, 2024 and 2023.

At September 30, 2023, the Company had $ 2.50 million of TDRs, all of which were paying as agreed.

There were no defaults in these loans during the years ended September 30, 2024 and 2023.

The following tables present the amortized cost basis of loans at September 30, 2025 that were both experiencing financial difficulty and modified during the year ended September 30, 2025, by loan class and modification type (dollars in thousands):

Combination - Term Extension and Collateral Addition

September 30, 2025 Amortized Cost Basis % of Total Loan Type Financial Effect

Commercial Business Loan $ 256 0.20 % Loan extended three months and secured by a deed of trust on a land parcel

Combination - Term Extension and Payment Modification

September 30, 2025 Amortized Cost Basis % of Total Loan Type Financial Effect

Commercial Business Loan $ 1 — % Loan extended seven months , monthly payment reduced with principal payments due at time of change in terms and 1.5 months after signing

The loans above are performing according to modified terms.

There were no modified loans to borrowers experiencing financial difficulty at September 30, 2024.

In accordance with the Company's policy guidelines, unsecured loans are generally charged-off when no payments have been received for three consecutive months unless an alternative action plan is in effect.

13 unchanged sentences

Premises and equipment, net $ 21,684 $ 21,486

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Note 6 – OREO and Other Repossessed Assets

3 unchanged sentences

Balance, beginning of year $ — 1 $ — 2

Other additions 221 1 — —

Sales — — — ( 1 )

Balance, end of year $ 221 2 $ — 1

At September 30, 2025, OREO and other repossessed assets consisted of two OREO properties in Washington with a book value of $ 221,000 .

At September 30, 2024, OREO and other repossessed assets consisted of one OREO property in Washington with no book value.

At September 30, 2023, OREO and other repossessed assets consisted of two OREO properties in Washington with no book value.

During the year ended September 30, 2024, the Company transferred one OREO property with no value, to the business association that manages the surrounding properties.

The Company did not record a net gain or loss on sale of OREO for the years ended September 30, 2025, 2024 and 2023.

For the year ended September 30, 2022, the Company recorded net gains on sales of OREO and other repossessed assets of $ 2,000 .

Gains and losses on sales of OREO and other repossessed assets are recorded in the OREO and other repossessed assets, net category in non-interest expense in the accompanying consolidated statements of income.

At September 30, 2024, and 2023 there were no foreclosed residential real estate properties held in OREO as a result of obtaining physical possession, and there were no one- to four-family properties in the process of foreclosure.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

At September 30, 2025 there were no foreclosed residential real estate properties held in OREO as a result of obtaining physical possession, and there was one one-to-four-family property in the process of foreclosure.

At September 30, 2024 there were no foreclosed residential real estate properties held in OREO as a result of obtaining physical position, and there were no one-to-four-family properties in the process of foreclosure.

Note 7 - Goodwill and CDI

7 unchanged sentences

The guaranteed principal amount of SBA loans serviced for others at September 30, 2025, 2024 and 2023 was $ 859,000 , $ 1,482,000 and $ 1,882,000 , respectively.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

The following is an analysis of the changes in Freddie Mac loan servicing rights for the years ended September 30, 2025, 2024 and 2023 (dollars in thousands):

3 unchanged sentences

Amortization ( 777 ) ( 894 ) ( 1,009 )

Valuation recovery — — 119

Balance, end of year $ 815 $ 1,372 $ 2,124

2 unchanged sentences

At September 30, 2025, 2024 and 2023, there was no valuation allowance.

At September 30, 2024 there were no SBA servicing rights and as of September 30, 2023, and 2022, the servicing rights were insignificant.

At September 30, 2025 and 2024 there were no SBA servicing rights.

There was no valuation allowance on SBA servicing rights at September 30, 2025 and 2024.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Note 9 - Leases

At September 30, 2024, the Company has operating leases for two retail bank branch offices and an administrative office.

The Company's leases have remaining lease terms of two to seven years , which include options to extend the leases for up to five years .

At September 30, 2025, the Company has operating leases for three retail bank branch offices and an administrative office.

The Company's leases have remaining lease terms of two to twenty-four years , which include options to extend the leases for up to fifteen years .

Lease extensions are not certain, and the Company evaluates each lease based on the specific circumstances for the location to determine the probability of exercising the extensions in the calculation of ROU assets and lease liabilities.

11 unchanged sentences

The Company's leases typically do not contain a discount rate implicit in the lease contracts.

As an alternative, the weighted average discount rate is used to estimate the present value of future lease payments in calculating the value of the ROU asset.

As an alternative, the incremental borrowing rate is used to estimate the present value of future lease payments in calculating the value of the ROU asset.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Maturities of operating lease liabilities at September 30, 2025 for the five fiscal years ending subsequent to September 30, 2025 and thereafter, are as follows (dollars in thousands):

3 unchanged sentences

Total $ 3,077

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Note 10 - Deposits

20 unchanged sentences

Total $ 31,272 $ 29,659 $ 11,302

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Note 11 – FHLB Borrowings and Other Borrowings

1 unchanged sentence

At September 30, 2025, the Bank had a borrowing capacity of $ 639,915,000 prior to outstanding borrowings.

The Bank had $ 20,000,000 short-term and no long-term FHLB borrowings outstanding at September 30, 2025.

The short-term borrowings consisted of three borrowings, which mature at various dates during the 2026 fiscal year and bear interest rates ranging from 3.95 % to 4.03 %.

The Bank had $ 20,000,000 long-term and no short-term FHLB borrowings outstanding at September 30, 2024.

The long-term borrowings consisted of three borrowings, which mature at various dates during the 2026 fiscal year and bear interest rates ranging from 3.95% - 4.03%.

The Bank had $ 15,000,000 long-term and $ 20,000,000 short-term FHLB borrowings outstanding at September 30, 2023.

The long term borrowings consisted of two borrowings, with scheduled maturities in May 2026, and each bears interest at 3.95%.

The short-term borrowings consisted of three borrowings, which matured at various dates during the 2024 fiscal year and bore interest at rates ranging from 5.52% to 5.57%.

The long-term borrowings consisted of three borrowings, which mature at various dates during the 2026 fiscal year and bear interest rates ranging from 3.95 % to 4.03 %.

Under the Advances, Pledge and Security Agreement entered into with the FHLB ("FHLB Borrowing Agreement"), virtually all of the Bank’s assets, not otherwise encumbered, are pledged as collateral for borrowings under the FHLB Borrowing Agreement.

The Bank also maintained two short-term borrowing lines with the FRB during the years ended September 30, 2024 and 2023, with total credit based on eligible collateral:

The Bank also maintained short-term borrowing lines with the FRB during the years ended September 30, 2025 and 2024, with total credit based on eligible collateral:

Borrower-in-custody ("BIC") and Bank Term Funding Program ("BTFP").

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

September 30, 2024, the Bank had a borrowing capacity on the BIC line of $ 86,634,000 , with no outstanding borrowings at September 30, 2024 and 2023.

At September 30, 2025, the Bank had a borrowing capacity on the BIC line of $ 70,571,000 , with no outstanding borrowings at September 30, 2025 and 2024.

At September 30, 2024, the Bank did not have a balance on the BTFP line, the borrowing program was discontinued by the FRB in March of 2024.

At September 30, 2023, the Bank had a borrowing capacity on the BTFP line of $ 57,000,000 , with no outstanding borrowings at September 30, 2023.

The Bank has a short-term $ 50,000,000 overnight borrowing line with Pacific Coast Bankers' Bank.

14 unchanged sentences

At September 30, 2025 and 2024, the Company had income tax receivable of $ 290,000 and $ 80,000 , respectively, which is included in other assets in the accompanying consolidated balance sheets.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

The components of the Company’s deferred tax assets and liabilities at September 30, 2025 and 2024 were as follows (dollars in thousands):

5 unchanged sentences

Deferred compensation and bonuses 121 163

Reserve for loan commitments 90 69

Operating lease liabilities 646 331

1 unchanged sentence

Total deferred tax assets 5,292 4,432

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Deferred Tax Liabilities

8 unchanged sentences

Net deferred tax assets $ 959 $ 492

Deferred tax assets are included in other assets, and deferred tax liabilities are included in other liabilities and accrued expenses in the accompanying consolidated balance sheets.

Net deferred tax assets are included in other assets in the accompanying consolidated balance sheets.

No valuation allowance for deferred tax assets was recorded as of September 30, 2025 and 2024, as management believes that it is more likely than not that all of the deferred tax assets will be realized based on management's expectations of future taxable income.

7 unchanged sentences

Provision for income taxes $ 7,070 $ 6,123 $ 6,876

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Note 14 - Employee Stock Ownership and 401(k) Plan

5 unchanged sentences

The loan was repaid primarily from the Bank’s contributions to the ESOP and was fully repaid by March 31, 2019.

As of September 30, 2024, an aggregate of 785,839 ESOP shares, which were previously released for allocation to participants, had been distributed to participants.

As of September 30, 2025, an aggregate of 789,903 ESOP shares, all of which were previously released for allocation to participants, had been distributed to participants.

Total shares held by the ESOP as of September 30, 2025, 2024 and 2023 were 268,097 , 272,161 and 317,094 , respectively.

There was no compensation expense recognized for the ESOP for the years ended September 30, 2025, 2024 and 2023.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Eligible employees may contribute a portion of their wages to the 401(k) Plan up to the maximum established under the Internal Revenue Code.

2 unchanged sentences

Note 15 - Stock Compensation Plans

The Company has two active stock compensation plans:

the 2014 Equity Incentive Plan and the 2019 Equity Incentive Plan.

Under the Company's 2014 Equity Incentive Plan, the Company may grant options and awards of restricted stock (with or without performance measures) for up to 352,366 shares of common stock to employees, officers, directors and directors emeriti.

The Company has one active stock compensation plan:

the 2019 Equity Incentive Plan.

Under the Company's 2019 Equity Incentive Plan, the Company may grant options and awards of restricted stock (with or without performance measures) for up to 350,000 shares of common stock, of which 300,000 shares are reserved to be awarded to employees and officers and 50,000 shares are reserved to be awarded to directors and directors emeriti.

4 unchanged sentences

Restricted stock grants generally vest over a three or five-year term from the date of grant.

At September 30, 2024, there were 15,576 and 154,655 shares of common stock available for future grants under the 2014 and 2019 Equity Incentive Plans, respectively.

At September 30, 2025, there were 129,855 shares of common stock available for future grants under 2019 Equity Incentive Plan.

As of September 30, 2025, there were 161,450 shares outstanding that had been previously granted in the 2019 Plan, of which 68,300 were vested and 93,150 were unvested.

The Company's 2014 Equity Incentive Plan (the "2014 Plan") expired on January 27, 2025;

therefore no further awards may be granted under the plan.

As of September 30, 2025, there were 124,530 shares outstanding that had been previously granted in the 2014 Plan, of which 111,930 were vested and 12,600 were unvested.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Stock option activity for the years ended September 30, 2025, 2024 and 2023 is summarized as follows:

22 unchanged sentences

There were 1,000 options granted during the year ended September 30, 2023 with an aggregate grant date fair value of $ 9,000 .

There were no options granted during the year ended September 30, 2024.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

The weighted average assumptions for options granted during the years ended September 30, 2023 and 2022 were as follows:

There were no options granted during the years ended September 30, 2025 and 2024.

The weighted average assumptions for options granted during the year ended September 30, 2023 was as follows:

Expected volatility 33 %

9 unchanged sentences

At September 30, 2024, there were 77,230 unvested options with an aggregate grant date fair value of $ 468,000 .

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Additional information regarding options outstanding at September 30, 2025 is as follows:

9 unchanged sentences

215,530 $ 26.22 4.8 180,230 $ 25.92 4.5

306,240 $ 25.21 5.4 229,010 $ 24.86 4.8

The aggregate intrinsic value of options outstanding at September 30, 2025, 2024 and 2023 was $ 1,523,000 , $ 1,599,000 and $ 1,518,000 , respectively.

3 unchanged sentences

During the year ended September 30, 2024, the Company granted a total of 28,815 shares of restricted stock from the 2019 plan subject to time-based vesting.

As of and for the year ended September 30, 2022 , there were no unvested restricted stock awards outstanding or restricted stock grants awarded.

During the year ended September 30, 2023, the Company granted a total of 26,150 shares of restricted stock from the 2019 Plan subject to time-based vesting.

The fair value of restricted stock awards is equal to the fair value of the Company's stock on the date of the grant.

1 unchanged sentence

At September 30, 2025, unrecognized compensation cost related to unvested restricted stock awards was $ 2,271,000 , which is expected to be recognized over a weighted average period of 2.55 years.

Total compensation expense related to restricted stock awards for the year ended September 30, 2024 was $ 157,000 .

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Total compensation expense related to restricted stock awards for the year ended September 30, 2025 and 2024 was $ 345,000 and $ 157,000 , respectively.

The following table presents the activity related to restricted stock for the years ended September 30, 2025, 2024 and 2023:

8 unchanged sentences

Outstanding, September 30, 2024 49,015 $ 29.28

Granted 35,350 34.46

Forfeited ( 2,150 ) 28.50

Issued ( 11,765 ) 29.09

Outstanding, September 30, 2025 70,450 $ 31.94

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Note 16 - Commitments and Contingencies

14 unchanged sentences

Commitments to extend credit 30,888 26,293

The Company maintains a separate ACL related to unfunded loan commitments.

Credit risk associated with the unfunded commitments is consistent with the loss ratio for each loan segment within the ACL for loans.

The ACL on unfunded loan commitments totaled $ 327,000 at September 30, 2024

Prior to the adoption of CECL the Company maintained a separate reserve for losses related to unfunded loan commitments.

Management estimated the amount of probable losses related to unfunded loan commitments by applying the loss factors used in the allowance for loan loss methodology to an estimate of the expected amount and funded and applied this adjusted factor to the unused portion of loan commitments.

The reserve for unfunded loan commitments totaled $ 332,000 at September 30,

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

This amount was included in other liabilities and accrued expenses in the accompanying consolidated balance sheets.

Increases (decreases) in the reserve for unfunded loan commitments were recorded in non-interest expense in the accompanying consolidated statements of income.

The following table sets forth information for the years ended September 30, 2025 and 2024 regarding activity in the ACL (reserve for loss) on unfunded loan commitments (dollars in thousands):

2 unchanged sentences

Impact of adopting CECL (ASU 2016-13) — 66

(Recapture of) provision for credit losses ( 71 ) 27

Provision for (recapture of) credit losses 105 ( 71 )

Ending ACL $ 432 $ 327

7 unchanged sentences

In the opinion of management, liabilities arising from these claims, if any, will not have a material effect on the future consolidated financial position of the Company.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Note 17 - Regulatory Matters

9 unchanged sentences

The following tables compare the Bank’s actual capital amounts at September 30, 2025 and 2024 to its minimum regulatory capital requirements and "Well Capitalized" regulatory capital at those dates (dollars in thousands):

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Actual Regulatory Minimum To Be "Adequately Capitalized" Regulatory Minimum To Be "Well Capitalized" Under Prompt Corrective Action Provisions

18 unchanged sentences

The following table presents for informational purposes the regulatory capital ratios for Timberland Bancorp at September 30, 2025 and 2024 assuming that Timberland Bancorp was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets (dollars in thousands):

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

Amount Ratio Amount Ratio

5 unchanged sentences

Total capital 264,800 20.7 247,044 19.4

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

Note 18 - Condensed Financial Information - Parent Company Only

4 unchanged sentences

Total cash and cash equivalents

Investment securities held to maturity, at amortized cost (net of allowance for credit losses of $5 at September 30, 2024 and $0 at September 30, 2023) (estimated fair value of $477 and $449) 495 500

Investment securities held to maturity, at amortized cost (net of ACL of $ 1 and $ 5 ) (estimated fair value of $ 495 and $ 477 )

Investment in Bank 261,021 243,527

31 unchanged sentences

Equity in undistributed income of Bank ( 17,401 ) ( 10,442 ) ( 15,897 )

Stock option compensation expense 390 320 246

Stock-based compensation expense 537 390 320

Other, net 22 ( 50 ) 100

32 unchanged sentences

September 30, 2025 and 2024

Note 20 - Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) ("AOCI") by component during the years ended September 30, 2024, 2023 and 2022 are as follows (dollars in thousands):

Note 20 - Accumulated Other Comprehensive (Loss) Income

The changes in accumulated other comprehensive (loss) income ("AOCI") by component during the years ended September 30, 2025, 2024 and 2023 are as follows (dollars in thousands):

Changes in fair value of available for sale securities [1]

1 unchanged sentence

Balance of AOCI at the beginning of period $ 20 $ — $ 20

Other comprehensive income 1,095 9 1,104

Other comprehensive loss ( 318 ) — ( 318 )

Balance of AOCI at the end of period $ ( 298 ) $ — $ ( 298 )

Balance of AOCI at the beginning of period $ ( 1,075 ) $ ( 9 ) $ ( 1,084 )

Other comprehensive income (loss) ( 369 ) 2 ( 367 )

Other comprehensive income 1,095 9 1,104

Balance of AOCI at the end of period $ 20 $ — $ 20

Balance of AOCI at the beginning of period $ ( 706 ) $ ( 11 ) $ ( 717 )

Other comprehensive income (loss) ( 781 ) 5 ( 776 )

Other comprehensive (loss) income ( 369 ) 2 ( 367 )

Balance of AOCI at the end of period $ ( 1,075 ) $ ( 9 ) $ ( 1,084 )

11 unchanged sentences

The Company's assets measured at fair value on a recurring basis consist of investment securities available for sale and investments in equity securities.

The estimated fair values of MBS are based upon quoted market prices (Level 1) and market prices of similar securities or observable inputs (Level 2).

The estimated fair values of available for sale investment securities are based upon quoted market prices (Level 1) and market prices of similar securities or observable inputs (Level 2).

The estimated fair values of mutual funds are based upon quoted market prices (Level 1).

8 unchanged sentences

Available for sale investment securities

government securities $ 4,968 $ — $ — $ 4,968

government agencies

4 unchanged sentences

Available for sale investment securities

government securities $ 3,939 $ — $ — $ 3,939

government agencies — 68,318 — 68,318

7 unchanged sentences

Individually Evaluated Collateral-Dependent Loans :

Loans for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, where applicable.

Accordingly, collateral dependent loans are classified within level 3 of the fair value hierarchy.

Impaired Loans:

Prior to the adoption of CECL, the estimated fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis.

The specific reserve for collateral dependent impaired loans is based on the estimated fair value of the collateral less estimated costs to sell, if applicable.

In some cases, adjustments are made to the appraised values due to various factors including age of the appraisal, age of the comparable collateral included in the appraisal and known changes in the market and underlying collateral.

Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

OREO and Other Repossessed Assets, net:

OREO and other repossessed assets are recorded at estimated fair value less estimated costs to sell.

Estimated fair value is generally determined by management based on a number of factors, including third-party appraisals of estimated fair value in an orderly sale.

Estimated costs to sell are based on standard market factors.

The valuation of OREO and other repossessed assets is subject to significant external and internal judgment (Level 3).

Notes to Consolidated Financial Statements

7 unchanged sentences

Individually evaluated collateral-dependent loans

Commercial business loans $ 177 $ — $ — $ 177

Total loans 177 — — 177

OREO and other repossessed assets 221 — — 221

Total $ 398 $ — $ — $ 398

September 30, 2024

Impaired loans $ 122 $ — $ — $ 122

Individually evaluated collateral-dependent loans $ 1,315 $ — $ — $ 1,315

The following table presents quantitative information about Level 3 inputs for financial instruments measured at fair value on a non-recurring basis at September 30, 2025 and 2024:

Valuation Technique Significant Unobservable Inputs Range

Individually evaluated collateral-dependent loans (2024) and impaired loans (2023) Market approach Appraised value less selling costs N/A

GAAP requires disclosure of estimated fair values for financial instruments.

Individually evaluated collateral-dependent loans Market approach Appraised value less estimated selling costs 8 %

OREO and other repossessed assets Market approach Lower of appraised value or listing price less estimated selling costs 8 %

GAAP requires disclosure of estimated fair values for certain financial instruments.

Such estimates are subjective in nature, and significant judgment is required regarding the risk characteristics of various financial instruments at a discrete point in time.

5 unchanged sentences

Additionally, the Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2025 and 2024

The recorded amounts and estimated fair values of financial instruments were as follows as of September 30, 2025 (dollars in thousands):

8 unchanged sentences

Other investments 3,000 3,000 3,000 — —

Loans held for sale 1,127 1,159 1,159 — —

Loans receivable, net 1,463,590 1,441,850 — — 1,441,850

5 unchanged sentences

Accrued interest payable 1,963 1,963 1,963 — —

Notes to Consolidated Financial Statements

Timberland Bancorp, Inc.

and Subsidiary

September 30, 2024 and 2023

The recorded amounts and estimated fair values of financial instruments were as follows as of September 30, 2024 (dollars in thousands):

8 unchanged sentences

Other investments 3,000 3,000 3,000 — —

Loans held for sale 400 407 407 — —

Loans receivable, net 1,421,523 1,387,642 — — 1,387,642

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Net interest income 16,547 15,981 15,635 16,004

Provision for loan losses ( 522 ) ( 610 ) ( 475 ) ( 525 )

Provision for credit losses, net ( 490 ) ( 244 ) ( 81 ) ( 336 )

Non-interest income 2,932 2,791 2,615 2,798

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Note 23 - Revenue from Contracts with Customers

In accordance with ASU 2014-09, Revenue from Contracts with Customers ("ASC 606") , revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services.

In accordance with ASC 606, Revenue from Contracts with Customers , revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

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(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenue when (or as) the Company satisfies a

and (5) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will

Notes to Consolidated Financial Statements

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September 30, 2025 and 2024

performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the goods or services it transfers to the customer.

collect the consideration that it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct.

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The majority of the Company's revenues are composed of interest income, deferred loan fee accretion, premium/discount accretion, gains on sales of loans and investments, BOLI net earnings, servicing income on loans sold and other loan fee income, which are not within the scope of ASC 606.

Revenue reported as service charges on deposits, ATM and debit card interchange transaction fees, merchant services fees, non-deposit investment fees and escrow fees are within the scope of ASC 606.

Revenue reported as service charges on deposits, ATM and debit card interchange transaction fees, non-deposit investment fees and escrow fees are within the scope of ASC 606.

All of the Company's revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income with the exception of gains on sales of OREO and gains on sales/dispositions of premises and equipment, which are included in non-interest expense.

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Non-transaction based fees such as account maintenance fees and monthly statement fees are considered to be provided to the customer under a day-to-day contract with ongoing renewals.

Revenue for these non-transaction fees are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

Revenue for these non-transaction fees is earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

Transaction-based fees such as non-sufficient fund charges, stop payment charges and wire fees are recognized at the time that the transaction is executed, as the contract duration does not extend beyond the service performed.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data