8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(AMENDMENT NO. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

May 20, 2011

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))

EXPLANATORY NOTE

On May 26, 2011, Columbia Banking System, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) to report that its wholly owned subsidiary, Columbia State Bank (the “Bank”), had entered into a definitive agreement with the Federal Deposit Insurance Corporation ( “FDIC”) on May 20, 2011, pursuant to which the Bank acquired certain assets and assumed certain liabilities of Summit Bank, a Washington state-chartered bank headquartered in Burlington, Washington (the “SB Acquisition”). In that filing, the Company indicated that it would amend the Original Form 8-K at a later date to provide financial information required by Item 9.01 of Form 8-K. This amendment is being filed to update the disclosures in Item 2.01 of the Original Form 8-K and to provide financial information required by Item 9.01. In accordance with the guidance provided in Securities and Exchange Commission (the “Commission”) Staff Accounting Bulletin Topic 1.K, Financial Statements of Acquired Troubled Financial Institutions (“SAB 1:K”), the Company has omitted certain financial information of Summit Bank required by Rule 3-05 of Regulation S-X. SAB 1:K provides relief from the requirements of Rule 3-05 of Regulation S-X under certain circumstances, including a transaction such as the SB Acquisition, in which the registrant engages in an acquisition of a troubled financial institution for which audited financial statements are not reasonably available and in which federal assistance is an essential and significant part of the transaction.

Statements made in this Amendment No. 1 on Form 8-K/A, other than those concerning historical financial information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements regarding the Company’s expectations concerning its financial condition, operating results, cash flows, earnings, net interest margin, net interest income, efficiencies achieved through combination of operational processes, liquidity, expected reimbursements under the shared-loss agreements and other effects of the shared-loss agreements and capital resources. A discussion of risks, uncertainties and other factors that could cause actual results to differ materially from management’s expectations is set forth in this document and exhibits, and under the captions “Forward-Looking Statements”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, expected to be filed on August 5, 2011.

Item 2.01 Completion of Acquisition or Disposition of Assets

Effective May 20, 2011, the Bank acquired certain assets and assumed certain liabilities of Summit Bank from the FDIC as receiver for Summit Bank, pursuant to the terms of a purchase and assumption agreement entered into by the Bank and the FDIC on May 20, 2011 (the “Purchase and Assumption Agreement” or “Agreement”). The SB Acquisition included all three branches of Summit Bank, which opened as branches of the Bank as of Monday, May 23, 2011.

Under the terms of the Purchase and Assumption Agreement, the Bank acquired certain assets of Summit Bank with a fair value of approximately $92.7 million, including $71.5 million of loans, $16.0 million of cash and cash equivalents, $871 thousand of investment securities, and $4.3 million of other assets. Liabilities with a fair value of approximately $131.1 million were also assumed, including $123.3 million of insured and uninsured deposits and $7.8 million of Federal Home Loan Bank (“FHLB”) advances. The fair values of the assets acquired and liabilities assumed were determined based on the requirements of the Fair Value Measurements and Disclosures topic of the Financial Accounting Standards Board Accounting Standards Codification (the “FASB ASC”). The Statement of Assets Acquired and Liabilities Assumed by the Bank, dated as of May 20, 2011, and the accompanying notes thereto, are attached hereto as Exhibit 99.1 and incorporated herein by reference (the “Audited Statement”). The initial accounting for acquired loans and the related indemnification asset for the SB Acquisition was incomplete as of August 5, 2011. The amounts currently recognized in the financial statements have been determined provisionally as we are completing a fair value analysis of those assets utilizing an income approach. The amounts are also subject to adjustments based upon final settlement with the FDIC. In addition, the tax treatment of FDIC assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition date. The terms of the Agreement provide for the FDIC to indemnify the Bank against claims with respect to liabilities of Summit Bank not assumed by the Bank and certain other types of claims identified in the Agreement. The disclosure set forth in this Item 2.01 reflects the status of these items to the best of management’s knowledge as of August 5, 2011.

In connection with the SB Acquisition, the Bank entered into loss sharing agreements (each, a “shared-loss agreement” and collectively, the “shared-loss agreements”) with the FDIC which collectively cover substantially all of the $71.5 million of Summit Bank’s loans and all of the $2.7 million of other real estate owned (“OREO”). The Bank will share in the losses, which begins with the first dollar of loss incurred, of the loan pools (including single family residential mortgage loans, commercial loans, and OREO) covered (“covered assets”) under the shared-loss agreements. Pursuant to the terms of the shared-loss agreements, the FDIC is obligated to reimburse the Bank 80% of eligible losses on covered assets. The Bank has a corresponding obligation to reimburse the FDIC for 80% of eligible recoveries related to covered assets.

The shared-loss agreement for commercial and single family residential mortgage loans is in effect for five years and ten years, respectively, from the May 20, 2011 acquisition date and the loss recovery provisions for such loans are in effect for eight years and ten years, respectively, from the acquisition date.

In June 2021, approximately ten years following the acquisition date, the Bank is required to make a payment to the FDIC in the event that losses on covered assets under the shared-loss agreements have been less than a threshold level. The payment amount will be 50% of the excess, if any, of (i) $3.4 million (or 20% of the stated threshold of $17.0 million) over (ii) the sum of (a) ($2.375 million) (or 25% of the asset discount of ($9.5 million)), plus (b) 20% of the net loss amount (as defined in the Agreement), plus (c) 3.5% of covered assets. As of June 30, 2011, the Bank estimates that there will be no liability under this provision.

The shared-loss agreements are subject to certain servicing procedures as specified in an agreement with the FDIC. The expected net reimbursements under the shared-loss agreements were recorded at their estimated fair value of $27.2 million on the acquisition date.

The Bank did not immediately acquire all the real estate, banking facilities, furniture or equipment of Summit Bank as part of the Purchase and Assumption Agreement. However, the Bank has the option to purchase or lease the real estate and furniture and equipment from the FDIC. The term of these options expires 90 days after May 20, 2011, unless extended by the FDIC. Acquisition costs of the real estate and furniture and equipment will be based on current appraisals and determined at a later date. Currently all banking facilities and equipment of Summit Bank are being leased from the FDIC on a month-to-month basis.

The foregoing summary of the Agreement, including the shared-loss agreements, is not complete and is qualified in its entirety by reference to the full text of the Agreement and certain exhibits attached thereto, a copy of which was previously filed as Exhibit 2.1 to the Original Form 8-K and is incorporated by reference into this Item 2.01.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired.

Discussion

As set forth in Item 2.01 above, on May 20, 2011, the Bank acquired certain assets and assumed substantially all of the deposits and certain liabilities of Summit Bank pursuant to the Purchase and Assumption Agreement with the FDIC. A narrative description of the anticipated effects of the SB Acquisition on the Company’s financial condition, liquidity, capital resources and operating results is presented below. This discussion should be read in conjunction with the historical financial statements and the related notes of the Company, which were filed with the Commission on Form 10-K on March 1, 2011, Form 10-Q on May 6, 2011, and the Audited Statement, which is attached hereto as Exhibit 99.1.

The SB Acquisition increased the Bank’s total assets and total deposits, which are expected to positively affect the Bank’s operating results, to the extent the Bank earns more from interest earned on its assets than it pays in interest on deposits and other borrowings. The ability of the Bank to successfully collect interest and principal on loans acquired will also impact the Bank’s cash flows and operating results.

The Company has determined that the acquisition of the net assets of Summit Bank constitutes a business acquisition as defined by the Business Combinations topic of the FASB ASC. Accordingly, the assets acquired and liabilities assumed as of May 20, 2011 are presented at their fair values in the table below as required by that topic. In many cases, the determination of these fair values required management to make estimates about discount rates, expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The initial accounting for acquired loans and the related indemnification asset for the SB Acquisition was incomplete as of August 5, 2011. The amounts currently recognized in the financial statements have been determined provisionally as we are completing a fair value analysis of those assets utilizing an income approach. Additionally, the Bank and the FDIC are engaged in ongoing discussions that may impact which assets and liabilities are ultimately acquired or assumed by the Bank and/or the purchase price.

Financial Condition

In the SB Acquisition, the Bank purchased loans with a fair value of $71.5 million, net of a $38.4 million discount. This amount represented approximately 3% of the Bank’s total loans (net of the allowance for loan and lease losses) at December 31, 2010. In addition, the Bank acquired $16.0 million in cash and cash equivalents and $871 thousand in investment securities at fair value. The Bank also acquired OREO with a fair value of $2.7 million. Finally, in connection with this acquisition, the Bank recorded an FDIC indemnification asset of $27.2 million, $3.8 million of goodwill and a $509 thousand core deposit intangible.

Investment Portfolio

The Bank acquired investment securities with an estimated fair value of $871 thousand in the SB Acquisition. The acquired securities were predominantly State and Municipal securities and U.S. Government agency and sponsored enterprise mortgage-backed securities and collateralized mortgage obligations.

The following table presents the composition of the investment securities portfolio acquired at May 20, 2011:

	May 20, 2011
	(in thousands)
U.S. Government agency and sponsored enterprise mortgage-backed securities and collateralized mortgage obligations	$	134
State and municipal securities		737
Investment securities	$	871

In addition, the Bank also acquired $406 thousand in FHLB stock.

The following table presents a summary of yields and contractual maturities of the debt securities in the investment securities portfolio acquired at May 20, 2011:

	Due through one year					After one but within five years					After five but within ten years					After ten years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
	(dollars in thousands)
U.S. Government agency and sponsored enterprise mortgage-backed securities and collateralized mortgage obligations	$	—		—	%	$	—		—	%	$	19		3.08	%	$	115		4.50	%	$	134		4.30	%
State and municipal securities		150		0.05	%		133		3.85	%		454		5.09	%		—		—	%		737		3.84	%
Total	$	150		0.05	%	$	133		3.85	%	$	473		5.01	%	$	115		4.50	%	$	871		3.91	%

Acquired loans

The following table presents the balance of each major category of loans acquired in the SB Acquisition as of May 20, 2011:

	May 20, 2011
	Amount			% of loans
	(dollars in thousands)
Commercial business	$	61,725			56	%
Real estate:
One-to-four family residential		9,245			8	%
Commercial and five or more family residential properties		17,145			16	%
Total real estate		26,390			24	%
Real estate construction:
One-to-four family residential		7,119			6	%
Commercial and five or more family residential properties		2,806			3	%
Total real estate construction		9,925			9	%
Consumer		11,796			11	%
Total acquired loans		109,836			100	%
Total discount resulting from acquisition date fair value		(38,384	)
Net acquired loans	$	71,452

At the May 20, 2011 acquisition date, the Bank estimated the fair value of the SB Acquisition loan portfolio at $71.5 million. As part of the loan portfolio fair value estimation, the Bank also established the FDIC indemnification asset, which represents the present value of the estimated losses on covered loans to be reimbursed by the FDIC. The FDIC indemnification asset will be reduced as losses are recognized on covered loans and loss sharing payments are received from the FDIC. Realized losses in excess of acquisition date estimates will increase the FDIC indemnification asset. Conversely, if realized losses are less than acquisition date estimates, the FDIC indemnification asset will be reduced by a charge to earnings.

Covered loans under the shared-loss agreements with the FDIC are reported in loans exclusive of the estimated FDIC indemnification asset. The covered loans acquired in the SB Acquisition transaction are recorded at their fair value at acquisition date.

Loans purchased with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are accounted for under Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, formerly SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. In situations where such loans have similar risk characteristics, loans are aggregated into pools to estimate cash flows. A pool is accounted for as a single asset with a single interest rate, cumulative loss rate, and cash flow expectation. Subsequent to the acquisition date, any increases in expected cash flows are prospectively recorded as interest income and any decreases in expected cash flows are recognized by recording an allowance for losses on acquired loans. Any disposals of loans, including sales of loans, payments in full or foreclosures result in the removal of the loan from the loan pool at the carrying amount. The Company elected to account for all loans acquired in the SB Acquisition under ASC 310-30.

The Bank also acquired OREO with a fair value of $2.7 million. The Bank refers to the certain loans and OREO acquired in the SB Acquisition as “covered assets” as the Bank will be reimbursed by the FDIC for a substantial portion of any future losses on them under the terms of the shared-loss agreements.

Contractual Maturity of Loan Portfolio

The following table presents the maturity schedule with respect to certain individual categories of loans acquired and provides separate analyses with respect to fixed rate loans and floating rate loans as of May 20, 2011. The amounts shown in the table are unpaid balances.

	Due through one year		After one but within five years		After five years		Total
	(in thousands)
Commercial business	$	14,029	$	38,241	$	9,455	$	61,725
Real estate:
One-to-four family residential		1,116		6,683		1,446		9,245
Commercial and five or more family residential properties		2,275		11,296		3,574		17,145
Total real estate		3,391		17,979		5,020		26,390
Real estate construction:
One-to-four family residential		1,820		4,977		322		7,119
Commercial and five or more family residential properties		5		2,801		—		2,806
Total real estate construction		1,825		7,778		322		9,925
Consumer		2,732		6,150		2,914		11,796
Total loans	$	21,977	$	70,148	$	17,711	$	109,836
	Due through one year		After one but within five years		After five years		Total
	(in thousands)
Total fixed rate	$	7,564	$	40,750	$	6,827	$	55,141
Total variable rate		14,413		29,398		10,884		54,695
Total	$	21,977	$	70,148	$	17,711	$	109,836

Deposits

In the SB Acquisition, the Bank assumed $123.3 million in deposits at fair value. This amount represents approximately 4% of the Bank’s total deposits of $3.33 billion at December 31, 2010. The following table presents a summary of the deposits acquired and the average interest rates in effect at the acquisition date:

	May 20, 2011
	Amount			Wtd. Avg. Rate
	(dollars in thousands)
Demand and other noninterest-bearing	$	7,476
Interest-bearing demand		3,105			0.45	%
Money market		6,537			0.85	%
Savings		5,305			0.66	%
Time deposits:
Less than $100,000		73,476			1.36	%
$100,000 or greater		27,397			1.46	%
Time deposits fair value adjustment		(17	)
Total deposits	$	123,279

At May 20, 2011, scheduled maturities of time deposits were as follows:

Years Ending December 31,	May 20, 2011
	(in thousands)
2011	$	36,707
2012		45,868
2013		9,365
2014		1,479
2015		3,895
Thereafter		3,559
Total	$	100,873

Under the terms of the SB Acquisition, the Bank was permitted to repay and re-price deposits assumed, including time and brokered deposits, which it did promptly after the acquisition. This re-pricing triggered time and brokered deposit run-off in-line with management’s expectations.

In its assumption of the deposit liabilities, the Bank determined that the customer relationships associated with these deposits have intangible value. The Bank applied the Business Combinations topic of the FASB ASC, which prescribes the accounting for goodwill and other intangible assets, such as core deposit intangibles in a business combination. The Bank determined the fair value of a core deposit intangible asset totaling approximately $509 thousand, which will be amortized based on the estimated economic benefits received. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and the age of deposit relationships. The estimation of the life and value of the core deposit intangible asset acquired is necessarily subjective. See Note 1 to the Audited Statement. The Company does not expect the core deposit intangible asset acquired or its amortization to have a material effect upon future results of operations, liquidity or capital resources.

Borrowings

The Bank assumed $7.8 million in FHLB advances, at fair value. The FHLB advances acquired at May 20, 2011 are term advances and were secured by a blanket lien on eligible loans. We may repay the advances at any time with a prepayment penalty. Of the $7.8 million in outstanding advances at May 20, 2011, $2.2 million matured and were repaid during June 2011.

The following table summarizes the principal balance of FHLB advances outstanding and weighted average interest rates at May 20, 2011:

	May 20, 2011
Year of Maturity	Amount		Wtd. Avg. Rate
	(dollars in thousands)
2011	$	6,220		1.44	%
2013		1,500		2.38	%
Borrowings fair value adjustment		52
Total borrowings	$	7,772

Operating Results and Cash Flows

The Company’s management has from time to time become aware of acquisition opportunities and has performed various levels of review related to potential acquisitions in the past. This particular transaction was attractive to the Company for a variety of reasons, including the:

• ability to increase the Company’s market share in the Pacific Northwest,

• attractiveness of immediate core deposit growth with a low cost of funds, and

• opportunities to enhance income and efficiency due to the centralization of some duties and elimination of duplications of effort.

The Company expects that the acquisition will positively affect its operating results in the near term. The Company believes that the transaction will improve the Company’s net interest income, as the Company earns more from interest earned on its loans and investments than it pays in interest on deposits and borrowings.

The degree to which the Company’s operating results may be adversely affected by the acquired loans is offset to a significant extent by the shared-loss agreements and the related discounts reflected in the fair value of these assets at the acquisition date. In accordance with the provisions of the Receivables topic of the FASB ASC, the fair values of the acquired loans reflect an estimate of expected losses related to the acquired loans. As a result, the Company’s operating results would only be adversely affected by loan losses of the acquired loans to the extent that such losses exceed the expected losses reflected in the fair value of the acquired loans at the acquisition date.

The shared-loss agreements will likely have a material impact on the cash flows and operating results of the Bank in both the short-term and the long-term. In the short-term, it is likely that there will be a significant amount of the covered loans that will experience deterioration in payment performance or will be determined to have inadequate collateral values to repay the loans. In such instances, the Bank will likely no longer receive payments from the borrowers, which will impact cash flows. The shared-loss agreements may not fully offset the financial effects of such a situation. However, if a loan is subsequently charged off or charged down after the Bank exhausts its best efforts at collection, the shared-loss agreements will cover a substantial portion of the loss associated with the covered assets.

The effects of the shared-loss agreements on cash flows and operating results in the long-term are likely to be similar to the short-term effects described above. The long-term effects that the Bank may experience will depend primarily on the ability of the borrowers under the various loans covered by the shared-loss agreements to make payments over time. As the shared-loss agreements cover up to a 10-year period, changing economic conditions will likely impact the timing of future charge-offs and the resulting reimbursements from the FDIC. The Bank believes that any recapture of interest income and recognition of cash flows from the borrowers or received from the FDIC may be recognized unevenly over this period, as the Bank exhausts its collection efforts under its normal practices. In addition, the Bank recorded substantial discounts related to the purchase of these covered loans. A portion of these discounts will be accreted to income over the economic life of the underlying loans and will be dependent upon the timing and success of the Bank’s collection efforts on the covered loans.

Liquidity and Capital Resources

The Bank acquired $16.0 million in cash and cash equivalents, as well as $871 thousand of investment securities. The securities provide monthly cash flows in the form of principal and interest payments. These additions to the Bank’s balance sheet represent additional support for its liquidity needs.

Deposits in the amount of $123.3 million were also assumed in the SB Acquisition. Of this amount, $22.4 million were in the form of highly liquid transaction accounts. Certificates of deposit comprised $100.9 million of total deposits, or 82%. Under the terms of the SB Acquisition, the Bank was permitted to re-price deposits assumed, including time and brokered deposits, which it did promptly after the acquisition. This re-pricing triggered time and brokered deposit run-off in-line with management’s expectations.

The Bank assumed $7.8 million in FHLB advances, at fair value. Of the $7.8 million in outstanding advances at May 20, 2011, $2.2 million matured and were repaid during June 2011.

Goodwill of $3.8 million and a core deposit intangible of $509 thousand were recorded in conjunction with the SB Acquisition. Such goodwill and intangibles are excluded from regulatory capital as calculated under regulatory accounting practices. This exclusion generally results in a reduction to the Company’s regulatory capital. The Bank remains “well-capitalized” under the regulatory framework for prompt corrective action after taking into consideration the results of the SB Acquisition.

Financial Statements

Attached hereto as Exhibit 99.1 and incorporated by reference into this Item 9.01(a) is an Audited Statement of Assets Acquired and Liabilities Assumed by the Bank (a wholly owned subsidiary of the Company) at May 20, 2011 and the accompanying notes thereto.

The Company has omitted certain financial information of Summit Bank required by Rule 3-05 of Regulation S-X and the related pro forma financial information under Article 11 of Regulation S-X pursuant to the guidance provided in SAB 1:K. SAB 1:K provides relief from the requirements of Rule 3-05 of Regulation S-X in certain instances, such as the SB Acquisition, where a registrant engages in an acquisition of a significant amount of assets of a troubled financial institution that involves pervasive federal assistance and audited financial statements of the troubled financial institution are not reasonably available.

(b) Pro Forma Financial Information.

The Company has omitted certain financial information of Summit Bank required by Rule 3-05 of Regulation S-X and the related pro forma financial information under Article 11 of Regulation S-X pursuant to the guidance provided in SAB 1:K. SAB 1:K provides relief from the requirements of Rule 3-05 of Regulation S-X in certain instances, such as the SB Acquisition, where a registrant engages in an acquisition of a significant amount of assets of a troubled financial institution that involves pervasive federal assistance and audited financial statements of the troubled financial institution are not reasonably available.

(d) Exhibits.

Exhibit Number	Description
23	Consent of Deloitte and Touche LLP
99.1	Report of Independent Registered Public Accounting Firm
	Statement of Assets Acquired and Liabilities Assumed at May 20, 2011
	Notes to Statement of Assets Acquired and Liabilities Assumed

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: August 5, 2011	/s/ Melanie J. Dressel
	Melanie J. Dressel
	President and Chief Executive Officer

EXHIBIT INDEX

Exhibit Number	Description
23	Consent of Deloitte and Touche LLP
99.1	Report of Independent Registered Public Accounting Firm
	Statement of Assets Acquired and Liabilities Assumed at May 20, 2011
	Notes to Statement of Assets Acquired and Liabilities Assumed

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-166401 and 333-166017 on Form S-3 and Nos. 33-95766, 333-160371, 333-160370, 333-100420, 333-120131, 333-125298, 333-135439, 333-144811, and 333-145207 on Form S-8 of our report dated August 5, 2011, relating to the statement of assets acquired and liabilities assumed by Columbia State Bank (a wholly owned subsidiary of Columbia Banking System, Inc.), pursuant to the Purchase and Assumption Agreement, dated May 20, 2011, which report appears in this Amendment No. 1 to the Current Report on Form 8-K/A of Columbia Banking System, Inc.

/s/ Deloitte & Touche LLP

Seattle, Washington

August 5, 2011

1

EX-99.1

Exhibit 99.1

INDEX OF FINANCIAL STATEMENTS

Description	Page Number
Report of Independent Registered Public Accounting Firm	2
Statement of Assets Acquired and Liabilities Assumed at May 20, 2011	3
Notes to Statement of Assets Acquired and Liabilities Assumed	4-9

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Columbia Banking System, Inc.

Tacoma, Washington

We have audited the accompanying statement of assets acquired and liabilities assumed by Columbia State Bank (the “Bank”), a wholly owned subsidiary of Columbia Banking System, Inc. (the “Company”), pursuant to the Purchase and Assumption Agreement, dated May 20, 2011, executed by the Bank with the Federal Deposit Insurance Corporation. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such statement of assets acquired and liabilities assumed by Columbia State Bank pursuant to the Purchase and Assumption Agreement, dated May 20, 2011, is presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statement, the amounts recognized in the financial statement for acquired loans and the related indemnification asset are provisional.

/s/ Deloitte & Touche LLP

Seattle, Washington

August 5, 2011

2

Statement of Assets Acquired and Liabilities Assumed

	May 20, 2011
	(in thousands)
Assets
Cash and due from banks	$	1,837
Interest-earning deposits with banks and federal funds sold		14,198
Investment securities		871
Federal Home Loan Bank stock		406
Acquired loans		71,452
Accrued interest receivable		429
Premises and equipment		42
FDIC receivable		6,984
Other real estate owned		2,671
Goodwill		3,770
Core deposit intangible		509
FDIC indemnification asset		27,174
Other assets		786
Total assets acquired	$	131,129
Liabilities
Deposits	$	123,279
Federal Home Loan Bank advances		7,772
Accrued interest payable		71
Other liabilities		7
Total liabilities assumed	$	131,129

The accompanying notes are an integral part of this financial statement.

3

NOTES TO STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Columbia Banking System, Inc. (the “Corporation”) is the holding company for Columbia State Bank (the “Bank”). The Bank provides a full range of financial services through 93 branch offices, including 68 in the State of Washington and 25 in Oregon. Because the Bank comprises substantially all of the business of the Corporation, references to the “Company” mean the Corporation and the Bank together.

The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and practices in the financial services industry.

As described in Note 2, the Bank acquired certain assets and assumed certain liabilities of the former Summit Bank in a Federal Deposit Insurance Corporation (“FDIC”)-assisted transaction (the “SB Acquisition”) on May 20, 2011. The acquisition of the net assets of Summit Bank constitutes a business acquisition as defined by the Business Combinations topic of the Financial Accounting Standards Board Accounting Standards Codification (the “FASB ASC”). The Business Combinations topic establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed. Accordingly, the estimated fair values of the acquired assets, including the FDIC indemnification asset and identifiable intangible assets, and the assumed liabilities in the SB Acquisition were measured and recorded at the May 20, 2011 acquisition date. The initial accounting for acquired loans and the related indemnification asset for the Summit Bank acquisition was incomplete as of August 5, 2011. The amounts currently recognized in the Statement of Assets Acquired and Liabilities Assumed have been determined provisionally as we are completing a fair value analysis of those assets utilizing an income approach.

Fair Value of Assets Acquired and Liabilities Assumed

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. In some cases, the estimation of fair values requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. We describe below the methods used to determine the fair values of the significant assets acquired and liabilities assumed.

Cash and cash equivalents - Cash and cash equivalents include cash and due from banks, and interest-earning deposits with banks and the Federal Reserve Bank. Cash and cash equivalents have a maturity of 90 days or less at the time of purchase. The fair value of financial instruments that are short-term or re-price frequently and that have little or no risk are considered to have a fair value equal to carrying value.

Investment securities - The fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.

Federal Home Loan Bank stock - The fair value of acquired Federal Home Loan Bank (“FHLB”) stock was estimated to be its redemption value, which is also the par value. The FHLB requires member banks to purchase its stock as a condition of membership and the amount of FHLB stock owned varies based on the level of FHLB advances outstanding. This stock is generally redeemable and is presented at the par value.

Loans - At the May 20, 2011 acquisition date, we estimated the fair value of the SB Acquisition loan portfolio, substantially all of which is subject to the FDIC shared-loss agreements, at $71.5 million. We utilized the market approach to estimate fair value. In this approach, acquired loans with similar risk characteristics and cash flow terms were aggregated and valued as loan pools. Fair value of each resulting loan pool was then estimated utilizing comparable market transactions for recently completed acquisitions in the Pacific Northwest.

Other real estate owned - Other real estate owned is presented at its estimated fair value and is also subject to the FDIC shared-loss agreements. The fair values were determined using expected selling price and date, less selling and carrying costs, discounted to present value.

Goodwill - Goodwill in the amount of $3.8 million was recorded in connection with the SB Acquisition. Goodwill represents the excess of the estimated fair value of the liabilities assumed over the estimated fair value of the assets acquired and is influenced significantly by the FDIC-assisted transaction process.

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Core deposit intangible - In determining the estimated life and fair value of the core deposit intangible, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates, and age of the deposit relationships. Based on this valuation, the core deposit intangible asset will be amortized over the projected useful lives of the related deposits on an accelerated basis over 10 years. 

FDIC indemnification asset - The FDIC indemnification asset is measured separately from each of the covered asset categories as it is not contractually embedded in any of the covered asset categories. For example, the FDIC indemnification asset related to estimated future loan losses is not transferable should we sell a loan prior to foreclosure or maturity. The fair value of the FDIC indemnification asset was estimated utilizing an intrinsic value approach. In this approach, we analyzed the combined loan and loss share fair value associated with recently completed FDIC-assisted transactions. Such transactions included a combined valuation of approximately 90% of the loan portfolios, implying an intrinsic value of 25%, or $27.2 million, for the indemnification asset.

Deposit liabilities - The fair values used for demand and savings deposits are, by definition, equal to the amount payable on demand at the reporting date. The fair values for time deposits are estimated using a discounted cash flow method that applies interest rates currently being offered on time deposits to a schedule of aggregated contractual maturities of such time deposits.

Borrowings - The fair values for FHLB advances are estimated using a discounted cash flow method based on the current market rates.

Clawback liability – Approximately ten years following the acquisition date, the Bank is required to make a payment to the FDIC in the event that losses on covered assets under the shared-loss agreements have been less than a certain threshold level. The fair value of this potential liability was estimated to be $0 on the acquisition date.

Use of Estimates

Management made a number of significant estimates and assumptions relating to the reporting of assets and liabilities at the date of the statement of assets acquired and liabilities assumed. Management exercised significant judgment regarding assumptions about market participant expectations regarding discount rates, expected cash flows including prepayments, default rates, market conditions and other future events that are highly subjective in nature, and subject to change, and all of which affected the estimation of the fair values of the assets acquired and liabilities assumed in the SB Acquisition. Actual results could differ from those estimates. Changes that may vary significantly from our assumptions include loan prepayments, the rate of default, the severity of defaults, the estimated market values of collateral at disposition, the timing of such disposition, and deposit attrition.

2. FDIC-ASSISTED ACQUISITION

On May 20, 2011 the Bank acquired certain assets and assumed certain liabilities of Summit Bank from the FDIC in an FDIC-assisted transaction. As part of the Purchase and Assumption Agreement, the Bank and the FDIC entered into shared-loss agreements (each, a “shared-loss agreement” and collectively, the “shared-loss agreements”), whereby the FDIC will cover a substantial portion of any future losses on loans (and related unfunded loan commitments), other real estate owned (“OREO”) and accrued interest on loans for up to 90 days. We refer to the acquired loans and OREO subject to the shared-loss agreements collectively as “covered assets.” Under the terms of the shared-loss agreements, the FDIC will absorb 80% of losses and share in 80% of loss recoveries on covered assets. The shared-loss provisions of the agreement for commercial and single family residential mortgage loans is in effect for five years and ten years, respectively, from the May 20, 2011 acquisition date and the loss recovery provisions for such loans are in effect for eight years and ten years, respectively, from the acquisition date.

The Bank purchased certain assets of Summit Bank from the FDIC including (at fair value) approximately $71.5 million in loans, $16.0 million of cash and cash equivalents, $2.7 million of OREO, and $871 thousand in investment securities. The Bank also assumed liabilities with fair value of approximately $123.3 million in deposits and $7.8 million in FHLB advances. Summit Bank was a Washington state chartered bank headquartered in Burlington, Washington that operated three branch locations in the State of Washington. We made this acquisition to expand our geographic footprint.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting (formerly the purchase method). The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the May 20, 2011 acquisition date. The application of the acquisition method of accounting resulted in the recognition in $3.8 million of goodwill. A summary of the net assets received from the FDIC and the estimated fair value adjustments resulting in the goodwill are as follows:

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	May 20, 2011
	(in thousands)
Summit Bank’s net assets acquired per Agreement	$	1,826
FDIC receivable		6,984
Fair value adjustments
Loans		(38,384	)
Core deposit intangible		509
FDIC indemnification asset		27,174
Other real estate owned		(1,727	)
Other assets		(117	)
Time deposits		17
Federal Home Loan Bank advances		(52	)
Goodwill to be recognized from Summit Bank Acquisition	$	3,770

Under the FDIC-assisted transaction process, only certain assets and liabilities are transferred to the acquirer and, depending on the nature and amount of the acquirer’s bid, the FDIC may be required to make a cash payment to the acquirer. In the SB Acquisition as shown in the above table, net assets of $1.8 million and a cash payment due from the FDIC of $6.9 million were transferred to us.

The Bank did not immediately acquire all the real estate, banking facilities, furniture or equipment of Summit Bank as part of the Purchase and Assumption Agreement. However, the Bank has the option to purchase or lease the real estate and furniture and equipment from the FDIC. The term of this option expires 90 days after May 20, 2011, unless extended by the FDIC. Acquisition costs of the real estate and furniture and equipment will be based on current appraisals and determined at a later date.

3. INVESTMENT SECURITIES AND FHLB STOCK

The Bank acquired $871 thousand of investment securities at estimated fair market value in the SB Acquisition. The acquired securities were predominantly U.S. Treasury and U.S. Government agency and sponsored enterprise mortgage-backed securities and collateralized mortgage obligations. The Bank also acquired $406 thousand in FHLB stock. The fair value of investment securities acquired is as follows:

	May 20, 2011
	(in thousands)
U.S. Government agency and sponsored enterprise mortgage-backed securities and collateralized mortgage obligations	$	134
State and municipal securities		737
Investment securities	$	871

Investment securities have contractual terms to maturity and require periodic payments to reduce principal. In addition, expected maturities may differ from contractual maturities because obligors and/or issuers may have the right to call or prepay obligations with or without call or prepayment penalties. The estimated fair value of debt securities at May 20, 2011 is shown below by contractual maturity.

	Fair Value
	(in thousands)
Due through one year	$	150
Due after one but within five years		133
Due after five but within ten years		472
Due after ten years		116
Total	$	871

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4. Acquired Loans

The composition of acquired loans at May 20, 2011 is as follows:

	May 20, 2011
	Amount			% of loans
	(dollars in thousands)
Commercial business	$	61,725			56	%
Real estate:
One-to-four family residential		9,245			8	%
Commercial and five or more family residential properties		17,145			16	%
Total real estate		26,390			24	%
Real estate construction:
One-to-four family residential		7,119			6	%
Commercial and five or more family residential properties		2,806			3	%
Total real estate construction		9,925			9	%
Consumer		11,796			11	%
Acquired loans	$	109,836			100	%
Total discount resulting from acquisition date fair value		(38,384	)
Net acquired loans	$	71,452

At the May 20, 2011 acquisition date, we estimated the fair value of Summit Bank’s loan portfolio, substantially all of which is subject to the shared-loss agreements to be $71.5 million. The loans acquired in the SB Acquisition are recorded at their fair value at acquisition date.

Loans purchased with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are accounted for under Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, formerly SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. In situations where such loans have similar risk characteristics, loans are aggregated into pools to estimate cash flows. A pool is accounted for as a single asset with a single interest rate, cumulative loss rate, and cash flow expectation. Subsequent to the acquisition date, any increases in expected cash flows are prospectively recorded as interest income and any decreases in expected cash flows are recognized by recording an allowance for losses on acquired loans. Any disposals of loans, including sales of loans, payments in full or foreclosures result in the removal of the loan from the loan pool at the carrying amount. The Company elected to account for all loans acquired in the SB Acquisition under ASC 310-30.

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5. DEPOSITS

Deposit liabilities assumed were composed of the following at May 20, 2011:

	May 20, 2011
	Amount			Wtd Avg. Rate
	(dollars in thousands)
Demand and other noninterest-bearing	$	7,476
Interest-bearing demand		3,105			0.45	%
Money market		6,537			0.85	%
Savings		5,305			0.66	%
Time deposits:
Less than $100,000		73,476			1.36	%
$100,000 or greater		27,397			1.46	%
Time deposits fair value adjustment		(17	)
Total deposits	$	123,279

At May 20, 2011, scheduled maturities of time deposits were as follows:

Years Ending December 31,	May 20, 2011
	(in thousands)
2011	$	36,707
2012		45,868
2013		9,365
2014		1,479
2015		3,895
Thereafter		3,559
Total	$	100,873

We recorded a $509 thousand core deposit intangible with an estimated 10-year life. The estimated amortization expense for the remainder of 2011 and for the subsequent five years is as follows:

Years Ending December 31,	Estimated Amortization Expense
	(in thousands)
2011	$	46
2012		88
2013		79
2014		69
2015		60
Thereafter		167
Total	$	509

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6. BORROWINGS

The FHLB advances acquired at May 20, 2011 are term advances and were secured by a blanket lien on eligible loans. We may repay the advances at any time with a prepayment penalty. Of the $7.8 million in outstanding advances at May 20, 2011, $2.2 million matured and were repaid during June 2011.

The following table summarizes the FHLB advances outstanding and weighted average interest rate at May 20, 2011:

	May 20, 2011
Year of Maturity	Amount		Wtd Avg. Rate
	(dollars in thousands)
2011	$	6,220		1.44	%
2013		1,500		2.38	%
Total		7,720
Fair value adjustment		52
Total	$	7,772

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