SECOND AMENDED AND RESTATED EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

THIS SECOND AMENDED AND RESTATED EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT (hereinafter “Agreement”)  is made and entered into effective as of this May 27, 2009 by and between COLUMBIA STATE BANK and COLUMBIA BANKING SYSTEM, INC., its parent holding company (jointly hereafter the “Employer”), and Gary R. Schminkey, an individual residing in the State of Washington (“Executive”).

This Second Amended and Restated Executive Supplemental Compensation Agreement now hereby amends, supersedes and replaces the First Amended and Restated Executive Supplemental Compensation Agreement by and between these same parties, effective as of  December 31, 2008 (which, in turn, amended, superseded and replaced the Executive Supplemental Compensation Agreement, entered into as of August 1, 2001).

For the purposes of this Agreement, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise:

1.1             Administrator .  The Employer shall be the "Administrator" and, solely for the purposes of ERISA, the "fiduciary" of this Agreement where a fiduciary is required by ERISA.

1.2             Agreement. The term “Agreement” shall refer to this Second Amended and Restated Executive Supplemental Compensation Agreement.

(i)           The date any one person, or persons acting as a group  acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the corporation possessing thirty  percent (30%) or more of the total voting power of the stock of such corporation; or

(ii)  The date a majority of members of the corporation’s board of directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors before the date of the appointment or election.

In addition to the forgoing, and in accordance with IRC 409A, in order to constitute a Change in Control event with respect to a specific Executive, the Change in Control must relate to (i) the corporation for whom Executive is performing services at the time of the Change in Control; (ii) the corporation that is liable for the payment of the deferred compensation (or all corporations liable for the payment if more than one corporation is liable) but only if either the deferred compensation is attributable to the performance of service by Executive for such corporation (or corporations) or there is a bona fide business purpose for such corporation or corporations to be liable for such payment and no significant purpose of making such corporation or corporations liable for such payment is the avoidance of Federal income tax; or (iii) a corporation that is a majority shareholder of a corporation identified above, or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified above. (A majority shareholder is a shareholder owning more than fifty (50%) percent of the total fair market value and total voting power of such corporation).

1.4             Disability/Disabled .   For the purpose of this Agreement, Executive will be considered disabled if:

A.           He is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than Twelve (12) months, or

B.           He is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than Twelve (12) months, receiving income replacement benefits for a period of not less than Three (3) months under an accident and health plan covering employees of the Executive’s employer.

1.5             Early Commencement Reduction Factor . The term “Early Commencement Reduction Factor” is the amount by which Executive’s benefit shall be reduced based on the benefit being paid prior to Executive’s attaining the Normal Retirement Age. The amount of the Early Commencement Reduction Factor shall be determined as follows: for each year (or partial year) that an Executive’s benefit hereunder is paid prior to his attainment of the Normal Retirement Age, then the benefit amount shall be reduced by a factor of Five Percent (5%). Thus, if an executive with a Normal Retirement Age of Sixty-Two (62) begins receiving payments at age Fifty-Nine (59), the amount of the annual benefit shall be reduced by 15% (62- 59 = 3; 3 x 5%= 15%).

1.6             Early Retirement Age .   The term “Early Retirement Age” shall mean the Executive’s attainment of the age of Fifty-Five (55).

1.7             Early Retirement Date . The term “Early Retirement Date” shall mean a date which satisfies the following: (a) it shall be a date on or after Executive has attained the Early Retirement Age, and before he attains the Normal Retirement Age; and (b) and it shall be the date on which Executive Separates From Service (for any reason other than for Cause).

1.9             ERISA .   The term "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.10             Executive Benefit . The term "Executive Benefit" shall mean the actual amount to be paid to Executive pursuant to this Agreement, which shall include any reductions or adjustments (a) required under the other provisions of this Agreement; or  (b) required by reason of the lawful order of any regulatory agency or body having jurisdiction over the Employer; or (c) required in order for the Employer to comply with any and all applicable state and federal laws, including, but not limited to, income, employment and disability income tax laws (e.g. FICA, FUTA, SDI).

1.11           Involuntary Separation From Service . In accordance with IRC 409A, the term “Involuntary Separation from Service” shall mean a Separation from Service due to the independent exercise of the unilateral authority of Employer to terminate Executive’s services, other than due to Executive’s implicit or explicit request, where Executive was willing and able to continue performing services.

1.12           IRC and IRC 409A . The term “IRC” shall mean the Internal Revenue Code of 1986, as amended. The term “IRC 409A” shall mean Internal Revenue Code Section 409A and the Treasury Regulations promulgated thereunder, including any subsequent and related notices or clarifications.

1.13           Normal Retirement Age . The term “Normal Retirement Age” shall mean Executive’s attainment of the age Sixty-Five (65). In the event Executive Separates From Service pursuant to the provisions of Paragraph 3.5, however, and for the purposes of calculating the Early Commencement Reduction Factor, Executive’s Normal Retirement Age shall be the age of Sixty-Two (62).

1.14           Normal Retirement Date . The term “Normal Retirement Date” shall mean a date which satisfies the following: (a) it shall be a date on or after Executive attains the Normal Retirement Age, and (b) it shall be the date on which Executive Separates From Service (for any reason other than For Cause).

1.15           Specified Employee. The term “Specified Employee” means an employee who, as of the date of his Separation from Service, is a key employee of an employer of which any stock is publicly traded on an established securities market or otherwise. An employee is a key employee if the employee meets the requirements of section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on a specified employee identification date. If Executive is a key employee as of a specified employee identification date, then Executive shall be treated as a key employee for the entire twelve (12) month period beginning on the specified employee effective date.

1.16           Supplemental Retirement Benefit. The term “Supplemental Retirement Benefit” shall be an annual amount equal to Two Hundred Six Thousand, Nine Hundred Fifty-Seven Dollars ($206,957).

1.17           Termination for Cause.   The term “Termination for Cause” shall mean a Termination of Employment of Executive by Employer by reason of any of the following:

1.18           Termination for Good Reason .  For the purposes of this Agreement, a Voluntary Termination by Executive following a Change in Control Event shall be deemed “for Good Reason” if one or more of the following conditions arise without the consent of  Executive:

A.           A material diminution in Executive’s base compensation;

1.19           Termination of Employment and Separation From Service . The terms  “Termination of Employment” (or “Terminate” or “Terminates”) as used in this Agreement shall be used interchangeably with the term “Separation From Service”, and shall be interpreted in accordance with the provisions of IRC 409A and any related notices, guidance or regulations. Under the current provisions of IRC 409A, whether a Separation From Service (or a Termination of Employment) has occurred is determined based on whether the facts and circumstances indicate that employer and employee reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the employee will perform after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than twenty (20%) percent of the average level of bona fide services performed (as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the employer if the employee has been providing services to the employer less than 36 months).  There shall be no Separation From Service while the Executive is on military leave, sick leave or other bona fide leave of absence, as long as such leave does not exceed six (6) months, or if longer, so long as the individual retains a right to reemployment with the service recipient under an applicable statute or by contract.

1.20           Voluntary Termination . The term “Voluntary Termination” shall mean a voluntary resignation of employment by Executive, and not as a result of Disability or a Termination for Good Reason.

2.1             Not a   Contract of Employment .   Although this Agreement and the benefit provided herein is intended to provide Executive with additional incentive to remain in the employ of Employer, this Agreement shall not constitute a contract of employment between Executive and Employer, nor shall any provision of this Agreement be applied to restrict or expand the right of Employer to terminate Executive’s Employment, with or without cause. This Agreement shall have no impact or effect upon any separate written employment agreement which Executive may have with Employer, it being the parties’ intention and agreement that unless this Agreement is specifically referenced in such employment agreement, then this Agreement   (and Employer’s obligations hereunder) shall stand separate and apart and shall have no effect on, or be affected by, the terms and provisions of any employment agreement. Events of Termination of Employment shall be characterized, for purposes of interpreting this Agreement, in accord with the definitions herein.

2.2             Fringe Benefit .   The benefits provided by this Agreement are granted by the Employer as a fringe benefit to Executive and are not a part of any salary reduction Agreement or any arrangement deferring a bonus or a salary increase.  Executive has no option to take any current payments or bonus in lieu of the benefits provided by this Agreement.

2.3             Prohibited Payments.   Notwithstanding anything in this Agreement to the contrary, if any payment made under this Agreement is a “golden parachute payment” as defined in Section 28(k) of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part 359 of the Rules and Regulations of the Federal Deposit Insurance Corporation  (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or subject to the prior approval of a Bank Regulator, no payment shall be made hereunder without complying with said FDIC Rules.

3.1             Separation From Service on or After Attaining the Normal Retirement Age . In the event Executive Separates From Service on or after attaining the Normal Retirement Age (and other than for Cause), then he shall receive an annual Executive Benefit equal to the Supplemental Retirement Benefit (reduced as required under Paragraph 1.10 and subject to the non-compete provisions of Paragraph 3.9). This annual Executive Benefit shall be paid in substantially equal monthly installments, with payments commencing on the first day of the first month following Executive’s Separation From Service, and continuing thereafter until Executive’s death. In addition to the forgoing, the annual Executive benefit amount shall be increased each year by two percent (2 %). These annual increases shall take effect each year on the anniversary of the first payment date and shall continue for as long as the Executive receives a benefit.

3.2             Separation From Service on a Date which Constitutes an Early Retirement Date .   In the event Executive Separates From Service on a date which constitutes an Early Retirement Date (and other than pursuant to the provisions of Paragraph 3.5), then he shall receive an annual Executive Benefit equal to the Supplemental Retirement Benefit (reduced as required under Paragraph 1.10 and subject to the non-compete provisions of Paragraph 3.9), reduced by the Early Commencement Reduction Factor (determined as of the date payments of benefits are to begin). This annual Executive Benefit shall be paid in substantially equal monthly installments, with payments commencing on the first day of the first month following Executive’s Separation From Service, and continuing until Executive’s death. In addition to the forgoing, the annual Executive benefit amount shall be increased each year by two percent (2 %). These annual increases shall take effect each year on the anniversary of the first payment date and shall continue for as long as the Executive receives a benefit.   

3.3             Separation From Service Prior to Attaining the Early Retirement Age. In the event Executive Voluntarily or Involuntarily Separates From Service prior to qualifying for Early Retirement (and other than pursuant to the terms of Paragraph 3.5 or for Cause), then (subject to the non-compete provisions of Paragraph 3.9), he shall be entitled to receive an annual amount equal to the Supplemental Retirement Benefit. This annual Executive Benefit shall be paid in substantially equal monthly installments, with payments commencing on the first day of the first m