MVB Financial Corp. Chief Executive Officer Larry Mazza says the bank business used to be pretty easy. "They called it '3,6,3 banking.' You got money in at 3 percent, lent it at 6 percent and got on the golf course by 3 p.m."
Of course he is exaggerating. It was never that easy.
Now it is very hard.
In the low-interest-rate environment the Federal Reserve has created in hopes of stimulating the economy, banks can't offer high rates and can't charge much, either. When bankers talk about the difference in what they can pay to attract money and the rate they can charge borrowers, they speak of the net interest margin.
Last week this key figure dropped to a three-year low.
"Banks used to have 4 percent margins," Mazza recalls. "Now it's going under 3 percent and it could get as thin as 2 percent for some banks."
Jefferson Security Bank of Shepherdstown is an example of a bank with a shrinking margin. In 2009 Jefferson achieved a 4.11 percent margin. On June 30 of this year it was 2.72 percent.
In contrast, the margin at Mazza's bank increased from 3.13 percent a year ago to 3.14 percent on June 30, 2012. How?