CHARLESTON, W.Va. -- 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?

"What's going on there is we still have a little bit of room to drop our deposit rates," Mazza says. "We continue to drop our deposit rates hard." But the Federal Reserves' stimulus program, known as Quantitative Easing 3, "is pushing down what we're charging for loans. Remember, the drop in deposit rates is not infinite. We can only go to zero. And you need deposits to make loans."

As part of its stimulus program, the Federal Reserve is buying $40 billion in mortgage-backed securities every month.

"That is keeping interest rates low," Mazza says. "So there is no way we're going to charge any more for loans. And we're to the point we can't pay any less for deposits. The only way we can return a reasonable amount to shareholders is to grow."

Which is one reason why Fairmont-based MVB plans to open five new branch offices, including a Charleston office.

A check of regulatory filings by West Virginia's 10 largest banks, as measured by market share, shows that only two -- City Holding, the corporate parent of City National Bank; and Huntington Bancshares, the corporate parent of Huntington Banks -- had higher margins on June 30 compared to a year ago.

Mazza believes thin margins, along with proposed higher capitalization requirements and additional federal regulation, will continue to pressure banks' profits for the foreseeable future. He thinks banks have to grow or merge, or they "are going to have some really tough times."

Reach George Hohmann at busin...@dailymail.com or 304-348-4836.