TIMBERLAND BANCORP INCTSBK
TIMBERLAND BANCORP INC Fair Value Disclosure
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 company’s 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 on a recurring basis consist of investment securities available for sale and investments in equity securities. 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).
The Company had no liabilities measured at fair value on a recurring basis at September 30, 2025 and 2024. The Company's assets measured at estimated fair value on a recurring basis at September 30, 2025 and 2024 are as follows (dollars in thousands):
| Estimated Fair Value | |||||||||||||||||||||||
| September 30, 2025 | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Available for sale investment securities | |||||||||||||||||||||||
| U.S. government securities | $ | 4,968 | $ | — | $ | — | $ | 4,968 | |||||||||||||||
MBS: U.S. government agencies | — | 73,272 | — | 73,272 | |||||||||||||||||||
| Investments in equity securities | |||||||||||||||||||||||
Mutual funds | 864 | — | — | 864 | |||||||||||||||||||
| Total | $ | 5,832 | $ | 73,272 | $ | — | $ | 79,104 | |||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||
| Available for sale investment securities | |||||||||||||||||||||||
| U.S. government securities | $ | 3,939 | $ | — | $ | — | $ | 3,939 | |||||||||||||||
| MBS: U.S. government agencies | — | 68,318 | — | 68,318 | |||||||||||||||||||
| Investments in equity securities | |||||||||||||||||||||||
| Mutual funds | 866 | — | — | 866 | |||||||||||||||||||
| Total | $ | 4,805 | $ | 68,318 | $ | — | $ | 73,123 | |||||||||||||||
There were no transfers among Level 1, Level 2 and Level 3 during the years ended September 30, 2025 and 2024.
The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.
The Company uses the following methods and significant assumptions to estimate fair value on a non-recurring basis:
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, where applicable. Accordingly, collateral dependent loans are classified within level 3 of the fair value hierarchy.
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).
The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at September 30, 2025 and 2024 (dollars in thousands):
| Total Estimated | Estimated Fair Value Measurements Using | |||||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||
| 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 | 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. Therefore, such estimates could vary significantly if assumptions regarding uncertain factors were to change. In addition, as the Company normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for certain items which are not defined as financial instruments but which may have significant value. The Company does not believe that it would be practicable to estimate a fair value for these types of items as of September 30, 2025 and 2024. Because GAAP excludes certain items from fair value disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company. 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.
The recorded amounts and estimated fair values of financial instruments were as follows as of September 30, 2025 (dollars in thousands):
| Fair Value Measurements Using: | |||||||||||||||||||||||||||||
| Recorded Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 243,428 | $ | 243,428 | $ | 243,428 | $ | — | $ | — | |||||||||||||||||||
| CDs held for investment | 7,217 | 7,217 | 7,217 | — | — | ||||||||||||||||||||||||
| Investment securities | 215,101 | 210,574 | 71,870 | 138,704 | — | ||||||||||||||||||||||||
| Investments in equity securities | 864 | 864 | 864 | — | — | ||||||||||||||||||||||||
| FHLB stock | 2,045 | 2,045 | 2,045 | — | — | ||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||
| Accrued interest receivable | 7,393 | 7,393 | 7,393 | — | — | ||||||||||||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||||||||
Certificates of deposit | 442,521 | 442,024 | — | — | 442,024 | ||||||||||||||||||||||||
| FHLB borrowings | 20,000 | 20,009 | — | — | 20,009 | ||||||||||||||||||||||||
| Accrued interest payable | 1,963 | 1,963 | 1,963 | — | — | ||||||||||||||||||||||||
The recorded amounts and estimated fair values of financial instruments were as follows as of September 30, 2024 (dollars in thousands):
| Fair Value Measurements Using: | |||||||||||||||||||||||||||||
| Recorded Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 164,728 | $ | 164,728 | $ | 164,728 | $ | — | $ | — | |||||||||||||||||||
| CDs held for investment | 10,209 | 10,209 | 10,209 | — | — | ||||||||||||||||||||||||
| Investment securities | 244,354 | 238,264 | 92,124 | 146,140 | — | ||||||||||||||||||||||||
| Investments in equity securities | 866 | 866 | 866 | — | — | ||||||||||||||||||||||||
| FHLB stock | 2,037 | 2,037 | 2,037 | — | — | ||||||||||||||||||||||||
| Other investments | 3,000 | 3,000 | 3,000 | — | — | ||||||||||||||||||||||||
| Loans receivable, net | 1,421,523 | 1,387,642 | — | — | 1,387,642 | ||||||||||||||||||||||||
| Accrued interest receivable | 6,990 | 6,990 | 6,990 | — | — | ||||||||||||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||||||||
Certificates of deposit | 368,308 | 368,312 | — | — | 368,312 | ||||||||||||||||||||||||
| FHLB borrowings | 20,000 | 20,035 | — | — | 20,035 | ||||||||||||||||||||||||
| Accrued interest payable | 2,132 | 2,132 | 2,132 | — | — | ||||||||||||||||||||||||
The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the estimated fair value of the Company’s financial instruments will change when interest rate levels change, and that change may either be favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to appropriately manage interest rate risk. However, borrowers with fixed interest rate obligations are less likely to prepay in a rising interest rate environment and more likely to prepay in a falling interest rate environment. Conversely, depositors who are receiving fixed interest rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors interest rates and maturities of assets and liabilities, and attempts to manage interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 9, 2025 | Showing above |
| 2024 | Dec 11, 2024 | |
| 2023 | Dec 11, 2023 | |
| 2022 | Dec 9, 2022 | |
| 2021 | Dec 8, 2021 | |
| 2020 | Dec 9, 2020 | |
| 2019 | Dec 9, 2019 | |
| 2018 | Dec 7, 2018 | |
| 2015 | Dec 7, 2015 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.