My, people were busy overnight. So many posts to wade through.
All seem to hinge on the table called Exhibit 1. It comes from S&P Global Market Intelligence and is apparently proprietary information available only to those who pay for it, since a search brings up nothing.
We therefore have no context for the title: “deposits less than $250K as a percentage of total deposits”. What does it mean and why would the number be useful in a business context?
One explanation is that the percentage is that of deposits that will be fully covered by the FDIC, with amounts over that presumably safe but subject to the exigencies of the individual case.
Another explanation is that the percentage is that of the number of accounts with total deposits less than $250,000 as opposed to larger accounts.
It’s hard to see why other businesses care about the amount covered by the FDIC. The number of small accounts, however, shows up in other hits as important business information.
A page on S&P Global uses it as a measure of problem banks.
Deposits continued to increase during the first quarter, growing by $230.7 billion, but the 1.2% gain was the slowest rate of deposit growth since the third quarter of 2020. Growth in deposit accounts less than $250,000 outpaced growth in deposit accounts greater than $250,000 for the first time in over two years, according to the report.
Another SPGobal report, on fintech banks, also made an issue of accounts under $250,000.
On average, the partner banks had larger numbers of accounts and therefore smaller average balances in those accounts. Looking at accounts of $250,000 or less, NBKC Bank had more than 990,000 as of June 30, which meant an average account size of roughly $450. Lincoln Savings Bank and Medallion Bank each had more than 1 million accounts, with average account sizes of roughly $830 and $1,000, respectively. But results varied, sometimes substantially. As the boxplot shows, partner banks have a wide range of deposit levels compared to non-partner banks. Their deposit levels also tended to be more volatile from quarter to quarter, as measured by standard deviation.
My inference from these examples is that “Accounts under $250,000” is a term of art in the banking community meaning literally that: accounts which do not contain more than $250,000. One cannot tell the total amount of funds in these accounts just by the number of them. As shown above, the average account size may be very small. Therefore extrapolating 2.7% of accounts being under $250,000 to the statement that 2.7% of total deposits are FDIC covered is the wrong conclusion.
However, @JRDelirious is correct is that the sum total of account types held by a single depositor is looked at for FDIC coverage. The proper nitpick I should have made is that joint accounts are insured at $250,000 each. Therefore a couple would not be counted in the $250,000 or under category if they had, say, $500,000 in their accounts, but all that money is fully FDIC insured. From the FDIC brochure they cited:
The balance of a joint account can exceed $250,000 and still be fully insured. For example, if the same two co-owners jointly own both a $350,000 CD and a $150,000 savings account at the same insured
bank, the two accounts would be added together and insured up to $500,000, providing up to $250,000
in insurance coverage for each co-owner.