Deposit franchise and interest-rate risk5 min read
Bank strategy tested against the clients who stay
After March 2023 I stopped classifying deposits by their age. The balances that stay through a frightening week are the ones a client's payroll, payables and collections depend on, and a bank should build its securities book, its pricing and its bankers' pay around that distinction.
I no longer believe that the length of time a deposit has sat with a bank says much about whether it will stay. For twenty-five years I accepted a version of that idea, and in March 2023 it failed in front of me. My position now is that a deposit is core only when the client's business runs through it: payroll goes out of it, receivables arrive in it, card sales settle into it. Everything else, however old, is a balance waiting for a reason to move, and a bank should invest, price and pay its bankers accordingly.
I do not think a bank chooses its strategy in the annual plan. It chooses it in the assumptions buried underneath: how long a deposit will stay, how long a regulator will take, whose ledger holds a customer's money. My job is to bring those assumptions into the open, put a number and an owner beside each one, and ask the board to decide with them in view.
Much of the value lost in a bank acquisition disappears between announcement and closing, while the seller is frozen and its bankers are courted. A buyer should assume a long review, let the seller keep competing and settle the obvious objections before it files.
03
Private credit and middle-market lending5 min read
Direct lenders now offer sponsor-backed companies more debt and fewer covenants than a regional bank should. We withdrew from that contest and concentrated on the revolver, the treasury relationship and careful lending to the funds themselves, which carries a concentration risk of its own.
Total assets
US$58bn
Varrowfield Financial Corporation, June 2026
Uninsured share of deposits
46% → 33%
December 2022 to June 2026, after the deposit franchise review
Seller deposit attrition before closing
3%
Kessling Bancshares, July 2024 to June 2025; 12% at Dunmarrow in 2019
I treat every strategic choice at a bank as a claim about which clients will still be with us after a bad week, and I ask for that claim to be written down before the money is spent.
I am executive vice president and chief strategy officer of Varrowfield Financial Corporation, a listed bank holding company in Phoenix, Arizona, with 148 branches across five western states, US$58 billion of assets and US$47 billion of deposits at June 2026. I lead strategy, acquisitions, partnerships and branch-network planning with a team of thirty-one. I report to our chief executive, Hollis Prentiss, sit on the management asset-liability committee and present the strategic plan to our board each year.
I came to strategy from the balance sheet, not from consulting. In 1997 I was running the interest-rate model at a Tucson savings and loan. I then spent eight and a half years advising banks on mergers at Halberd Rowe & Co. in Denver, including failed-bank acquisitions arranged by the FDIC. I joined Varrowfield in 2011 to run balance-sheet management, led corporate development from 2016 and became chief strategy officer in September 2021, eighteen months before the spring that tested every assumption we held about deposits.
Three questions run through my work as a result. Which of our deposits would stay through a week of alarming headlines, and how long should we lend and invest against them? How do we keep a bank's clients and bankers while a regulator reviews our purchase of it? Which fintech partnerships repay the compliance work they create, and where should a regional bank stop competing with private credit and work beside it? I have been wrong on parts of each, and these pages say where.
Half the surge, invested short
In late 2021 I argued against putting US$6 billion of pandemic deposit inflows into long mortgage securities. We invested US$2.5 billion in paper maturing within three years. It cost about US$34 million of 2022 income; by March 2023 our unrealised securities losses were 19% of tangible common equity, against a peer median near 31%.
Deposits sorted by the work they do
After the 2023 stress I led a review that classified every commercial balance by the services attached to it. We exited US$2.2 billion of rate-sensitive escrow and title deposits, and uninsured deposits fell from 46% of the total to 33% by June 2026.
An acquisition designed for a long review
For Kessling Bancshares we offered seven branches for divestiture before filing and let the seller keep lending and hiring through an eleven-month review. Its deposits fell 3% between announcement and closing; at Dunmarrow in 2019 they had fallen 12%.
Four fintech programmes closed early
In 2022 I recommended winding down four of our six partner-banking programmes, contracts I had approved myself, because we could not reconcile their customers' balances every day. We gave up about US$12 million of annual revenue and no end user lost money.
Current focus
For our 2027 plan I am testing whether Varrowfield should approach US$100 billion of assets by acquisition, given the heavier supervisory requirements at that size and their cost before the earnings arrive, and replanning branches in the fastest-growing suburbs of Phoenix, Salt Lake City and northern Denver.
Conversations I welcome
From mid-2027, once the Kessling integration has run a full year, I would discuss a chief executive or president role at a bank of roughly US$10 billion to US$30 billion. I would also consider one non-executive seat outside banking, with my chief executive's agreement, and accept a few advisory and speaking invitations each year.
Beyond the page
The record behind the perspective.
In the boardroom
Sunfallow Community Loan FundDirector; chair of the loan committee · January 2018–present
Formation
Bachelor of Arts in economicsSaltrick College · 1997
Master of Business Administration (part-time, evening programme)Ollander University · 2002
Audrey's memos tend to include the paragraph I would rather not read. The one on partner banking opened by saying she had signed the contracts herself. I now turn to that paragraph first.
Hollis PrentissChief executive officer, Varrowfield Financial CorporationThe full record ↗
Contact
From mid-2027, once the Kessling integration has run a full year, I would discuss a chief executive or president role at a bank of roughly US$10 billion to US$30 billion. I would also consider one non-executive seat outside banking, with my chief executive's agreement, and accept a few advisory and speaking invitations each year.