COMMITMENTS AND CONTINGENCIES

Legal Proceedings:

FIB was a defendant in a lender liability lawsuit, Kelly Logging Inc. v. First Interstate Bank (the “case"), which was tried in in the Montana Fourth Judicial District, Missoula County in Missoula, Montana (the “court") in August, 2014. On August 14, 2014, a jury awarded damages to Kelly Logging of $17,047, which included $287 in compensatory damages and $16,760 in punitive damages. On October 1, 2014, a non-final judgment was entered in this matter in the amount of $17,047 plus reasonable attorney fees and interest. The non-final judgment is subject to the court's mandatory review of the jury's punitive damages award. The court held oral argument on the punitive damages award and an evidentiary hearing on Kelly Logging's attorneys' fees and costs. No decisions on the punitive damages award or Kelly Logging’s fees and costs have been rendered but FIB's other post-trial motions have been deemed denied for failure of the court to rule on them within the time allowed by the Montana Rules of Civil Procedure.

The Company intends to continue to defend itself vigorously in this litigation and believes it has valid bases in law and fact to appeal the verdict. The Montana Supreme Court has previously reduced an excessive punitive damage award to an amount within the upper limit of the federal due process guidelines and such guidelines are expected to be applied by the court and, if necessary, by the Montana Supreme Court in this case. Although the Company believes it has meritorious defenses and appellate issues for this litigation, these proceedings are subject to many uncertainties and, given their complexity and scope, the final outcome cannot be predicted and could have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company. During 2014, the Company accrued $4,000 of litigation-related loss contingency expense, which takes into consideration the federal due process guidelines related to punitive damage awards and reasonable estimates of the plaintiff's attorneys fees and interest.

In the normal course of business, the Company is involved in various other claims and litigation. In the opinion of management, following consultation with legal counsel, the ultimate liability or disposition thereof is not expected to have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.

Other Committments:

The Company had commitments under construction contracts of $4,047 as of December 31, 2014.

The Company had commitments to purchase available-for-sale residential mortgage-backed investment securities of $16,840 as of December 31, 2014.

The Parent Company and the Billings office of FIB are the anchor tenants in a building owned by a partnership in which FIB is one of two partners, and has a 50% partnership interest.

The Company leases certain premises and equipment from third parties under operating leases. Total rental expense to third parties was $1,190 in 2014, $1,403 in 2013 and $1,423 in 2012.

The total future minimum rental commitments, exclusive of maintenance and operating costs, required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2014, are as follows:



	Third Parties		Related Partnership		Total
For the year ending December 31:
2015	$	2,132	$	676	$	2,808
2016	2,236		676		2,912
2017	1,728		499		2,227
2018	1,537		188		1,725
2019	1,487		—		1,487
Thereafter	9,941		—		9,941
Total	$	19,061	$	2,039	$	21,100

Residential mortgage loans sold to investors in the secondary market are sold with varying recourse provisions. Essentially all of the loan sales agreements require the repurchase of a mortgage loan by the seller in situations such as breach of representation, warranty or covenant; untimely document delivery; false or misleading statements; failure to obtain certain certificates or insurance; unmarketability; etc. Certain loan sales agreements contain repurchase requirements based on payment-related defects that are defined in terms of the number of days or months since the purchase, the sequence number of the payment, and/or the number of days of payment delinquency. Based on the specific terms stated in the agreements, the Company had $4,486 and $5,871 of sold residential mortgage loans with recourse provisions still in effect as of December 31, 2014 and 2013, respectively. The Company did not repurchase any significant amount of loans from secondary market investors under the terms of loan sales agreements during the years ended December 31, 2014, 2013 and 2012. In the opinion of management, the risk of recourse and the subsequent requirement of loan repurchase to the Company is not significant, and accordingly no liabilities have been established related to such. In addition, the Company made various representations and warranties associated with the sale of loans. The Company has not incurred significant losses resulting from these provisions.