8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

01/29/09

COLUMBIA BANKING SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Washington	0-20288	91-1422237
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1301 A Street
Tacoma, WA	98402
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (253) 305-1900

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Items to be Included in this Report

Item 2.02 Results of Operations and Financial Condition

On January 29, 2009, we issued a press release announcing our fourth quarter and year ended December 31, 2008 financial results. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference in its entirety.

The information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

Item 8.01 Other Events

On January 29, 2009, we issued a press release that Columbia Banking System, Inc. declared a $0.04 per common share dividend. The dividend will be paid on February 25, 2009, to shareholders of record at the close of business on February 11, 2009.  A copy of the press release is attached as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits

(a) Financial statements. – not applicable

(b) Pro forma financial information. – not applicable

(c) Shell company transactions. – not applicable

(d) The following exhibits are being furnished herewith:

99.1   Press Release dated January 29, 2009 announcing fourth quarter and year ended December 31, 2008 financial results.

99.2   Press Release dated January 29, 2009 announcing a quarterly cash dividend.

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 hereunto duly authorized.

	COLUMBIA BANKING SYSTEM, INC.
Date: January 30, 2009	/s/ Melanie J. Dressel
	Melanie J. Dressel
	President and Chief Executive Officer

EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

January 29, 2009

Contacts:                                Melanie J. Dressel, President and

Chief Executive Officer

(253) 305-1911

Gary R. Schminkey, Executive Vice President

and Chief Financial Officer

(253) 305-1966

COLUMBIA BANKING SYSTEM ANNOUNCES EARNINGS FOR

FOURTH QUARTER AND FULL YEAR 2008

Company is Very Well-Capitalized, with Strong Liquidity,

Excellent Core Deposit Base and Stable Net Interest Margin

TACOMA, Washington---Columbia Banking System, Inc. (NASDAQ: COLB) today announced net income of $1.8 million for the quarter ended December 31, 2008, compared to $7.3 million for the same quarter of 2007.  On a diluted per common share basis, net income for the quarter was $0.07, a decline from $0.41 in 2007.  These results reflect a provision for loan losses of $13.3 million and an additional $1 million impairment charge related to the continuing decline of an investment in preferred stock issued by the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”).

For the year ended December 31, 2008, net income was $6.0 million compared to $32.4 million for 2007.  On a diluted per common share basis, earnings for the year were $0.31 a decrease from $1.91 in the prior year.  The lower earnings for the year resulted from a provision for loan losses of $41.2 million, primarily due to our portfolio of real estate related construction loans resulting from the rapid deterioration of the Pacific Northwest economic environment and a $19.5 million impairment charge

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related to the decline in the fair value of the investment in Freddie Mac and Fannie Mae preferred stock.  The remaining book value of this preferred stock is less than $500,000.

“We achieved a profitable fourth quarter and full year 2008 during a year of unprecedented economic challenges,” said Melanie Dressel, President and Chief Executive Officer. “Our focus on sound, fundamental banking, expense control and our diversified loan portfolio has resulted in profitable core operations. As shown in the table below, our core earnings for the fourth quarter 2008 were $2.2 million, compared to $8.5 million for the fourth quarter 2007, and were $14.8 million for the year 2008 compared to $33.5 million for the year 2007.  Despite the pressure of dramatic interest rate cuts during the quarter, our strong core deposit base has allowed us to maintain our stable net interest margin.  For the fourth quarter 2008, our net interest margin increased to 4.39% from 4.29% a year ago, and 4.34% for the third quarter 2008.”

Ms. Dressel said, “We have mitigated risk by continuing our focus on a diversified loan portfolio, avoiding concentration of risk in any one segment. This diversification is a strength for us, with 36% of our total portfolio in commercial business loans, 13% in real estate construction related loans, and approximately 9% in the for-sale housing segment. We remain concerned about the general decline in the economy with a resulting negative impact to our credit quality.  Nonperforming assets to total assets ended the year at 3.54%.  Until the economy stabilizes, we anticipate our annual provision for loan losses and net charge-offs to be elevated, similar to the levels we recorded in 2008.”

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For comparative purposes, the table below illustrates core earnings, a non-GAAP measure removing the effect of income and expense items not derived from customary business activities.

Core Earnings

	Three months ended December 31,					Twelve months ended December 31,
	2008			2007		2008			2007
	(Dollars in thousands, except per share data)
Net Income	$	1,814		$	7,298	$	5,968		$	32,381
Add: (amounts shown net of tax)
Preferred stock impairment write-down		660			--		12,594			--
Accrual of Visa litigation expense		--		$	1,155		--			1,155
Deduct: (amounts shown net of tax)
Gain on sale of investment securities		--			--		(545	)		--
Redemption of Visa and MasterCard shares		--			--		(1,952	)		--
Reversal of  Visa litigation expense		(259	)		--		(832	)		--
Insurance proceeds received on death of former officer		--			--		(395	)		--
Core Earnings	$	2,215		$	8,453	$	14,838		$	33,536
Earnings per Diluted Share:
GAAP earnings	$	0.07		$	0.41	$	0.31		$	1.91
Core earnings	$	0.12		$	0.47	$	0.82		$	1.98

The amounts contained in the above table have been tax affected to illustrate their impact on net income.

Ms. Dressel continued, “On November 21, 2008, we issued approximately $77 million in preferred stock.  Because of our financial strength, we were one of the first regional banks selected to participate in the U.S. Treasury’s Capital Purchase Program. This additional equity bolstered our already strong capital levels, and further affirms both our financial strength and our successful business model.   Our total risk-based capital ratio was 14.25% at December at 31, 2008, enhancing our ability to lend and increasing our flexibility to pursue strategic opportunities which may arise.  Our liquidity

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ratio remains strong as well at 34%, which translates into over $1 billion of available funding for the general operation of our bank and to meet the loan and deposit needs of our customers.”

Revenue (net interest income plus noninterest income) was $35.7 million for the fourth quarter of 2008, down 3% from $36.8 million one year ago.   Revenue for 2008 totaled $134.4 million, down 2% from $136.6 million for the year 2006. Despite the deep cuts of 200 basis points in interest rates during the quarter, the efficiency ratio improved to 57.62% and 59.88% for the fourth quarter and year to date 2008 as compared to 62.83% and 61.33% for the same periods in 2007.

 Return on average assets and return on average equity for the quarter was 0.24% and 1.60%, respectively, compared to 0.92% and 8.63%, respectively, for the same period in 2007.Return on average assets and return on average equity for the year were 0.19% and 1.59%, respectively, compared with 1.14% and 11.19% for 2007.

Results for the full year 2008 reflect the financial consolidation of Mountain Bank Holding Company and Town Center Bancorp, which were both acquired on July 23, 2007; accordingly, full year 2008 financial information includes a full year of the results of the two organizations.  Additionally, earnings per diluted common share for the year 2008 were affected by an increase in the total number of shares outstanding as a result of shares issued in conjunction with the 2007 acquisitions.

At December 31, 2008, Columbia’s total assets were $3.10 billion compared to $3.18 billion at December 31, 2007.  Total loans were $2.23 billion at December 31, 2008, down 2% from December 31, 2007, and total securities decreased $32.4 million to $540.5 million at December 31, 2008, a decrease of 6% from the prior year.  Total deposits decreased 5% from December 31, 2007, ending at $2.38 billion at December 31, 2008.  Core deposits, defined as demand, savings, money market accounts and certificates of deposit under $100,000, totaled $1.94 billion at year-end 2008, comprising 81.5% of total deposits.  Ms. Dressel commented, “We are actively managing our loan and deposit portfolios, which have declined as we reposition the loan portfolio to further manage risk and maintain diligence around our deposit pricing.”

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Operating Results

Quarter and Year-Ended December 31, 2008

Net Interest Income

Net interest income for the fourth quarter of 2008 was $29.3 million, a decrease of 1%, relatively unchanged from $29.6 million for the same quarter in 2007, primarily due to an increase in earning assets from the prior year. Columbia’s net interest margin increased to 4.39% in the fourth quarter of 2008 from 4.29% for the same quarter last year.  On a linked 2008 quarterly basis, the net interest margin was 4.38% for the first quarter, 4.39% for the second quarter, and 4.34% for the third quarter.

Average interest-earning assets were $2.77 billion during the quarter, a decrease of 2% compared with $2.84 billion during the same quarter of 2007.   The yield on average interest-earning assets decreased 129 basis points (a basis point equals 1/100 of 1%) to 5.92% during the quarter compared with 7.21% during the same quarter of 2007.  During the same period, average interest-bearing liabilities decreased to $2.19 billion, or 4%, from $2.29 billion in 2007. The cost of average interest-bearing liabilities decreased 169 basis points to 1.93%during the quarter, from 3.62% in the same quarter of 2007.

 For the twelve months ended December 31, 2008, net interest income increased to $119.5 million compared to $108.8 million in 2007. During 2008, the Company’s net interest margin increased to 4.38% from 4.35% for 2007.  Total revenue for the year was $134.4 million, a decrease of 2% from $136.6 million for 2007.  Average interest-earning assets grew 10% to $2.85 billion during 2008, compared with $2.60 billion during 2007. The yield on average interest-earning assets decreased 92 basis points to 6.33% during 2008, from 7.25% in 2007.  In comparison, average interest-bearing liabilities grew to $2.28 billion compared with $2.08 billion for 2007. The cost of average interest-bearing liabilities decreased 119 basis points to 2.44% during 2008 from 3.63% in 2007.

Noninterest Income

Noninterest income for the quarter was $6.3 million, a decrease of $865,000, or 12% from the same quarter in 2007.  The decrease is primarily due to the $1 million impairment charge for the

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quarter on Fannie Mae and Freddie Mac investment securities.  Service charges and other fees were $3.7 million for the quarter, unchanged from one year ago.

For the year, noninterest income was $14.9 million, a decrease of $13 million from $27.7 million for 2007, reflective of the $19.5 million impairment charge on investment securities mentioned above.  The decrease in noninterest income was partially offset with proceeds from the redemption of Visa and MasterCard shares of $3 million.  For the full year 2008, service charges and other fees were $14.8 million, an increase of 10% from $13.5 million for 2007, reflecting a change in our deposit account fee structure in conjunction with an increase in the number of deposit accounts.  Other income for the year increased $1.6 million, or 40%, due in part to insurance proceeds received for the death of a former officer in the amount of $612,000.

Noninterest Expense

Total noninterest expense for the fourth quarter was $21.8 million, a decrease of 15% from $25.7 million for the same quarter in 2007. This decrease is primarily due to increased legal and professional fees in the fourth quarter of 2007 related to the Visa litigation, and a recovery in the fourth quarter of 2008 of the same expense, as well as traditional year-end adjustments to accruals.  In response to current economic and market conditions, Columbia’s executive management team has elected to forgo increases in base salary for 2009.

Noninterest expense for the year was $92.1 million, an increase of 4% from $88.8 million from the prior year. The increase was due to compensation, employee benefits and occupancy costs related to the third quarter 2007 acquisitions.  Regulatory premiums were $1.6 million higher for the year 2008 over the same period in 2007, resulting from a credit received in 2007 which offset the majority of the FDIC premiums due and the increased deposit account base due in part from the acquisitions.

Nonperforming Assets and Loan Loss Provision 

As of December 31, 2008, non-performing assets were $109.6 million, compared to $78.2 million at September 30, 2008, and $14.6 million at December 31, 2007.  Residential construction loans continue to be the primary driver of nonperforming assets, representing $69.7 million, or 64%, of

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nonperforming assets.  Commercial real estate loans account for another $30.3 million, or 28% of non-performing loans. These commercial real estate non-performing assets are primarily centered in condominium development loans of approximately $9.1 million and retail development of approximately $15.0 million.  The increase in both of these categories reflects the continued weakness in the for sale housing industry. In addition, the more recent decline in retail sales and consumer spending has negatively affected retail leasing activity in a few of our more recently completed retail development projects.

For the quarter ended December 31, 2008, net loan charge-offs were approximately $6.3 million compared to $16.4 million for the linked quarter and $188,000 for the same period a year ago.  Net charge offs continue to be associated with loans principally in our for sale housing portfolio.  Past due loans were $10.4 million, or 0.46% of total loans, at December 31, 2008 compared to $13.1 million, or 0.59% of total loans, at September 30, 2008, and $11.6 million, or 0.51% of total loans, at December 31, 2007.

Ms. Dressel said, “We remain aggressive in managing our construction loan portfolio and continue to be successful at reducing our overall exposure in both the 1-4 family residential construction segment as well as in the commercial real estate construction segment.  For the year, total construction loans declined 33.1% due to payoffs and conversions to permanent loan status.  Our 1-4 family residential construction loans, where most of our challenges are centered, now represent less than 10% of our entire loan portfolio.  While we believe both of these segments will remain challenged during 2009, we are confident in our risk management strategies we have in place.”

Organizational Update

                Ms. Dressel noted, “In 2008, we continued our commitment to improving efficiencies while maintaining our core value of customer service.  During the second quarter, two Mt. Rainier branch locations in Federal Way and Auburn, Washington, were consolidated into two Columbia Bank branches due to their proximity.  In the third quarter, our 30th Avenue and Commerce branches in Longview, Washington, also consolidated and moved to a more visible and accessible new branch

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location.  In December, 2008, we opened Bank of Astoria’s long-awaited, full service branch in downtown Tillamook, Oregon.We have also begun construction of our long-planned Renton, Washington branch, the only location scheduled to open in 2009.  At the end of 2008, our strong retail system included 53 branches in 10 counties in Washington and Oregon.

Ms. Dressel continued, “Our long standing strategy continues to focus on improving efficiencies without jeopardizing the strength of our customer relationships, which are the foundation of our bank.  We are confident that our healthy core deposits, the diversity of our loan and deposit portfolios and our relationships with our customers, employees and communities will result in long-term benefits for our shareholders.”

Conference Call

Columbia Banking System management will discuss the company’s fourth quarter and full-year 2008 results on a conference call scheduled for Thursday, January 29, 2009 at 1:00 p.m. PST.     Interested parties may listen to this discussion by calling 1-888-318-7969; Conference ID code #80748714.    A conference call replay will be available from approximately 4:00 p.m. PST on January 29th through midnight PDT on Thursday, February 5, 2009.  The conference call replay can be accessed by dialing 1-800-642-1687 and entering Conference ID code 80748714.

Annual Meeting of Shareholders

Columbia Banking System’s Annual Meeting of Shareholders will be held at 1:00 PDT on April 22, 2008, at the Greater Tacoma Convention & Trade Center; 1500 Broadway, Tacoma, Washington.

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About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank which was selected by Washington CEO magazine as one of 2008’s “Washington’s Best 100 Companies to Work For”. With the 2007 acquisitions of Mountain Bank Holding Company and Town Center Bancorp and the 2008 internal merger of its subsidiary, Bank of Astoria, into Columbia Bank, Columbia Banking System has

53 banking offices in Pierce, King, Cowlitz, Kitsap, Thurston and Whatcom counties in Washington State, and Clackamas, Clatsop, Tillamook and Multnomah counties in Oregon. Included in Columbia Bank are former branches of Mt. Rainier National Bank, doing business as Mt. Rainier Bank, with 5 branches in King and Pierce counties. Columbia Bank does business under the Bank of Astoria name at the Bank of Astoria’s former branches located in Astoria, Warrenton, Seaside and Cannon Beach in Clatsop County and in Manzanita and Tillamook in Tillamook County. More information about Columbia can be found on its website at www.columbiabank.com.

# # #

Note Regarding Forward-Looking Statements

This news release includes forward looking statements, which management believes are a benefit to shareholders.  These forward looking statements describe Columbia’s management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia’s style of banking and the strength of the local economy.  The words “will,” “believe,” “expect,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements.   Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.  In addition to discussions about risks and uncertainties set forth from time to time in Columbia’s filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities:  (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which Columbia is engaged.

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FINANCIAL STATISTICS
Columbia Banking System, Inc.	Three Months Ended								Twelve Months Ended
Unaudited	December 31,								December 31,
(in thousands except per share)	2008				2007				2008			2007
Earnings
Net interest income	$	29,319			$	29,562			$	119,513		$	108,820
Provision for loan and lease losses	$	13,250			$	1,407			$	41,176		$	3,605
Noninterest income	$	6,334			$	7,199			$	14,850		$	27,748
Noninterest expense	$	21,813			$	25,736			$	92,125		$	88,829
Net income	$	1,814			$	7,298			$	5,968		$	32,381
Per Common Share
Net income (basic)	$	0.07			$	0.41			$	0.31		$	1.93
Net income (diluted)	$	0.07			$	0.41			$	0.31		$	1.91
Averages
Total assets	$	3,061,867			$	3,131,122			$	3,134,054		$	2,837,162
Interest-earning assets	$	2,767,854			$	2,836,045			$	2,851,555		$	2,599,379
Loans	$	2,214,918			$	2,241,893			$	2,264,486		$	1,990,622
Securities	$	535,763			$	572,412			$	565,299		$	581,122
Deposits	$	2,297,422			$	2,487,356			$	2,382,484		$	2,242,134
Core deposits	$	1,865,402			$	1,960,136			$	1,911,897		$	1,887,391
Interest-bearing deposits	$	1,837,166			$	2,023,255			$	1,921,737		$	1,803,660
Interest-bearing liabilities	$	2,193,437			$	2,289,566			$	2,277,422		$	2,075,564
Noninterest-bearing deposits	$	460,257			$	464,100			$	460,747		$	438,474
Shareholders' equity	$	368,184			$	335,510			$	354,387		$	289,297
Financial Ratios
Return on average assets		0.24	%			0.92	%			0.19	%		1.14	%
Return on average common equity		1.60	%			8.63	%			1.59	%		11.19	%
Return on average tangible common equity(1)		2.75	%			13.08	%			2.72	%		14.53	%
Average equity to average assets		12.02	%			10.72	%			11.31	%		10.20	%
Net interest margin		4.39	%			4.29	%			4.38	%		4.35	%
Efficiency ratio (tax equivalent)(2)		57.62	%			62.83	%			59.88	%		61.33	%
	December 31,
Period end	2008				2007
Total assets	$	3,097,079			$	3,178,713
Loans	$	2,232,332			$	2,282,728
Allowance for loan and lease losses	$	42,747			$	26,599
Securities	$	540,525			$	572,973
Deposits	$	2,382,151			$	2,498,061
Core deposits	$	1,941,047			$	1,996,393
Shareholders' equity	$	415,385			$	341,731
Book value per common share	$	18.82			$	19.03
Tangible book value per common share	$	13.23			$	13.29
Nonperforming assets
Nonaccrual loans	$	106,163			$	14,005
Restructured loans		587				456
Other real estate owned		2,874				181
Total nonperforming assets	$	109,624			$	14,642
Nonperforming loans to period-end loans		4.78	%			0.63	%
Nonperforming assets to period-end assets		3.54	%			0.46	%
Allowance for loan and lease losses to period-end loans		1.91	%			1.17	%
Allowance for loan and lease losses to nonperforming loans		40.04	%			183.94	%
Allowance for loan and lease losses to nonperforming assets		38.99	%			181.66	%
Net loan charges-offs	$	25,028		(3)	$	380		(4)

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(1)  Annualized net income, excluding core deposit intangible asset amortization and preferred dividends divided by average daily

       shareholders' equity, excluding average goodwill and average core deposit intangible asset.

(2)  Noninterest expense divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding gain/loss

      on sale of investment securities, net cost (gain) of OREO, proceeds from redemption of Visa and Mastercard shares, reversal of

      previously accrued Visa litigation expense, net income from BOLI policy swap transactions, death benefit insurance proceeds and

      other than temporary security impairment charge.

(3)  For the twelve months ended December 31, 2008.

(4)  For the twelve months ended December 31, 2007.

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FINANCIAL STATISTICS
Columbia Banking System, Inc.
Unaudited	December 31,
(in thousands)	2008					2007
Loan Portfolio Composition
Commercial business	$	810,922		36.3	%	$	762,365		33.4	%
Real Estate:
One-to-four family residential		57,237		2.6	%		60,991		2.7	%
Five or more family residential and commercial		862,595		38.7	%		852,139		37.3	%
Total Real Estate		919,832		41.3	%		913,130		40.0	%
Real Estate Construction:
One-to-four family residential		209,682		9.4	%		269,115		11.8	%
Five or more family residential and commercial		81,176		3.6	%		165,490		7.2	%
Total Real Estate Construction		290,858		13.0	%		434,605		19.0	%
Consumer		214,753		9.6	%		176,559		7.8	%
Subtotal loans		2,236,365		100.2	%		2,286,659		100.2	%
Less:  Deferred loan fees		(4,033	)	-0.2	%		(3,931	)	-0.2	%
Total loans	$	2,232,332		100.0	%	$	2,282,728		100.0	%
Loans held for sale	$	1,964				$	4,482
	December 31,
	2008					2007
Deposit Composition
Core deposits:
Demand and other non-interest bearing	$	466,078		19.6	%	$	468,237		18.7	%
Interest bearing demand		519,124		21.8	%		478,596		19.2	%
Money market		530,065		22.3	%		609,502		24.4	%
Savings		122,076		5.1	%		115,324		4.6	%
Certificates of deposit less than $100,000		303,704		12.7	%		324,734		13.0	%
Total core deposits		1,941,047		81.5	%		1,996,393		79.9	%
Certificates of deposit greater than $100,000		338,971		14.2	%		428,885		17.2	%
Wholesale certificates of deposit (CDARS®)		39,903		1.7	%		762		0.0	%
Wholesale certificates of deposit		62,230		2.6	%		72,021		2.9	%
Total deposits	$	2,382,151		100.0	%	$	2,498,061		100.0	%

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QUARTERLY FINANCIAL STATISTICS
Columbia Banking System, Inc.	Three Months Ended
Unaudited	Dec 31	Sept 30	Jun 30	Mar 31	Dec 31
(in thousands except per share)	2008	2008	2008	2008	2007
Earnings
Net interest income	$29,319	$29,593	$30,274	$30,327	$29,562
Provision for loan and lease losses	$13,250	$10,500	$15,350	$2,076	$1,407
Noninterest income	$6,334	$(10,946)	$9,305	$10,157	$7,199
Noninterest expense	$21,813	$23,391	$23,367	$23,554	$25,736
Net income (loss)	$1,814	$(8,759)	$1,936	$10,977	$7,298
Per Common Share
Net income (loss) (basic)	$0.07	$(0.49)	$0.11	$0.61	$0.41
Net income (loss) (diluted)	$0.07	$(0.49)	$0.11	$0.61	$0.41
Averages
Total assets	$3,061,867	$3,106,556	$3,182,877	$3,186,013	$3,131,122
Interest-earning assets	$2,767,854	$2,830,894	$2,902,449	$2,906,172	$2,836,045
Loans	$2,214,918	$2,241,574	$2,297,661	$2,304,588	$2,241,893
Securities	$535,763	$558,990	$584,780	$582,056	$572,412
Deposits	$2,297,422	$2,365,222	$2,413,225	$2,455,190	$2,487,356
Core deposits	$1,865,402	$1,925,780	$1,923,973	$1,932,813	$1,960,136
Interest-bearing deposits	$1,837,166	$1,896,767	$1,950,123	$2,004,095	$2,023,255
Interest-bearing liabilities	$2,193,437	$2,259,655	$2,319,556	$2,338,159	$2,289,566
Noninterest-bearing deposits	$460,257	$468,455	$463,102	$451,095	$464,100
Shareholders' equity	$368,184	$344,158	$354,895	$350,271	$335,510
Financial Ratios
Return on average assets	0.24%	-1.12%	0.24%	1.39%	0.92%
Return on average common equity	1.60%	-10.10%	2.19%	12.60%	8.63%
Return on average tangible common equity	2.75%	-13.89%	3.56%	18.33%	13.08%
Average equity to average assets	12.02%	11.08%	11.15%	10.99%	10.72%
Net interest margin	4.39%	4.34%	4.39%	4.38%	4.29%
Efficiency ratio (tax equivalent)	57.62%	60.34%	59.31%	62.36%	62.83%
Period end
Total assets	$3,097,079	$3,104,980	$3,169,607	$3,246,586	$3,178,713
Loans	$2,232,332	$2,216,133	$2,275,719	$2,300,465	$2,282,728
Allowance for loan and lease losses	$42,747	$35,814	$41,724	$27,914	$26,599
Securities	$540,525	$551,062	$549,755	$598,470	$572,973
Deposits	$2,382,151	$2,355,821	$2,398,924	$2,526,514	$2,498,061
Core deposits	$1,941,047	$1,944,779	$1,933,256	$1,997,975	$1,996,393
Shareholders' equity	$415,385	$336,435	$344,270	$351,667	$341,731
Book value per common share	$18.82	$18.54	$19.01	$19.45	$19.03
Tangible book value per common share	$13.23	$12.94	$13.35	$13.77	$13.29
Nonperforming assets
Nonaccrual loans	$106,163	$76,164	$71,730	$14,368	$14,005
Restructured loans	587	746	540	468	456
Other personal property owned	--	--	--	187	--
Other real estate owned	2,874	1,288	--	--	181
Total nonperforming assets	$109,624	$78,198	$72,270	$15,023	$14,642
Nonperforming loans to period-end loans	4.78%	3.47%	3.18%	0.64%	0.63%
Nonperforming assets to period-end assets	3.54%	2.52%	2.28%	0.46%	0.46%
Allowance for loan and lease losses to period-end loans	1.91%	1.62%	1.83%	1.21%	1.17%
Allowance for loan and lease losses to nonperforming loans	40.04%	46.57%	57.73%	188.15%	183.94%
Allowance for loan and lease losses to nonperforming assets	38.99%	45.80%	57.73%	185.81%	181.66%
Net loan charges-offs	$6,317	$16,410	$1,540	$761	$188

13

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Columbia Banking System, Inc.	Three Months Ended					Twelve Months Ended
(Unaudited)	December 31,					December 31,
(in thousands except per share)	2008			2007		2008			2007
Interest Income
Loans	$	33,603		$	43,646	$	147,830		$	156,253
Taxable securities		4,362			4,547		18,852			18,614
Tax-exempt securities		1,979			1,998		7,976			7,923
Federal funds sold and deposits in banks		23			247		402			1,427
Total interest income		39,967			50,438		175,060			184,217
Interest Expense
Deposits		8,863			17,313		45,307			59,930
Federal Home Loan Bank and Federal Reserve Bank advances		1,109			2,948		7,573			11,065
Long-term obligations		461			573		1,800			2,177
Other borrowings		215			42		867			2,225
Total interest expense		10,648			20,876		55,547			75,397
Net Interest Income		29,319			29,562		119,513			108,820
Provision for loan and lease losses		13,250			1,407		41,176			3,605
Net interest income after provision for loan and lease losses		16,069			28,155		78,337			105,215
Noninterest Income
Service charges and other fees		3,684			3,685		14,813			13,498
Merchant services fees		1,881			2,029		8,040			8,373
Redemption of Visa and Mastercard shares		--			--		3,028			--
Gain (loss) on sale of investment securities, net		(36	)		--		846			--
Impairment charge on investment securities		(1,024	)		--		(19,541	)		--
Bank owned life insurance ("BOLI")		488			507		2,075			1,886
Other		1,341			978		5,589			3,991
Total noninterest income		6,334			7,199		14,850			27,748
Noninterest Expense
Compensation and employee benefits		11,398			12,338		49,315			46,703
Occupancy		3,132			3,299		12,838			12,322
Merchant processing		827			883		3,558			3,470
Advertising and promotion		527			612		2,324			2,391
Data processing		979			701		3,486			2,564
Legal and professional fees		490			2,707		1,969			4,912
Taxes, licenses and fees		650			793		2,917			2,882
Regulatory premiums		616			334		2,141			507
Net (gain) loss on sale of other real estate owned		(30	)		5		(49	)		5
Other		3,224			4,064		13,626			13,073
Total noninterest expense		21,813			25,736		92,125			88,829
Income before income taxes		590			9,618		1,062			44,134
Provision (benefit) for income taxes		(1,224	)		2,320		(4,906	)		11,753
Net Income	$	1,814		$	7,298	$	5,968		$	32,381
Net Income Applicable to Common Shareholders (1)	$	1,344		$	7,298	$	5,498		$	32,381
Earnings per common share
Basic	$	0.07		$	0.41	$	0.31		$	1.93
Diluted	$	0.07		$	0.41	$	0.31		$	1.91
Dividends paid per common share	$	0.07		$	0.17	$	0.58		$	0.66
Weighted average number of common shares outstanding		17,959			17,783		17,914			16,802
Weighted average number of diluted common shares outstanding		17,972			17,982		18,010			16,972
(1) For 2008, QTD and YTD net income less accumulated preferred dividends ($427) and amortization of preferred stock discount ($43)

14

CONSOLIDATED CONDENSED BALANCE SHEETS
Columbia Banking System, Inc.
(Unaudited)					December 31,
(in thousands)					2008		2007
ASSETS
Cash and due from banks					$	84,787	$	82,735
Interest-earning deposits with banks						3,943		11,240
Total cash and cash equivalents						88,730		93,975
Securities available for sale at fair value (amortized cost of $525,110 and $558,685, respectively)						528,918		561,366
Federal Home Loan Bank stock at cost						11,607		11,607
Loans held for sale						1,964		4,482
Loans, net of deferred loan fees of ($4,033) and ($3,931), respectively						2,232,332		2,282,728
Less: allowance for loan and lease losses						42,747		26,599
Loans, net						2,189,585		2,256,129
Interest receivable						11,646		14,622
Premises and equipment, net						61,139		56,122
Other real estate owned						2,874		181
Goodwill						95,519		96,011
Core deposit intangible, net						5,908		7,050
Other assets						99,189		77,168
Total Assets					$	3,097,079	$	3,178,713
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing					$	466,078	$	468,237
Interest-bearing						1,916,073		2,029,824
Total deposits						2,382,151		2,498,061
Federal Home Loan Bank and Federal Reserve Bank advances						200,000		257,670
Securities sold under agreements to repurchase						25,000		--
Other borrowings						201		5,061
Long-term subordinated debt						25,603		25,519
Other liabilities						48,739		50,671
Total liabilities						2,681,694		2,836,982
Commitments and contingent liabilities
Shareholders' equity
	December 31,
	2008		2007
Preferred stock (no par value, 76,898 aggregate liquidation preference)
Authorized shares		2,000		2,000
Issued and outstanding(1)		77		-		73,743		--
Common Stock (no par value)
Authorized shares		63,033		63,033
Issued and outstanding		18,151		17,953		233,192		226,550
Retained earnings						103,061		110,169
Accumulated other comprehensive income						5,389		5,012
Total shareholders' equity						415,385		341,731
Total Liabilities and Shareholders' Equity					$	3,097,079	$	3,178,713
(1) Net EESA of 2008 Capital Purchase Program proceeds ($76,868) less net preferred stock discount attributable to common stock warrant ($3,125)

15

EX-99.2

EXHIBIT 99.2

FOR IMMEDIATE RELEASE

January 29, 2009

Contacts:                      Melanie J. Dressel, President and

Chief Executive Officer

(253) 305-1911

Gary R. Schminkey, Executive Vice President

and Chief Financial Officer

(253) 305-1966

COLUMBIA BANKING SYSTEM DECLARES

CASH DIVIDEND

TACOMA, Washington--- The Board of Directors of Columbia Banking System, Inc. (Nasdaq: COLB) announced that a quarterly cash dividend of $0.04 per share will be paid on February 25, 2009 to shareholders of record as of the close of business on February 11, 2009.

About Columbia        

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank. With the 2007 acquisitions of Mountain Bank Holding Company and Town Center Bancorp and the 2008 internal merger of its subsidiary, Bank of Astoria, into Columbia Bank, Columbia Banking System has 53 banking offices in Pierce, King, Cowlitz, Kitsap, Thurston and Whatcom counties in Washington State, and Clackamas, Clatsop, Tillamook and Multnomah counties in Oregon. Included in Columbia Bank are former branches of Mt. Rainier National Bank, doing business as Mt. Rainier Bank, with 5 branches in King and Pierce counties. Columbia Bank does business under the Bank of Astoria name at the Bank of Astoria’s former branches located in Astoria, Warrenton, Seaside and Cannon Beach in Clatsop County and in Manzanita and Tillamook in Tillamook County. More information about Columbia can be found on its website at www.columbiabank.com.

###

Note Regarding Forward Looking Statements

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as “may,” “expected,” “anticipate”, “continue,” or other comparable words.  In addition, all statements other than statements of historical facts that address activities that Columbia expects or anticipates will or may occur in the future are forward-looking statements.  Readers are encouraged to read the SEC reports of Columbia, particularly its form 10-K for the Fiscal Year ended December 31, 2007, for meaningful cautionary language discussing why actual results may vary materially from those anticipated by management.