CORE DEPOSITS Core deposits, by definition, are those deposits that either dont bear interest, dont reprice

in tandem with market rates or reprice more favorably than market rates at the time of repricing. Accordingly, core deposits are traditionally a lower cost of long-term funding directly affecting bottom-line profit. Generally, core deposit inflows will have a positive effect on the banks interest rate risk profile and bottom-line profitability by enhancing margins, noninterest income and potentially the banks ability to compete for and retain loan customers. (Source: The Value of Building Core Deposits in a Lagging Loan Demand Environment ; January 2010; Author: Brian Mischel)

Core deposits are defined in the Uniform Bank Performance Report (UBPR) User Guide as the sum of demand deposits, all NOW* and ATS** accounts, MMDA*** savings, other savings deposits, and time deposits under $100,000. Core deposits are generally stable, lower cost funding sources that typically lag behind other funding sources in the need for repricing during a period of rising interest rates. These deposits are typically funds of local customers that also have a borrowing or other relationship with the institution. Convenient branch locations, superior customer service, dense ATM networks, and low or no fee accounts are significant factors associated with the inertia of these deposits. However, in some instances, core deposit accounts (e.g., time deposits) might exhibit characteristics associated with more volatile funding sources. Conversely, deposit accounts generally viewed as volatile funding (e.g., CDs larger than $100,000) might be relatively stable funding sources. Refer to the Examination Treatment of Liquidity (UBPR Ratios) section of this chapter for discussion of ratio analysis involving core deposit ratios. (Source: FDIC Risk Management Manual of Examination Policies; Section 6.1 Liquidity and Funds Management)
* NOW Negotiable Order of Withdrawal is a checking account at a bank or thrift that earns interest. The account holder is allowed to write checks or drafts against the money in the account and may withdraw any amount of money from it on demand. **ATS - Automatic Transfer Service account is a deposit account that allows the transfer of funds from a savings account to a checking account in order to cover a check written or to maintain a minimum balance. *** MMDA Money Market Demand Account is an account, such as a checking or savings account, that pays a certain (low) interest rate to the holder and from which funds may be withdrawn on demand. Money market demand accounts are included in most counts of money supply.

Core deposits = All deposits (including CASA) above 1 year + net worth (Source: Liquidity Risk Management & Basel III on Liquidity Standards )