Core deposits are the everyday customer funds a bank can count on: checking accounts, savings accounts, money market accounts, and certificates of deposit of $250,000 or less, minus any brokered deposits under that threshold.1Federal Deposit Insurance Corporation. RMS Manual of Examination Policies – Section 6.1 Liquidity and Funds Management They matter because they are the cheapest, stickiest money a bank has. Customers rarely move them, they cost the bank almost nothing in interest, and they don’t run for the door when markets turn.
What Counts as a Core Deposit
The FDIC’s Uniform Bank Performance Report treats the following as core: demand deposits (checking), NOW accounts, money market deposit accounts, other savings accounts, and CDs up to $250,000. Brokered deposits under $250,000 are excluded, even though they fall below the insurance cap, because they lack the customer relationship that makes a deposit reliable.1Federal Deposit Insurance Corporation. RMS Manual of Examination Policies – Section 6.1 Liquidity and Funds Management
The $250,000 line matters because it is the FDIC’s standard maximum insurance amount per depositor, per ownership category, at each insured bank.2Federal Deposit Insurance Corporation. Understanding Deposit Insurance No depositor has lost insured funds since the FDIC was created in 1933. That guarantee is a big part of why core deposits stay put during a scare. A customer with $80,000 in checking has no reason to run.
Strip the definition down and four ingredients make a deposit “core”:
- It’s held by a person or small business.
- It sits within FDIC insurance limits.
- It’s tied to an ongoing banking relationship, not a rate hunt.
- It wasn’t placed through a third-party broker.
Take any one of those away and the deposit starts looking a lot less reliable.
Core Deposits vs. Non-Core “Hot Money”
Non-core deposits earn the nickname “hot money” for a reason. They chase the best rate and leave when a better one shows up. This category includes large institutional deposits above the $250,000 cap, jumbo CDs held by corporations or government treasurers, and brokered deposits placed by intermediaries on behalf of yield-seeking clients.
Under federal rules, a brokered deposit is any deposit obtained through or with the help of a deposit broker, typically a third party shopping funds around for the best yield.3eCFR. 12 CFR 337.6 – Brokered Deposits The depositor often doesn’t know or care which bank ends up holding the money. When the rate slips behind the competition, those dollars vanish.
The cost gap is huge. As of early 2026, the average checking account pays around 0.07%, and the average savings account pays about 0.39%. Banks have to offer far more on brokered or jumbo CDs to pull in institutional cash. A bank funded mostly by cheap checking and savings deposits is simply more profitable than one competing in wholesale markets.
The stability gap is bigger. When rates spike, non-core depositors renegotiate or walk. A bank leaning on that funding may have to sell assets at a loss to cover the outflows. Core depositors, insulated by habit, insurance, and the sheer nuisance of switching banks, tend to stay. That inertia is worth a fortune in a liquidity crunch.
Why Core Deposits Signal a Healthier Bank
A high share of core deposits is one of the clearest signs of a well-funded bank. Institutions where core deposits are 85% to 90% of total deposits are generally seen as sound, while those relying heavily on non-core sources draw closer supervisory attention. A bank that funds itself through customer relationships is far less likely to face a run.
Stable funding also enables steady lending. A bank confident in its deposit base can commit to 15-year commercial real estate loans or 30-year mortgages without worrying that the money behind them will evaporate. A bank dependent on hot money has to match its funding to shorter, more liquid assets, which limits what it can offer borrowers.
Regulators reinforce this. Well-capitalized banks face no restrictions on brokered deposits. An adequately capitalized bank needs an FDIC waiver to accept them, and an undercapitalized bank is barred from them outright.4eCFR. 12 CFR 337.6 – Brokered Deposits Banks that drop below well-capitalized status also face caps that prevent them from paying above-market rates to lure deposits. In effect, the rules push weak banks toward a core-deposit-based funding structure or force them to shrink.
What Silicon Valley Bank Showed
The March 2023 collapse of Silicon Valley Bank is the clearest recent illustration of what happens when a bank’s deposit base is the opposite of core. Roughly 94% of SVB’s deposits were uninsured, sitting above the $250,000 threshold and belonging mostly to venture capital firms and tech startups with large, concentrated cash balances.5Federal Reserve Board Office of Inspector General. Material Loss Review of Silicon Valley Bank These were sophisticated depositors watching rates closely and ready to move at the first sign of trouble.
Trouble came fast. On March 9, 2023, customers pulled $42 billion in a single day, nearly a quarter of the bank’s total deposits. Another $100 billion in withdrawal requests were queued for the next morning. By March 10, regulators had seized the bank.5Federal Reserve Board Office of Inspector General. Material Loss Review of Silicon Valley Bank
The Federal Reserve’s post-mortem was blunt: SVB’s management and supervisors “did not appreciate the risks associated with this concentration and seemed to presume that SVB’s depositors would remain at SVB because of their perceived loyalty.”5Federal Reserve Board Office of Inspector General. Material Loss Review of Silicon Valley Bank A traditional core base of insured retail and small business accounts would not have produced that kind of single-day outflow.
What This Means for You as a Depositor
If you’re not a banker, why care? Because the composition of your bank’s funding tells you something real about its stability. A bank funded mostly by core deposits from customers like you is inherently more resilient than one propped up by institutional hot money. Your funds are insured up to $250,000 per ownership category either way, so you won’t lose insured money in a failure, but dealing with a failed bank is a hassle nobody wants.2Federal Deposit Insurance Corporation. Understanding Deposit Insurance
The trade-off is honest. Core deposits are cheap for banks precisely because they pay you very little. A checking account earning 0.07% is quietly subsidizing the bank’s lending, and in exchange you get convenience, insurance, branches, and the everyday plumbing of banking. Move that money to a high-yield online savings account or a brokered CD and you’ll earn more, but from the bank’s perspective your dollars have just shifted into the non-core column.
When you size up a bank, look at where its money comes from. Community banks and regional institutions that draw most of their deposits from local retail customers and small businesses generally show strong core deposit ratios. Banks that have grown fast by paying above-market rates or leaning on brokered deposits may be more exposed if conditions change. That doesn’t mean you should skip high-yield accounts. It just means knowing what kind of funding sits behind your bank gives you a sharper read on the institution holding your money.