-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FXX5y0KylInNBogAfICamPFU8yPapYlNe75dsT/eVXpUNjlMUbuucMnO4aatBkNh vZ1+ZF0rEyqG9xF6QRlNbg== 0000939057-11-000068.txt : 20110224 0000939057-11-000068.hdr.sgml : 20110224 20110224101939 ACCESSION NUMBER: 0000939057-11-000068 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20100930 FILED AS OF DATE: 20110224 DATE AS OF CHANGE: 20110224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMBERLAND BANCORP INC CENTRAL INDEX KEY: 0001046050 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 911863696 STATE OF INCORPORATION: WA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 11-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23333 FILM NUMBER: 11634532 BUSINESS ADDRESS: STREET 1: 624 SIMPSON AVE CITY: HOQUIAM STATE: WA ZIP: 98550 BUSINESS PHONE: 3605334747 MAIL ADDRESS: STREET 1: 624 SIMPSON AVE CITY: HOQUIAM STATE: WA ZIP: 98550 11-K 1 k1111.txt TIMBERLAND BANK FORM 11-K FORM 11-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2010 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-23333 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Timberland Bank Employee Stock Ownership and 401(k) Plan B. Name of issuer of securities held pursuant to the plan and the address of its principal executive office: Timberland Bank 624 Simpson Avenue Hoquiam, Washington 98550 Financial Statements and Exhibits Page (a) Reports of Independent Registered Public Accounting Firms 1 (b) Financial Statements Statements of Net Assets Available for Benefits at September 30, 2010 and 2009 2 Statement of Changes in Net Assets Available for Benefits for the Year Ended September 30, 2010 4 Notes to the Financial Statements 6 (c) Supplemental Schedule Schedule H, Line 4i Schedule of Assets (Held at End of Year) 13 (d) Exhibit 23 Consent of Independent Registered Public Accounting Firm 15 Signatures The Plan: Pursuant to the requirements of the Securities and Exchange Act of 1934, the trustees (or other persons who administer employees benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. -------------------------------------------------- Administrator, Timberland Bank Employee Stock Ownership and 401(k) Plan By: /s/Dean J. Brydon ------------------------------ Dean J. Brydon (name) ------------------------------ Chief Financial Officer (title) ------------------------------ Timberland Bank (bank) ------------------------------ Date: February 24, 2011 Timberland Bank Employee Stock Ownership and 401(k) Plan Financial Report September 30, 2010 Timberland Bank Employee Stock Ownership And 401(k) Plan Financial Report September 30 2010 Contents Report of Registered Independent Public Accounting Firm ............. 1 Financial Statements Statements of Net Assets Available for Benefits...................... 2-3 Statement of Changes in Net Assets Available for Benefits............ 4 Notes to Financial Statements........................................5-12 Supplemental Schedule Schedule H, Line 4i - Schedule of Assets (Held at End of Year)......13-14 Report of Independent Registered Public Accounting Firm To the Plan Administrator, Investment and Benefit Committees of Timberland Bank Employee Stock Ownership and 401(k) Plan: We have audited the accompanying statements of net assets available for benefits of the Timberland Bank Employee Stock Ownership and 401(k) Plan (the Plan) as of September 30, 2010 and 2009 and the related statement of changes in net assets available for benefits for the year ended September 30, 2010. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of September 30, 2010 and 2009 and the changes in net assets available for benefits for the year ended September 30, 2010, in conformity with accounting principles generally accepted in the United States of America. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule H, line 4i schedule of assets (held at the end of year) as of September 30, 2010 is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor's Rule and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PMB Helin Donovan, LLP /s/ PMB Helin Donovan, LLP Spokane, Washington February 16, 2011 Financial Statements Statements of Net Assets Available for Benefits - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 September 30, 2010 Nonparticipant- Directed Participant- ---------------------- Directed Allocated Unallocated Total Assets Investments, at fair value: Stable Value Common Collective Trust Fund $ 569,438 $ - - $ - - $ 569,438 Other common collective trust funds 6,205,607 - - - - 6,205,607 Timberland Bancorp, Inc. ("Bancorp") common stock 1,568,750 2,284,660 1,211,106 5,064,516 ---------- ---------- ----------- ----------- Total investments 8,343,795 2,284,660 1,211,106 11,839,561 Cash 296,940 1,212 2,308 300,460 ---------- ---------- ----------- ----------- Total assets 8,640,735 2,285,872 1,213,414 12,140,021 Liabilities Note payable - - - - 3,537,777 3,537,777 ---------- ---------- ----------- ----------- Net assets available at fair value 8,640,735 2,285,872 (2,324,363) 8,602,244 Adjustment from fair value to contract value for fully benefit-responsive investment contracts (7,031) - - - - (7,031) Net assets available ---------- ---------- ----------- ----------- for benefits $8,633,704 $2,285,872 $(2,324,363) $ 8,595,213 ========== ========== =========== =========== See notes to financial statements. 2 Statements of Net Assets Available for Benefits - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 September 30, 2009 Nonparticipant- Directed Participant- ---------------------- Directed Allocated Unallocated Total Assets Investments, at fair value: Stable Value Common Collective Trust Fund $ 570,798 $ - - $ - - $ 570,798 Other common collective trust funds 5,678,533 - - - - 5,678,533 Bancorp common stock 1,686,671 2,555,502 1,554,644 5,796,817 ---------- ---------- ----------- ----------- Total investments 7,936,002 2,555,502 1,554,644 12,046,148 Cash 65,360 16,653 2,304 84,317 ---------- ---------- ----------- ----------- Total assets 8,001,362 2,572,155 1,556,948 12,130,465 Liabilities Note payable - - - - 3,811,270 3,811,270 Net assets available at ---------- ---------- ----------- ----------- fair value 8,001,362 2,572,155 (2,254,322) 8,319,195 Adjustment from fair value to contract value for fully benefit-responsive investment contracts (32,836) - - - - (32,836) Net assets available ---------- ---------- ----------- ----------- for benefits $7,968,526 $2,572,155 $(2,254,322) $ 8,286,359 ========== ========== =========== =========== See notes to financial statements. 3 Statement of Changes in Net Assets Available for Benefits - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan Year Ended September 30, 2010 Nonparticipant- Directed Participant- ---------------------- Directed Allocated Unallocated Total Additions to net assets Investment income: Net appreciation (depreciation) in fair value of investments: Stable Value Common Collective Trust Fund $ 14,528 $ - - $ - - $ 14,528 Other common collective trust funds 483,772 - - - - 483,772 Bancorp common stock (276,463) (488,528) (57,122) (822,113) Interest and dividends 21,471 22,093 13,370 56,934 Contributions: Employer 294,324 - - 553,412 847,736 Participant 473,052 - - - - 473,052 Allocation of 35,266.74 shares of Bancorp common stock - - 264,324 - - 264,324 ---------- ---------- ----------- ---------- Total additions to net assets 1,010,684 (202,111) 509,660 1,318,233 ---------- ---------- ----------- ---------- Deductions from net assets Interest expense - - - - 315,377 315,377 Benefit payments 345,506 84,172 - - 429,678 Allocation of 35,266.74 shares of Bancorp common stock - - - - 264,324 264,324 ---------- ---------- ----------- ---------- Total deductions from net assets 345,506 84,172 579,701 1,009,379 ---------- ---------- ----------- ---------- Net increase (decrease) 665,178 (286,283) (70,041) 308,854 Net assets available for benefits Beginning of year 7,968,526 2,572,155 (2,254,322) 8,286,359 ---------- ---------- ----------- ---------- End of year $8,633,704 $2,285,872 $(2,324,363) $8,595,213 ========== ========== =========== ========== See notes to financial statements. 4 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 1 - Plan Description and Basis of Presentation The following description of the Timberland Bank Employee Stock Ownership and 401(k) Plan ("Plan") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General Effective October 1, 2006, Timberland Bank ("Company") established the Plan by combining the existing Timberland Bank Employee Stock Ownership Plan and the Timberland Bank 401(k) Profit Sharing Plan. The Plan is comprised of two components, a defined contribution 401(k) plan and a leveraged employee stock ownership plan ("ESOP"). It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and is designed to comply with Section 401(a) and 4975(e)(7) and the regulations thereunder of the Internal Revenue Code of 1986, as amended ("Code"). The Plan is administered by Pentegra Retirement Services and Pentegra Trust Company is the trustee for Bancorp stock and Reliance Trust Company is the trustee for all other funds in the Plan. The Company is the wholly owned subsidiary of the Bancorp. The Plan has recently been amended and restated to comply with the Pension Protection Act of 2006 and subsequent legislation, including related guidance. The Plan purchased Bancorp common stock using proceeds borrowed from the Bancorp to fund the ESOP portion of the Plan. The borrowing is to be repaid over a period of 21.25 years by fully deductible Company contributions to the Plan. As the Plan makes each payment of principal and interest, an appropriate percentage of stock is released and allocated annually to eligible employee accounts, in accordance with applicable Code regulations. The borrowing is collateralized by unallocated shares of stock and guaranteed by the Company. The Bancorp has no rights against shares once they are allocated under the Plan. Accordingly, the accompanying financial statements present, separately, assets and liabilities, and changes therein pertaining to: * The accounts of employees with vested rights in allocated stock (Allocated) * Stock not yet allocated to employees (Unallocated) Voting Rights Each participant may direct the trustee as to the voting rights attributable to shares of Bancorp common stock held in the ESOP component of the Plan, which are allocated to the participant's stock account. Any allocated shares in which voting instructions are not received, unallocated shares under the ESOP component of the Plan, and shares held in the 401(k) component of the Plan are voted by the trustee in the same proportion as shares for which the trustee receives voting instructions. Eligibility for Participation and Contributions The Plan covers substantially all employees of the Company or an affiliated entity who have one year of service and are 21 years of age or older. Generally, a year of service is credited upon the completion of at least 1,000 hours of service within a Plan year (October 1 to September 30). The Plan provides entry dates on the first day of each calendar quarter. However, employees who are at least age 21, but have not been credited with a year of service, are eligible to make 401(k) contributions as of the first day of the month after employment. Participants who do not have at least 1,000 hours of service during such Plan year, or who are not employed on the last working day of the Plan year, are not eligible for an allocation of the ESOP contribution for that Plan year. 5 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 1 - Plan Description and Basis of Presentation (continued) 401(k) and Company Contributions and Participant Investment Options The Plan participants may contribute into the 401(k) component up to the maximum of pretax annual compensation as set by law ($16,500 for 2010 and 2009). Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (rollover contributions). The Company makes an annual safe harbor profit sharing contribution of three percent of eligible compensation, with additional amounts contributed at the option of its Board of Directors. The Company also makes contributions necessary to repay the ESOP loan. Participants age 50 and older during the Plan year are permitted to make elective 401(k) catch-up deferrals in accordance with Section 414(v) of the Code. For 2010 and 2009, the maximum catch-up deferral by law was $5,500 per year. Participants may direct the investments of their 401(k) salary deferral contributions, safe harbor contribution and the employer discretionary contribution, if any, into a variety of investment choices, which are more fully described in the Plan's literature. Participant Account Allocations Each eligible participant's account is credited with allocations of the (a) Company's safe-harbor contribution, (b) Company's discretionary contribution (if the participant is eligible), (c) Company stock released as a result of the ESOP loan repayments (if the participant is eligible), (d) Participants 401(k) and catch-up contributions, (e) the Plan's earnings and (f) the forfeitures of terminated participants' nonvested accounts (if the participant is eligible). ESOP allocations and Company discretionary contributions are based upon the relation of the participant's compensation to total eligible Plan compensation for the Plan year. Eligible compensation is limited for any participant to $245,000 for 2010 and 2009. Dividends from Bancorp common stock in the ESOP component are used, along with Company contributions, to make payments on the ESOP loan. Dividends earned on allocated shares are credited to participant accounts in the form of Bancorp stock equal to the fair market value of the stock at the time of the dividend. Forfeited balances of terminated participant nonvested accounts are treated as discretionary contributions for the Plan year in which the forfeitures occur. Forfeitures allocated for the years ended September 30, 2010 and 2009, totaled $2,953 and $10,936, respectively for the ESOP part of the Plan. For the years ended September 30, 2010 and 2009, the 401(k) forfeitures totaled $4,837 and $6,586, respectively. Benefit Payments and Plan Amendments On termination of service, a participant whose vested Plan accounts totaled $1,000 or less will receive a lump-sum amount equal to the value of the vested interest in his or her account. A participant whose vested Plan accounts exceed $1,000 may leave the funds in the Plan or elect to receive his or her vested interest in either a lump sum distribution or a distribution over a certain period in monthly, quarterly, semiannual or annual installments. A participant's vested Plan accounts will be distributed upon attaining age 65, unless an election has been made to defer or accelerate the distribution of benefits. All distributions from the 401(k) component are in cash. Distributions from the ESOP component are in the form of Bancorp common stock or cash as elected by the participant. During the year ended September 30, 2010, the Plan distributed 22,458 shares of Bancorp common stock from the ESOP component. 6 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 1 - Plan Description and Basis of Presentation (continued) Vesting Participants are immediately vested in all deferral, rollover and safe harbor contributions, plus actual earnings thereon. Vesting in the Company's discretionary contribution portion of accounts, the ESOP, plus earnings thereon, is based on years of credited service. Participants gradually vest in these accounts, and are fully vested after six years of credited service. A participant's account also becomes 100 percent vested upon attaining the age of 65 while actively employed, or if the participant's separation from service is a result of death or disability. ESOP Component Diversification Diversification is available to a participant that has three years or more of service with the Company. They may diversify their entire ESOP balance or any portion they choose. The divestment may be directed into the same fund choices available for the 401(k) component of the Plan. Divestment and reinvestment may occur once a month. During the Plan year ended September 30, 2010, there were 1,383 shares or $6,222 that were diversified out of the ESOP component of the Plan. Plan Termination The Company reserves the right to terminate the Plan at any time, subject to the Plan's provisions. Upon termination of the Plan, the interest of each participant will be distributed to the participant or to their beneficiary at the time prescribed by the Plan terms and the Code. In the event of Plan termination, participants become 100 percent vested in their accounts. Note 2 - Summary of Significant Accounting Policies Basis of Accounting The financial statements of the Plan are prepared under the accrual method of accounting. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and the disclosure of contingent assets and liabilities, at the date of the financial statements. Actual results could differ from those estimates. Investment Valuation and Income Recognition The Plan's investments at September 30, 2010 and 2009 consist of common collective trust funds and Bancorp common stock; both of which are stated at fair value. Quoted market prices are used to value shares of Bancorp common stock. The Plan's interest in the common collective trust funds are based on the fair values of the common collective trust funds' underlying investments, based on net asset value information reported by the investment manager (State Street Global Advisors) to the asset custodian (Reliance Trust Company) and trustees (Reliance Trust Company and Pentegra Trust Company). Fluctuations in market value are reflected as net appreciation (depreciation) in fair value of investments. 7 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 2 - Summary of Significant Accounting Policies (continued) Investment Valuation and Income Recognition (concluded) Purchases and sales of securities are recorded on the trade-date basis. Interest income is recognized when earned. Dividends are recorded on the ex-dividend date. As of December 31, 2008, the Plan adopted the Financial Accounting Standards Board ("FASB") issued staff position on interim disclosures about fair value of financial instruments for financial assets and liabilities. The FASB guidance defines fair value, and increases disclosures regarding fair value calculations. Payment of Benefits Benefits are recorded when paid. Fully Benefit-Responsive Investment Contracts As described in the FASB Audit Guidance for Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the American Institute of Certified Public Accountants Investing Company Guide and Defined-Contribution Health and Welfare and Pension Plans, investment contracts held by a defined contribution plan are required to be reported at fair value. Contract value is the relevant measurement attributed for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan invests in investment contracts through a common collective trust fund. Contract value for this common collective trust fund is based on the net asset value of the fund, as reported by the investment manager. As required by the FASB guidance, the statements of net assets available for benefits present the fair value of the investment in the common collective trust fund as well as the adjustment of the investment in the common collective trust fund from fair value to contract value relating to the investment contracts. The statement of changes in net assets available for benefits is prepared on a contract value basis. The provisions of the FASB guidance for reporting of fully benefit-responsive investment contracts have been applied to the statement of net assets available for benefits as of September 30, 2010 and 2009. Note 3 - Tax Status The Plan obtained its latest determination letter dated December 19, 2001, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. The Plan has been amended since receiving the determination letter; however, the Plan Administrator believes the Plan is designed and operating in compliance with the applicable requirements of the Code. On December 15, 2010, the Plan applied for a new determination letter and as of February 16, 2011 the determination letter request was still pending. 8 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 4 - Administration of Plan Assets Certain administrative functions of the Plan are performed by officers and employees of the Company. No such officers or employees receive compensation from the Plan. The Company also retained the services of a third party to perform third-party administrative functions. Administrative expenses are paid directly by the Company and approximated $22,583 for the year ended September 30, 2010. Note 5 - Investments The following presents, separately, identified investments that represent five percent or more of the Plan's net assets and Bancorp common stock at September 30, 2010: Nonparticipant- Directed Participant- ---------------------- Directed Allocated Unallocated Total Bancorp common stock Number of shares 388,314 565,524 299,786 1,253,624 Market value $1,568,750 $2,284,660 $1,211,106 $ 5,064,516 State Street Global Advisors Common Collective Trust Short Term Investment Fund 1,450,935 - - - - 1,450,935 State Street Global Advisors Moderate Strategic Balanced SL Fund 930,321 - - - - 930,321 State Street Global Advisors Russell 2000 Index SL Series Fund - Class A 828,553 - - - - 828,553 State Street Global Advisors Aggressive Strategic Balanced SL Fund 734,883 - - - - 734,883 State Street Global Advisors S&P 500 Flagship SL Series Fund - Class A 658,270 - - - - 658,270 Other (including common collective trust funds) 2,172,083 - - - - 2,172,083 Total investments at fair ---------- ---------- ---------- ----------- value $8,343,795 $2,284,660 $1,211,106 $11,839,561 ========== ========== ========== =========== 9 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 5 - Investments (continued) The following presents, separately, identified investments that represent five percent or more of the Plan's net assets and Bancorp common stock at September 30, 2009: Nonparticipant- Directed Participant- ---------------------- Directed Allocated Unallocated Total Bancorp common stock Number of shares 363,507 550,755 335,052 1,249,314 Market value $1,686,671 $2,555,502 $1,554,644 $5,796,817 State Street Global Advisors Common Collective Trust Short Term Investment Fund 1,543,161 - - - - 1,543,161 State Street Global Advisors Moderate Strategic Balanced SL Fund 849,560 - - - - 849,560 State Street Global Advisors Russell 2000 Index SL Series Fund - Class A 723,875 - - - - 723,875 State Street Global Advisors Aggressive Strategic Balanced SL Fund 689,030 - - - - 689,030 Other (including common collective trust funds) 2,443,705 - - - - 2,443,705 Total investments at ---------- ---------- ---------- ----------- fair value $7,936,002 $2,555,502 $1,554,644 $12,046,148 ========== ========== ========== =========== During the year ended September 30, 2010, the Plan's investments, including gains and losses on investments bought and sold, as well as held during each period, appreciated (depreciated) in value as follows: Stable value common collective trust fund $ 14,528 Other common collective trust funds 483,772 Bancorp common stock (822,113) ---------- Net depreciation in fair value of investments $ (323,813) ========== The Stable Value Common Collective Trust Fund is administrated by State Street Global Advisors. The average yield and crediting interest rates were approximately 2.1% and 2.7%, respectively for the Plan year 2010. 10 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 6 - Note Payable On December 19, 2006, the Company approved the extension of the Plan's term loan agreement with the Bancorp (a related party). The new agreement extended the maturity date of the note to March 31, 2019. The quarterly payments decreased to $147,217 from $234,269 with the interest rate remaining at 8.5 percent. The note is guaranteed by the Company and remains collateralized by unallocated shares of Bancorp common stock. The new annual principal and interest payments total $588,870 and are due through maturity in 2019. Note 7 - Employer Contributions The Company is obligated to make contributions in cash to the Plan for the ESOP component, which, when aggregated with the Plan's dividends and interest earnings, equal the amount necessary to enable the Plan to make its regularly scheduled payments of principal and interest on the term loan. In addition, the Company is obligated to make an annual safe-harbor contribution of three percent of eligible compensation into the 401(k) component which totalled $294,324 for the year ended September 30, 2010. At the discretion of the Board of Directors, the Company may make an additional profit sharing contribution to the 401(k) component of the Plan. For the year ended September 30, 2010, there was no such discretionary contribution. Note 8 - Risks and Uncertainties The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the value of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported on the statement of net assets available for benefits. 11 Notes to Financial Statements - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 and 2009 Note 9 - Fair Value of Investments As discussed in Note 2, the Plan adopted the authoritative guidance on fair value of financial instruments as of December 31, 2008. The authoritative guidance established a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques in fair value calculations. The three levels of inputs are defined as follows: Level 1 - unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company. Level 2 - inputs that are observable in the marketplace other than those inputs classified as Level 1 Level 3 - inputs that are unobservable in the marketplace and significant to the valuation The guidance on fair value of financial instruments requires the Plan to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis at September 30, 2010 and 2009 (in thousands): Fair Value --------------------------- 2010 Level 1 Level 2 Level 3 Total Losses Available for Sale Securities Bancorp common stock $5,064 $ - - $ - - $ (822) Stable Value common collective trust fund - - 569 - - - - Other common collective trust funds - - 6,206 - - - - ------ ------ ------ ------- Total $5,064 $6,775 $ - - $ (822) Fair Value --------------------------- 2009 Level 1 Level 2 Level 3 Total Losses Available for Sale Securities Bancorp common stock $5,797 $ - - $ - - $(3,554) Stable Value common collective trust fund - - 571 - - - - Other common collective trust funds - - 5,678 - - (68) ------ ------ ------ ------- Total $5,797 $6,249 $ - - $(3,622) Note 10 - Subsequent Events Management has evaluated events and transactions that occurred after the balance sheet date of September 30, 2010 through February 16, 2011, the date the financial statements were available to be issued. 12 Supplemental Schedule Schedule H, Line 4i - Schedule of Assets (Held at End of Year) - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 EIN: 20-5645878 Plan #: 002 (a) and (b) (c) (d) (e) Identity of Issue, Description of Investment, Including Cost Current Borrower, Lessor Maturity Date, Rate of Interest, Value or Similar Party Collateral, Par or Maturity Value Stable Value Common Collective Trust Fund - ----------------------------------------- State Street Global Advisors Pentegra Stable Value Fund, at Fair Value $ * $ 569,438 Employer Stock - -------------- **Timberland Bancorp, Inc. Common Stock - 865,310 Shares 6,485,498 3,495,766 **Timberland Bancorp, Inc. Common Stock 388,314 Shares * 1,568,750 ---------- 5,064,516 Other Common Collective Trust Funds - ----------------------------------- State Street Global Advisors Common Collective Trust Short Term Invesment Fund * 1,450,935 State Street Global Advisors Moderate Strategic Balanced SL Fund * 930,321 State Street Global Advisors Russell 2000 Index SL Series Fund - Class A * 828,553 State Street Global Advisors Aggressive Strategic Balanced SL Fund * 734,883 State Street Global Advisors S&P 500 Flagship SL Series Fund - Class A * 658,270 State Street Global Advisors Daily EAFE Index SL Series Fund - Class T * 258,461 State Street Global Advisors S&P Midcap Index SL Series Fund - Class A * 202,714 State Street Global Advisors S&P Value Index SL Fund Series A * 188,110 State Street Global Advisors Long US Treasury Index SL Series Fund Class A * 185,234 State Street Global Advisors NASDAQ 100 Index Non-Lending Fund Series A * 143,986 State Street Global Advisors REIT Index Non-Lending Series Fund - Class A * 135,465 State Street Global Advisors S&P Growth Index SL Fund Series A * 134,210 State Street Global Advisors Target Retirement Fund 2015 * 118,544 13 Schedule H, Line 4i - Schedule of Assets (Held at End of Year) (continued) - ------------------------------------------------------------------------------ Timberland Bank Employee Stock Ownership and 401(k) Plan September 30, 2010 EIN: 20-5645878 Plan #: 002 (a) and (b) (c) (d) (e) Identity of Issue, Description of Investment, Including Cost Current Borrower, Lessor Maturity Date, Rate of Interest, Value or Similar Party Collateral, Par or Maturity Value Other Common Collective Trust Funds (continued) - ----------------------------------------------- State Street Global Advisors Passive Bond Market Index SL Series Fund A * 112,494 State Street Global Advisors Conservative Strategic Balanced SL Fund * 70,817 State Street Global Advisors Target Retirement Fund 2025 * 26,385 State Street Global Advisors Target Retirement Fund 2045 * 14,106 State Street Global Advisors Target Retirement Fund 2035 * 12,119 ----------- 6,205,607 ----------- $11,839,561 =========== * Historical cost not required for participant-directed accounts. **Represents a party-in-interest 14 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement (No. 333-116163, filed June 4, 2004) on Form S-8 of Timberland Bancorp, Inc. of our report dated February 16, 2011 appearing in this Annual Report on Form 11-K of Timberland Bank Employee Stock Ownership and 401(k) Plan for the year ended September 30, 2010. PMB Helin Donovan, LLP /s/ PMB Helin Donovan, LLOP Spokane, Washington February 16, 2011 15 -----END PRIVACY-ENHANCED MESSAGE-----