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, 2008
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, 2008 and 2007 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended September 30, 2008 5
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 Consents of Independent Registered Public Accounting
Firms 15-16
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: March 25, 2009
Timberland Bank Employee Stock Ownership and 401(k) Plan
Financial Report
September 30, 2008
Timberland
Bank
Employee
Stock
Ownership
And
401(k)
Plan
Financial
Report
September 30
2008
Contents
------------------------------------------------------------------------------
Reports of Independent Registered Public Accounting Firms.......... 1-2
Financial Statements
Statements of Net Assets Available for Benefits.................... 3-4
Statement of Changes in Net Assets Available for Benefits............ 5
Notes to Financial Statements..................................... 6-12
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)... 13-14
Report of Independent Registered Public Accounting Firm
To: Plan Administrator, Investment, and Benefit Committees
of Timberland Bank Employee Stock Ownership and 401(k) Plan
We have audited the accompanying statement of net assets available for
benefits of the Timberland Bank Employee Stock Ownership and 401(k) Plan (the
Plan) as of September 30, 2008 and the related statement of changes in net
assets available for benefits for the year then ended. 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 audit 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
audit provides 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, 2008, and the changes in net assets available for benefits for
the year then ended, in conformity with U.S. generally accepted accounting
principles.
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 end of year) as of September 30, 2008 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 Rules 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
March 13, 2009
Report of Independent Registered Public Accounting Firm
To the Audit Committee
Timberland Bank Employee Stock Ownership and 401(k) Plan
Hoquiam, Washington
We have audited the accompanying statement of net assets available for
benefits of Timberland Bank Employee Stock Ownership and 401(k) Plan (the
Plan) as of September 30, 2007. This financial statement is the responsibility
of the Plan's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets available for benefits of the Plan as of
September 30, 2007, in conformity with U.S. generally accepted accounting
principles.
As discussed in Note 2, the Plan's financial statements reflect the adoption
of Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and
Statements of Position 94-4-1, Reporting of Fully Benefit-Responsive
Investment Contracts Held by Certain Investment Companies Subject to the AICPA
Investment Company Guide and Defined-Contribution Health and Welfare and
Pension Plans.
/s/McGladrey & Pullen, LLP
Seattle, Washington
March 27, 2008
Financial
Statements
Statements of Net Assets Available for Benefits
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008
September 30, 2008
Nonparticipant-Directed
Participant- ------------------------
Directed Allocated Unallocated Total
Assets
Investments, at fair
value:
Stable Value Common
Collective Trust
Fund $ 44,814 $ - - $ - - $ 44,814
Other common
collective trust
funds 5,525,538 - - - - 5,525,538
Timberland Bancorp,
Inc. ("Bancorp")
common stock 2,377,796 3,952,209 2,795,763 9,125,768
----------- ---------- ---------- -----------
Total investments 7,948,148 3,952,209 2,795,763 14,696,120
Cash 73,179 1,260 1,901 76,340
----------- ---------- ---------- -----------
Total assets 8,021,327 3,953,469 2,797,664 14,772,460
Liabilities
Note payable - - - - 4,062,700 4,062,700
Net assets available
---------- ---------- ---------- -----------
at fair value 8,021,327 3,953,469 (1,265,036) 10,709,760
Adjustment from fair
value to contract
value for fully
benefit-responsive
investment contracts 3,131 - - - - 3,131
Net assets
available for ---------- ---------- ---------- -----------
benefits $8,024,458 $3,953,469 ($1,265,036) $10,712,891
========== ========== ========== ===========
See notes to financial statements.
3
Statements of Net Assets Available for Benefits
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008
September 30, 2007
Nonparticipant-Directed
Participant- ------------------------
Directed Allocated Unallocated Total
Assets
Investments, at fair
value:
Stable Value Common
Collective Trust
Fund $ 27,987 $ - - $ - - $ 27,987
Other common
collective trust
funds 5,601,175 - - - - 5,601,175
Timberland Bancorp,
Inc. ("Bancorp")
common stock 4,830,623 8,102,390 6,347,114 19,280,127
----------- ---------- ---------- -----------
Total investments 10,459,785 8,102,390 6,347,114 24,909,289
Cash 143,627 1,777 - - 145,404
----------- ---------- ---------- -----------
Total assets 10,603,412 8,104,167 6,347,114 25,054,693
Liabilities
Note payable - - - - 4,292,902 4,292,902
Net assets available ----------- ---------- ---------- -----------
at fair value 10,603,412 8,104,167 2,054,212 20,761,791
Adjustment from fair
value to contract
value for fully
benefit-responsive
investment contracts 2,129 - - - - 2,129
Net assets available ----------- ---------- ---------- -----------
for benefits $10,605,541 $8,104,167 $2,054,212 $20,763,920
=========== ========== ========== ===========
See notes to financial statements.
4
Statement of Changes in Net Assets Available for Benefits
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
Year Ended September 30, 2008
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 $ 1,031 $ - - $ - - $ 1,031
Other common
collective trust
funds (676,245) - - - - (676,245)
Bancorp common
stock (2,319,691) (4,570,620) (3,068,099) (9,958,410)
Interest and
dividends 137,295 217,027 171,718 526,040
Contributions:
Employer 423,365 - - 200,125 623,490
Participant 523,997 - - - - 523,997
Allocation of
35,266.74 shares of
Bancorp common stock - - 264,324 - - 264,324
----------- ----------- ----------- -----------
Total additions to
net assets (1,910,248) (4,089,269) (2,696,256) (8,695,773)
----------- ----------- ----------- -----------
Deductions from net assets
Interest expense - - - - 358,668 358,668
Benefit payments 670,835 61,429 - - 732,264
Allocation of 35,266.74
shares of Bancorp
common stock - - - - 264,324 264,324
----------- ----------- ----------- -----------
Total deductions from
net assets 670,835 61,429 622,992 1,355,256
----------- ----------- ----------- -----------
Net decrease (2,581,083) (4,150,698) (3,319,248) (10,051,029)
Net assets available
for benefits
Beginning of year 10,605,541 8,104,167 2,054,212 20,763,920
----------- ----------- ----------- -----------
End of year $ 8,024,458 $ 3,953,469 ($1,265,036) $10,712,891
=========== =========== =========== ===========
See notes to financial statements.
5
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
Note 1 - Plan Description and Basis of Presentation
The following description of the Timberland Bank Employee Stock Ownership and
401(k) Plan ("the 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 ("the 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 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 Indiana Bank and Trust is the trustee. The Company is the wholly
owned subsidiary of Timberland Bancorp Inc. ("the Bancorp").
The Plan purchased Bancorp common stock using proceeds borrowed from Bancorp
to fund the ESOP portion of the plan. The borrowing is to be repaid over a
period of 21 1/4 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 committed to be released and annually the Plan
allocates committed stock to eligible employee accounts, in accordance with
applicable Code regulations.
The borrowing is collateralized by unallocated shares of stock and guaranteed
by the Company. 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, 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
The Plan covers substantially all full-time employees of the Company who have
one year of service and are 21 years of age or older. Employees are generally
eligible to participate upon the completion of at least 1,000 hours of service
within a 12-month period. 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 year. The Plan provides entry dates on the first day of
each calendar quarter.
6
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
Note 1 - Plan Description and Basis of Presentation (continued)
401(k) 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 ($15,500 for 2008 and
2007). Participants may also contribute amounts representing distributions
from other qualified defined benefit or defined contribution plans. The
Company makes an annual safe harbor contribution of three percent of eligible
compensation, with additional amounts contributed at the option of its board
of directors.
Participants must direct 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.
Partcipants age 50 and older as of September 30 of the Plan year are permitted
to make elective catch-up deferrals in accordance with Section 414(v) of the
Code. For 2008 and 2007, the maximum catch-up deferral by law was $5,000.
Participant Accounts and Forfeitures
Each participant's account is credited with allocations of the (a) Company's
contributions, (b) the Plan's earnings and (c) the forfeitures of terminated
participants' nonvested accounts. ESOP allocations are based upon the
relation of the participant's compensation to total eligible Plan compensation
for the Plan year. Dividends from Bancorp common stock in the ESOP component
are used, along with Company contributions, to make payments on the note
payable. 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, 2008 and 2007, totaled $16,024 and $52,653,
respectively for the ESOP component. For the years ended September 30, 2008
and 2007, the 401(k) forefeitures totaled $16,884 and $61,276, respectively.
Benefit Payments and Plan Amendments
On termination of service, a participant with an accrued benefit of $1,000 or
less will receive a lump-sum amount equal to the value of the vested interest
in their account. A Participant with an accrued benefit in excess of $1,000
may leave the funds in the Plan or elect to receive a lump sum distribution or
a distribution over a certain period in monthly, quarterly, semiannual or
annual installments equal to the value of the vested interest in his or her
accounts. The distribution date will be the earliest administratively feasible
date for participants who attain normal retirement at the age of 62 or early
retirement at the age of 55 with 10 years of service. 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, 2008, the Plan distributed 29,520 shares of
Bancorp common stock from the ESOP component.
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 are fully vested
after six years of credited service. A participant's accrued benefit derived
from employer contributions is also 100% nonforfeitable upon attaining the age
of 65, or if the participant's separation from service is a result of death or
disability.
7
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
Note 1 - Plan Description and Basis of Presentation (continued)
ESOP Component Diversification
Effective October 1, 2007, diversification is offered to a participant that
has three years or more of service with Timberland Bank. 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.
Plan Termination
The Company reserves the right to terminate the Plan at any time, subject to
Plan 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 will 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, 2008 and 2007 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 and trustee (Indiana Bank and
Trust). Fluctuations in market value are reflected as net appreciation
(depreciation) in fair value of investments. 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.
8
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
Note 2 - Summary of Significant Accounting Policies (continued)
Payment of Benefits
Benefits are recorded when paid.
Fully Benefit-Responsive Investment Contracts
As described in FASB Staff Position ("FSP"), FSP Audit Accounting Guide
("AAG") INV-1 and Statement of Position ("SOP") 94-4-1, 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
("the FSP"), investment contracts held by a defined contribution plan are
required to be reported at fair value. However, 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 FSP, the statements of net assets
available for benefits present the fair value of the investment in the common
collective trust funds 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 FSP AAG
INV-1 and SOP 94-4-1 have been applied to the statement of nets assets
available for benefits as of September 30, 2008 and 2007.
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.
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 administrative functions. Administrative expenses are paid directly
by the Company and approximated $31,300 for the year ended September 30, 2008.
9
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
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:
September 30, 2008
Nonparticipant-Directed
Participant- ------------------------
Directed Allocated Unallocated Total
Bancorp common stock
Number of shares 314,940 523,471 370,300 1,208,711
Market value $2,377,796 $3,952,209 $2,795,763 $9,125,768
State Street Global
Advisors Common
Collective Trust
Short Term Investment
Fund 1,724,668 - - - - 1,724,668
State Street Global
Advisors Moderate
Strategic Balanced SL
Fund 784,300 - - - - 784,300
State Street Global
Advisors Russell
2000 Index SL Series
Fund - Class A 783,248 - - - - 783,248
Other (including
common collective
trust funds) 2,278,136 - - - - 2,278,136
Total investments at ---------- ---------- ---------- -----------
fair value $7,948,148 $3,952,209 $2,795,763 $14,696,120
========== ========== ========== ===========
10
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
Note 5 - Investments (continued)
September 30, 2007
Nonparticipant-Directed
Participant- ------------------------
Directed Allocated Unallocated Total
Bancorp common stock
Number of shares 308,666 517,725 405,566 1,231,957
Market value $4,830,623 $8,102,390 $6,347,114 $19,280,127
State Street Global
Advisors Common
Collective Trust Short
Term Investment Fund 1,547,122 - - - - 1,547,122
Other (including common
collective trust funds) 4,082,040 - - - - 4,082,040
Total investments at ----------- ---------- ---------- -----------
fair value $10,459,785 $8,102,390 $6,347,114 $24,909,289
=========== ========== ========== ===========
During the year ended September 30, 2008 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 $ 1,031
Other common collective trust funds (676,245)
Bancorp common stock (9,958,410)
Net (depreciation) in fair value of investments ($10,633,624)
The Pentegra Stable Value Fund is a collective trust fund administrated by
State Street Global Advisors. The average yield and crediting interest rates
were approximately 3.0% and 3.4%, respectively for 2008.
Note 6 - Note Payable
On December 19, 2006, the Company approved the extension of the Plan's term
loan agreement with the Bancorp, Inc. (a related party). The new agreement
extends 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.
11
Notes to Financial Statements
------------------------------------------------------------------------------
Timberland Bank Employee Stock Ownership and 401(k) Plan
September 30, 2008 and 2007
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 into the 401(k) component. At the discretion of the Board of
Directors, the Company made an additional contribution to the 401(k) component
for the year ended September 30, 2008 in the amount of two percent of total
eligible participant compensation.
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.
Note 9 - Subsequent Event
On December 31, 2008 the Plan was notified by Indiana Bank and Trust, the
Plan's Trustee, that they intended to resign as trustee of employee benefit
plans that hold company stock as an investment option. Pentegra Retirement
Services will be appointed as successor trustee and Reliance Trust Company as
custodian.
In 2008 the U.S. economy moved into an economic recession that deepened during
the latter portion of the year, triggered in part by the intensifying
financial crisis. In response to the weaker demand, businesses cut production
and employment, and postponed capital spending plans. As a result of the
financial crisis and the economic slowdown, Federal government agencies
including the U.S. Treasury Department (U.S. Treasury) and the Federal Reserve
initiated several actions which changed the landscape of the U.S. financial
services industry. The financial crisis intensified in September 2008
following the collapse of several leading investment banks.
Market dislocations throughout 2008, including the severe volatility,
illiquidity and credit dislocations that were experienced in the debt and
equity markets in the fourth fiscal quarter of 2008, adversely impacted the
Plan's market value of the Plan's investments, including the common stock in
the Bancorp. The market dislocations have continued to impact the market
values of the Plan's investments into 2009. The per share market value of the
Bancorp stock declined from $15.65 at September 30, 2007 to $7.55 at September
30, 2008 to $4.47 at March 13, 2009.
It is anticipated that the above conditions will continue to adversely impact
the Plan's results in 2009. The degree of the impact is dependent upon the
duration and severity of such conditions.
As discussed in Note 1, the Company is obligated to fund the debt repayment
either through direct contributions to the Plan or dividend payments received
by the Plan for ESOP shares. The Plan's management believes the Company has
the ability to continue to make such payments. The Company and the Bancorp
were profitable during the quarter ended December 31, 2008 and the fiscal year
ended September 30, 2008 and both are classified as well capitalized. On
December 23, 2008 the Bancorp received $16.64 million from the U.S. Treasury
as part of the U.S. Treasury's Capital Purchase Program.
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, 2008
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 Funds
------------------
State Street Global Advisors Pentegra Stable Value Fund, at Fair Value $ * $ 44,814
Employer Stock
--------------
**Timberland Bancorp, Inc. Common Stock - 893,771 Shares 6,698,814 6,747,972
**Timberland Bancorp, Inc. Common Stock - 314,940 Shares * 2,377,796
---------
9,125,768
Other Common Collective Trusts
------------------------------
State Street Global Advisors Short-Term Investment Fund (STIF) * 1,724,668
State Street Global Advisors Moderate Strategic Balanced SL Fund * 784,300
State Street Global Advisors Russell 2000 Index SL Series Fund - Class A * 783,248
State Street Global Advisors Aggressive Strategic Balanced SL Fund * 678,503
State Street Global Advisors S&P 500 Flagship SL Series Fund - Class A * 591,988
State Street Global Advisors Daily EAFE Index SL Series Fund - Class T * 142,296
State Street Global Advisors Long US Treasury Index SL Series Fund Class A * 139,281
State Street Global Advisors S&P Midcap Index SL Series Fund - Class A * 107,715
State Street Global Advisors S&P Value Index SL Fund Series A * 92,765
State Street Global Advisors Target Retirement Fund 2025 * 83,776
State Street Global Advisors REIT Index Non-Lending Series Fund - Class A * 77,624
State Street Global Advisors Passive Bond Market Index SL Series Fund A * 73,212
State Street Global Advisors Target Retirement Fund 2015 * 69,479
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, 2008
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 Trusts (continued)
------------------------------------------
State Street Global Advisors S&P Growth Index SL Fund Series A * 68,168
State Street Global Advisors NASDAQ 100 Index Non-Lending Fund Series A * 68,123
State Street Global Advisors Conservative Strategic Balanced SL Fund * 33,819
State Street Global Advisors Target Retirement Fund 2035 * 5,125
State Street Global Advisors Target Retirement Fund 2045 * 1,448
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5,525,538
-----------
$14,696,120
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* 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 March 13, 2009 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, 2008.
PMB Helin Donovan, LLP
/s/ Helin Donovan, LLP
Spokane, Washington
March 13, 2009
15
[McGladrey & Pullen, LLP Letterhead]
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration
Statement (No. 333-116163) on Form S-8 of Timberland Bancorp, Inc. of our
report dated March 27, 2008, relating to our audit of the financial statements
for the year ended September 30, 2007, 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, 2008.
/s/McGladrey & Pullen, LLP
Seattle, Washington
March 25, 2009
16