Document:

<PAGE>

                                                                    Exhibit 10.6

                         AMENDED EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by and
between Columbia State Bank, a Washington banking corporation ("Columbia Bank")
together with Columbia Banking System, Inc., a Washington corporation ("CBSI")
(collectively, the "Employer"), and J. JAMES GALLAGHER (the "Executive").  This
Agreement shall become effective as of December 20, 2000.

                                    RECITALS

     A.   Executive has been serving Employer as Chief Executive Officer of
          CBSI, in addition to his position as Vice Chairman of CBSI and
          Columbia Bank and has substantial knowledge of Employer's affairs and
          of the business of financial institutions in general.  Employer has
          incurred substantial growth and is looking to continue expansion of
          its operations, with the assistance of Executive.

     B.   Executive and Employer desire to amend and restate existing Employment
          Agreement to update terms addressing compensation and to conform
          certain provisions to those contained in recently granted contracts to
          other executives.

     In consideration of the mutual promises made in this Agreement, the parties
          agree as follows:

                                   AGREEMENT

     1.   Employment.

     Employer employs Executive and Executive accepts employment with Employer
on the terms and conditions set forth in this Agreement.

     2.   Term.

     The term of this Agreement will commence as of December 20, 2000, and will
continue until June 30, 2003, unless extended or sooner terminated as provided
in this Agreement.

     3.   Duties.

                 (a) Executive will be Vice-Chairman and Chief Executive Officer
of CBSI and Vice Chairman of Columbia Bank. In such capacities, and subject to
the authority of the Board of Directors of CBSI and Columbia Bank, as
appropriate, (i) Executive will have general management of the business of CBSI;
(ii) will be specifically responsible for strategic planning, merger and
acquisition activity, and legal and regulatory compliance of Columbia Bank; and
(iii) will perform such other tasks in connection with the affairs of Columbia
Bank that are normal and customary to the position he will hold.
<PAGE>

               (b)  Executive will perform such other duties as may be
appropriate to his position and as may be prescribed from time to time by the
Board, or that are provided in the Bylaws of CBSI or Columbia Bank.

               (c)  Executive will devote his best efforts and all necessary
time, attention, and effort to the business and affairs of Employer and its
affiliates, as such business and affairs now exist or hereafter may be changed
or supplemented, in order to properly discharge his responsibilities under this
Agreement. He may delegate such of his duties as he sees fit to the other
officers of CBSI or its subsidiaries.

     4.   Salary, Bonus, and Other Compensation.

          4.1  Salary.

               (a)  During the term of this Agreement, Employer will pay
Executive an annual (calendar year) base salary of not less than $235,000 per
year (payable at the rate of $19,583.33 per month) beginning January 1, 2001.

               (b)  Columbia Bank will guarantee payment of any portion of
Executive's compensation that may be allocated to a subsidiary of CBSI.

               (c)  If this Agreement terminates prior to June 30, 2003, then
Employer will pay Executive such greater or lesser amount of the agreed
compensation as provided in Section 5.

          4.2  Bonus.  Executive will be eligible to participate in the bonus
pools, if any, that the Board of Columbia Bank or CBSI may establish for senior
executives, either under an executive incentive plan or otherwise.

          4.3  Benefits. In addition to the base salary and bonus payable or
potentially payable to Executive pursuant to this Section 4, Executive will be
entitled to receive benefits sim-ilar to those offered to other senior
executives of Employer.

5.   Termination of Agreement.

     5.1       Early Termination.

               (a)  This Agreement may be terminated at any time by the Board of
Employer or by Executive, and it shall terminate upon Executive's death or
disability.  Any termination by the Board of Employer other than termination for
cause (as defined below) shall not prejudice Executive's right to compensation
or other benefits under this Agreement.  Except as provided in Section 7, if
Executive voluntarily terminates his employment before June 30, 2003 he will be
entitled only to such payments as he would have the right to receive upon
termination for cause under subsection 5.1(b).

               (b)  Except as provided in Section 7, if Employer terminates this
Agreement without cause, Employer shall pay Executive upon the effective date of
such termination all salary earned, the pro-rata portion of any incentive
payment expected to be

                                       2
<PAGE>

received for the year when termination occurs, benefits accrued and all
reimbursable expenses hereunder incurred through such termination date and, in
addition, liquidated damages in an amount equal to the greater of (i) two years'
salary, or (ii) salary for the then-remaining term of the Agreement payable
hereunder; in such event, all forfeiture provisions regarding any then
outstanding restricted stock award or other compensation agreement shall lapse.
If Employer terminates this Agreement for cause, Employer shall pay Executive
upon the effective date of such termination only such salary earned, benefits
accrued and expenses reimbursable hereunder incurred through such termination
date. Executive shall have no right to receive compensation or other benefits
for any period after termination for cause.

               (c)  For purposes of this Agreement, the term "cause" shall mean
(i) willful misfeasance or gross negligence in the performance of his duties;
(ii) conduct demonstrably and significantly harmful to Employer (including
willful violation of any final cease and desist order applicable to Employer or
a financial institution subsidiary); or (iii) conviction of a felony. For
purposes of this Agreement, "disability" shall have the meaning contained in any
long term disability insurance coverage maintained by Columbia Bank or its
affiliate, or if no such coverage is in existence, shall mean a medically
reimbursable physical or mental impairment that may be expected to result in
death, or to be of long, continued duration, and that renders Executive
incapable of performing the duties required under this Agreement. The Board or
the Compensation Committee of the Board, acting in good faith, shall make the
final determination of whether Executive is suffering under any disability as
herein defined and, for purposes of making such determination, may require
Executive to submit himself to a physical examination by a physician mutually
agreed upon by Executive and the Board or the Committee at Employer's expense.

               (d)  In the event of termination of this Agreement by reason of
Executive's death or disability, all forfeiture provisions regarding any then
outstanding restricted stock award or other compensation agreement shall lapse.

          5.2  Obligations.  Except as otherwise provided in Section 7 or in a
particular option grant, Executive's rights, if any, to vested but unexercised
stock options will continue for a period of one year after early termination,
other than termination for cause.  In the case of termination for cause,
Executive's unvested stock options, if any, shall terminate immediately.

6.   Restrictive Covenant.

          6.1  Noncompetition.

               (a)  Executive agrees that except as otherwise set forth in this
Agreement, he will not, during the term of this Agreement and for a period of
two years after the later of (i) expiration of the term of this Agreement, or
(ii) completion of service as an active executive officer and/or Board member of
CBSI or Columbia Bank, directly or indirectly, become interested in, as
principal shareholder, director, or officer, any financial institution (other
than an institution controlled by, controlling, or under common control with
Employer and its affiliates) that competes within the State of Washington with
Employer or any of its affiliates,

                                       3
<PAGE>

with respect to activities of the type performed by such companies within such
service area immediately prior to Executive's termination.

               (b)  The restrictions concerning competition after termination as
contained in this Section 6.1 shall apply only in the event that Executive
voluntarily terminates his employment with Employer without good reason.  For
purposes of this Agreement, termination for "good reason" shall mean termination
by Executive as a result of any material breach of this Agreement by Employer,
or any significant diminution of duties of Executive by the Board of either
Columbia Bank or CBSI.  The provisions restricting competition by Executive may
be waived by the Employer.

          6.2  Noninterference.  During the noncompetition period described in
Section 6.1, Executive shall not solicit or attempt to solicit any other
employee of Employer or its affiliates to leave the employ of those companies,
or in any way interfere with the relationship between Employer and any other
employee of Employer or its affiliates.

          6.3  Interpretation.  If a court or any other administrative body with
jurisdiction over a dispute related to this Agreement should determine that the
restrictive covenants set forth above is unreasonably broad, the parties
authorize such court or administrative body to narrow the covenants so as to
make it reasonable, given all relevant circumstances, and to enforce such
revised covenants.  The covenants in this paragraph shall survive termination of
this Agreement.

     7.   Change of Control.

          7.1  Benefits.  The parties recognize that a "change of control" of
Employer (as defined in Section 7.2) could be detrimental to Executive's
continued employment. Accordingly, in order to give further assurances to the
Executive to enter into this Agreement, if:

               (a)  There is a change of control of CBSI; and either

               (b)  Within 730 days of such change in control, Executive
terminates his employment with Employer; or

               (c)  At any time from and after sixty days prior to the public
announcement by Employer of a transaction that will result in the change of
control, Employer (or its successor) terminates Executive's employment without
cause, then Executive, as of the date of termination of his employment, subject
to the remaining provisions of this Section 7.1, shall be paid or provided with:
(i) continued payment of his base salary, the pro-rata portion of any incentive
payment expected to be received for the year when termination occurs and all
benefits provided for in this Agreement until two years following termination or
June 30, 2003, whichever is longer; and (ii) vesting of all stock options and
lapse of all restrictions with respect to any then outstanding restricted stock
award or other compensation agreement shall occur.  The provisions of this
Section 7.1 shall survive expiration of the term of the Agreement.

                                       4
<PAGE>

          7.2  Definitions.  For purposes of this Agreement, the term "change of
control" shall mean the occurrence of one or more of the following events:

               (a)  One person or entity acquiring or otherwise becoming the
owner of twenty-five percent or more of CBSI's outstanding common stock;

               (b)  Replacement of a majority of the incumbent directors of CBSI
or Columbia Bank by directors whose elections have not been supported by a
majority of the Board of either company, as appropriate; or

               (c)  Dissolution, or sale of fifty percent or more in value of
the assets, of either CBSI or Columbia Bank.

          7.3  Reimbursement.  In the event the provisions of this Section 7.3
result in imposition of a tax on Executive under the provisions of Internal
Revenue Code (S) 4999, Employer agrees to reimburse Executive for the same,
exclusive of any tax imposed by reason of receipt of reimbursement under this
Section 7.3.

     8.   Miscellaneous.

          8.1  This Agreement contains the entire agreement between the parties
with respect to Executive's employment with Employer and his covenant not to
compete with Employer and its affiliates, and is subject to modification or
amendment only upon amendment in writing signed by both parties.

          8.2  This Agreement shall bind and inure to the benefit of the heirs,
legal representatives, successors, and assigns of the parties, except that
Employer's rights and obligations may not be assigned.  The provisions of
Section 6.1 of this Agreement are intended to confer upon CBSI and its
subsidiaries and affiliates the benefits of Executive's covenant not to compete.

          8.3  If any provision of this Agreement is invalid or otherwise
unenforceable, all other provisions shall remain unaffected and shall be
enforceable to the fullest extent permitted by law.

          8.4  This Agreement is made with reference to and is intended to be
construed in accordance with the laws of the State of Washington.  Venue for any
action arising out of or concerning this Agreement shall lie in Pierce County,
Washington. In the event of a dispute under this Agreement not involving
injunctive relief, the dispute shall be arbitrated pursuant to the Superior
Court Mandatory Arbitration Rules ("MAR") adopted by the Washington State
Supreme Court, irrespective of the amount in controversy.  This Agreement shall
be deemed as stipulation to that effect pursuant to MAR 1.2 and 8.1. The
arbitrator, in his or her discretion, may award attorney's fees to the
prevailing party or parties.

                                       5
<PAGE>

          8.5  Any notice required to be given under this Agreement to either
party shall be given by personal service or by depositing a copy thereof in the
United States registered or certified mail, postage prepaid, addressed to the
following address, or such other address as addressee shall designate in
writing:

Employer:    1102 Broadway       Executive:       23 Lagoon Lane North
             Tacoma, WA  98402                    Lakewood, WA  98498

                                 COLUMBIA STATE BANK

                                 By: /s/ Melanie J. Dressel
                                    -----------------------------
                                    Melanie J. Dressel
                                    Its President and Chief Executive Officer

                                 COLUMBIA BANKING SYSTEM, INC.

                                 By: /s/ Melanie J. Dressel
                                    -----------------------------
                                 Melanie J. Dressel
                                 Its President and Chief Operating Officer

                                 EXECUTIVE

                                     /s/ J. James Gallagher
                                 --------------------------------
                                 J. JAMES GALLAGHER

                                       6<PAGE>

                                                                    Exhibit 10.7

                         AMENDED EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered by and
between Columbia State Bank, a Washington banking corporation ("Columbia Bank")
together with Columbia Banking System, Inc., a Washington corporation ("CBSI")
(collectively, the "Employer"), and MELANIE J. DRESSEL (the "Executive"). This
Agreement shall become effective as of December 20, 2000.

                                   RECITALS

     A.   Executive is currently serving as President and Chief Operating
          Officer of CBSI and President and Chief Executive Officer of Columbia
          Bank.

     B.   Employer considers the continuance of sound and vital management
          essential to protecting and enhancing Employer's best interests.

     C.   Employer desires to assure itself of retaining the exclusive services
          of Executive and to continue the Employment of Executive under the
          terms of this Agreement, and to reward Executive for her valuable,
          dedicated service to Employer should her employment be terminated
          under the circumstances described in this Agreement.

     D.   Executive and Employer desire to amend and restate existing Employment
          Agreement to update terms addressing compensation and to conform
          certain provisions to those contained in recently granted contracts to
          other executives.

          In consideration of the mutual promises made in this Agreement, the
     parties agree as follows:

AGREEMENT

     1.   Employment.

     Employer employs Executive and Executive accepts employment with Employer
on the terms and conditions set forth in this Agreement.

     2.   Term.

     The term of this Agreement will commence as of December 20, 2000, and will
continue until June 30, 2004, unless extended or sooner terminated as provided
in this Agreement.
<PAGE>

     3.   Duties.

               (a)  Executive will be President and Chief Executive Officer of
Columbia Bank and President and Chief Operating Officer of CBSI.  In such
capacities, and subject to the authority of the Vice Chairman and Chief
Executive Officer of CBSI and the Boards of Directors of Columbia Bank and CBSI
(separately or collectively, the "Board" as applicable), as appropriate,
Executive will render the executive management services and perform such tasks
in connection with the affairs of Columbia Bank and CBSI that are normal and
customary to the positions that she holds.

               (b)  Executive will perform such other duties as may be
appropriate to her position and as may be prescribed from time to time by the
Vice Chairman and Chief Executive Officer of CBSI or the Board of Columbia Bank,
as appropriate, or that are provided in the Bylaws of Columbia Bank or CBSI.

               (c)  Executive will devote her best efforts and all necessary
time, attention, and effort to the business and affairs of Employer and its
affiliates, as such business and affairs now exist or hereafter may be changed
or supplemented, in order to properly discharge her responsibilities under this
Agreement. She may delegate such of her duties as she sees fit to the other
officers of CBSI or its subsidiaries.

     4.   Salary, Bonus, and Other Compensation.

          4.1  Salary.

               (a)  During the term of this Agreement, Employer will pay
Executive an annual (calendar year) base salary of not less than $225,000 per
year beginning January 1, 2001 (payable at the rate of $18,750 per month).

               (b)  Columbia Bank will guarantee payment of any portion of
Executive's compensation that may be allocated to a subsidiary of CBSI.

               (c)  If this Agreement terminates prior to June 30, 2004, then
Employer will pay Executive such greater or lesser amount of the agreed
compensation as provided in Section 5.

          4.2  Bonus.  Executive will be eligible to participate in the bonus
pools, if any, that the Board of Columbia Bank or CBSI may establish for senior
executives, either under an executive incentive plan or otherwise.

          4.3  Benefits.  In addition to the base salary and bonus payable or
potentially payable to Executive pursuant to this Section 4, Executive will be
entitled to receive benefits similar to those offered to other senior executives
of Employer.

                                       2
<PAGE>

     5.   Termination of Agreement.

          5.1  Early Termination.

               (a)  This Agreement may be terminated at any time by the Board of
Employer or by Executive, and it shall terminate upon Executive's death or
disability. Any termination by the Board of Employer other than termination for
cause (as defined below) shall not prejudice Executive's right to compensation
or other benefits under this Agreement. Except as provided in Section 7, if
Executive voluntarily terminates her employment before June 30, 2004 she will be
entitled only to such payments as she would have the right to receive upon
termination for cause under subsection 5.l(b).

               (b)  Except as provided in Section 7, if Employer terminates this
Agreement without cause, Employer shall pay Executive upon the effective date of
such termination all salary earned, the pro-rata portion of any incentive
payment expected to be received for the year when termination occurs, benefits
accrued and all reimbursable expenses hereunder incurred through such
termination date and, in addition, liquidated damages in an amount equal to the
greater of (i) two years' salary, or (ii) salary for the then-remaining term of
the Agreement payable hereunder; in such event, all forfeiture provisions
regarding any then outstanding restricted stock award or other compensation
agreement shall lapse. If Employer terminates this Agreement for cause, Employer
shall pay Executive upon the effective date of such termination only such salary
earned, benefits accrued and expenses reimbursable hereunder incurred through
such termination date. Executive shall have no right to receive compensation or
other benefits for any period after termination for cause.

               (c)  For purposes of this Agreement, the term "cause" shall mean
(i) willful misfeasance or gross negligence in the performance of her duties;
(ii) conduct demonstrably and significantly harmful to Employer (including
willful violation of any final cease and desist order applicable to Employer or
a financial institution subsidiary); or (iii) conviction of a felony. For
purposes of this Agreement, "disability" shall have the meaning contained in any
long term disability insurance coverage maintained by Columbia Bank or its
affiliate, or if no such coverage is in existence, shall mean a medically
reimbursable physical or mental impairment that may be expected to result in
death, or to be of long, continued duration, and that renders Executive
incapable of performing the duties required under this Agreement. The Board or
the Compensation Committee of the Board, acting in good faith, shall make the
final determination of whether Executive is suffering under any disability as
herein defined and, for purposes of making such determination, may require
Executive to submit himself to a physical examination by a physician mutually
agreed upon by Executive and the Board or the Committee at Employer's expense.

               (d)  In the event of termination of this Agreement by reason of
Executive's death or disability, all forfeiture provisions regarding any then
outstanding restricted stock award or other compensation agreement shall lapse.

                                       3
<PAGE>

          5.2  Obligations.  Except as otherwise provided in Section 7 or in a
particular option grant, Executive's rights, if any, to vested but unexercised
stock options will continue for a period of one year after early termination,
other than termination for cause.  In the case of termination for cause,
Executive's unvested stock options, if any, shall terminate immediately.

     6.   Restrictive Covenant.

          6.1  Noncompetition.

               (a)  Executive agrees that except as otherwise set forth in this
Agreement, she will not, during the term of this Agreement and for a period of
two years after the later of (i) expiration of the term of this Agreement, or
(ii) completion of service as an active executive officer and/or Board member of
CBSI or Columbia Bank, directly or indirectly, become interested in, as
principal shareholder, director, or officer, any financial institution (other
than an institution controlled by, controlling, or under common control with
Employer and its affiliates) that competes within the State of Washington with
Employer or any of its affiliates, with respect to activities of the type
performed by such companies within such service area immediately prior to
Executive's termination.

               (b)  The restrictions concerning competition after termination as
contained in this Section 6.1 shall apply only in the event that Executive
voluntarily terminates her employment with Employer without good reason.  For
purposes of this Agreement, termination for "good reason" shall mean termination
by Executive as a result of any material breach of this Agreement by Employer,
or any significant diminution of duties of Executive by the Board of either
Columbia Bank or CBSI. The provisions restricting competition by Executive may
be waived by the Employer.

          6.2  Noninterference.  During the noncompetition period described in
Section 6.1, Executive shall not solicit or attempt to solicit any other
employee of Employer or its affiliates to leave the employ of those companies,
or in any way interfere with the relationship between Employer and any other
employee of Employer or its affiliates.

          6.3  Interpretation.  If a court or any other administrative body with
jurisdiction over a dispute related to this Agreement should determine that the
restrictive covenants set forth above is unreasonably broad, the parties
authorize such court or administrative body to narrow the covenants so as to
make it reasonable, given all relevant circumstances, and to enforce such
revised covenants.  The covenants in this paragraph shall survive termination of
this Agreement.

     7.   Change of Control.

          7.1  Benefits.  The parties recognize that a "change of control" of
Employer (as defined in Section 7.2) could be detrimental to Executive's
continued employment. Accordingly, in order to give further assurances to the
Executive to enter into this Agreement, if:

               (a)  There is a change of control; and either;

                                       4
<PAGE>

               (b)  Within 730 days of such change in control, Executive
terminates her employment with Employer; or

               (c)  At any time from and after sixty days prior to the public
announcement by Employer of a transaction that will result in the change of
control, Employer (or its successor) terminates Executive's employment without
cause, then Executive, as of the date of termination of her employment, subject
to the remaining provisions of this Section 7.1, shall be paid or provided with:
(i) continued payment of her base salary, the pro-rata portion of any incentive
payment expected to be received for the year when termination occurs and all
benefits provided for in this Agreement until two years following termination or
June 30, 2004, whichever is longer; and (ii) vesting of all stock options and
lapse of all restrictions with respect to any outstanding restricted stock
awards or other compensation agreement shall occur.  The provisions of this
Section 7.1 shall survive expiration of the term of the Agreement.

          7.2  Definitions.  For purposes of this Agreement, the term "change of
control" shall mean the occurrence of one or more of the following events:

               (a)  One person or entity acquiring or otherwise becoming the
owner of twenty-five percent or more of CBSI's outstanding common stock;

               (b)  Replacement of a majority of the incumbent directors of CBSI
or Columbia Bank by directors whose elections have not been supported by a
majority of the Board of either company, as appropriate; or

               (c)  Dissolution or sale of fifty percent or more in value of the
assets, of either CBSI or Columbia Bank.

          7.3  Reimbursement.  In the event the provisions of this Section 7.3
result in imposition of a tax on Executive under the provisions of Internal
Revenue Code (S) 4999, Employer agrees to reimburse Executive for the same,
exclusive of any tax imposed by reason of receipt of reimbursement under this
Section 7.3.

     8.   Miscellaneous.

          8.1  This Agreement contains the entire agreement between the parties
with respect to Executive's employment with Employer and her covenant not to
compete with Employer and its affiliates, and is subject to modification or
amendment only upon amendment in writing signed by both parties.

          8.2  This Agreement shall bind and inure to the benefit of the heirs,
legal representatives, successors, and assigns of the parties, except that
Employer's rights and obligations may not be assigned.  The provisions of
Section 6.1 of this Agreement are intended to confer upon CBSI and its
subsidiaries and affiliates the benefits of Executive's covenant not to compete.

          8.3  If any provision of this Agreement is invalid or otherwise
unenforceable, all other provisions shall remain unaffected and shall be
enforceable to the fullest extent permitted by law.

                                       5
<PAGE>

          8.4  This Agreement is made with reference to and is intended to be
construed in accordance with the laws of the State of Washington. Venue for any
action arising out of or concerning this Agreement shall lie in Pierce County,
Washington. In the event of a dispute under this Agreement not involving
injunctive relief, the dispute shall be arbitrated pursuant to the Superior
Court Mandatory Arbitration Rules ("MAR") adopted by the Washington State
Supreme Court, irrespective of the amount in controversy. This Agreement shall
be deemed as stipulation to that effect pursuant to MAR 1.2 and 8.1. The
arbitrator, in his or her discretion, may award attorney's fees to the
prevailing party or parties.

          8.5  Any notice required to be given under this Agreement to either
party shall be given by personal service or by depositing a copy thereof in the
United States registered or certified mail, postage prepaid, addressed to the
following address, or such other address as addressee shall designate in
writing:

          Employer:           Columbia Banking System, Inc.
                              1102 Broadway
                              Tacoma, WA 98402

          Executive:          Melanie J. Dressel
                              10924 Bliss-Cochrane KPN
                              Gig harbor, WA 98329

     IN WITNESS WHEREOF, the parties have executed this Agreement effective on
December 20, 2000.

                              COLUMBIA STATE BANK

                              By: /s/ J. James Gallagher
                                 -------------------------
                              J. James Gallagher
                              Its Vice Chairman

                              COLUMBIA BANKING SYSTEM, INC.

                              By: /s/ J. James Gallagher
                                 -------------------------
                              J. James Gallagher
                              Its Vice Chairman and Chief Executive Officer

                              EXECUTIVE

                                  /s/ Melanie J. Dressel
                              ----------------------------
                              Melanie J. Dressel

                                       6

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