What is the definition of core deposit intangible?

Answer 1

a premium paid to acquire the core deposits of an institution. The premium is the amount paid in excess of the dollar amount of the deposits, and under accounting rules, the premium is listed on the books as an intangible asset.Definitions of core deposits vary. Core deposits are defined by the Office of the Comptroller of the Currency (OCC) as "the deposit base". The deposit base, while usually not restricted, is generally based on stable customer relationships the bank can expect to maintain for an extended period of time. There is a variety of opinion regarding which deposits comprise a financial institution's "core deposits"; however, the market forces of the particular financial institution should be considered in determining core deposits. Generally, in markets further removed from metropolitan areas, there is a less competitive environment, thus, in metro environments CDs > 100k would not be considered core deposits, certain CDs > than 100k may be considered core deposits.

Core deposits represent a stable source of money. The value of the core deposit intangible is derived from the difference between the cost of core deposit compared with the most favorable market alternative. The measurement of the initial core deposit intangible is accomplished by spreading the benefit over the economic life of the core deposits and discounting back to its present value.

Answer 2

A core deposit intangible refers to the value of customer deposits held by a financial institution that cannot be physically touched or seen. It represents the relationship and loyalty of customers, which is considered to be an intangible asset on the balance sheet. The value of core deposit intangible is determined based on the expected future income that these deposits will generate.