Timberland Bancorp Hits $2.01B Assets, Diversifies Lending Portfolio

TL;DR

**TSBK is making a risky bet on commercial real estate and construction loans in a softening housing market, which could either pay off big or lead to significant credit losses.**

AI Summary

Timberland Bancorp, Inc. (TSBK) reported total assets of $2.01 billion, net loans receivable of $1.46 billion, total deposits of $1.72 billion, and total shareholders' equity of $262.61 million as of September 30, 2025. The company's net loans receivable constituted 72.7% of consolidated total assets, with commercial real estate, construction, multi-family, and land loans making up a significant $1.08 billion, or 73.4% of total loans. TSBK operates 23 branches across six Washington counties, with a new branch opening soon in University Place, Pierce County. The economic conditions in its primary market areas show mixed signals; for example, Grays Harbor County saw a 2.9% increase in median home prices to $368,400 and a 9.2% increase in home sales for the quarter ended June 30, 2025, while King County experienced a 3.4% decrease in home sales despite a 3.0% increase in median home prices to $1.03 million. Unemployment rates generally increased across its market areas from September 2024 to August 2025, with Grays Harbor County rising to 5.6% and Thurston County to 4.5%. The company's strategy involves expanding and diversifying its market area beyond its historical dependence on Grays Harbor County's economy.

Why It Matters

Timberland Bancorp's strategic expansion into more diversified markets like Pierce and King counties, moving beyond its Grays Harbor roots, is crucial for long-term stability and growth, especially given the mixed economic signals and rising unemployment rates in its traditional areas. For investors, the significant concentration of $1.08 billion in commercial real estate, construction, multi-family, and land loans, representing 73.4% of total loans, indicates a higher-yield, higher-risk strategy compared to its historical focus on one-to-four family residential loans. This shift could impact profitability and risk exposure, making TSBK's ability to manage these higher-risk assets critical in a competitive banking landscape with larger regional players.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant concentration in higher-risk lending activities, with commercial real estate, construction, multi-family, and land loans totaling $1.08 billion, or 73.4% of total loans. While these loans offer higher yields, they inherently carry a higher degree of risk compared to one-to-four family residential loans. Additionally, unemployment rates increased across all six primary market areas from September 2024 to August 2025, such as Grays Harbor County rising from 5.5% to 5.6% and Pierce County from 4.5% to 5.0%, indicating potential economic headwinds that could impact loan performance.

Analyst Insight

Investors should closely monitor TSBK's loan loss provisions and asset quality metrics, particularly for its substantial commercial real estate and construction loan portfolio, given the rising unemployment rates in its market areas. A cautious approach is warranted until there's clearer evidence of the company's ability to mitigate the increased risks associated with its lending diversification strategy.

Key Numbers

• $2.01 billion — Total Assets (as of September 30, 2025)
• $1.46 billion — Net Loans Receivable (representing 72.7% of total assets as of September 30, 2025)
• $1.72 billion — Total Deposits (as of September 30, 2025)
• $262.61 million — Total Shareholders' Equity (as of September 30, 2025)
• $1.08 billion — Commercial Real Estate, Construction, Multi-family, and Land Loans (representing 73.4% of total loans as of September 30, 2025)
• 5.6% — Unemployment Rate in Grays Harbor County (increased from 5.5% at September 30, 2024, to August 31, 2025)
• 2.9% — Increase in Median Resale Home Price in Grays Harbor County (to $368,400 for the quarter ended June 30, 2025)
• 9.2% — Increase in Home Sales in Grays Harbor County (for the quarter ended June 30, 2025)
• 3.4% — Decrease in Home Sales in King County (for the quarter ended June 30, 2025)
• $1.03 million — Median Resale Home Price in King County (increased 3.0% for the quarter ended June 30, 2025)

Key Players & Entities

• Timberland Bancorp, Inc. (company) — registrant
• Timberland Bank (company) — wholly-owned subsidiary
• Federal Deposit Insurance Corporation (regulator) — deposit insurer
• Federal Reserve (regulator) — regulator of the Company
• Washington State Department of Financial Institutions - Division of Banks (regulator) — regulator of the Bank
• Grays Harbor County (company) — primary market area
• Pierce County (company) — primary market area
• Thurston County (company) — primary market area
• King County (company) — primary market area
• Lewis County (company) — primary market area

FAQ

Risk Factors

• Economic Conditions in Market Areas [medium — market]: The Bank's primary market areas, including Grays Harbor and King counties, exhibit mixed economic signals. Grays Harbor saw a 2.9% increase in median home prices to $368,400 and a 9.2% increase in home sales for the quarter ended June 30, 2025. Conversely, King County experienced a 3.4% decrease in home sales despite a 3.0% increase in median home prices to $1.03 million. This divergence could impact loan performance and demand for banking services.
• Rising Unemployment Rates [medium — market]: Unemployment rates have generally increased across TSBK's market areas from September 2024 to August 2025. Grays Harbor County's unemployment rose to 5.6%, and Thurston County's increased to 4.5%. Persistent or further increases in unemployment could lead to higher loan delinquencies and defaults, particularly in consumer and small business loan portfolios.
• Concentration in Real Estate Lending [high — financial]: As of September 30, 2025, commercial real estate, construction, multi-family, and land loans constitute $1.08 billion, or 73.4% of total loans. This significant concentration in real estate-related lending exposes the bank to risks associated with fluctuations in the real estate market and economic downturns affecting property values and borrower repayment capacity.
• Regulatory Compliance [medium — regulatory]: As a financial institution, TSBK is subject to extensive regulation by the Washington State Department of Financial Institutions - Division of Banks (DFI), the FDIC, and the Federal Reserve. Changes in regulations, compliance burdens, and potential penalties for non-compliance represent ongoing operational and financial risks.
• Competition [medium — operational]: TSBK operates in a competitive banking environment across its six Washington counties. Competition comes from other community banks, regional banks, and national financial institutions, which can affect deposit gathering, loan origination, and pricing strategies.

Industry Context

Timberland Bancorp operates within the community banking sector, characterized by a focus on local markets and relationship-based lending. The industry faces ongoing competition from larger financial institutions and fintech companies, alongside evolving regulatory landscapes. Trends include a continued emphasis on digital transformation, managing interest rate sensitivity, and navigating economic conditions that impact loan demand and credit quality.

Regulatory Implications

As a Washington state-chartered bank regulated by the DFI, FDIC, and its holding company by the Federal Reserve, TSBK is subject to stringent capital requirements, lending standards, and consumer protection laws. Compliance with these regulations is critical to avoid penalties and maintain operational stability. Changes in monetary policy and banking regulations can significantly impact profitability and strategic decisions.

What Investors Should Do

1. Monitor loan portfolio diversification and concentration risk.
2. Analyze the impact of local economic conditions on loan performance.
3. Evaluate the bank's interest rate risk management.
4. Assess the effectiveness of the expansion strategy.

Key Dates

• 2025-09-30: Fiscal Year End — Reporting period for the 10-K, providing a snapshot of the company's financial condition, including total assets of $2.01 billion, net loans of $1.46 billion, deposits of $1.72 billion, and equity of $262.61 million.
• 2025-06-30: Quarterly Economic Data Reference — Data on median home prices and home sales in key market areas (Grays Harbor and King counties) for this quarter indicate mixed economic trends relevant to the bank's loan portfolio.
• 2025-08-31: Unemployment Data Reference — Unemployment rates for August 2025 in market areas like Grays Harbor (5.6%) and Thurston (4.5%) show an increasing trend, impacting the bank's risk assessment.
• 2024-09-30: Prior Year Comparison Point — Used as a baseline for comparing financial condition and operating results in the MD&A section, allowing for year-over-year analysis.
• 1915-01-01: Bank Establishment — Indicates the long operating history of Timberland Bank, suggesting established market presence and customer relationships.

Glossary

Net Loans Receivable

The total amount of money lent out by the bank, minus any allowances for potential loan losses. (Represents the largest asset category for TSBK ($1.46 billion), indicating the core business of the bank and its primary source of interest income, but also a significant source of credit risk.)

Commercial Real Estate Loans

Loans made to businesses or individuals for the purchase, development, or construction of properties intended for commercial use. (A major component of TSBK's loan portfolio ($1.08 billion in CRE, construction, multi-family, and land loans), highlighting a concentration risk tied to the commercial real estate market.)

FDIC

Federal Deposit Insurance Corporation, an independent agency of the U.S. government that insures deposits in banks and savings associations. (Confirms that customer deposits at Timberland Bank are insured up to legal limits, providing confidence to depositors and stability to the bank's funding base.)

Secondary Market

A market where investors buy and sell securities or loans that have already been issued. (TSBK originates adjustable-rate residential mortgage loans that do not qualify for sale in the secondary market, meaning the bank retains these loans on its balance sheet, impacting its liquidity and risk profile.)

Community-Oriented Bank

A bank that focuses its services and lending on the local communities it serves, often emphasizing personal relationships and local economic development. (Describes TSBK's strategic approach, suggesting a focus on local market dynamics and customer relationships, which can be both a strength and a vulnerability if local economies falter.)

Year-Over-Year Comparison

The provided 10-K filing for September 30, 2025, does not contain comparative data from the previous year's filing (September 30, 2024) within the provided text. Therefore, a direct comparison of key metrics such as revenue growth, margin changes, or the emergence of new risks cannot be made based solely on this excerpt. The MD&A section mentions comparisons to September 30, 2024, and 2023, but the specific figures are not detailed here.

Key Financial Figures

• $30.15 — s $ 238.29 million (7,903,489 shares at $30.15). For purposes of this calculation, com
• $2.01 b — basis, the Company had total assets of $2.01 billion, net loans receivable of $1.46 bi
• $1.46 b — $2.01 billion, net loans receivable of $1.46 billion, total deposits of $1.72 billion
• $1.72 billion — ble of $1.46 billion, total deposits of $1.72 billion and total shareholders' equity of $262.
• $262.61 million — llion and total shareholders' equity of $262.61 million. The Company's business activities gene
• $94,800 — estimates and a median family income of $94,800 according to 2025 estimates from the De
• $368,400 — r ended June 30, 2025 increased 2.9% to $368,400 from $358,100 for the comparable prior
• $358,100 — 0, 2025 increased 2.9% to $368,400 from $358,100 for the comparable prior year period. T
• $120,800 — s. The county's median family income is $120,800 according to 2025 HUD estimates. The ec
• $579,500 — r ended June 30, 2025 increased 1.7% to $579,500 from $569,600 for the comparable prior
• $569,600 — 0, 2025 increased 1.7% to $579,500 from $569,600 for the comparable prior year period. T
• $116,700 — estimates and a median family income of $116,700 according to 2025 HUD estimates. Thurst
• $547,000 — r ended June 30, 2025 increased 6.4% to $547,000 from $514,100 for the same quarter one
• $514,100 — 0, 2025 increased 6.4% to $547,000 from $514,100 for the same quarter one year earlier.
• $124,300 — estimates and a median family income of $124,300 according to 2025 HUD estimates. The Ba

Filing Documents

• tsbk-20250930.htm (10-K) — 4700KB
• tsbk-9302025x10kxex21.htm (EX-21) — 7KB
• tsbk-9302025x10kxex231.htm (EX-23.1) — 3KB
• tsbk-9302025x10kxex311.htm (EX-31.1) — 10KB
• tsbk-9302025x10kxex312.htm (EX-31.2) — 10KB
• tsbk-9302025x10kxex32.htm (EX-32) — 6KB
• delap.jpg (GRAPHIC) — 54KB
• tsbk-20250930_g1.jpg (GRAPHIC) — 166KB
• 0000939057-25-000319.txt ( ) — 23310KB
• tsbk-20250930.xsd (EX-101.SCH) — 105KB
• tsbk-20250930_cal.xml (EX-101.CAL) — 163KB
• tsbk-20250930_def.xml (EX-101.DEF) — 524KB
• tsbk-20250930_lab.xml (EX-101.LAB) — 1228KB
• tsbk-20250930_pre.xml (EX-101.PRE) — 916KB
• tsbk-20250930_htm.xml (XML) — 5588KB

Business

Item 1. Business General 4 Market Area 4 Lending Activities 6 Investment Activities 21 Deposit Activities and Other Sources of Funds 22 Bank Owned Life Insurance 25 How We Are Regulated 25 Taxation 31 Competition 32 Subsidiary Activities 32 Employees and Human Capital Resources 32 Executive Officers of the Registrant 34

Risk Factors 34

Item 1A. Risk Factors 34

Unresolved Staff Comments

Item 1B. Unresolved Staff Comments 45

Cybersecurity 46

Item 1C. Cybersecurity 46

Properties 47

Item 2. Properties 47

Legal Proceedings 47

Item 3. Legal Proceedings 47

Mine Safety Disclosures 47

Item 4. Mine Safety Disclosures 47 PART II.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 47

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 47

Management's Discussion and Analysis of Financial Condition and Results of Operations 49

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 49 General 49 Overview 49 Operating Strategy 50

Selected Financial Data 51

Selected Financial Data 51 Critical Accounting Estimates 54 Market Risk and Asset and Liability Management 55 Comparison of Financial Condition at September 30, 2025 and September 30, 2024 56 Comparison of Operating Results for the Years Ended September 30, 2025 and 2024 59 Comparison of Operating Results for the Years Ended September 30. 2024 and 2023 61 Average Balances, Interest and Average Yields/Cost 61 Rate/Volume Analysis 63 Liquidity and Capital Resources 63 New Accounting Pronouncements 65

Quantitative and Qualitative Disclosures About Market Risk 65

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65

Financial Statements and Supplementary Data 65

Item 8. Financial Statements and Supplementary Data 65

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 125

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 125

Controls and Procedures 125

Item 9A. Controls and Procedures 125

Other Information 127

Item 9B. Other Information 127

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 127

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 127 PART III.

Directors, Executive Officers and Corporate Governance 127

Item 10. Directors, Executive Officers and Corporate Governance 127

Executive Compensation 128

Item 11. Executive Compensation 128

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 128

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 128

Certain Relationships and Related Transactions, and Director Independence 129

Item 13. Certain Relationships and Related Transactions, and Director Independence 129

Principal Accountant Fees and Services 129

Item 14. Principal Accountant Fees and Services 129 PART IV.

Exhibits and Financial Statement Schedules 130

Item 15. Exhibits and Financial Statement Schedules 130

Form 10-K Summary 131

Item 16. Form 10-K Summary 131 As used throughout this report, the terms "we," "us," "our" and the "Company" refer to Timberland Bancorp, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. References to the "Bank" in this report refer to Timberland Bank, a wholly- owned subsidiary of Timberland Bancorp, Inc., and the Bank's wholly- owned subsidiary, Timberland Service Corporation. 2 Special Note Regarding Forward-Looking Statements Certain matters discussed in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future economic performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to: adverse impacts to economic conditions in our local markets or other markets where we have lending relationships; effects of employment levels, labor shortages inflation, a recession or slowed economic growth; changes in interest rate levels and the duration of such changes, including actions by the Board of Governors of the Federal Reserve System ("Federal Reserve"), which could materially affe

Business

Item 1. Business General Timberland Bancorp, Inc. ("Timberland Bancorp"), a Washington corporation, was organized on September 8, 1997 for the purpose of becoming the holding company for Timberland Bank (the "Bank"). At September 30, 2025, on a consolidated basis, the Company had total assets of $2.01 billion, net loans receivable of $1.46 billion, total deposits of $1.72 billion and total shareholders' equity of $262.61 million. The Company's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including consolidated financial statements and related data, relates primarily to the Bank and its subsidiary, Timberland Service Corp. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Pierce, Thurston, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 23 branches (including its main office in Hoquiam). The Bank's deposits are insured up to applicable legal limits by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank has been a member of the Federal Home Loan Bank System since 1937. The Bank is regulated by the Washington State Department of Financial Institutions - Division of Banks (the "DFI") and the FDIC. The Company is regulated by the Federal Reserve. Timberland Bank is a community-oriented bank which has traditionally offered a variety of savings products to its retail customers while concentrating its lending activities on real estate mortgage loans. Lending activities have been focused primarily on the origination of loans secured by real estate, including residential and commercial / multi-family construction loans, one- to four-family residential loans, multi-family loans, commercial real estate loans and land loans. The Bank originates adjustable-rate residential mortgage loans that do not qualify for sale in the secondar

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