Wall Street workers flee to small-town security

ALBANY, N.Y. -- Bankers and brokers looking to escape the financial meltdown are scrambling to relocate their families, possessions and rarified talent far from Wall Street to places such as Florida, Chicago, Milwaukee, Virginia and Asia.

Travis Lacey left investment bank Jeffries & Co. and Wall Street behind in September to work for Baird in Chicago. He also left behind the nagging sense of worry that had plagued him since his company had started announcing layoffs earlier in the year.

"Anyone in that environment, you never know what's going to happen," Lacey said. "There are a lot of good bankers that unfortunately are at the wrong place at the wrong time, especially in New York."

Corporate headhunters say Wall Street's malaise will lead to a permanent talent loss for New York. It could help small boutique firms become bigger players with employees they would never have been able to lure from the city long-regarded as the world's financial capital.

Former Wall Streeters also tend to bring clients with larger net worth -- another potential long-term blow to firms trying to recover from the meltdown -- so boutiques and middle market firms stand to reap the profits. In turn they deliver something that's elusive on Wall Street: stability. Jobs in the financial sector can pay anywhere from $100,000 to well into the seven-figure range depending on location, experience and the size of a firm, said Kimberly Bishop, vice chairman of Slayton Search partners, a Chicago-based headhunting firm.

"There's some talent available to some companies that wasn't available before," she said.

Wall Street workers who are thinking about relocating need to be flexible about income, Bishop said. Some junior Wall Street workers may be able to get more senior positions in smaller firms, getting comparable or better pay. But many more will make less while benefiting from a cheaper cost of living outside of New York City.

New York is the top paying state for personal financial advisers, with an average salary of $131,660, according to the U.S. Bureau of Labor statistics. Colorado followed, paying an average of $119,590, then Massachusetts, with an average pay of $116,170, according to the 2007 occupational employment survey.

Idaho was the lowest paying state for financial advisers, paying an average of $50,980. West Virginia, North Dakota, Alaska, Nebraska and Kentucky all follow, paying an average below $60,000 a year for the same job.

Middle market and boutique firms are also appealing because they offer increased job responsibility and freedom, said Peter Kies, a managing director at Robert W. Baird, a Milwaukee-based middle market firm.

"As every round of cuts occurred, we got an increasing flow of resumes," Kies said. "You can have a Wall Street kind of experience and live in Richmond, Milwaukee or Chicago."

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Fed eyes another rate cut

WASHINGTON -- As the economic wreckage piles dangerously higher, the Federal Reserve is prepared to ratchet down interest rates -- perhaps to their lowest point in more than four years -- with the hope of relieving some of the pain felt by many Americans.

The convergence of a housing collapse and a lockup in lending has created the worst financial crisis in more than a half-century. Alan Greenspan, who ran the Fed for 18 1/2 years, called it a "once-in-a century credit tsunami," and conceded that he made mistakes that may have aggravated the economy's slump.

With a recession seen as inevitable, if not already under way, any Fed rate cut would be aimed at cushioning the fallout.

Vanishing jobs and shrinking paychecks have forced consumers to cut back sharply. Millions of ordinary Americans have watched their 401(k)s and other nest eggs shrink and the value of their homes drop, making them feel in even worse financial shape. In turn, businesses have cut back on hiring and other investments as customers hunker down and credit problems make it harder and more costly to get financing.

"These are sobering times," said Paul Kasriel, chief economist at Northern Trust Co.

All the problems have been feeding on each other. So far, Fed Chairman Ben Bernanke and his colleagues haven't been able to break the vicious cycle, despite hefty rate reductions and a flurry of unprecedented steps aimed at getting credit flowing more freely again.

Bernanke says he'll use all tools to battle the crisis.

To that end, Fed policymakers are widely expected to lower the central bank's key interest rate at the conclusion of a two-day meeting Wednesday -- their last session before the November elections.

Investors and some economists predict the central bank will drop the rate by half a percentage point to 1 percent. If that happens, it would mark the lowest rate since the summer of 2004. Others, however, think the rate will be cut by a smaller, quarter-point to 1.25 percent.

In turn, rates on home equity, certain credit cards and other floating-rate loans tied to commercial banks' prime rate should drop by a corresponding amount. A half point reduction would leave the prime rate at 4 percent; a quarter-point cut would drop the rate to 4.25 percent. Either way, the prime rate would be the lowest in more than four years.

The Fed hopes that lower rates will spur people and businesses to spend again, helping to brace the wobbly economy.

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Home, business owners harness solar power

Phillip N.H. Smith worked on an experimental solar-powered house when he was a student at the Massachusetts Institute of Technology in 1951.

Now, the retired Copperweld Corp. chief executive and his wife, Martha, want to use some of the sun's energy to power their Fox Chapel home. They plan to install solar panels on the roof of an attached garage, once a state subsidy for alternative energy equipment becomes available.

"This is a chance for us to see what we can do," he said.

Hundreds of home and business owners and even local governments have been pricing solar panels, small wind turbines and other energy-making systems in the three months since Gov. Ed Rendell signed into law a bill that, for solar equipment, would cut costs by 35 percent.

The federal renewable energy and energy efficiency tax credit program recently was expanded, meaning even more potential savings.

Homeowners like the Smiths are waiting for the state Department of Environmental Protection to write the rules for Pennsylvania's program, specifying what types of home and small-business systems are covered and how and where they can be installed, department spokesman Charlie Young said.

Similar incentives in other states, such as Maryland, have increased solar panel installations dramatically. So far, almost 2,300 people have signed up for DEP's e-mail notifications about the program, Young said, and the program could be running by early next year.

Contractors who install solar rooftop panels are seeing an uptick in inquiries. "We have 200 potential customers -- a lot are waiting to see what the rebates are," said Rich Foltz, president of Vox Energy Solutions in McCandless.

"We go out every week and do proposals. People are just starting now to get educated, and they say they're doing the research and waiting for the rebate. I compare it to buying a $60,000 car for $40,000 -- who wouldn't take the deal?"

About $100 million has been earmarked for state rebates for solar installations at residences and small businesses, Young said. Another $25 million is to be available for wind and geothermal equipment.

The recent renewal of federal investment tax credits for solar power, once capped at $2,000 for a residential system, could cover another big part of the costs. The new federal incentive is 30 percent of the project cost, Young said, though state officials are unsure at this point how the two programs might overlap.

Costs vary for home solar systems. Foltz said an average, 2,200-square-foot home with two adults and two children uses about 9,000 kilowatt hours each year.

A system that could "zero out" electricity bills for that home might cost $40,000 to $50,000, and involve as many as 24 solar panels. Foltz added the financial benefits of solar panels vary greatly, depending on the price of electricity in the region.

Steve O'Hare just bought four more 120-watt solar panels at around $600 each for his Shadyside home, adding to the two he installed a few years ago. They feed electricity to a battery that powers the garage and outdoor lights, plus his tools and a dehumidifier in the basement.

His family's electric bill was around $80 a month without the panels. "Now, it comes in at $50," said O'Hare, who owns rental properties and restores older homes. "I'm very pro-solar alternative and I'm trying to get all my neighbors interested. Even if they put a couple panels up, it would offset their electric bills."

Much of consumers' new interest in solar, wind and other systems, in fact, is rooted in worries about rising electric bills in the next two years.

State officials have warned some utilities could raise their rates by 40 percent or more as the capped prices imposed under the state's deregulation law in 1996 expire, and demand for power increases.

Most of Vox's solar installations have been in the center part of the state, but the company started servicing Western Pennsylvania early this year, Foltz said. So far, it's put about four systems online in the Pittsburgh region.

Conservation Consultants Inc. plans to double the solar panel array on the roof of its South Side building, said Ann Gerace, executive director. The nonprofit promotes environmental responsibility through programs such as home energy audits.

The expanded system should produce 10 percent of the energy used in the building, where 55 people work. And because utilities have to buy excess power produced by solar systems, Gerace said, "We figure when we're not here on the weekends, we might as well give it back and let Duquesne Light pay us for it."

The Smiths had been considering solar panels for their home for years. What convinced them was a four-day power outage last year that ruined all their refrigerated and frozen food, and forced them to replace an older refrigerator that never recovered, Martha Smith said.

The couple say they might put a small wind turbine on their three-acre lot on a hilltop, to help power the electric-heated house where they raised six children.

More immediately, Martha Smith intends to go solar on the local roads. She ordered a Solar Bug vehicle for $15,000 from Free Drive of Bozeman, Mont., that should be delivered in November.

Resembling a miniature golf cart with one seat in front and one in back, the electric-powered car has a roof full of solar panels.

Smith said she's been promised the second car the company produces, and she's ordered a vanity license plate: "Sunbug2."

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Airport authority raises airline fees

The Allegheny County Airport Authority Board on Friday unanimously approved an $88.9 million operating budget for 2009, which includes fee increases for airlines at Pittsburgh International Airport.

To accommodate the continued downsizing by US Airways, the authority said it raised landed-weight fees and terminal rents for all carriers by about 35 percent. The ramp fee rate -- a nominal part of airlines' charges -- has nearly tripled, from just under $200 per linear foot annually to $575.

That will increase the average cost for airlines to board a passenger at Pittsburgh International to $16.64 in 2009 -- a 44 percent increase from the current $11.57.

"Those numbers are concerning," said Steve Sisneros, property manager for Southwest Airlines, the second-busiest carrier in Pittsburgh after US Airways. Authority executives, however, will meet with the airlines next month to discuss trimming those costs. In addition, the authority re-evaluates costs throughout the year, and has cut fees in previous years.

The authority will pay $62.6 million in 2009 for debt service on construction of the 16-year-old airport in Findlay, which was built to US Airways' specifications. In 1997 the airline boarded nearly 19 million passengers here. Last year, that figure was just 5.2 million.

"Debt service stays the same if you run two people or 20 million through the airport," said authority Executive Director Brad Penrod. "With (fewer) passengers, the cost per unit goes up."

The 2009 operating budget, which also covers Allegheny County Airport in West Mifflin, will rise 1.7 percent from this year, mostly due to increased energy costs, Gill said. The capital budget is $120.9 million, all but $14.6 million of which will come from authority-generated funds. The rest comes from federal, state and other grants.

Board member Rich Stanizzo said yesterday a third party could be hired to review two proposals to improve energy efficiency at the airport, with a decision expected at November's meeting.

"There were still some items that were ambiguous to us," he said. " We really can't get a clear understanding if one was better than the other."

James Platz of Siemens Building Technologies Inc., a bidder for that contract, said the board had delayed a decision for five months, and changed bid procedures in the interim.

"We have $1.4 billion of airport experience across the United States. Our competitor ... replaced a few light bulbs here at this airport," Platz said. The competitor is "CLT, a Charles Zappala company."

Zappala is a Pittsburgh businessman and founding investor in CLT, as well as a brother of former state Supreme Court Chief Justice Stephen A. Zappala and uncle of Allegheny County District Attorney Stephen A. Zappala Jr. Neither Charles Zappala nor CLT President Troy Geanopulos returned a call for comment.

Platz later declined to say whether he thought Zappala's firm was getting preferential treatment.

"I would say there's a delay in the process and we'd like to know why," Platz said. "We're just asking questions. We don't have the answers."

Penrod said the contract is a new hybrid that combines design and bid aspects. The state government is sponsoring a workshop to educate stakeholders about it.

"We want to make the right decision the first time," he said.

Penrod, Stanizzo and board chair Glenn Mahone said the bidding process is proceeding in accordance with the law and airport policy, and that Zappala is exerting no influence over it.

Parkvale CEO optimistic despite earnings drop

Despite a drop in earnings and "near hysteria" in the financial markets, Parkvale Financial Corp. CEO Robert McCarthy Jr. says he's confident the Monroeville company's stock will rebound.

Shares of the savings institution have lost about half their value this year, dropping from about $28 in early January. The stock closed Friday at $14.60, down 40 cents from Thursday's close.

The parent of Parkvale Bank reported net income plunged to $1.1 million, or 20 cents a share, for the fiscal first quarter ended Sept. 30, compared with more than $3.6 million, or 65 cents a share the year earlier.

Results were mainly hurt by expenses from writing down the value of securities owned by Parkvale. It wrote down preferred stock holdings in troubled home mortgage giant Freddie Mac by $2.6 million, and debt securities of now-failed Washington Mutual, once the nation's largest savings institution, by $1.3 million. Parkvale had no such charges the year before.

David Lazar, bank analyst and managing director of Stifel Nicolaus & Co., Philadelphia, said Parkvale should not be "criticized" for its exposure to those two institutions, which were beset with subprime mortgages. He termed Parkvale's losses "relatively small," compared with many of its peers.

"I do believe our stock price will recover," McCarthy told shareholders at their annual meeting in Oakland on Thursday.

"We just have to get through these unprecedented times," he said, referring to the housing and financial crises, including the failure of several giant commercial and investment banks.

"Parkvale has not originated or purchased subprime loans and does not own any," said the CEO. "But unfortunately, our investment portfolio did include some companies that invested in subprime."

McCarthy also said Parkvale might want to acquire branches or institutions in Ohio, central Pennsylvania or western Maryland, if it can strike the "right price." But he's not interested until the housing and financial turmoil "hits bottom," which McCarthy expects to happen in the next six to 12 months.

Parkvale is the 10th-largest financial institution in the seven-county Pittsburgh region. It has 41 branches in the region (sixth-most) and seven in northern West Virginia and northeast Ohio.

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UPMC says operations OK despite need for layoffs

The University of Pittsburgh Medical Center on Friday reported solid operating gains and a healthy rise in admissions for the first three months of the fiscal year.

Just one day after it confirmed the layoffs of 500 workers, the health giant reported income from patient operations of $63 million from July through September, a slight improvement over the same period a year ago.

UPMC Chief Financial Officer Robert DeMichiei said the layoffs are a way of "addressing our cost structure to get ready for what we see is a worsening economy."

"Even though the results are strong now, we need to ensure they stay strong six months from now, a year from now, because we are committed to keeping a financially strong and viable organization," DeMichiei said in a meeting at UPMC headquarters, Downtown.

The layoffs have been concentrated in nonclinical, administrative jobs, DeMichiei said. Fewer than 50 clinical workers have been laid off, he said.

It isn't known if more layoffs will be forthcoming, but officials said other cost-cutting measures may include cuts to advertising and travel budgets.

DeMichiei invoked the wars in Iraq and Afghanistan and the stock market turmoil as examples of why UPMC next year expects cuts in its federal reimbursement. That could be a significant reduction in reimbursement because about 60 percent of UPMC's revenue comes from the federal Centers for Medicare and Medicaid Services, he said.

Job cuts in other industries can have an impact on health care providers such as UPMC because they may be forced to care for more uninsured patients, he said.

"Our economy is worse, and it's going to be much worse in the years ahead," DeMichiei said.

Indeed, the battered market has affected UPMC's sizable investment portfolio, which dropped to $2.8 billion during the first quarter, from $3.1 billion reported in fiscal year 2008.

"It's a big number but not a number that we're not anticipating," said UPMC Treasurer and Senior Vice President Talbot Heppenstall Jr.

The investment money in the bank is not used for day-to-day operations, Heppenstall said.

Officials expressed optimism about the coming year, based on a key measure of financial stability known as EBIDA, which stands for earnings before interest, depreciation and amortization. UPMC during the quarter realized $149 million in EBIDA, described by officials as the money used to run the business and fund capital expenditures. UPMC is on target to exceed $500 million in EBIDA by the end of the fiscal year.

Overall, operating revenue during the first quarter grew by 16 percent to $1.9 billion.

Officials yesterday reported a 11 percent increase in admissions across the network's 21 hospitals, to 47,470 from 42,724 during the same three-month period a year before. Most of the increase was attributed to the acquisition of UPMC Mercy, but even without Mercy, admissions would have shot up, officials said.

Other indicators of growth included a 6 percent jump in the number of employed physicians to 2,621 from 2,453, and a 7 percent jump in membership in the UPMC Health Plan, to 1,297,288 from 1,205,788.

UPMC is maintaining its "AA" credit rating, which officials said is another indicator of financial strength.

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PNC springs into elite with $5.6B National City buy

PNC Financial Services Group's deal to acquire troubled National City Corp. will give PNC control of more than half the banking deposits in Western Pennsylvania and will give other banks a chance to buy branches it is expected to discard, analysts said Friday.

National City, Ohio's biggest bank, agreed to be purchased by PNC, Pennsylvania's biggest bank, for about $5.6 billion in a government-assisted merger.

The transaction vaults PNC into the ranks of the nation's five largest banks -- which are being pushed to merge by the global financial crisis.

The new PNC will dominate Pittsburgh's and Pennsylvania's banking business. Operating mainly in the Mid-Atlantic states, PNC will push west into new markets from Cleveland to Chicago to St. Louis.

"This is a tremendous opportunity and will be viewed as a coup for PNC over the long term," said Gerard Cassidy, an analyst at RBC Capital Markets of Portland, Maine, who follows both banks.

PNC plans to eliminate $1.2 billion in expenses, equal to 10 percent of the combined banks' overhead. But not much will be cut in the Pittsburgh market, said CEO James Rohr in an interview.

"This is a terrific deal and a good thing for Pittsburgh, too," said Rohr, who returned from making the deal in Cleveland about 3 a.m. yesterday. "We're not going to lose jobs in Pittsburgh from this."

Rohr said the addition of National City, the nation's seventh-largest bank by deposits, will push more banking transactions through PNC's operations. That will produce jobs over time at PNC Firstside Center, the bank's operations base Downtown, "because we will be processing a lot of things in Pittsburgh," he said.

PNC has about 7,000 employees and National City about 1,800 employees in Western Pennsylvania.

A government infusion of money set up the deal, which came hours after the U.S. Treasury agreed to pay $7.7 billion in exchange for PNC preferred shares. The money is part of the U.S. government's program to stabilize financial institutions and adds significantly to PNC's capital strength.

Treasury officials turned down National City's request for money in exchange for preferred shares and directed National City to "find an acquirer," Cassidy said.

National City was essentially auctioned off Thursday night in Cleveland. The only other bid came from U.S. Bancorp, the fifth-largest bank by deposits. But its bid of $1.25 per National City share was much lower than PNC's $2.23 offer.

"PNC got a bargain. And they are doing it with cheap capital from the (government) program," said Frank Barkocy, research director at Mendon Capital Advisors of New York.

Three days ago, National City said it would cut 4,000 jobs over the next three years. The announcement coincided with the Cleveland bank posting a $729 million loss for the July-September quarter, mainly the result of its portfolio of problem loans.

"It's logical to set that (job-cutting plan) aside. The PNC transaction supersedes that," said National City spokeswoman Kristen Baird Adams. "It's now PNC's determination to make in terms of how they want to proceed."

Adams would not comment about regulators' involvement in the deal.

There will still be job cuts, mostly outside Pittsburgh. Rohr said duplication in businesses, such as information services and commercial mortgage servicing, would likely be eliminated.

"I think a good portion of that $1.2 billion, maybe about 30 percent, they could get out of the corporate headquarters in Cleveland," said Cassidy.

PNC will consolidate a number of branches where the two banks' offices overlap, said Rohr. He could not say how many might be closed or sold because PNC spent more time examining National City's troubled loan portfolio than its branches.

"They will consolidate branches that are close together," but retain their deposits, said Robert Wagner, senior vice president at Ferris Baker Watts, a securities firm in Mt. Lebanon.

"The most logical players to take advantage of a spinoff of branches would be FNB Corp., S&T Bank and First Commonwealth," he said. "They want a greater presence in the Pittsburgh region."

"Yes, we would have an interest, once PNC determines which branch offices it wants to divest," said Robert New Jr., CEO of FNB, based in Hermitage, Mercer County, which operates locally as First National Bank.

"Community banks like First Commonwealth have benefited from unprecedented changes in the financial services arena in the past year. This should be no different," said Ed Lipkus, First Commonwealth Financial's chief financial officer.

A spokesman for S&T said it was too early to comment.

The fortified PNC Bank would command 53 percent of the deposits in the seven-county Pittsburgh region, where PNC is largest and National City is second. The deal also gives PNC 254 branches -- twice as many as next-highest Citizens Bank.

Analyst Barkocy believes PNC will be able to digest the bad loans it gets from National City. PNC said it expects to lose $19.9 billion over time on National City's $113.4 billion in loans. But National City set aside nearly $4 billion to cover those losses.

"This was not overnight due diligence. PNC did a helluva lot of homework," said Barkocy. "Rohr said PNC examined virtually every credit."

National City stockholders will receive 0.0392 shares of PNC stock for each one of their own, equating to a price of $2.23 per share for National City. The deal is expected to be completed by Dec. 31.

"This is a tragic end for National City," said Cassidy. "This is a bank that was trading at $37 in spring 2007, and now it's selling out for $2.23 a share."

National City shares closed yesterday at $2.07, down 68 cents. PNC shares closed at $58.88, up $2.

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