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Rural Hospital Locks in New Facility with LOC Financing

Corry Memorial Hospital has been a community fixture for nearly 60 years in the town of Corry, Pennsylvania, located about 30 miles from the city of Erie. And like many rural hospitals, it has seen its infrastructure age and bed utilization decline with a significant shift from inpatient to outpatient services. Hospital administrators worked for years to come up with the financing to build a new hospital to better respond to community needs.

Their efforts paid off when Northwest Savings Bank, an FHLBank Pittsburgh member, provided a  $12 million Letter of Credit (LOC), confirmed by FHLBank Pittsburgh’s LOC, to support construction financing through a tax-exempt bond issue. LOCs for tax-exempt bonds, the financing tool that was available from FHLBank for the last two years, drive down bond costs and extend capital to bolster community and economic development. Northwest’s LOC will provide credit support for the initial two years of the project and will then be replaced by a U.S. Department of Agriculture (USDA) loan guarantee. A direct USDA loan helps round out the financing.

Dan Franks, regional vice president, Commercial Lending at Northwest Savings, embraced the deal quickly. “By utilizing FHLBank’s top-level credit ratings, we’ve lowered borrowing costs for Corry Memorial and assisted them in getting a modern hospital built,” Franks said.

Last fall, hospital officials confidently confirmed that financing had been secured to build a 20-bed, 73,000 square-foot, state-of-the-art facility at a new location that will expand existing emergency and outpatient services.

Paul Roche Jr., chairman of Corry Memorial's board of trustees, said that many banks were considered for the project. "We just really want to emphasize how pleased we were with Northwest Savings Bank," Roche said. "It is nice that a local bank had the resources and took the time to understand Corry Memorial,” he added.

Corry Memorial plans to start construction this month and complete the project by June 2012. According to hospital officials, the new hospital will help perpetuate jobs for its 260 employees, plus another 80 people who have jobs associated with the hospital. In addition, an estimated $38 million in construction costs will benefit the local economy.

While the authority for FHLBanks to issue LOCs in support of non-housing tax-exempt municipal projects expired on the first of this year, FHLBank Pittsburgh continues to advocate, along with its partners, to restore this authority in the future. In the meantime, FHLBank Pittsburgh is still able to issue LOCs to members in support of housing-related projects throughout Delaware, Pennsylvania and West Virginia.