Financial Analysis

Commitments and Contingencies In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk not recognized in the consolidated balance sheets. The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit - worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on managements credit evaluation of the party. However, such loan to value ratios will subsequently change, based on increases and decreases in the supporting collateral values. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, land and income-producing commercial p …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Employee Stock Ownership and 401(k) Plan The Timberland Bank Employee Stock Ownership and 401(k) Plan (KSOP) is comprised of two components, the ESOP and the 401(k) Plan. The KSOP benefits employees with at least one year of service who are 18 years of age or older. The Bank may fund the ESOP with contributions of cash or stock, which are made at the discretion of the Board, and may fund the 401(k) Plan with contributions of cash. Employee vesting occurs over six years. ESOP In January 1998, the ESOP borrowed $7,930,000 from the Company to purchase 1,058,000 shares of common stock of the Company. The loan was repaid primarily from the Banks contributions to the ESOP and was fully repaid by March 31, 2019. 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. 401(k) Plan Eligible employees may contribute a portion of their wages to the 401(k) Plan up to the maximum established under the Internal Revenue Code. Contributions by the Bank are at the discretion of the Board except for a safe harbor contribution of 3% of eligible employees' wages, which is mandatory according to the plan document. Bank contributions totaled $1,086,000 , $1, …

CompensationAndEmployeeBenefitPlansTextBlock · excerpt; the full note is in the filing

"Stock Compensation Plans 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. Shares issued may be purchased in the open market or may be issued from authorized and unissued shares. The exercise price of each option equals the fair market value of the Companys common stock on the date of grant. Generally, options and restricted stock vest in equal annual installments commencing on the first anniversary of the grant date. Stock options generally vest over a five year period from the date of the grant with a maximum contractual term of ten years from the date of the grant. Restricted stock grants generally vest over a three or five-year term from the date of grant. 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 …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Fair Value Measurements Fair value is defined under GAAP as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels. These levels are: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a companys own assumptions about the assumptions that market participants would use in pricing an asset or liability based on the best information available in the circumstances. The Company's assets measured at fair value …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Goodwill and CDI Goodwill There were no changes to the recorded amount of goodwill for both years ended September 30, 2025 and 2024. CDI The CDI amortization expense totaled $180,000 , $226,000 and $271,000 for the years ended September 30, 2025, 2024 and 2023, respectively. Amortization expense for the CDI for fiscal years ending subsequent to September 30, 2025 is estimated to be as follows (dollars in thousands): 2026 $ 136 2027 90 2028 45 Total $ 271

GoodwillAndIntangibleAssetsDisclosureTextBlock

"Income Taxes The components of the provision for income taxes for the years ended September 30, 2025, 2024 and 2023 were as follows (dollars in thousands): 2025 2024 2023 Current: Federal $ 7,453 $ 6,506 $ 7,167 Deferred (383) (383) (291) Provision for income taxes $ 7,070 $ 6,123 $ 6,876 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. The components of the Companys deferred tax assets and liabilities at September 30, 2025 and 2024 were as follows (dollars in thousands): 2025 2024 Deferred Tax Assets Allowance for credit losses $ 3,800 $ 3,670 Allowance for OREO losses 5 5 OTTI credit impairment on investment securities 38 50 Accrued interest on loans 68 69 Deferred compensation and bonuses 121 163 Reserve for loan commitments 90 69 Operating lease liabilities 646 331 Net unrealized losses on investment securities and investments in equity securities 89 5 Other 435 70 Total deferred tax assets 5,292 4,432 Deferred Tax Liabilities Goodwill 1,187 1,187 Loan servicing rights 171 288 Depreciation 997 815 Loan fees/costs 1,108 1,044 Prepaid expenses 168 159 Purchase accounting adjustment 83 110 Operating lease ROU assets 619 310 Other 27 Total deferred tax liabilities 4,333 3,940 Net deferred tax assets $ 959 $ 492 Net deferred tax assets are included in other assets in the accompanying consolidated balance sheets. No valuation allowance …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leases 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. The components of lease cost (included in the premises and equipment expense category in the consolidated statements of income) are as follows for the years ended September 30, 2025, 2024 and 2023 (dollars in thousands): Lease cost: 2025 2024 2023 Operating lease cost $ 417 $ 380 $ 354 Short-term lease cost Total lease cost $ 417 $ 380 $ 354 The following table provides supplemental information related to operating leases at or for the years ended September 30, 2025, 2024 and 2023 (dollars in thousands): 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 344 $ 332 $ 316 Weighted average remaining lease term-operating leases 16.44 yrs 5.94 yrs 6.69 yrs Weighted average discount rate-operating leases 4.07 % 2.34 % 2.33 % The Company's leases typically do not contain a discount rate implicit in the lease contracts. As an alternative, the incremental borrowing rate is used to estimate the present …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"In June 2016, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, as amended by ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11. ASU 2016-13 replaces the existing incurred losses methodology with a current expected losses methodology with respect to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held to maturity investment securities and off-balance sheet commitments. 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 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. As a ""smaller reporting company"" filer with the U.S. Securities and Exchange Commission, ASU 2016-13 was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Upon adoption, the Company experienced changes in the processes and procedures to calculate the ACL, including changes in the assumptions and estimates to consider expected credit losses over the life of the loan versus the accounting practices that were uti …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Revenue from Contracts with Customers 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: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; 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 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. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. A …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Timberland Bancorp, Inc. (Timberland Bancorp), its wholly owned subsidiary, Timberland Bank (the Bank), and the Banks wholly owned subsidiary, Timberland Service Corp. (collectively, the ""Company). All significant intercompany transactions and balances have been eliminated in consolidation. Nature of Operations Timberland Bancorp is a bank holding company which operates primarily through its subsidiary, the Bank. The Bank was established in 1915 and, through its 23 branches located in Grays Harbor, Pierce, Thurston, Kitsap, King and Lewis counties in Washington State, attracts deposits from the general public and uses those funds, along with other borrowings, primarily to provide residential real estate, construction, commercial real estate, commercial business and consumer loans to borrowers primarily in western Washington. Consolidated Financial Statement Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (""U.S."") (GAAP) and prevailing practices within the banking industry. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the co …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk not recognized in the consolidated balance sheets. The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit - worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on managements credit evaluation of the party. However, such loan to value ratios will subsequently change, based on increases and decreases in the supporting collateral values. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, land and income-producing commercial prop …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"STOCK COMPENSATION PLANS The Company maintains one active stock compensation plan, the 2019 Equity Incentive Plan (the ""2019 Plan""). Under the 2019 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 for issuance to employees and officers, and 50,000 shares are reserved for issuance to directors and directors emeriti. Shares issued under the 2019 Plan may be purchased in the open market or issued from the Company's authorized and unissued shares. The exercise price of each stock option equals the fair market value of the Companys common stock on the date of grant. Stock options generally vest in equal annual installments over five years beginning on the first anniversary of the grant date and have a maximum contractual term of ten years. Restricted stock awards typically vest in equal annual installments over a three - or five-year period beginning on the first anniversary of the grant date. At December 31, 2025, 132,935 shares of common stock remained available for further issuance under the 2019 Plan, either as stock options or restricted stock. 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 December 31, 2025, there were 109,890 shares outstanding that had been previously granted in the 2014 Plan, of which 98,090 were vested and 11,8 …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

FAIR VALUE MEASUREMENTS Fair value is defined under GAAP as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels. These levels are: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a companys own assumptions about the assumptions that market participants would use in pricing an asset or liability based on the best information available in the circumstances. The Company's assets measured at fair value …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

"GOODWILL AND CDI 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. Goodwill is presumed to have an indefinite useful life and is analyzed annually for impairment. The Company performs an annual review during the third quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill is impaired. 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. 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 units 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 that reporting uni …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

LEASES At December 31, 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 one to twenty-four years, and 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. The components of lease cost (included in the premises and equipment expense category in the consolidated statements of income) are as follows for the three months ended December 31, 2025 and 2024 (dollars in thousands): Three Months Ended December 31, Lease cost: 2025 2024 Operating lease cost $ 126 $ 96 Short-term lease cost Total lease cost $ 126 $ 96 The following table provides supplemental information related to operating leases at or for the three months ended December 31, 2025 and 2024 (dollars in thousands): At or For the Three Months Ended December 31 2025 At or For the Three Months Ended December 31, 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 88 $ 83 Weighted average remaining lease term-operating leases 16.6 years 5.8 years Weighted average discount rate-operating leases 4.13 % 2.34 % The Company's leases typically do not contain a discount rate implicit in the lease contracts. As an al …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"REVENUE FROM CONTRACTS WITH CUSTOMERS ASU 2014-09 Revenue from Contracts with Customers (""ASC 606"") applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope. 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, 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/disposition of premises and equipment, which are included in non-interest expense. For the three months ended December 31, 2025, the Company recognized $989,000 in service charges on deposits, $1.19 million in ATM and debit card interchange transaction fees, $24,000 in escrow fees, and $23,000 in fee income from non-deposit investment sales included in ""Other, net"" in non-interest income on the consolidated statement of income, all considered within the scope of ASC 606. For the three months ended December 31, 2024, the Company recognized $999,000 in service char …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation: The accompanying unaudited consolidated financial statements of Timberland Bancorp, Inc. and its wholly-owned subsidiary, Timberland Bank (the ""Bank"") (collectively, ""the Company"") were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments which are, in the opinion of management, necessary for a fair presentation of the interim consolidated financial statements have been included. All such adjustments are of a normal recurring nature. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended September 30, 2025 (2025 Form 10-K). The unaudited consolidated results of operations for the three months ended December 31, 2025 are not necessarily indicative of the results that may be expected for the entire fiscal year ending September 30, 2026. (b) Principles of Consolidation: The unaudited consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, and the Bank's wholly owned subsidiary, Tim …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing