The former sounds much more likely to me. I think it should have been pretty obvious to AA that this product appeals to people who are likely to redeem a good fraction of the miles they earn this way, probably at decent value; if they didn't think that at first, it should have been pretty easy for them to realize it over time.

TCBI's filings barely mention BankDirect; it's clearly a minor part of their overall business. 75% of their deposits are from the Dallas area (which is just a portion of their physical branches); a bunch more are from their Cayman Islands branch; and some of BankDirect is non-mileage. I don't know if it's turned around lately, but their spending on miles had been declining sharply: $1.3 million in 2005, $1.1 million in 2006, $835,000 in 2007. They stopped reporting it after that, which probably means it became insignificant.

Using the 2007 figures, and assuming nobody bought mileage CD's, the cost of miles was about 0.85% of average total interest-bearing transaction deposits. If mileage accounts were 1/3 of that category, which seems unlikely, then they were spending 2.55% of mileage account balances to pay for the miles.