The 3-6-3 Rule: How Bankers Used to Operate

In the past, bankers operated using the 3-6-3 Rule: collect deposits at 3 percent, lend them at 6 percent, and be done for the day by 3 PM.

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In a bygone era, bankers operated by what was once known as the 3-6-3 Rule: collect deposits at 3 percent, lend them at 6 percent and be on the golf course by 3 PM. More than a decade of low interest rates following the Great Financial Crisis seemingly upended this dictum and heightened regulation of the industry contributed to a race to build scale. However, with interest rates on the rise once again, it's possible that the old 3-6-3 Rule may make a comeback. Time will tell whether this is simply a blip on the radar or a lasting trend.

No doubt, said regulation has broadly kept the industry out of trouble, and capital requirements provide a strong base to absorb potential future calamities. But banks have had to resort to making gains in technology and growing fee generating business to support returns. It's good that banks are being proactive and making gains in technology and fee-generating businesses to support returns. However, they should also be mindful of potential future calamities and make sure they are prepared to absorb them.

With interest rates on the rise, traditional banking is becoming a more attractive proposition. Depositors can expect to see their rates increase as well, although not as much as borrowers. This margin between the two rates is likely to keep banks profitable in the current environment.

These two small-cap banks are in a great position to capitalize on their customer loyalty and market presence. By raising deposit costs at a slower pace than their competition, they can attract more customers and grow their businesses.

The Big Cheese is a big hit!

As the largest bank holding company based in Wisconsin, Associated Bank has grown to serve over 100 communities throughout Wisconsin, Illinois and Minnesota. Since 2016, Associated’s deposit base has shifted away from higher-cost wholesale deposits in favor of Community, Consumer & Business balances, which now represent 63% of the total. Looking ahead, Associated Bank is committed to growing its Community, Consumer & Business deposit share to 70% of the total, while maintaining a strong focus on risk management and profitability. This shift in focus will allow the bank to better serve the needs of its customers and communities, while also positioning it for continued growth and success in the future.

The management team at ABC Corporation is very bullish on the prospects for the company in the coming year. They expect that the Federal Reserve's decision to raise interest rates will help to boost the company's Net Interest Income by more than 10% in 2023. They also believe that the company's stock price will rebound significantly from its July lows and that it will trade at a multiple of 9 times earnings in 2023. ABC Corporation is a great investment for those looking for income and growth potential.

Banking in the Land of the Pines: A Guide to Finding the Right Financial Institution

First Bancorp is a community bank that has been in operation since 1935. The bank has 108 branches across North and South Carolina and assets of $10.6 billion. First Bancorp has acquired a number of smaller banks over the past decade, which has allowed it to more than triple deposits. The latest purchase is of GrandSouth, with 8 branches in South Carolina, for $181 million. This is set to close early Q1 and will expand the asset base by another $1.3 billion.

Looking at First's recent financials, it's clear that the bank is in a strong position. Its funding costs have trended lower over the past few years and are now very low, while its efficiency ratio is also on the decline. This indicates that First is well-managed and efficient, and is able to compete effectively in the market.

FBNC looks poised to benefit from strong population growth in its home state, which was recently named the top state for business by CNBC. A 16% slide in its share price year-to-date leaves FBNC attractively priced at just 9 times the consensus 2023 EPS estimate. Additionally, FBNC's dividend has grown at greater than 20% on average over the past five years, with the yield now 2.3%.