Question of the day
2026-07-07
FIG
What is a core deposit intangible?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
The CDI is the intangible asset recognized in bank acquisition accounting for the value of the target's low-cost, stable core deposit base — economically, the present value of funding cheaper than the marginal wholesale alternative. Key properties
- it is amortized through earnings, often over roughly ten years on an accelerated basis, but the amortization is non-cash and typically added back in 'cash EPS' accretion math
- it is deducted in computing tangible book value and regulatory CET1, so a bigger CDI means more day-one TBV dilution
- its size is rate-dependent — when rates are high, cheap deposits are worth more, so CDIs balloon. It is the accounting embodiment of 'bank M&A is buying deposits.'
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