Liquidity & Balance Sheet
Core Deposits
Core deposits are a bank's stable, relationship-based funding (checking, savings, and smaller time deposits) excluding rate-sensitive jumbo CDs and brokered money. They are the cheapest and stickiest funding a bank has.
How is Core Deposits calculated?
Derived from Schedule RC-E. The idea is to remove funding that chases rate and leaves quickly (large uninsured CDs and brokered deposits) leaving the relationship balances that stay through a rate cycle. Dividing by total funding (deposits plus borrowings) gives the funding-based measure used in the bands below; the core deposit ratio page divides by total deposits instead, so its figures run higher.
Why does Core Deposits matter?
Core deposits are the foundation of a durable, low-cost funding base. A bank funded mostly by core deposits weathers rising rates and stress far better than one leaning on brokered or wholesale money, which reprices fast and runs in a panic.
How do you interpret Core Deposits?
Read core deposits as a share of total funding (core ÷ total funding). A high ratio signals a stable franchise; a falling one means the bank is replacing departing relationship money with costlier, flightier funding, a classic pre-stress pattern.
What do Core Deposits levels indicate?
| Range | Label | Interpretation |
|---|---|---|
| ≥ 85% of funding | Strong | Predominantly stable relationship funding. |
| 70-85% | Adequate | Solid core base with some wholesale reliance. |
| 50-70% | Watch | Meaningful dependence on rate-sensitive funding. |
| < 50% | Concern | Funding dominated by hot money; elevated liquidity risk. |
Worked example
Frequently asked
What are core deposits?
Core deposits are the deposits a bank can count on to stay: checking and savings accounts, money market accounts, and time deposits of $250,000 or less, gathered from its own customers. They exclude jumbo time deposits above the insurance limit and brokered deposits, which move when rates change.
What is the core deposit definition used in bank analysis?
Start from total deposits on Schedule RC-E of the Call Report and subtract time deposits over $250,000, brokered deposits of $250,000 or less, and deposits in foreign offices. The result is the funding a bank holds through a rate cycle. Core deposits are a dollar amount; the core deposit ratio divides them by total deposits.
What is excluded from core deposits?
Large time deposits above the $250,000 insurance limit (jumbo CDs) and brokered deposits are excluded because they are rate-sensitive and prone to leave. What remains (checking, savings, and small CDs) is core.
Why are core deposits considered stable?
They come from ongoing customer relationships rather than rate-shopping, so they stay through rate cycles and stress events, giving the bank dependable, low-cost funding.
Sources
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