<SUBMISSION>
<ACCESSION-NUMBER>0001072613-00-000749
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20000630
<FILING-DATE>20000728
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>COLUMBIA BANKING SYSTEM INC
<CIK>0000887343
<ASSIGNED-SIC>6035
<IRS-NUMBER>911422237
<STATE-OF-INCORPORATION>WA
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-20288
<FILM-NUMBER>681449
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1102 BROADWAY PLAZA
<CITY>TACOMA
<STATE>WA
<ZIP>98402
<PHONE>2533051900
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1102 BROADWAY PLAZA
<CITY>TACOMA
<STATE>WA
<ZIP>98402
</MAIL-ADDRESS>
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<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

================================================================================

     UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

                                    FORM 10-Q


(Mark One)
   /X/   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the quarterly period ended June 30, 2000.

   / /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from ____________ to ____________.

         Commission File Number 0-20288
                                -------


                          COLUMBIA BANKING SYSTEM, INC.
--------------------------------------------------------------------------------
               (Exact name of issuer as specified in its charter)


         Washington                                          91-1422237
--------------------------------------------------------------------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                         Identification Number)


         1102 Broadway Plaza
         Tacoma, Washington                                     98402
--------------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)


                                 (253) 305-1900
--------------------------------------------------------------------------------
                (Issuer's telephone number, including area code)



--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)


Indicate by check mark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X     No
    -----      -----


        The number of shares of the issuer's Common Stock outstanding at
                          July 27, 2000 was 11,705,588

================================================================================
<PAGE>

                                TABLE OF CONTENTS


                         PART I -- FINANCIAL INFORMATION

                                                                            Page
                                                                            ----
Item 1.  Condensed unaudited Financial statements

               Consolidated Condensed Statements of Operations -
               three months and six months ended June 30, 2000 and 1999       2

               Consolidated Condensed Balance Sheets - June 30, 2000
               and December 31, 1999                                          3

               Consolidated Condensed Statements of Shareholders'
               Equity - twelve months ended December 31, 1999, and six
               months ended June 30, 2000                                     4

               Consolidated Condensed Statements of Cash Flows -
               six months ended June 30, 2000 and 1999                        5

               Notes to consolidated financial statements                     6



Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            9


Item 3.  Quantitative and Qualitative Disclosures about Market Risk          20



                          PART II -- OTHER INFORMATION


Item 4.  Submission of matters to a vote of security holders                 21

Item 6.  Exhibits and reports on Form 8-K                                    21

         Signatures                                                          22






                                        1
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
COLUMBIA BANKING SYSTEM, INC.
(UNAUDITED)
<TABLE><CAPTION>
                                             Three Months Ended       Six Months Ended
                                                   June 30,                June 30,
(IN THOUSANDS EXCEPT PER SHARE)                2000        1999        2000        1999
----------------------------------------     -------     -------     -------     -------
<S>                                          <C>         <C>         <C>         <C>
INTEREST INCOME
Loans                                        $25,516     $18,548     $48,859     $36,027
Securities available for sale                  1,390       1,416       2,779       2,855
Securities held to maturity                       67          73         131         154
Deposits with banks                               37         136          54         488
----------------------------------------     -------     -------     -------     -------
  Total interest income                       27,010      20,173      51,823      39,524

INTEREST EXPENSE
Deposits                                      11,287       7,864      21,296      15,581
Federal Home Loan Bank advances                1,141         499       2,032         839
Other borrowings                                 133         192
----------------------------------------     -------     -------     -------     -------
  Total interest expense                      12,561       8,363      23,520      16,420
----------------------------------------     -------     -------     -------     -------

NET INTEREST INCOME                           14,449      11,810      28,303      23,104
Provision for loan losses                        900         600       1,800       1,200
----------------------------------------     -------     -------     -------     -------
  Net interest income after provision
     for loan losses                          13,549      11,210      26,503      21,904

NONINTEREST INCOME
Service charges and other fees                 1,488       1,479       3,016       2,751
Mortgage banking                                 245         297         400         653
Merchant services fees                           910         647       1,682       1,157
Other                                            264         154         402         279
----------------------------------------     -------     -------     -------     -------
  Total noninterest income                     2,907       2,577       5,500       4,840

NONINTEREST EXPENSE
Compensation and employee benefits             5,736       4,829      11,310       9,668
Occupancy                                      1,542       1,631       3,133       3,278
Merchant processing                              495         347         889         594
Advertising and promotion                        371         474         812         914
Data processing                                  564         502       1,093         984
Taxes, licenses & fees                           588         371       1,016         681
Other                                          1,988       1,610       3,854       3,441
----------------------------------------     -------     -------     -------     -------
  Total noninterest expense                   11,284       9,764      22,107      19,560
----------------------------------------     -------     -------     -------     -------
Income before income taxes                     5,172       4,023       9,896       7,184
Provision for income taxes                     1,781       1,361       3,409       2,434
----------------------------------------     -------     -------     -------     -------
NET INCOME                                   $ 3,391     $ 2,662     $ 6,487     $ 4,750
========================================     =======     =======     =======     =======

Net income per common share:
  Basic                                      $  0.29     $  0.23     $  0.56     $  0.41
  Diluted                                       0.28        0.22        0.54        0.40
Average number of common
  shares outstanding                          11,570      11,649      11,568      11,646
Average number of diluted common
  shares outstanding                          11,917      11,945      11,921      11,946
</TABLE>
See accompanying notes to consolidated condensed financial statements.

                                        2
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
COLUMBIA BANKING SYSTEM, INC.
(UNAUDITED)
<TABLE><CAPTION>
                                                                              June 30,       December 31,
(IN THOUSANDS)                                                                  2000             1999
--------------------------------------------------------------------------   ----------       ----------
<S>                                                                          <C>              <C>
ASSETS
Cash and due from banks                                                      $   57,369       $   43,027
Interest-earning deposits with banks                                              3,430              170
--------------------------------------------------------------------------   ----------       ----------
    Total cash and cash equivalents                                              60,799           43,197

Securities available for sale (fair value)                                       80,644           81,029
Securities held to maturity (fair value of $7,034 and $7,040 respectively)        7,094            7,084
Federal Home Loan Bank stock                                                      8,267            6,916

Loans held for sale                                                              13,641            5,479
Loans, net of unearned income                                                 1,156,890        1,048,006
  Less: allowance for loan losses                                                12,072            9,967
--------------------------------------------------------------------------   ----------       ----------
    Loans, net                                                                1,144,818        1,038,039

Interest receivable                                                               9,282            7,609
Premises and equipment, net                                                      47,949           39,166
Real estate owned                                                                 1,285            1,263
Other                                                                             7,736            7,375
--------------------------------------------------------------------------   ----------       ----------
Total Assets                                                                 $1,381,515       $1,237,157
==========================================================================   ==========       ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing                                                          $  209,243       $  181,716
Interest-bearing                                                                969,739          861,828
--------------------------------------------------------------------------   ----------       ----------
    Total deposits                                                            1,178,982        1,043,544

Federal Home Loan Bank advances                                                  79,000           83,700
Other borrowings                                                                  6,500            3,000
Other liabilities                                                                10,654            7,699
--------------------------------------------------------------------------   ----------       ----------
    Total liabilities                                                         1,275,136        1,137,943

Shareholders' equity:
  Preferred stock (no par value)
    Authorized, 2 million shares; none outstanding

                                            June 30,       December 31,
                                              2000             1999
                                           ----------       ----------
  Common stock (no par value)
    Authorized shares                          51,975           51,975
    Issued and outstanding                     11,692           10,603           91,331           78,285
  Retained earnings                                                              18,066           23,916
  Accumulated other comprehensive income (loss):
    Unrealized losses on securities available for sale, net of tax               (3,018)          (2,987)
--------------------------------------------------------------------------   ----------       ----------
    Total shareholders' equity                                                  106,379           99,214
--------------------------------------------------------------------------   ----------       ----------
Total Liabilities and Shareholders' Equity                                   $1,381,515       $1,237,157
==========================================================================   ==========       ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.

                                        3
<PAGE>

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
COLUMBIA BANKING SYSTEM, INC.
(UNAUDITED)

<TABLE><CAPTION>
                                                         Common stock                         Accumulated
                                                      ----------------------                     Other         Total
                                                      Number of                   Retained   Comprehensive  Shareholders'
(IN THOUSANDS)                                         Shares        Amount       Earnings    Income(Loss)     Equity
---------------------------------------------------   --------      --------      --------      --------      --------
<S>                                                   <C>           <C>           <C>           <C>           <C>
BALANCE AT JANUARY 1, 1999                              10,050      $ 68,612      $ 20,616      $    338      $ 89,566

  Comprehensive income:
  Net income for 1999                                                               11,670
  Change in unrealized gains and (losses)
   on securities available for sale, net of tax                                                   (3,325)
      Total comprehensive income                                                                                 8,345
  Issuance of stock under stock option
   and other plans                                          49         1,303                                     1,303
  Issuance of shares of common stock--
   5% stock dividend                                       504         8,370        (8,370)
---------------------------------------------------   --------      --------      --------      --------      --------
BALANCE AT DECEMBER 31, 1999                            10,603        78,285        23,916        (2,987)       99,214
---------------------------------------------------   --------      --------      --------      --------      --------

  Comprehensive income:
  Net income for 2000                                                                6,487
  Change in unrealized gains and (losses) on
   securities available for sale, net of tax                                                         (31)
      Total comprehensive income                                                                                 6,456
  Issuance of stock under stock option
   and other plans                                          28           331                                       331
  Tax benefits from prior year exercise of
   stock options                                                         378                                       378
  Issuance of shares of common stock--
   10% stock dividend                                    1,061        12,337       (12,337)
---------------------------------------------------   --------      --------      --------      --------      --------
BALANCE AT JUNE 30, 2000                                11,692      $ 91,331      $ 18,066      ($ 3,018)     $106,379
===================================================   ========      ========      ========      ========      ========
</TABLE>








See accompanying notes to consolidated condensed financial statements.

                                        4
<PAGE>

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
COLUMBIA BANKING SYSTEM, INC.
(UNAUDITED)
<TABLE><CAPTION>
                                                                                 Six Months Ended
                                                                                     June 30,
(IN THOUSANDS)                                                                  2000          1999
---------------------------------------------------------------------------   ---------    ---------
<S>                                                                           <C>          <C>
OPERATING ACTIVITIES
  Net income                                                                  $   6,487    $   4,750
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for loan losses                                                   1,800        1,200
      Depreciation and amortization                                               1,048        1,389
      Deferred income tax (benefit) expense                                         (75)      (1,066)
      (Increase) decrease in loans held for sale                                 (8,162)       3,380
      (Increase) Decrease in interest receivable                                 (1,673)        (524)
      Increase in interest payable                                                3,496          525
      Net changes in other assets and liabilities                                  (816)      (1,769)
---------------------------------------------------------------------------   ---------    ---------
          Net cash provided by operating activities                               2,105        7,885

INVESTING ACTIVITIES
  Proceeds from maturities of securities available for sale                          23       14,109
  Purchases of securities available for sale                                                  (8,151)
  Proceeds from maturities of mortgage-backed securities available for sale         324          204
  Proceeds from maturities of  securities held to maturity                          280          860
  Purchases of  securities held to maturity                                        (291)      (1,980)
  Purchases of Federal Home Loan Bank stock                                      (1,351)        (580)
  Loans originated and acquired, net of principal collected                    (107,988)    (105,854)
  Purchases of premises and equipment                                           (10,453)      (2,728)
  Other, net                                                                          6           (5)
---------------------------------------------------------------------------   ---------    ---------
          Net cash used by investing activities                                (119,450)    (104,125)

FINANCING ACTIVITIES
  Net increase in deposits                                                      135,438       52,018
  Net increase in long-term borrowings                                            3,500
  Net increase (decrease) in Federal Home Loan Bank advances                     (4,700)      32,250
  Proceeds from issuance of common stock, net                                       331          921
  Tax benefits from prior year exercise of stock options                            378
---------------------------------------------------------------------------   ---------    ---------
          Net cash provided by financing activities                             134,947       85,189
---------------------------------------------------------------------------   ---------    ---------
  Increase (decrease) in cash and cash equivalents                               17,602      (11,051)
  Cash and cash equivalents at beginning of period                               43,197       76,418
---------------------------------------------------------------------------   ---------    ---------
          Cash and cash equivalents at end of period                          $  60,799    $  65,367
===========================================================================   =========    =========

Supplemental information:
  Cash paid for interest                                                      $  20,024    $  15,895
  Cash paid for income taxes                                                      4,025        2,670
  Loans foreclosed and transferred to real estate owned                              22          402
</TABLE>

See accompanying notes to consolidated condensed financial statements.

                                        5
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COLUMBIA BANKING SYSTEM, INC.

Columbia Banking System, Inc. (the "Company") is a registered bank holding
company whose wholly owned subsidiary, Columbia State Bank ("Columbia Bank"),
conducts a full-service commercial banking business. Headquartered in Tacoma,
Washington, the Company provides a full range of banking services to small and
medium-sized businesses, professionals and other individuals through banking
offices located in the Tacoma metropolitan area and contiguous parts of the
Puget Sound region of Washington, as well as the Longview and Woodland
communities in southwestern Washington. Substantially all of the Company's
loans, loan commitments and core deposits are geographically concentrated in its
service areas.

1.  BASIS OF PRESENTATION

The interim unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
In the opinion of management, all adjustments consisting only of normal
recurring accruals necessary for a fair presentation of the financial condition
and the results of operations for the interim periods included herein have been
made. The results of operations for the six months ended June 30, 2000, are not
necessarily indicative of results to be anticipated for the year ending December
31, 2000. Certain amounts in the 1999 financial statements have been
reclassified to conform with the 2000 presentation. For additional information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended December 31, 1999.

2.  EARNINGS PER SHARE

Earnings per share ("EPS") is computed using the weighted average number of
common and diluted common shares outstanding during the period. Basic EPS is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. The primary
reconciling items affecting the calculation of earnings per share is the
inclusion of stock options affecting diluted earnings per share of 347,000 and
296,000 for the three months ended June 30, 2000 and 1999, respectively, and
353,000 and 300,000 for the six months ended June 30, 2000 and 1999,
respectively.

3.  STOCK DIVIDEND

On April 25, 2000, the Company announced a 10% stock dividend payable on May 24,
2000, to shareholders of record as of May 10, 2000. Average shares outstanding
and net income per share for all periods presented have been retroactively
adjusted to give effect to this transaction.

4.  BUSINESS SEGMENT INFORMATION

The Company is managed along three major lines of business: commercial banking,
retail banking, and real estate lending. The treasury function of the Company,
although not considered a line of business, is responsible for the management of
investments and interest rate risk.

The principal activities conducted by commercial banking are the origination of
commercial business loans and private banking services. Retail banking includes
all deposit products, with their related fee income, and all consumer loan
products as well as commercial loan products offered in the Bank's branch
offices. Real estate lending includes single-family residential, multi-family
residential, and commercial real estate loans, and the associated loan servicing
activities.

Prior to 1999, the Company was managed as one segment, not by discrete operating
segments. Segment information for the three months and six months ended June 30,
1999, has been restated to conform with presentation of the Company's reportable
segments at June 30, 2000.

                                        6
<PAGE>

The financial results of each segment were derived from the Company's general
ledger system. Since the Company is not specifically organized around lines of
business, most reportable segments are comprised of more than one operating
segment. Expenses incurred directly by sales and back office support functions
are not allocated to the major lines of business.

Since the Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information," requires no
segmentation or methodology standardization, the organizational structure of the
Company and its business line financial results are not necessarily comparable
across companies. As such, the Company's business line performance may not be
directly comparable with similar information from other financial institutions.

Financial highlights by lines of business:

CONDENSED STATEMENTS OF OPERATIONS:
<TABLE><CAPTION>
                                                                   THREE MONTHS ENDED JUNE 30, 2000

                                               Commercial       Retail       Real Estate
(IN THOUSANDS)                                   Banking        Banking        Lending         Other          Total
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
<S>                                            <C>            <C>            <C>            <C>            <C>
Net interest income after
  provision for loan losses                    $     2,420    $    10,764    $     1,391    $    (1,026)   $    13,549
Other income                                           141          1,048            247          1,471          2,907
Other expense                                         (415)        (3,394)          (511)        (6,964)       (11,284)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Contribution to overhead and profit            $     2,146    $     8,418    $     1,127    $    (6,519)         5,172
Income taxes                                                                                                    (1,781)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Net income                                                                                                 $     3,391
============================================   ===========    ===========    ===========    ===========    ===========
Total assets                                   $   363,174    $   587,697    $   301,560    $   129,084    $ 1,381,515
============================================   ===========    ===========    ===========    ===========    ===========



                                                                   THREE MONTHS ENDED JUNE 30, 1999

                                               Commercial       Retail       Real Estate
(IN THOUSANDS)                                   Banking        Banking        Lending         Other          Total
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Net interest income after
  provision for loan losses                    $     2,437    $     7,187    $     1,865    $      (279)   $    11,210
Other income                                           131            964            305          1,177          2,577
Other expense                                         (575)        (3,206)          (465)        (5,518)        (9,764)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Contribution to overhead and profit            $     1,993    $     4,945    $     1,705    $    (4,620)         4,023
Income taxes                                                                                                    (1,361)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Net income                                                                                                 $     2,662
============================================   ===========    ===========    ===========    ===========    ===========
Total assets                                   $   322,821    $   446,222    $   239,142    $   138,753    $ 1,146,938
============================================   ===========    ===========    ===========    ===========    ===========
</TABLE>






                                        7
<PAGE>

CONDENSED STATEMENTS OF OPERATIONS:

<TABLE><CAPTION>
                                                                    SIX MONTHS ENDED JUNE 30, 2000

                                               Commercial       Retail       Real Estate
(IN THOUSANDS)                                   Banking        Banking        Lending         Other          Total
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
<S>                                            <C>            <C>            <C>            <C>            <C>
Net interest income after
  provision for loan losses                    $     4,899    $    20,393    $     2,950    $    (1,739)   $    26,503
Other income                                           296          2,064            404          2,736          5,500
Other expense                                       (1,044)        (6,883)        (1,041)       (13,139)       (22,107)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Contribution to overhead and profit            $     4,151    $    15,574    $     2,313    $   (12,142)         9,896
Income taxes                                                                                                    (3,409)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Net income                                                                                                 $     6,487
============================================   ===========    ===========    ===========    ===========    ===========
Total assets                                   $   363,174    $   587,697    $   301,560    $   129,084    $ 1,381,515
============================================   ===========    ===========    ===========    ===========    ===========







                                                                  SIX MONTHS ENDED JUNE 30, 1999

                                               Commercial       Retail       Real Estate
(IN THOUSANDS)                                   Banking        Banking        Lending         Other          Total
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Net interest income after
  provision for loan losses                    $     4,652    $    13,815    $     3,916    $      (479)   $    21,904
Other income                                           197          1,855            703          2,085          4,840
Other expense                                       (1,178)        (6,395)          (987)       (11,000)       (19,560)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Contribution to overhead and profit            $     3,671    $     9,275    $     3,632    $    (9,394)         7,184
Income taxes                                                                                                    (2,434)
--------------------------------------------   -----------    -----------    -----------    -----------    -----------
Net income                                                                                                 $     4,750
============================================   ===========    ===========    ===========    ===========    ===========
Total assets                                   $   322,821    $   446,222    $   239,142    $   138,753    $ 1,146,938
============================================   ===========    ===========    ===========    ===========    ===========
</TABLE>










                                        8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COLUMBIA BANKING SYSTEM, INC.

This discussion should be read in conjunction with the unaudited consolidated
financial statements of Columbia Banking System, Inc. (the "Company") and notes
thereto presented elsewhere in this report. In the following discussion, unless
otherwise noted, references to increases or decreases in average balances in
items of income and expense for a particular period and balances at a particular
date refer to the comparison with corresponding amounts for the period or date
one year earlier.

THIS DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS
DUE TO A NUMBER OF FACTORS. SPECIFIC FACTORS INCLUDE, AMONG OTHERS, THE EFFECT
OF INTEREST RATE CHANGES, RISK ASSOCIATED WITH ACQUIRING OTHER BANKS, OR OPENING
AND ACQUIRING NEW BRANCHES, CONTROLLING EXPENSES, AND GENERAL ECONOMIC
CONDITIONS.

OVERVIEW

The Company is a registered bank holding company whose wholly owned subsidiary,
Columbia State Bank ("Columbia Bank"), conducts a full-service commercial
banking business. Headquartered in Tacoma, Washington, the Company provides a
full range of banking services to small and medium-sized businesses,
professionals and other individuals through 28 banking offices located in the
Tacoma metropolitan area and contiguous parts of the Puget Sound region of
Washington, as well as the Longview and Woodland communities in southwestern
Washington. Substantially all of the Company's loans, loan commitments and core
deposits are geographically concentrated in its service areas. Columbia Bank is
a Washington state-chartered commercial bank, the deposits of which are insured
by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank is subject
to regulation by the FDIC and the Washington State Department of Financial
Institutions (Division of Banks). Although Columbia Bank is not a member of the
Federal Reserve System, the Board of Governors of the Federal Reserve System has
certain supervisory authority over the Company, which can also affect Columbia
Bank. At June 30, 2000, the Company had total assets of $1.4 billion.

Management believes the ongoing consolidation among financial institutions in
Washington has created significant gaps in the ability of large banks operating
in Washington to serve certain customers, particularly the Company's target
customer base of small and medium-sized businesses, professionals and other
individuals. The Company's business strategy is to provide its customers with
the financial sophistication and breadth of products of a regional banking
company while retaining the appeal and service level of a community bank.
Management believes that as a result of the Company's strong commitment to
highly personalized relationship-oriented customer service, its varied products,
its strategic branch locations and the long-standing community presence of its
managers, lending officers and branch personnel, it is well positioned to
attract new customers and to increase its market share of loans, deposits, and
other financial services. The Company has closely followed the recent changes to
federal banking laws which allow financial institutions to engage in a broader
range of activities than previously permitted. The new legislation also
authorizes the creation of financial holding companies to facilitate such
expanded activity. As the Company pursues its aggressive growth strategy, it is
likely that the Company will utilize the new financial holding company structure
to accommodate an expansion of its products and services.

The Company intends to effect its growth strategy through a combination of
growth at existing branch offices, new branch openings (usually following the
hiring of an experienced branch manager and/or lending officer with strong
community ties and banking relationships), Columbia On Call telephone banking,
Columbia OnLine internet banking, development of complimentary lines of
business, and acquisitions. In particular, the Company anticipates continued
expansion in Pierce County, north into King County (the location of
                                        9
<PAGE>

Auburn and Bellevue), south into Thurston County (the location of the state
capital, Olympia) and northwest into Kitsap County (the location of Port
Orchard). Expansion by acquisition into other geographic and product line
markets will be considered as promising situations arise. In order to fund its
lending activities and to allow for increased contact with customers, the
Company is establishing a branch system catering primarily to retail depositors,
supplemented by business customer deposits and other borrowings. The Company
believes this mix of funding sources will enable it to expand lending activities
rapidly while attracting a stable core deposit base. In order to support its
strategy of growth, without compromising its personalized banking approach or
its commitment to asset quality, the Company has made significant investments in
experienced branch, lending and administrative personnel and has incurred
significant costs related to its branch expansion. Although the Company's
expense ratios have improved since 1993, management anticipates that the expense
ratios will remain relatively high by industry standards for the foreseeable
future due to the Company's aggressive growth strategy and emphasis on
convenience and personal service. Management has consistently emphasized control
of noninterest expense. See the discussion of noninterest expense for further
detail.

In April 2000, Columbia Bank opened its third branch in the Auburn area with its
newly constructed Forest Villa Branch. The Company's future plans include new
locations in Pierce, King, Kitsap and Thurston counties of western Washington.
Management continues to pursue opportunities for expansion via a combination of
internal growth and external growth by acquisition. New branches normally do not
contribute to net income for many months after opening.

The Company has 28 branches, 15 in Pierce County, 7 in King County, 4 in Cowlitz
County, 1 in Kitsap County, and 1 in Thurston County. Since beginning its major
Pierce County expansion in August 1993, the Company has grown to 28 branches
from 4 primarily through internal and to a lesser degree, external growth by
acquisition.

In addition to the ongoing expansion of its branch network, the Company
continuously reviews new products and services to give its customers more
financial services options. Also, new technology and services are reviewed for
business development and cost saving purposes. The Company is now completing the
testing phase of its new online banking module "Columbia On-Line", with plans
for full operation by the end of the third quarter of 2000. Customers will be
able to conduct a full range of services, including, balance inquiries,
transfers, bill paying, and loan information.

The economy of the Company's principal market area, while primarily dependent
upon aerospace, foreign trade and natural resources, including agriculture and
timber, has become more diversified over the past decade as a result of the
success of software companies such as Microsoft and the establishment of
numerous research and biotechnology firms. The Washington economy and that of
the Puget Sound region generally have experienced strong growth and stability in
recent years.


RESULTS OF OPERATIONS

The results of operations of the Company are dependent to a large degree on the
Company's net interest income. The Company also generates noninterest income
through service charges and fees, merchant services fees, and income from
mortgage banking operations. The Company's operating expenses consist primarily
of compensation and employee benefits expense, and occupancy expense. Like most
financial institutions, the Company's interest income and cost of funds are
affected significantly by general economic conditions, particularly changes in
market interest rates, and by government policies and actions of regulatory
authorities.

Net income for the second quarter of 2000 was $3.4 million, or $0.28 per diluted
share, compared to $2.7 million, or $0.22 per diluted share, for the second
quarter of 1999, an increase in net income of 27%. Net income for the six months
ended June 30, 2000, was $6.5 million, or $0.54 per diluted share, an increase
of 37%, compared to $4.8 million, or $0.40 per diluted share for the same period
in 1999. The earnings increase for the second quarter and six month periods
reflect significant growth in total revenue (net interest income plus
noninterest income), which was up 21% from both the second quarter and the six
month periods ending

                                       10
<PAGE>

June 30, 1999, and to slower increases in noninterest expense, which increased
16% compared with the second quarter of 1999 and 13% from the six month period
ending June 30, 1999.

On April 25, 2000, the Company announced a 10% stock dividend payable on May 24,
2000, to shareholders of record as of May 12, 2000. Average shares outstanding
and net income per share for all periods presented have been retroactively
adjusted to give effect to this transaction.


NET INTEREST INCOME

Net interest income for the second quarter of 2000 increased 22% to $14.4
million, from $11.8 million in the second quarter of 1999. For the six months
ended June 30, 2000, net interest income increased 23% to $28.3 million from
$23.1 million for the same period in 1999. The increase in net interest income
was largely due to the overall growth of the Company. Net interest income was
favorably affected by average interest-earning assets increasing more rapidly
than average interest-bearing liabilities, with the difference funded by
noninterest-bearing deposits and shareholders' equity. During the first six
months of 2000, average interest-earning assets increased $221.7 million, while
average interest-bearing liabilities increased only $201.1 million, compared
with the same period in 1999. Net interest income is up 4% from the first
quarter to the second quarter of 2000.

Net interest margin (net interest income divided by average interest-earning
assets) decreased to 4.67% in the second quarter of 2000 from 4.70% in the
second quarter of 1999. Average interest-earning assets grew to $1.2 billion
during the second quarter of 2000, compared with $1.0 billion for the same
period in 1999. The average yield on interest-earning assets increased 0.70% to
8.71% during the second quarter of 2000 from 8.01% in the same period of 1999.
In comparison, the average cost of interest-bearing liabilities increased 0.77%
to 4.84% during the second quarter of 2000 from 4.07% in the same period of
1999.

For the first six months of 2000, net interest margin was unchanged at 4.71%
from the same period in 1999. Average interest-earning assets grew to $1.2
billion during the first six months of 2000, compared with $992.3 million for
the same period in 1999. The average yield on interest-earning assets increased
0.55% to 8.60% during the first six months of 2000 from 8.05% in the same period
of 1999. In comparison, the average cost of interest-bearing liabilities
increased 0.61% to 4.68% during the first nine months of 2000 from 4.07% in the
same period of 1999.

For the first six months of 2000, competition and increasing interest rates have
caused loan yields to rise along with deposit and borrowing costs, causing the
net interest margin to remain steady. Interest rates in general have exhibited
an increasing trend since the middle of 1999 and during the first six months of
2000. During the past twelve months, although loan yields have risen with
increases in the "prime rate", competition for deposits to fund continued strong
loan demand within the Company's market areas has placed upward pressure on the
cost of deposits and borrowings. To fund strong loan demand during the first six
months of 2000, the Company has made greater use of borrowings from the FHLB of
Seattle and wholesale certificates of deposit. The funding of new loan
production at higher incremental rates, versus the Company's historical mix of
deposits, has caused the average cost of interest-bearing liabilities to
increase faster than the yield on interest-earning assets.


                                       11
<PAGE>

CONSOLIDATED AVERAGE BALANCES--NET CHANGES
COLUMBIA BANKING SYSTEM, INC.

<TABLE><CAPTION>
                                             Three Months Ended     Increase       Six Months Ended        Increase
                                                 June 30,          (Decrease)           June 30,          (Decrease)
(IN THOUSANDS)                              2000         1999        Amount        2000         1999        Amount
--------------------------------------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                      <C>          <C>          <C>          <C>          <C>          <C>
ASSETS
Loans                                    $1,151,729   $  899,818   $  251,911   $1,116,732   $  869,801   $  246,931
Securities                                   95,566      100,441       (4,875)      95,479      101,885       (6,406)
Interest-earning deposits with banks          2,383       11,449       (9,066)       1,753       20,587      (18,834)
--------------------------------------   ----------   ----------   ----------   ----------   ----------   ----------
   Total interest-earning assets          1,249,678    1,011,708      237,970    1,213,964      992,273      221,691

Noninterest-earning assets                  115,678       89,740       25,938      107,201       88,047       19,154
--------------------------------------   ----------   ----------   ----------   ----------   ----------   ----------
   Total assets                          $1,365,356   $1,101,448   $  263,908   $1,321,165   $1,080,320   $  240,845
======================================   ==========   ==========   ==========   ==========   ==========   ==========


LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits                $  968,198   $  786,675   $  181,523   $  940,254   $  776,809   $  163,445
Federal Home Loan Bank advances              69,622       37,907       31,715       64,528       31,622       32,906
Other borrowings                              6,500                     6,500        4,788                     4,788
--------------------------------------   ----------   ----------   ----------   ----------   ----------   ----------
   Total interest-bearing liabilities     1,044,320      824,582      219,738    1,009,570      808,431      201,139

Noninterest-bearing deposits                205,326      176,905       28,421      198,642      173,104       25,538
Other noninterest-bearing liabilities        10,705        6,596        4,109        9,776        6,439        3,337
Shareholders' equity                        105,005       93,365       11,640      103,177       92,346       10,831
--------------------------------------   ----------   ----------   ----------   ----------   ----------   ----------
   Total liabilities and
   shareholders' equity                  $1,365,356   $1,101,448   $  263,908   $1,321,165   $1,080,320      240,845
======================================   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>


NONINTEREST INCOME

Noninterest income increased $330,000, or 13%, in the second quarter of 2000,
and $660,000, or 14%, for the first six months of 2000, compared with the same
periods in 1999, respectively, despite decreases in residential mortgage loan
originations due to the effect of higher long-term interest rates. Increases
during the second quarter and the first six months of 2000, were primarily
centered in account service charges and merchant services income. In general,
increases in account service charges and merchant services are due to the
overall growth of the Company.

NONINTEREST EXPENSE

Total noninterest expense increased $1.5 million, or 16%, for the second quarter
of 2000, and $2.5 million, or 13%, for the first six months of 2000,compared
with the same periods in 1999. The increase was primarily due to personnel costs
associated with the Company's expansion as well as merchant services, taxes and
licenses, and other expenses. The Company's efficiency ratio (noninterest
expense, excluding unusual and nonrecurring items, divided by the sum of net
interest income plus noninterest income, excluding unusual and nonrecurring
items) was 65.0% and 65.4% for the second quarter and first six months of 2000,
respectively, compared to 67.9% and 70.0% for the same periods in 1999. There
were no material unusual and nonrecurring items for the three and six months
ending June 30, 2000 and 1999.

INCOME TAXES

For the second quarter and first six months of 2000, the Company recorded income
tax provisions of $1.8 million and $3.4 million, respectively, compared with
$1.4 million and $2.4 million for the same periods in 1999.

                                       12
<PAGE>

CREDIT RISK MANAGEMENT

The extension of credit in the form of loans or other credit substitutes to
individuals and businesses is a major portion of the Company's principal
business activity. Company policies and applicable laws and regulations require
risk analysis as well as ongoing portfolio and credit management. The Company
manages its credit risk through lending limit constraints, credit review,
approval policies and extensive, ongoing internal monitoring. The Company also
manages credit risk through diversification of the loan portfolio by type of
loan, type of industry, aggregation of debt limits to a single borrower and the
type of borrower.

In analyzing its existing portfolio, the Company reviews its consumer and
residential loan portfolios by risk rating each loan and analyzing their
performance as a pool of loans since no single loan is individually significant
or judged by its risk rating, size, or potential risk of loss. In contrast, the
monitoring process for the commercial business, real estate construction, and
commercial real estate portfolios includes periodic reviews of individual loans
with risk ratings assigned to each loan and performance judged on a loan by loan
basis. The Company reviews these loans to assess the ability of the borrower to
service all of its interest and principal obligations and as a result the risk
rating may be adjusted accordingly. In the event that full collection of
principal and interest is not reasonably assured, the loan is appropriately
downgraded and, if warranted, placed on nonaccrual status even though the loan
may be current as to principal and interest payments. Additionally, the Company
would assess whether an impairment of a loan as provided in SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan", would warrant establishing a
specific reserve for the loan.

Loan policies, credit quality criteria, portfolio guidelines and other controls
are established under the guidance of the Company's chief credit officer and
approved, as appropriate, by the Board. Credit Administration, together with
appropriate loan committee, has the responsibility for administering the credit
approval process. As another part of its control process, the Company uses an
independent internal credit review and examination function to provide assurance
that loans and commitments are made and maintained as prescribed by the
Company's credit policies. This includes a review of documentation when the loan
is initially extended and subsequent on-site examination to ensure continued
performance and proper risk assessment.










                                       13
<PAGE>

LENDING ACTIVITIES

The Company operates a full service commercial bank, which originates a wide
variety of loans. Consistent with the trend begun in 1993, the Company continues
to have success originating commercial business and commercial real estate
loans.

The following table sets forth the Company's loan portfolio composition by type
of loan for the dates indicated:

<TABLE><CAPTION>
                                                       June 30,       % of       December 31,     % of
(IN THOUSANDS)                                          2000          Total         1999          Total
--------------------------------------------------   -----------    --------     -----------    --------
<S>                                                  <C>            <C>          <C>            <C>
Commercial                                           $   492,894        42.6%    $   426,060        40.6%
Real estate:
    One-to four-family residential                        63,348         5.5          64,669         6.2
    Five or more family residential
       and commercial properties                         408,738        35.3         377,708        36.0
--------------------------------------------------   -----------    --------     -----------    --------
            Total real estate                            472,086        40.8         442,377        42.2
Real estate construction:
    One-to four-family residential                        38,435         3.3          32,742         3.1
    Five or more family residential
       and commercial properties                          51,213         4.4          45,886         4.4
--------------------------------------------------   -----------    --------     -----------    --------
            Total real estate construction                89,648         7.7          78,628         7.5
Consumer                                                 105,160         9.1         103,296         9.9
--------------------------------------------------   -----------    --------     -----------    --------
    Sub-total loans                                    1,159,788       100.2       1,050,361       100.2
Less: Deferred loan fees                                  (2,898)       (0.2)         (2,355)       (0.2)
--------------------------------------------------   -----------    --------     -----------    --------
            Total loans                              $ 1,156,890       100.0%    $ 1,048,006       100.0%
==================================================   ===========    ========     ===========    ========
Loans held for sale                                  $    13,641                 $     5,479
==================================================   ===========    ========     ===========    ========
</TABLE>

Total loans at June 30, 2000, increased $108.9 million, or 10%, to $1.2 billion
from year-end 1999. Commercial loans and five or more family residential and
commercial properties were the categories contributing a majority of the
increase.

COMMERCIAL LOANS: Commercial loans increased $66.8 million, or 16%, to $492.9
million from year-end 1999, representing 42.6% of total loans compared with
40.6% of total loans at December 31, 1999. Management is committed to providing
competitive commercial lending in the Company's primary market areas. The
Company expects to continue to expand its commercial lending products and to
emphasize in particular its relationship banking with businesses, business
owners and affluent individuals.

REAL ESTATE LOANS: Residential one- to four-family loans decreased $1.3 million
to $63.3 million at June 30, 2000, representing 5.5% of total loans, compared
with $64.7 million, or 6.2% of total loans at December 31, 1999. These loans are
used by the Company to collateralize advances from the FHLB. The Company's
underwriting standards require that one- to four-family portfolio loans
generally be owner-occupied and that loan amounts not exceed 80% (90% with
private mortgage insurance) of the appraised value or cost, whichever is lower,
of the underlying collateral at origination. Generally, management's policy is
to originate for sale to third parties residential loans secured by properties
located within the Company's primary market areas.

The Company makes multi-family and commercial real estate loans in its primary
market areas. Multi-family and commercial real estate lending increased $31.0
million, or 8%, to $408.7 million at June 30, 2000, representing 35.3% of total
loans, from $377.7 million, or 36.0% of total loans at December 31, 1999. The
increase in multi-family and commercial real estate lending in the first three
months reflects a mix of owner occupied and income property transactions.
Generally, multi-family and commercial real estate loans are made

                                       14
<PAGE>

only to borrowers who have existing banking relationships with the Company. The
Company's underwriting standards generally require that the loan-to-value ratio
for multi-family and commercial real estate loans not exceed 75% of appraised
value or cost, whichever is lower, and that commercial properties maintain debt
coverage ratios (net operating income divided by annual debt servicing) of 1.2
or better. Underwriting standards can be influenced by competition. The Company
endeavors to maintain the highest practical underwriting standards while
balancing the need to remain competitive in its lending practices.

The Company originates a variety of real estate construction loans. One- to
four-family residential construction loans are originated for the construction
of custom homes (where the home buyer is the borrower) and provides financing to
builders for the construction of pre-sold homes and speculative residential
construction. Construction loans on one- to four-family residences increased
$5.7 million to $38.4 million at June 30, 2000, representing 3.3% of total
loans, from $32.7 million, or 3.1% of total loans at December 31, 1999.
Multi-family and commercial real estate construction loans increased $5.3
million, or 12%, to $51.2 million at June 30, 2000 from $45.9 million at
December 31, 1999, representing 4.4% of total loans for both ending periods.

The Company endeavors to limit its construction lending risk through adherence
to strict underwriting procedures.

CONSUMER LENDING: At June 30, 2000, the Company had $105.2 million of consumer
loans outstanding, representing 9.1% of total loans, as compared with $103.3
million, or 9.9%, at December 31, 1999. The balance at December 31, 1999,
included approximately $6.0 million of short-term loans made to a group of
individuals in connection with a single transaction which matured in February
2000. Consumer loans made by the Company include automobile loans, boat and
recreational vehicle financing, home equity and home improvement loans and
miscellaneous personal loans.

Columbia Bank is not involved with loans to foreign companies and foreign
countries.

















                                       15
<PAGE>
NONPERFORMING ASSETS

Nonperforming assets consist of: (i) nonaccrual loans, which generally are loans
placed on a nonaccrual basis when the loan becomes past due 90 days or when
there are otherwise serious doubts about the collectibility of principal or
interest; (ii) restructured loans, for which concessions, including the
reduction of interest rates below a rate otherwise available to that borrower or
the deferral of interest or principal, have been granted due to the borrower's
weakened financial condition (interest on restructured loans is accrued at the
restructured rates when it is anticipated that no loss of original principal
will occur); (iii) real estate owned.

The following tables set forth, at the dates indicated, information with respect
to nonaccrual loans, restructured loans, total nonperforming loans (nonaccrual
loans plus restructured loans), real estate owned, and total nonperforming
assets of the Company:

                                                      June 30,    December 31,
(IN THOUSANDS)                                          2000         1999
----------------------------------------------------   ------       ------
Nonaccrual:
  One-to four-family residential                       $    4       $   23
  Commercial real estate                                2,183        1,784
  Commercial business                                   4,114        2,176
  Consumer                                                396          377
----------------------------------------------------   ------       ------
     Total                                              6,697        4,360

Restructured:
  One-to four-family residential construction                          122
  Commercial business                                       4           65
  Consumer                                                 17
----------------------------------------------------   ------       ------
     Total                                                 21          187

----------------------------------------------------   ------       ------
     Total nonperforming loans                         $6,718       $4,547
====================================================   ======       ======

Real estate owned                                      $1,285       $1,263
----------------------------------------------------   ------       ------
Total nonperforming assets                             $8,003       $5,810
====================================================   ======       ======


Nonperforming loans increased $2.2 million to $6.7 million, or 0.58% of total
loans (excluding loans held for sale) at June 30, 2000, from $4.5 million, or
0.43% of total loans at December 31, 1999, due principally to increases in the
commercial business and commercial real estate categories.

Restructured loans totaled $21,000 at June 30, 2000.

Real estate owned, which is comprised of foreclosed real estate loans, increased
$22,000 at June 30, 2000, from its balance of $1.3 million at December 31, 1999.
During the second quarter of 2000, the Company foreclosed on a $34,000
residential land loan collateralized by real estate and transferred the real
estate to REO. At June 30, 2000, REO consisted of three foreclosed properties.

Total nonperforming assets totaled $8.0 million, or 58% of period-end assets, at
June 30,2000, compared to $5.8 million, or .47% of period-end assets, at
December 31, 1999.

Nonaccrual loans and other nonperforming assets are centered in a small number
of lending relationships which management considers to be adequately reserved.
All nonperforming loans are to Washington businesses.

                                       16
<PAGE>

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The Company maintains an allowance for loan losses to absorb losses inherent in
the loan portfolio. The size of the allowance is determined through quarterly
assessments of the probable estimated losses in the loan portfolio. The
Company's methodology for making such assessments and determining the adequacy
of the allowance includes the following key elements:

1.   Formula based allowances calculated on minimum thresholds and historical
     performance of the portfolio for a minimum of 5 years.
2.   Specific allowances for identified problem loans in accordance with SFAS
     No. 114, "Accounting by Creditors for Impairment of a Loan."
3.   Unallocated allowance that considers other potential losses inherent in the
     loan portfolio that are not contemplated in the formula based allowances.

On a quarterly basis (semi-annual in the case of economic and business
conditions reviews) the senior credit officers of the Company review with
Executive Management and the Board of Directors the various additional factors
that management considers when determining the adequacy of the allowance. These
factors include the following as of the applicable balance sheet date:

1.   Existing general economic and business conditions affecting the Company's
     market place
2.   Credit quality trends, including trends in nonperforming loans
3.   Collateral values
4.   Seasoning of the loan portfolio
5.   Bank regulatory examination results
6.   Findings of internal credit examiners
7.   Duration of current business cycle

The allowance is increased by provisions charged to operations, and is reduced
by loans charged off, net of recoveries.

While management believes it uses the best information available to determine
the allowance for loan losses, unforeseen market conditions could result in
adjustments to the allowance, and net income could be significantly affected, if
circumstances differ substantially from the assumptions used in determining the
allowance.

At June 30, 2000, the Company's allowance for loan losses was $12.1 million, or
1.04% of the total loan portfolio (excluding loans held for sale), and 179.7% of
nonperforming loans. This compares with an allowance of $10.0 million, or 0.95%
of the total loan portfolio, and 219.2% of nonperforming loans, at December 31,
1999. The increase in the allowance as a percentage of loans was due primarily
to the $1.8 million in loan loss provisions during the first six months of 2000.

Net loan recoveries amounted to $305,000 for the first six months of 2000
compared with net loan charge-offs of $221,000 for the same period in 1999.
During the first six months of 2000, the Company set aside a $1.8 million
provision for loan losses as compared with $1.2 million for the same period in
1999.







                                       17
<PAGE>

The following table sets forth at the dates indicated the changes in the
Company's allowance for loan losses:

<TABLE><CAPTION>
                                                    Three Months Ended       Six Months Ended
                                                         June 30,                June 30,
(IN THOUSANDS)                                       2000        1999        2000        1999
------------------------------------------------   --------    --------    --------    --------
<S>                                                <C>         <C>         <C>         <C>
Beginning balance                                  $ 10,897    $  9,588    $  9,967    $  9,002
Charge-offs:
  One-to-four family residential construction           (12)                    (12)         (1)
  Commercial business                                   (86)       (233)       (273)       (281)
  Consumer                                              (57)         (8)       (116)        (32)
------------------------------------------------   --------    --------    --------    --------
     Total charge-offs                                 (155)       (241)       (401)       (314)

Recoveries:
  Commercial business                                   429           2         694          57
  Consumer                                                1          32          12          36
------------------------------------------------   --------    --------    --------    --------
     Total recoveries                                   430          34         706          93
------------------------------------------------   --------    --------    --------    --------
Net (charge-offs) recoveries                            275        (207)        305        (221)

Provision charged to expense                            900         600       1,800       1,200
------------------------------------------------   --------    --------    --------    --------
Ending balance                                     $ 12,072    $  9,981    $ 12,072    $  9,981
================================================   ========    ========    ========    ========
</TABLE>


LIQUIDITY AND SOURCES OF FUNDS

The Company's primary sources of funds are customer deposits, advances from the
Federal Home Loan Bank of Seattle (the "FHLB") and brokered deposits. These
funds, together with loan repayments, loan sales, retained earnings, equity and
other borrowed funds, are used to make loans, to acquire securities and other
assets and to fund continuing operations.

DEPOSIT ACTIVITIES

The Company's deposit products include a wide variety of transaction accounts,
savings accounts and time deposit accounts. Total deposits increased $135.4
million, or 13%, to $1.2 billion at June 30, 2000 from $1.0 billion at December
31, 1999.

The Company has established a branch system catering primarily to retail
depositors, supplemented by business customer deposits and other borrowings. The
branch system deposits are intended to provide a stable core funding base for
the Company. Together with that stable core deposit base, management's strategy
for funding growth is also to make use of brokered and other wholesale deposits.
The Company's use of brokered and other wholesale deposits increased in 1999 and
2000, and management anticipates continued use of such deposits to fund
increasing loan demand. At June 30, 2000, brokered and other wholesale deposits
(excluding public deposits) totaled $53.6 million, or 5% of total deposits,
compared with $25.3 million, or 2.4% of total deposits at December 31, 1999. The
brokered deposits have varied maturities up to 5 years.

BORROWINGS

The Company relies on FHLB advances to supplement its funding sources, and the
FHLB serves as the Company's primary source of long-term borrowings. In
addition, the Company uses short-term borrowings from the FHLB when necessary.
FHLB advances are secured by one- to four-family real estate mortgages and
certain other assets. At June 30, 2000, the Company had short-term advances of
$79.0 million compared to a balance of $83.7 million at December 31, 1999.
Management anticipates that the Company will continue to rely on the same
sources of funds in the future, and will use those funds primarily to make loans
and purchase securities.

                                       18
<PAGE>

The Company maintains a borrowing relationship with a third party financial
institution to fund the liquidity needs of the Company and to provide for the
capital needs of Columbia Bank. At June 30, 2000, the Company had $6.5 million
in long-term borrowings from that institution.


CAPITAL

Shareholders' equity at June 30, 2000, was $106.4 million compared with $99.2
million at December 31, 1999. The increase is due primarily to net income of
$6.5 million during the first six months of 2000. Shareholders' equity was 7.70%
and 8.02% of total period-end assets at June 30, 2000, and December 31, 1999,
respectively.

Banking regulations require bank holding companies to maintain a minimum
"leverage" ratio of core capital to adjusted quarterly average total assets of
at least 3%. At June 30, 2000, the Company's leverage ratio was 8.01%, compared
with 8.46% at December 31, 1999. In addition, banking regulators have adopted
risk-based capital guidelines, under which risk percentages are assigned to
various categories of assets and off-balance sheet items to calculate a
risk-adjusted capital ratio. Tier I capital generally consists of common
shareholders' equity, less goodwill and certain identifiable intangible assets,
while Tier II capital includes the allowance for loan losses and subordinated
debt, both subject to certain limitations. Regulatory minimum risk-based capital
guidelines require Tier I capital of 4% of risk-adjusted assets and total
capital (combined Tier I and Tier II) of 8% of risk-adjusted assets to be
considered "adequately capitalized". The Company's Tier I and total capital
ratios were 8.71% and 9.67%, respectively, at June 30, 2000, compared with 9.12%
and 10.01%, respectively, at December 31, 1999.

During 1992, the Federal Deposit Insurance Corporation (the "FDIC") published
the qualifications necessary to be classified as a "well capitalized" bank,
primarily for assignment of FDIC insurance premium rates beginning in 1993. To
qualify as "well capitalized," banks must have a Tier I risk-adjusted capital
ratio of at least 6%, a total risk-adjusted capital ratio of at least 10%, and a
leverage ratio of at least 5%. Columbia Bank qualified as "well-capitalized" at
June 30, 2000. Failure to qualify as "well capitalized" can negatively impact a
bank's ability to expand and to engage in certain activities.

Applicable federal and Washington state regulations restrict capital
distributions by institutions such as Columbia Bank, including dividends. Such
restrictions are tied to the institution's capital levels after giving effect to
distributions. The Company's ability to pay cash dividends is substantially
dependent upon receipt of dividends from the Bank.

On April 25, 2000, the Company announced a 10% stock dividend payable on May 24,
2000, to shareholders of record as of May 10, 2000. Average shares outstanding,
net income per share and book value per share for all periods presented have
been retroactively adjusted to give effect to this transaction.











                                       19
<PAGE>



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A number of measures are used to monitor and manage interest rate risk,
including income simulations and interest sensitivity (gap) analyses. An income
simulation model is the primary tool used to assess the direction and magnitude
of changes in net interest income resulting from changes in interest rates. Key
assumptions in the model include prepayment speeds on mortgage-related assets,
cash flows and maturities of other investment securities, loan and deposit
volumes and pricing. These assumptions are inherently subjective and, as a
result, the model cannot precisely estimate net interest income or precisely
predict the impact of higher or lower interest rates on net interest income.
Actual results will differ from simulated results due to timing, magnitude and
frequency of interest rate changes and changes in market conditions and
management strategies, among other factors. At June 30, 2000, based on the
measures used to monitor and manage interest rate risk, there has not been a
material change in the Company's interest rate risk since December 31, 1999. For
additional information, refer to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" referenced in the Company's
annual report on Form 10-K for the year ended December 31, 1999.



























                                       20
<PAGE>

PART II  -  OTHER INFORMATION


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its annual shareholders meeting on April 25, 2000, for the
purpose of electing the Board of Directors.

All fifteen persons nominated were elected to hold office for the ensuing year.

     Nominee                        Votes "For"            Votes "Withheld"
---------------------------------------------------------------------------

Richard S. DeVine                    8,953,618                 181,868
Melanie J. Dressel                   8,954,137                 181,349
Jack Fabulich                        8,952,484                 183,002
Jonathan Fine                        8,954,137                 181,349
John P. Folsom                       8,953,618                 181,868
J. James Gallagher                   8,954,144                 181,342
John A. Halleran                     8,954,137                 181,349
Thomas M. Hulbert                    8,954,144                 181,342
Thomas L. Matson                     8,954,144                 181,342
William W. Philip                    8,954,144                 181,342
Robert E. Quoidbach                  8,954,137                 181,349
Donald Rodman                        8,954,137                 181,349
Sidney R. Snyder                     8,954,137                 181,349
William T. Weyerhaeuser              8,953,688                 181,798
James M. Will                        8,954,137                 181,349



A proposal to amend and restate Columbia's Stock Option Plan was approved by the
following vote of the shareholders:


   Shares          Shares                                            Shares
   Voted           Voted            Shares           Broker            Not
   "FOR"         "AGAINST"       "ABSTAINING"       Non-Votes         Voted
   -----         ---------       ------------       ---------         -----

 5,028,910       1,003,210          136,711         2,966,655        1,467,578



Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibit 10

         (a) Amended and Restated Stock Option Plan of Columbia Banking
             System, Inc.
         (b) Amended and Restated Articles of Incorporation of Columbia Banking
             System, Inc.

         Exhibit 27 - Financial Data Schedule


   (b)   Reports on Form 8-K
         None




                                       21
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                          COLUMBIA BANKING SYSTEM, INC.
                                  (Registrant)



Date     July 28, 2000                  By  /s/ J. James Gallagher
     -----------------------                ------------------------------
                                                J. James Gallagher
                                                 Vice Chairman and
                                              Chief Executive Officer






Date     July 28, 2000                  By  /s/ Gary R. Schminkey
     -----------------------                ------------------------------
                                                Gary R. Schminkey
                                            Executive Vice President and
                                               Chief Financial Officer













                                       22
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.A
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>STOCK OPTION PLAN OF COLUMBIA BANKING SYSTEM, INC.
<TEXT>

                                                                    EXHIBIT 10.a
                                                                    ------------
                              AMENDED AND RESTATED
                                STOCK OPTION PLAN
                                       OF
                          COLUMBIA BANKING SYSTEM, INC.


                                     RECITAL

         The original Employee Stock Option Plan (the "Plan") of First Federal
Corporation, the predecessor to Columbia Banking System, Inc., was adopted by
the Board of Directors and Shareholders on August 2, 1988. The Plan was
subsequently amended and approved by the Shareholders on July 19, 1993 and April
23, 1997. The Plan is now being amended and restated, subject to shareholder
approval, for the purpose of (1) extending the term of the Plan; (2) adding and
clarifying definitions and making implementing changes throughout the Plan,
including amending the definition of employee to provide authority to grant
options to new hires prior to the employees start date (provided that the
options may not vest prior to the start date); (3) increasing the number of
shares available for issuance under the Plan by 325,000 shares of common stock
to 995,734 shares of Common Stock plus up to 100,000 shares of Common Stock that
are reacquired by the Company in the open market or in private transactions (by
amending Section 3); (4) clarifying the authority and composition of the
Committee empowered to administer the Plan (by amending Section 4); (5)
clarifying the manner in which options may be exercised and the authority the
Committee has to determine procedures and conditions for exercises of options
(by amending Section 6); and (6) implementing miscellaneous technical changes
throughout the Plan.

         In all other respects, this Amended and Restated Stock Option Plan is
as adopted by the Board and approved by the Shareholders on April 23, 1997.

                                      PLAN

         1.  Purpose of the Plan. The purpose of this Plan is to provide
additional incentives to Employees and Directors of Columbia Banking System,
Inc. and its present and future Subsidiaries, thereby helping to attract and
retain the best available personnel for positions of responsibility with said
corporations and otherwise promoting the success of the business activities of
said corporations. It is intended that Options issued pursuant to this Plan
shall constitute either Incentive Stock Options or Nonqualified Stock Options.

         2.  Definitions. As used herein, the following definitions shall apply:

             a.  "Board" shall mean the Board of Directors of the Employer.

             b.  "Code" means the Internal Revenue Code of 1986, as amended.  A
reference to any provision of the Code shall include reference to any successor
provision of the Code.

                                        1
<PAGE>

             c.  "Common Stock" shall mean the Employer's no par value common
stock.

             d.  "Committee" shall mean the Board or the Committee appointed by
the Board in accordance with subsection 4(a) of the Plan.

             e.  "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other approved leave of absence, except as provided under
applicable Incentive Stock Option rules.

             f.  "Director" shall mean any person who has been elected or
appointed as a member of the Board of Directors of the Employer and who occupied
that position at the date an Option was granted to such person.

             g.  "Employee" shall mean any person employed by the Employer or
any Subsidiary of the Employer which now exists or is hereafter organized or is
acquired by the Employer. An Option may be granted to an Employee, in connection
with hiring, retention or otherwise, prior to the date the Employee first
performs services for Employer or a Subsidiary, provided that such Option shall
not become vested prior to the date the Employee first performs such services.

             h.  "Employer" shall mean Columbia Banking System, Inc., a
Washington corporation.

             i.  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

             j.  "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

                          (1) If the Common Stock is listed on any established
                 stock exchange or a national market system, including without
                 limitation The Nasdaq National Market or The Nasdaq Small
                 Market of the Nasdaq Stock Market, its Fair Market Value shall
                 be the closing sales price for such stock (or the closing bid,
                 if no sales were reported) as quoted on such exchange or system
                 for the last market trading day on the date of such
                 determination, as reported in The Wall Street Journal or other
                 source as the Committee deems reliable, or,

                          (2) If the Common Stock is regularly quoted by a
                 recognized securities dealer but selling prices are not
                 reported, its Fair Market Value shall be the mean of the
                 closing bid and asked prices for such stock on the date of such
                 determination, as reported in The Wall Street Journal or other
                 source as the Committee deems reliable, or,

                          (3) In the absence of an established market for the
                 Common Stock, the Fair Market Value shall be determined in good
                 faith by the Committee.

                                        2
<PAGE>

             k.  "Incentive Stock Option" means an Option with the intention
that it qualify as an "incentive stock option" as that term is defined in
Section 422 of the Code.

             l.  "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.

             m.  "Option" shall mean a right to purchase Common Stock granted
under the Plan. Options shall include both Incentive Stock Options and
Nonqualified Stock Options as the context requires.

             n.  "Optioned Stock" shall mean the Common Stock subject to an
Option.

             o.  "Optionee" shall mean an Employee or Director who receives an
Option.

             p.  "Plan" shall mean this Amended and Restated Stock Option Plan.

             q.  "SEC" means the United States Securities and Exchange
Commission.

             r.  "Shareholder-Employee" shall mean an Employee who owns, at the
time an Incentive Stock Option is granted, stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Employer or Subsidiary. For this purpose, the attribution of stock ownership
rules provided in Section 424(d) of the Internal Revenue Code shall apply.

             s.  "Subsidiary" shall mean any corporation having a relationship
with the Employer as described in Section 424(f) of the Internal Revenue Code.

         3.  Stock Subject to Options.

             Subject to Section 6(a), the maximum number of shares that may be
delivered to Optionees and their beneficiaries under the Plan shall be equal to
the sum of: (i) 995,734 (subject to adjustment as provided in subsection 6(i) of
the Plan); and (ii) up to 100,000 shares, to the extent authorized by the Board
of Directors, which are reacquired by the Employer in the open market or in
private transactions after the effective date of this Plan.

             To the extent any shares covered by an Option are not delivered to
an Optionee or beneficiary because the Option is forfeited or cancelled, or the
shares are not delivered because the Employer settles the Option in cash or the
Option is used to satisfy applicable tax withholding obligations, such shares
shall not be deemed to have been delivered for purposes of determining the
maximum number of shares available for delivery under the Plan. If the exercise
price of any Option granted under the Plan is satisfied by tendering shares to
the Employer (by either actual delivery or by attestation), only the number of
shares issued net of the shares tendered shall be deemed delivered for purposes
of determining the maximum number of shares available for delivery under the
Plan.

                                        3
<PAGE>

         4.  Administration of the Plan.

                 a.  The Committee. The authority to control and manage the
operation and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with this Section 4. The Committee shall be selected
by the Board and shall consist solely of two or more members of the Board. If
the Committee does not exist, or if for any other reason as determined by the
Board, the Board desires to directly exercise its powers under this Plan, then
the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee. Once appointed, any such Committee shall
continue to serve until otherwise directed by the Board. From time to time, the
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause), appoint individuals in substitution
therefor, and fill vacancies however caused. The Committee shall select one of
its members as chairman, and shall hold meetings at such times and places as the
chairman or a majority of the Committee may determine.

             Except to the extent prohibited by applicable law or the applicable
rules of a stock exchange, the Committee may allocate all or a portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it. Any such allocation or delegation may be revoked by the
Committee at any time.


             At least annually, the Committee shall present a written report to
the Board indicating the persons to whom Options have been granted since the
date of the last such report, and in each case the date or dates of Options
granted, the number of shares optioned, and the Option price per share.


                 b. Powers of the Committee. Except for the terms and conditions
explicitly set forth in the Plan, the Committee shall have the authority and
discretion:
                          (1) to determine the persons to whom Options are to be
                 granted, the times of grant, and the number of shares to be
                 represented by each Option;

                          (2) to determine the Option price for the shares of
                 Common Stock to be issued pursuant to each Option, subject to
                 the provisions of subsection 6(b) of the Plan;

                          (3) to determine all other terms and conditions of
                 each Option granted under the Plan, which need not be
                 identical;

                          (4) to modify or amend the terms of any Option
                 previously granted, or to grant substitute Options, subject to
                 the provisions of subsections 6(l) and 6(m) and Section 8 of
                 the Plan; provided that the Committee shall not have the
                 authority to reprice or exchange Options in an aggregate amount
                 which will exceed 10% of the number of shares subject to
                 outstanding Options at such date;

                                        4
<PAGE>

                          (5) to cancel or suspend Options, subject to the
                 restrictions imposed by Section 8 of the Plan;

                          (6) to interpret the Plan;

                          (7) to authorize any person or persons to execute and
                 deliver Option agreements or to take any other actions deemed
                 by the Committee to be necessary or appropriate to effectuate
                 the grant of Options;

                          (8) to make all other determinations and take all
                 other actions which the Committee deems necessary or
                 appropriate to administer the Plan in accordance with its terms
                 and conditions.

         All decisions, determinations and interpretations of the Committee
shall be final and binding upon all persons, including all Optionees and any
other holders or persons interested in any Options, unless otherwise expressly
determined by a vote of the majority of the entire Board. No member of the
Committee or of the Board shall be liable for any action or determination made
in good faith with respect to the Plan or any Option.

                 c.  Section 16(b) Compliance and Bifurcation of Plan. It is the
intention of the Company that this Plan, and Options granted under this Plan,
comply in all respects with Rule 16b-3 under the Exchange Act and, if any Plan
provision is later found not to be in compliance with such Rule, the provision
shall be deemed null and void, and in all events this Plan will be construed in
favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in
this Plan to the contrary, the Board, in its absolute discretion, may bifurcate
this Plan so as to restrict, limit or condition the use of any provision of this
Plan to participants who are officers and directors subject to Section 16(b) of
the Exchange Act without so restricting, limiting, or conditioning other Plan
participants.

         5.  Eligibility. Options may be granted only to Employees and Directors
who the Committee, in its discretion, from time to time selects; provided that
Directors who are not also Employees may not be granted Incentive Stock Options.

         Granting of Options pursuant to the Plan shall be entirely
discretionary with the Committee or its designee(s), and the adoption of this
Plan shall not confer upon any person any right to receive any Option or Options
pursuant to the Plan unless and until said Options are granted by the Committee
or its designee(s), in its sole discretion. Neither the adoption of the Plan nor
the granting of any Options pursuant to the Plan shall confer upon any Employee
any right with respect to continuation of employment, nor shall the same
interfere in any way with the Employee's right or with the right of the Employer
or any Subsidiary to terminate the employment relationship at any time.

         6.  Terms and Conditions of Options. All Options granted pursuant to
the Plan must be authorized by the Committee or its designee(s) and shall be
subject to such terms and conditions, not inconsistent with this Plan, as the
Committee shall, in its sole discretion,

                                        5
<PAGE>

prescribe. The terms and conditions of any Option shall be reflected in such
form of written document as is determined by the Committee. Unless waived or
modified by the Committee, all Options shall be subject to the following terms
and conditions:

                 a. Number of Shares; Annual Limitation. Each Option agreement
shall state whether the Option is an Incentive Stock Option or a Nonqualified
Stock Option and the number of shares subject to Option. Any number of Options
may be granted to a single eligible person at any time and from time to time,
except that (i) in the case of Incentive Stock Options, the aggregate fair
market value (determined as of the time each Option is granted) of all shares of
Common Stock with respect to which Incentive Stock Options become exercisable
for the first time by an Employee in any one calendar year (under all incentive
stock option plans of the Employer, and all of its Subsidiaries taken together)
shall not exceed $100,000, and (ii) not more than 50,000 shares of Common Stock,
as adjusted pursuant to Section 6(i), in the aggregate may be made subject to
grants under the Plan to any participant in any one fiscal year.

                 b. Option Price and Consideration. The exercise price of each
Option shall be established by the Committee or shall be determined by a method
established by the Committee at the time the Option is granted. The exercise
price shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date of grant of the Option. In the case of an Incentive Stock
Option granted to an Employee who, immediately before the grant of such
Incentive Stock Option, is a Shareholder-Employee, the Incentive Stock Option
exercise price shall be at least 110% of the Fair Market Value of the Common
Stock on the date of grant of the Incentive Stock Option.

                 c. Term of Option. No Incentive Stock Option granted pursuant
to the Plan shall in any event be exercisable after the expiration of ten (10)
years from the date such Option is granted, except that the term of an Incentive
Stock Option granted to an Employee who, immediately before such Incentive Stock
Option is granted, is a Shareholder-Employee shall be for not more than five (5)
years from the date of grant thereof. Subject to the foregoing and other
applicable provisions of the Plan including but not limited to subsection 6(e)
herein, the term of each Option shall be determined by the Committee in its
discretion.

                 d. Manner of Exercise. An Option shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.

         The payment of the exercise price of an Option shall be subject to the
following:
                          (i) subject to the following provisions of this
                 subsection 6(d), the full exercise price for shares of Common
                 Stock purchased upon the exercise of any Option shall be paid
                 at the time of such exercise (except that, in the case of an
                 exercise arrangement approved by the Committee and described in
                 paragraph (iii) below, payment may be made as soon as
                 practicable after the exercise).

                          (ii) the exercise price shall be payable in cash or
                 such other consideration of comparable value deemed to be
                 acceptable by the Committee, including tendering, by either
                 actual delivery of shares or by attestation, shares of Common

                                        6
<PAGE>

                 Stock acceptable to the Committee, and valued at Fair Market
                 Value as of the day of exercise, or in any combination thereof,
                 as determined by the Committee.

                          (iii) the Committee may permit an Optionee to elect to
                 pay the exercise price upon the exercise of an Option by
                 irrevocably authorizing a third party to sell shares of Common
                 Stock (or a sufficient portion of the shares of Common Stock)
                 acquired upon exercise of the Option and remit to Employer a
                 sufficient portion of the sale proceeds to pay the entire
                 exercise price and any tax withholding resulting from such
                 exercise.

         Shares of Common Stock delivered pursuant to the exercise of an Option
shall be subject to such conditions, restrictions and contingencies as the
Committee may establish. The Committee may impose such conditions, restrictions
and contingencies with respect to shares of Common Stock acquired pursuant to
the exercise of an Option as the Committee determines to be desirable.

                 e. Death of Optionee. In the event of the death of an Optionee
who at the time of his death was an Employee and who had been in Continuous
Status as an Employee since the date of grant of the Option, the Option shall
terminate on the earlier of (1)(a) one year after the date of death of the
Optionee or (b) such later date as may be set in the discretion of the
Committee; or (2) the expiration date otherwise provided in the Option
agreement, except that if the expiration date of an Option should occur during
the 90-day period immediately following the Optionee's death, such Option shall
terminate at the end of such 90-day period. The Option shall be exercisable at
any time prior to such termination by the Optionee's estate, or by such person
or persons who have acquired the right to exercise the Option by bequest or by
inheritance or by reason of the death of the Optionee.

                 f. Disability of Optionee. If an Optionee's status as an
Employee is terminated at any time during the Option period by reason of a
disability (within the meaning of Section 22(e) (3) of the Internal Revenue
Code) and if said Optionee had been in Continuous Status as an Employee at all
times between the date of grant of the Option and the termination of his status
as an Employee, his Incentive Stock Option shall terminate on the earlier of (i)
one year after the date of termination of his status as an Employee, or (ii) the
expiration date otherwise provided in his Option agreement.

                 g. Termination of Status as an Employee. If an Optionee's
status as an Employee is terminated at any time after the grant of his Option
for any reason other than death or disability, as provided in subparagraphs (e)
and (f) above, and not by reason of fraud or willful misconduct, as provided
below:
                          (1) His Incentive Stock Option shall terminate on the
                 earlier of (i) the same day of the third month after the date
                 of termination of his status as an Employee, or (ii) the
                 expiration date otherwise provided in his Option agreement;

                          (2) His Nonqualified Stock Option shall terminate on
                 the expiration date as provided in his Option Agreement, or if
                 no such expiration date is provided,

                                        7
<PAGE>

                 then such Option shall terminate on the same day of the third
                 month after the date of termination of his status as an
                 Employee.

If an Optionee's status as an Employee is terminated at any time after the grant
of his Option by reason of fraud or willful misconduct, then his Option shall
terminate on the date of termination of his status as an Employee.


                 h. Non-transferability of Options. No Option granted pursuant
to the Plan may be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee.

                 i. Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Employer, the number of shares of
Common Stock covered by each outstanding Option, the number of shares of Common
Stock available for grant of additional Options, and the price per share of
Common Stock specified in each outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from any stock split or other subdivision or consolidation of
shares, the payment of any stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of such shares of Common Stock effected
without receipt of consideration by the Employer; provided, however, that
conversion of any convertible securities of the Employer shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Committee, whose determination in that respect shall be final,
binding and conclusive.

         No Incentive Stock Option shall be adjusted by the Committee pursuant
to this subparagraph 6(i) in a manner which causes the Incentive Stock Option to
fail to continue to qualify as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code.

         Except as otherwise expressly provided in this subsection 6(i), no
Optionee shall have any rights by reason of any stock split or the payment of
any stock dividend or any other increase or decrease in the number of shares of
Common Stock. Except as otherwise expressly provided in this subsection 6(i),
any issue by the Employer of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect the number of
shares or price of Common Stock subject to any Options, and no adjustments in
Options shall be made by reason thereof. The grant of an Option pursuant to the
Plan shall not affect in any way the right or power of the Employer to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure.

                 j. Date of Grant of Option. The date of grant of an Option
shall, for all purposes, be the date on which the Committee or its designee
makes the determination granting such Option. Said date of grant shall be
specified in the Option agreement.

                                        8
<PAGE>

                 k. Conditions Upon Issuance of Shares. Shares of Common Stock
shall not be issued with respect to an Option granted under the Plan unless the
exercise of such Option and the issuance and delivery of such shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the Common Stock may then be listed, and shall
be further subject to the approval of counsel for the Employer with respect to
such compliance.

                 l. Merger, Sale of Assets, Etc. Except as otherwise provided in
the written agreement that evidences an Option, in the event of the merger or
other reorganization of the Employer with and into any other corporation with
the Employer not surviving (other than a reorganization where the ownership of
the surviving company is substantially the same as that of the Employer), or in
the event of a proposed sale of substantially all of the assets of the Employer,
or in the event of a proposed dissolution or liquidation of the Employer, (i)
all outstanding and unexercised Options shall become immediately exercisable,
and (ii) such Options shall either be assumed by the successor corporation, or
parent thereof, in the reorganization transaction described above or be replaced
with a comparable award for the purchase of shares of the capital stock of the
successor corporation, except that if such Options are not so assumed or
replaced, then (iii) the Committee may, in the exercise of its sole discretion,
terminate all outstanding Options as of a date fixed by the Committee, which may
be sooner than the originally stated Option term. The Committee shall notify
each Optionee of such action in writing not less than sixty (60) days prior to
the termination date fixed by the Committee, and each Optionee shall have the
right to exercise his Option prior to said termination date.

                 m. Substitute Stock Options. In connection with the acquisition
or proposed acquisition by the Employer or any Subsidiary, whether by merger,
acquisition of stock or assets, or other reorganization transaction, of a
business any employees of which have been granted Incentive Stock Options, the
Committee is authorized to issue, in substitution of any such unexercised stock
option, a new Option under this Plan which confers upon the Optionee
substantially the same benefits as the old option; provided, however, that the
issuance of any new Option for an old Incentive Stock Option shall satisfy the
requirements of Section 424(a) of the Internal Revenue Code.

                 n. Tax Compliance. The Employer, in its sole discretion, may
take any actions reasonably believed by it to be required to comply with any
local, state, or federal tax laws relating to the reporting or withholding of
taxes attributable to the grant or exercise of any Option or the disposition of
any shares of Common Stock issued upon exercise of an Option, including, but not
limited to, (i) withholding from any person exercising an Option a number of
shares of Common Stock having a fair market value equal to the amount required
to be withheld by Employer under applicable tax laws, and (ii) withholding from
any form of compensation or other amount due an Optionee or holder of shares of
Common Stock issued upon exercise of an Option any amount required to be
withheld by Employer under applicable tax laws. Withholding or reporting shall
be considered required for purposes of this subparagraph if any tax deduction or
other favorable tax treatment available to Employer is conditioned upon such
reporting or withholding.

                                        9
<PAGE>

                 o. Other Provisions. Option agreements executed pursuant to the
Plan may contain such other provisions as the Committee shall deem advisable,
provided in the case of Incentive Stock Options that the provisions are not
inconsistent with the provisions of Section 422(b) of the Internal Revenue Code
or with any of the other terms and conditions of this Plan.

                 p. Director Options. Notwithstanding the terms and conditions
set forth above in this section 6, (i) no Director who is not also an Employee
shall be granted an Incentive Stock Option, and (ii) Non-Qualified Stock Options
granted to a Director who ceases to be a member of the Board of Employer or any
Subsidiary shall be exercisable on such terms and conditions as the Committee
shall determine.

         7.  Term of the Plan. The Plan shall become effective on the earlier of
(a) the date of adoption of the Plan by the Board; or (b) the date of
shareholder approval of the Plan. The Plan shall be unlimited in duration and,
in the event of a Plan termination as provided in Section 8 of the Plan, shall
remain in effect as long as any Options under it are outstanding; provided,
however, that, to the extent required by the Code, no Incentive Stock Option may
be granted under the Plan on a date that is more than ten years from the date
the Plan (or amendment increasing shares available under the Plan) is adopted
or, if earlier, the date the Plan (or amendment increasing shares available
under the Plan) is approved by shareholders.

         8.  Amendment or Early Termination of the Plan.

                 a. Amendment or Early Termination. The Board may terminate the
Plan at any time. The Board may amend the Plan at any time and from time to time
in such respects as the Board may deem advisable, except that, without proper
approval of the shareholders, no such revision or amendment shall:

                          (1) increase the number of shares of Common Stock
                 subject to the Plan other than in connection with an adjustment
                 under subsection 6(i) of the Plan; or

                          (2) make any amendment to the Plan which would require
                 shareholder approval under any applicable law or regulation.

         Any amendment made to this Plan which would constitute a "modification"
to Incentive Stock Options outstanding on the date of such amendment, shall not
be applicable to such outstanding Incentive Stock Options, but shall have
prospective effect only, unless the Optionee agrees otherwise.

                 b. Modification and Amendment of Option. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within the limitations of this Plan, the Board or
Committee may modify or amend outstanding Options granted under this Plan. The
modification or amendment of an outstanding Option shall not, without the
consent of the Optionee, impair or diminish any of his or her rights or any of
the obligations of the Company under such Option. Except as otherwise provided
in this Plan, no outstanding Option shall be terminated without the consent of
the Optionee. Unless the Optionee

                                       10
<PAGE>

agrees otherwise, any changes or adjustments made to outstanding Incentive Stock
Options granted under this Plan shall be made in such manner so as not to
constitute a "modification" as defined in Code Section 424(h) and so as not to
cause any Incentive Stock Option issued hereunder to fail to continue to qualify
as an Incentive Stock Option as defined in Code Section 422(b).



                             CERTIFICATE OF ADOPTION

         I certify that the foregoing Plan was adopted by the Board of Directors
of Columbia Banking System, Inc. on January 26, 2000, and approved by the
shareholders of Columbia Banking System, Inc. on April 25, 2000.




                                                   /s/ Jill L. Myers
                                                   ------------------------
                                                   Jill L. Myers, Secretary




















                                       11
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.B
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>ARTICLES OF INCORPORATION OF COLUMBIA BANKING SYS.
<TEXT>

                                                                    EXHIBIT 10.b
                                                                    ------------


                 AMENDED AND RESTATED ARTICLES OF INCORPORATION
                                       OF
                          COLUMBIA BANKING SYSTEM, INC.

The undersigned, being the Secretary of Columbia Banking System, Inc., executes
in duplicate the following Amended and Restated Articles of Incorporation for
the corporation.

                                    ARTICLE 1
                                    ---------

SECTION 1.1 The name of the corporation shall be COLUMBIA BANKING SYSTEM, INC.

                                    ARTICLE 2
                                    ---------

SECTION 2.1 The corporation's period of duration shall be perpetual.

                                    ARTICLE 3
                                    ---------

SECTION 3.1 The purpose for which the corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the Washington Business Corporation Act.

                                    ARTICLE 4
                                    ---------

SECTION 4.1 The aggregate number of shares which the corporation shall have
authority to issue is 51,975,000 common shares with no par value (hereinafter
referred to as "the common stock") and 2,000,000 preferred shares with no par
value (hereinafter referred to as "the preferred stock"). The preferred stock is
senior to the common stock, and the common stock is subject to the rights and
preferences of the preferred stock as provided in the following section.

SECTION 4.2 The board of directors is hereby vested with authority to divide any
or all of the preferred stock into one or more series and, within the
limitations set forth in the Washington Business Corporation Act (as amended
from time to time), to fix and determine or to amend the relative rights and
preferences of the shares of any series so established.

                                    ARTICLE 5
                                    ---------

SECTION 5.1 No shareholder shall have the preemptive right to acquire unissued
shares of the corporation.

                                    ARTICLE 6
                                    ---------

SECTION 6.1 Each shareholder entitled to vote at any election for directors
shall have the right to vote, in person or by proxy, the number of shares owned
by him for as many persons as there are

                                        1
<PAGE>

directors to be elected and for whose election he has a right to vote, and no
shareholder shall be entitled to cumulate his votes.

                                    ARTICLE 7
                                    ---------

SECTION 7.1 The corporation reserves the right to amend, alter, change or repeal
any provision of its Articles of Incorporation to the extent permitted by the
laws of the State of Washington. All rights of shareholders are granted subject
to this reservation.

                                    ARTICLE 8
                                    ---------

SECTION 8.1 The address of the initial registered office of the corporation is
1301 Fifth Avenue, Suite 3400, Seattle, Washington 98101. The name of its
initial registered agent at that address is J. James Gallagher.

                                    ARTICLE 9
                                    ---------

SECTION 9.1 The corporation may enter into a contract and otherwise transact
business as vendor, purchaser, or otherwise, with its directors, officers and
shareholders, and with corporations, associations, firms and entities in which
they are or may become interested as directors, officers, shareholders, members
or otherwise, as freely as though such adverse interest did not exist, even
though the vote, action or presence of such director, officer or shareholder may
be necessary to obligate the corporation upon such contract or transaction; and
in the absence of fraud, no such contract or transaction shall be avoided and no
such director, officer or shareholder shall be held liable to account to the
corporation, by reason of such adverse interest or any fiduciary relationship to
the corporation arising out of such office or stock ownership, for any profit or
benefit realized by him through any such contract or transaction; provided that
the nature of the interest of such director, officer or shareholder, though not
necessarily the details or extent thereof, be disclosed or known to the board of
directors or shareholders of the corporation, at the meeting thereof at which
such contract or transaction is authorized or confirmed. A general notice that a
director, officer or shareholder of the corporation is interested in any
corporation, association, firm or entity shall be sufficient disclosure as to
such director, officer or shareholder with respect to all contracts and
transactions with that corporation, association, firm or entity.

                                   ARTICLE 10
                                   ----------

SECTION 10.1 Nominations for election to the board of directors may be made by
the board of directors or by any stockholder of any outstanding class of stock
of the corporation entitled to vote for the election of directors. Nominations,
other than those made by the board of directors, shall be made in writing and
shall be delivered or mailed, U.S. mail, postage prepaid, to the Chairman of the
corporation not less than fourteen (14) days nor more than fifty (50) days prior
to any meeting of shareholders called for the election of directors; provided,
however, that if less than twenty-one days' notice of the meeting is given to
shareholders, such nomination shall be delivered or mailed, U.S. mail, postage
prepaid, to the Chairman of the corporation not later than the close of business
on the seventh day following the day on which the notice of meeting was

                                        2
<PAGE>

mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder:

         (a)  The name and address of each proposed nominee;

         (b)  The principal occupation of each proposed nominee;

         (c)  The total number of shares of stock of the corporation that will
              be voted for each proposed nominee;

         (d)  The name and address of the notifying shareholder; and

         (e)  The number of shares of common stock of the corporation owned by
              the notifying shareholder.

Nominations not made in accordance herewith may, in his discretion, be
disregarded by the Chairman of the meeting, and upon his instructions, the vote
teller may disregard all votes cast for such nominee.

                                   ARTICLE 11
                                   ----------

SECTION 11.1 In addition to the requirements of any applicable statute, and
notwithstanding any other provisions of any other articles of these Articles of
Incorporation, the affirmative vote of not less than 66 2/3% of the total shares
attributable to persons other than a Control Person (as defined below),
considered for the purposes of this Article 11 as one class, which are entitled
to be voted in an election of directors shall be required for the approval of
any Business Combination (as defined below) between the corporation and any
Control Person.

SECTION 11.2 The approval requirements of Section 11.1 shall not apply if
either:

         (a)  The Business Combination is approved by at least a majority of
              Continuing Directors (as defined below) of the corporation; or

         (b)  All the following conditions are satisfied:

              (i) The cash or fair market value of the property, securities or
other consideration to be received per share in the Business Combination by
holders of the common stock of the corporation is not less than the higher of:
(A) the highest price per share (including brokerage commissions, soliciting
dealers, fees and dealer-management compensation) paid by such Control Person in
acquiring any of its holdings of the corporation's common stock; (B) the highest
per share market price of the common stock during the three-month period
immediately preceding the date of the proxy statement described in (iii) below;
or (C) the per share value of the common stock at the end of the fiscal quarter
immediately prior to the Business Combination, as determined by an appraisal
prepared by persons, selected by the Continuing Directors, who are

                                        3
<PAGE>

independent of the corporation and the Control Person, and who are experienced
and expert in the area of corporate appraisal.

              (ii) After becoming a Control Person and prior to the consummation
of such Business Combination (A) such Control Person shall not have acquired any
newly issued shares of capital stock, directly or indirectly, from the
corporation (except upon conversion of convertible securities acquired by it
prior to becoming a Control Person or upon compliance with the provisions of
this Article 11 or as a result of a pro rata stock dividend or stock split), and
(B) such Control Person shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by the
corporation, or made any major changes in the corporation's business or equity
capital structure; and

              (iii) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934, whether or not the corporation is then subject
to such requirements, shall be mailed to the public stockholders of the
corporation for the purpose of soliciting stockholder approval of such Business
Combination.

SECTION 11.3  For the purpose of this Article 11

(a) The term "Business Combination" shall mean (i) any merger or consolidation
of the corporation with or into a Control Person, (ii) any sale, lease,
exchange, transfer or other disposition, including without limitation a mortgage
or any other security device, of all or any Substantial Part (as defined below)
of the assets of the corporation (including without limitation any voting
securities of a subsidiary) or of a subsidiary, to a Control Person, (iii) any
merger or consolidation of a Control Person with or into the corporation or a
subsidiary of the corporation, (iv) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a Control Person to
the corporation or a subsidiary of the corporation, (v) the issuance of any
securities of the corporation or a subsidiary of the corporation to a Control
Person, (vi) the acquisition by the corporation or a subsidiary of the
corporation of any securities of a Control Person, (vii) any reclassification of
common stock of the corporation, or any recapitalization involving common stock
of the corporation, consummated within five years after a Control Person becomes
a Control Person, or (viii) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of Business
Combination;

(b) The term "Continuing Director" shall mean (i) a director who was a member of
the board of directors of the corporation immediately prior to the time that a
Control Person became the beneficial owner (as this term is defined in Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act of
1934 on the date on which this amendment becomes effective) of 10% or more of
the outstanding shares of common stock of the corporation or (ii) a person so
designated before initially becoming a director by a majority of the then
Continuing Directors.

(c) The term "Control Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with their
Affiliates and Associates (as those terms

                                        4
<PAGE>

are defined on the date on which this amendment becomes effective in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934)
is the beneficial owner in the aggregate of 20% or more of the outstanding
shares of common stock of the corporation, and any Affiliate or Associate of any
such individual, corporation, partnership or other person or entity;

(d) The term "Substantial Part" shall mean more than 10% of the total assets of
the corporation in question, as of the end of its most recent fiscal year prior
to the time the determination is being made;

(e) Without limitation, any shares of common stock of the corporation which any
Control Person has the right to acquire at any time pursuant to any agreement,
or upon exercise of conversion rights, warrants or options, or otherwise, shall
be deemed outstanding and beneficially owned by such Control Person for purposes
of this Article 11; and

(f) For the purposes of Section 11.2(b)(i) of this Article 11, the phrase "other
consideration to be received" shall include, without limitation, common stock of
the corporation retained by its existing public stockholders in the event of a
Business Combination with such Control Person in which the corporation is the
surviving corporation.

SECTION 11.4 For the purposes of this Article 11, a majority of the Continuing
Directors shall have the power and duty to determine on the basis of information
known to them (a) whether a proposed transaction is subject to the provisions of
this Article 11, (b) the amount of shares of the corporation Beneficially Owned
by any person, (c) whether a person is an Affiliate or Associate of another, and
(d) such other matters as to which a determination may be required by the
provisions of this Article 11.

SECTION 11.5 The provisions set forth in this Article 11 may not be repealed or
amended in any respect or in any manner including any merger or consolidation of
the corporation with any other corporation unless the surviving corporation's
Articles of Incorporation contain an article to the same effect as this Article
11, except by the affirmative vote of the holders of not less than 66 2/3% of
the outstanding shares of common stock of the corporation, subject to the
provisions of any series of preferred stock which may at the time be
outstanding; provided, however, that if there is a Control Person such action
must be approved by not less than 66 2/3% of the total shares entitled to be
voted in an election of directors attributable to shares owned by person other
than the Control Persons.

                                   ARTICLE 12
                                   ----------

SECTION 12.1 The board of directors of the corporation, when evaluating any
offer of another party to (a) make a tender or exchange offer for any equity
security of the corporation, (b) merge or consolidate the corporation with
another corporation, or (c) purchase or otherwise acquire all or substantially
all of the properties and assets of the corporation, shall, in connection with
the exercise of its judgment in determining what is in the best interests of the
corporation and its stockholders, give due consideration to all relevant
factors, including without limitation the social and economic effects on the
employees, customers, suppliers and other constituents of the

                                       5
<PAGE>

corporation and its subsidiaries and on the communities in which the corporation
and its subsidiaries operate or are located.

                                   ARTICLE 13

SECTION 13.1  Defined Terms.  As used in this Article 13:

(a) "Egregious conduct" by a person shall mean acts or omissions that involve
intentional misconduct or a knowing violation of law, conduct violating section
23B. of the Revised Code of Washington, or participation in any transaction from
which the person will personally receive a benefit in money, property, or
services to which the person is not legally entitled.

(b) "Finally adjudged" shall mean stated in a judgment based upon clear and
convincing evidence by a court having jurisdiction, from which there is no
further right to appeal.

(c) "Director" shall mean any person who is a director of the corporation and
any person who, while a director of the corporation, is serving at the request
of the corporation as a director, officer, partner, trustee, employee, or agent
of another foreign or domestic corporation, partnership, joint venture, trust,
or other enterprise, or is a fiduciary or party in interest in relation to any
employee benefit plan covering any employee of the corporation or of any
employer in which it has an ownership interest; and "conduct as a director"
shall include conduct while a director is acting in any of such capacities.

(d) "Officer-director" shall mean any person who is simultaneously both an
officer and director of the corporation and any person who, while simultaneously
both an officer and director of the corporation, is serving at the request of
the corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, or is a fiduciary or party in interest in relation to any
employee benefit plan covering any employee of the corporation or of any
employer in which it has an ownership interest; and "conduct as an
officer-director" shall include conduct while an officer-director is acting as
an officer of the corporation or in any of such other capacities.

(e) "Subsidiary corporation" shall mean any corporation at least eighty percent
of the voting stock of which is held beneficially by this corporation.

SECTION 13.2 - LIABILITY OF DIRECTORS. No director, officer-director, former
director or former officer-director of the corporation shall be personally
liable to the corporation or its shareholders for monetary damages for conduct
as a director or officer-director occurring after the effective date of this
Article 13 unless the conduct is finally adjudged to have been egregious
conduct, as defined herein.

SECTION 13.3 - LIABILITY OF SUBSIDIARY DIRECTORS. No director, officer-director,
former director, or former officer-director of a subsidiary corporation shall be
personally liable in any action brought directly by this corporation as a
shareholder of the subsidiary corporation or derivatively on behalf of the
subsidiary corporation (or by any shareholder of this corporation
double-

                                        6
<PAGE>

derivatively on behalf of this corporation and the subsidiary
corporation) for monetary damages for conduct as a director or officer-director
of such subsidiary corporation occurring after the effective date of this
Article 13 unless the conduct is finally adjudged to have been egregious
conduct, as defined herein.

SECTION 13.4 - INDEMNIFICATION OF DIRECTORS. The corporation shall indemnify any
person who is, or is threatened to be made, a party to any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and
whether by or in the right of the corporation or its shareholders or by any
other party, by reason of the fact that the person is or was a director or
officer-director of the corporation or of a subsidiary corporation against
judgments, penalties or penalty taxes, fines, settlements (even if paid or
payable to the corporation or its shareholders or to a subsidiary corporation)
and reasonable expenses, including attorneys' fees, actually incurred in
connection with such proceeding unless the liability and expenses were on
account of conduct finally adjudged to be egregious conduct, as defined herein.
The reasonable expenses, including attorneys' fees, of such person incurred in
connection with such proceeding shall be paid or reimbursed by the corporation,
upon request of such person, in advance of the final disposition of such
proceeding upon receipt by the corporation of a written, unsecured promise by
the person to repay such amount if it shall be finally adjudged that the person
is not eligible for indemnification. All expenses incurred by such person in
connection with such proceeding shall be considered reasonable unless finally
adjudged to be unreasonable.

SECTION 13.5 - PROCEDURE. No action by the board of directors, the shareholders,
independent counsel, or any other person or persons shall be necessary or
appropriate to the determination of the corporation's indemnification obligation
in any specific case, to the determination of the reasonableness of any expenses
incurred by a person entitled to indemnification under this Article 13, nor to
the authorization of indemnification in any specific case.

SECTION 13.6 INTERNAL CLAIMS EXPECTED. Notwithstanding section 13.4, the
corporation shall not be obligated to indemnify any person for any expenses,
including attorneys' fees, incurred to assert any claim against the corporation
(except a claim based on section 13.7) or any person related to or associated
with it, including any person who would be entitled hereby to indemnification in
connection with the claim.

SECTION 13.7 - ENFORCEMENT OF RIGHTS. The corporation shall indemnify any person
granted indemnification rights under this Article 13 against any reasonable
expenses incurred by the person to enforce such rights.

SECTION 13.8 - SET-OFF OF CLAIMS. Any person granted indemnification rights
herein may directly assert such rights in set-off of any claim raised against
the person by or in the right of the corporation and shall be entitled to have
the same tribunal which adjudicates the corporation's claim adjudicate the
person's entitlement to indemnification by the corporation.

SECTION 13.9 - CONTINUATION OF RIGHTS. The indemnification rights provided in
this Article 13 shall continue as to a person who has ceased to be a director or
officer-director and shall inure to the benefit of the heirs, executors, and
administrators of such person.

                                        7
<PAGE>

SECTION 13.10 - EFFECT OF AMENDMENT OR REPEAL. Any amendment or repeal of this
Article 13 shall not adversely affect any right or protection of a director,
officer-director, former director or former officer-director existing at the
time of such amendment or repeal with respect to acts or omissions occurring
prior to such amendment or repeal.

SECTION 13.11 - SEVERABILITY OF PROVISIONS. Each of the substantive provisions
of this Article 13 is separate and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions.

                                   ARTICLE 14
                                   ----------

SECTION 14.1 The name and address of the incorporator is Mark C. Lewington, 1301
Fifth Avenue, Suite 3400, Seattle, WA 98101.

These Amended and Restated Articles of Incorporation correctly set forth without
change the corresponding provisions of the Articles of Incorporation as
heretofore amended, and supersede the original Articles of Incorporation and all
amendments thereto.

Executed in duplicate this 26th day of April, 2000.
                           ----

                                                   COLUMBIA BANKING SYSTEM, INC.


                                                   By:  /s/ Jill L. Myers
                                                        ------------------------
                                                        Jill L. Myers, Secretary
















                                        8
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<FILENAME>0004.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 9

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-START>                             JAN-01-2000
<PERIOD-END>                               JUN-30-2000
<CASH>                                           57369
<INT-BEARING-DEPOSITS>                            3430
<FED-FUNDS-SOLD>                                     0
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                      80644
<INVESTMENTS-CARRYING>                            7094
<INVESTMENTS-MARKET>                                 0
<LOANS>                                        1170531
<ALLOWANCE>                                      12072
<TOTAL-ASSETS>                                 1381515
<DEPOSITS>                                     1178982
<SHORT-TERM>                                     79000
<LIABILITIES-OTHER>                              10654
<LONG-TERM>                                       6500
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         91331
<OTHER-SE>                                       15048
<TOTAL-LIABILITIES-AND-EQUITY>                 1381515
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<INCOME-PRETAX>                                   9896
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