Intermountain Community Bancorp, of Sandpoint, says it has received preliminary approval from the U.S. government to participate in the federal capital purchase program and will seek approval from its shareholders to pursue the funds.

Intermountain says its shareholders will meet in Sandpoint Dec. 17 to vote on a proposed amendment to its articles of incorporation that would enable the company to issue shares of preferred stock, which it can't do now. Under the government's capital purchase program, the U.S. Treasury buys preferred shares worth up to 3 percent of the value of a financial institution's risk-weighted assets and also receives warrants to buy common shares.

If Intermountain's shareholders approve the amendment, the company could issue up to $27 million in preferred stock to the government and also would issue warrants good for the purchase of $4 million of the company's common stock.

"While our capital position is already strong, this new equity will increase our capacity to lend and enhance our competitive position," says Curt Hecker, Intermountain's president and CEO. "The capital is offered at favorable market terms. As such, it will serve as relatively low-cost insurance against the uncertain economic times we face and give us an advantage with respect to future opportunities."

The company's Web site say the federal program restricts institutions from paying certain levels of executive compensation, and that each of Intermountain's executives has agreed to modify his or her employment agreement and release Intermountain from its obligation to pay any compensation that's prohibited by the program. The company says a $27 million investment by the government would represent about 30 percent of its average equity.

The company's banking subsidiary, Panhandle State Bank, has offices in eight North Idaho cities and operates three divisions: Intermountain Community Bank, Intermountain Community Bank Washington, and Magic Valley Bank.