News & Media

It’s been a rocky start to 2025, so we gathered five banking experts to talk about what they are seeing from the economy and how they are helping clients navigate.

Moderator: The early days of the Trump administration have brought turmoil to the stock market and uncertainty about where the economy is headed. What are the things that are keeping you busy right now, and what are the things that are keeping you up?at night?

Adrian Brown: In our bank, we take a long-term view and view our clients through a long-term lens as well. Historically, our bank’s been in a position of strength in challenging economic times, and we enter this period of uncertainty in a strong financial position. With that said, I’m certainly spending time thinking about our clients that are most impacted by tariffs, how we can add value and be an advisor to them. For most loans that we approve right now, we’re talking about tariffs. We want to understand how the client might be impacted and what contingency plans they have at this point. That’s adding some time to our lending discussions right now.

Felisha Dowdy: What’s keeping me up at night is thinking about the unknown. I think about the unknown because we weren’t prepared for a pandemic. Nobody predicted that. Nobody could predict September 11. Nobody could predict 2008. My thoughts are to make sure that we’re ready and how quickly we can respond if something does happen. And the thing that keeps us busy right now is staying close to our clients and trying to help them feel a little more comfortable about what’s going on, because there is a lot of unknowns right now. We are having open and frank conversations with them about where they are in their business and how to prepare them. We watch our balance sheet, as far as the bank goes, to make sure we’re prepared for rate increases or rate decreases so that we can react and manage and maintain our credit quality.

Sarah Mattingly: What we’re trying to do is really to reconnect with our clients and talk to them about the status of their workout officers and any re-education that’s needed or appropriate right now on the management of distressed loans. We’ve found that a lot of those workout officers that existed a decade ago worked themselves out of a job. There weren’t a lot of bad loans in the last decade, and so that institutional knowledge is gone or is substantially decreased. So, we’re reconnecting with our clients and working on re-educating them on how to deal with the stress loads on the legal side.

Phil Poindexter: What I am spending most of my time on are growth initiatives for the bank — how are we going to grow the bank and be relevant in the industry? And that’s about having great people, talking to our employees and making sure they’re motivated, as well as being in great markets and having a great sales and service culture. Our industry has been consolidating for a long time. We want to be a survivor; we want to be relevant. We have to grow to do that, and I’m very optimistic. I will probably be your most optimistic person on this call today, because I think things are still pretty great. A lot of uncertainty, yes, and we’ll have to see where it all comes down. As far as things that keep me up at night, I try not to worry about things that are out of our control. I don’t try to predict the next recession. We’re going to have a recession at some point. I know people who have been predicting the next recession for the last five years. A lot of people are calling for that right now.

Andrew Pyles: I agree with Phil. I think conditions are still pretty strong. We’re still seeing a lot of activity on the lending side, on the deposit side, business activity in general. That’s between Kentucky and Tennessee. We think that the overall economy looks good. However, as Adrian mentioned, we are having the discussion about tariffs, certainly, as we talk about new loan requests. And as Felisha mentioned, staying in touch with our clients about their exposure to tariffs and what they’re seeing out there.

Moderator: What are your clients saying about tariffs and impacts they are experiencing now or see coming?

Dowdy: When we talk with our clients in the industrial, shipping, real estate industry, the concern appears to be what their cost of doing business is going to be. The question is how will it increase their material and labor cost? My opinion is, and of others that I’ve talked with, is that we don’t really know. The tariff situation is changing day by day. I think any of the price increases that our customers are seeing in materials are related to suppliers increasing them because of the unknown.

Brown: There’s just a lot of scenario planning going on right now. I like Phil’s comments about how he’s thinking about growing the bank and broader strategic things. I think these unknowns and the potential tariffs and where they go are keeping some of our clients from longer-term strategic discussions. Their focus is on scenario planning in case various things could happen. Our client base is family-owned companies doing less than $50 million in revenue. They don’t have the luxury to go hire McKinsey to help them figure this out. They’ve got a limited pool of resources and advisors. So, they’re spending a lot of time thinking about what-if scenarios. Many haven’t been impacted quite yet, they’re just planning for different scenarios that might impact them in the future.

Pyles: To an extent, it’s still a business as usual. But as far as big-ticket items, we are seeing some pause on that in terms of big strategic moves.

Poindexter: I think there’s a level of frustration with the knowledge that the rules are going to change. I think people want to know what the rules are so they can compete. I think there’s some anxiety about what it will end up being. And I’m kind of surprised that we haven’t seen more large projects stall or maybe press the pause button here and say, “Let’s just see what this is going to cost to build.” But it’s business as usual for the business customers, the operating companies. I think everybody’s kind of waiting to see. This is one of those things where I think before all this started if you’d come out and said the end of this is going to be a 10% tariff on every country in the world, everybody would have said, “No, they’re never going to accept that.” Now, I think most countries around the world are begging for 10%. Certainly, the administration has taken all of this on at one time, and it really seems chaotic. Business confidence is down, but I have not seen anybody change their strategy and I’ve not seen any pricing changes yet.

Moderator: Another area where we’ve seen a lot of fluctuation in recent weeks is interest rates. Do you think we can expect that to continue?

Pyles: I wish I could predict that . . . It’s been a bit chaotic. It’s funny, things are changing so quickly. I started preparing for this conversation about three or four weeks ago and started jotting down notes. Before this call today, I looked back at some of my notes from three or four weeks ago, and several of them are no longer relevant. Things are changing so quickly. They’re unpredictable. As Phil mentioned, there’s some uncertainty?in the air. And that certainly applies?with rates.

Dowdy: I’m going based on what the Fed said recently. They did indicate there would be one to two decreases by the end of the year. Who’s to say — that may happen, that may not happen. They announced last year that we were going to see more than that this year, and we haven’t really. Some analysts are saying that it’s going to hold steady through the end of the year. I don’t think we’re going to see anything drastic.

Poindexter: There’s a futures curve that you look at for Fed funds. And about a week ago, it was four declines, starting probably at the June meeting or the July meeting. But now it’s two. I think when we look at interest rates, we look at them on the short end of the curve, the Fed funds, and we look at the long end — the 10 years and up. And there was some pretty good volatility in the 10-year rate back in April, but it seems to have settled down. We have a normal yield curve on the two to 10 right now. But when you look at the short rates versus the five-year, we’re still inverted. I would say the interest rate environment right now is way more preferable than it was a couple of years ago when we had short-term rates going up 500 basis points and a severely inverted curve throughout. This is a healthier environment for banks, and I think healthier for the economy, too. If I had to predict, I’d say you’re going to see short term rates lower by 25-50 bps before year end. I wouldn’t be at all surprised if you see the longer rates remain where they are.

Brown: I think that until the tariffs are set, maybe three or four months from now, we are going to see volatility in the longer end of the curve. On the short end, you’ve got unemployment that’s pretty much at full employment. Inflation’s just a little bit over the Fed’s 2% target. So, there’s not really a business case to lower rates right now. Chairman Powell is very data-driven, and that data is just not there right now to justify rate cuts in my opinion. The economy is doing very well. We look at the futures’ market, too, and it’s predicting a couple of rate decreases by the end of the year. But sitting here today, I would be surprised if that happened based on how well I think the economy is doing. As for what tools we have, I don’t think we have a different mousetrap than anybody else. We could do interest rate swaps to help customers lock in a long-term rate if they feel like rates are going to increase. Typically, on a lot of real estate projects, we look at a fixed rate. We’re offering some fixed and some floating right now as options because people have different opinions on where they think rates are going. We’re just trying to give options and talk about the pros and cons of each of them with our clients.

Moderator: How has loan demand been affected since January?

Pyles: Like we alluded to earlier, it’s business as usual. We’re still seeing pretty robust activity. Again, maybe not as much strategic overhauls, but we’re still seeing a lot of business as usual, still quite a bit of loan demand.

One quick thing I’ll add on the interest rate discussion: We all here are familiar with the interest rate futures market. People go out and bet on what interest rates are going to do. We all track it. Everybody here does. But it changes with the wind, and it’s unbelievable how many articles you’ll read that say the Fed funds futures market is saying that we’ll have six rate cuts this year, and then a month later it’s down to two or three. And they’ve been wrong every year since 2021, 2022 at least.

But back to loan demand, we’re not necessarily seeing huge strategic activities. We are still seeing a little restraint and a little skepticism because of tariffs and just overall uncertainty. But we are still seeing, for the most part, business as usual.

Poindexter: I’ve told my board for the last two years: a higher interest rate environment equals lower loan demand. We haven’t seen it. We’ve seen very, very steady loan demand. We’ve seen very, very good loan growth — outsized loan growth in the last year. It is a little surprising. I would think that some of this tariff uncertainty would lead people to press pause more. But there’s a lot of stimulative policy in this administration. It’s interesting how the president has phased what he’s doing. He did all the tariffs first, and I think what he’s going to try to pass this summer is some tax reform and some regulatory reform. Those are going to be stimulative things. I think the business world says, “I might have to adjust my business model and my margins might suffer, but maybe we’ll get some permanency in these tax rates or maybe even a tax cut, less regulation, maybe those types of things will balance it out.” Loan demand’s been good. Asset quality really continues to be good.

Moderator: Sarah, can you speak a little bit about loan quality? Are you seeing any increase in loan delinquencies?

Mattingly: We have been predicting a recession for a long time and trying to gear up. And we’re honestly not seeing the volume that we thought we would. There are things on the margins: We’ve been repossessing some cryptocurrency loans recently, which made their way to Kentucky. We’ve got some developments that went south, but that’s really more because of a management issue, not on the bank side, but the borrower itself. I think the industry we’ve been dealing with the most and seen the most increase in delinquency is health care. There’s been a massive uptick in health care delinquencies and distress. A little of that is due, I think, to reimbursement rates and the structural crisis undergoing the health care industry right now. But like the bankers here, we keep waiting for the shoe to drop and we just don’t see the volume like we anticipated we would?right now.

Moderator: You mentioned at the top of the conversation some concerns around lack of institutional knowledge when dealing with delinquent loans. Talk a little bit more about what that means and what you’re seeing.

Mattingly: Historically what happened was when loans got delinquent in the last recession, you allowed the loan officer to be the point of contact for your borrower. But what a lot of people didn’t realize was that could be a risk. Your loan officer wants to keep the relationship, wants to make sure the borrower stays and continues in the future. But when you get a distressed loan and you get collateral that’s deteriorating or needs some more active engagement, having your loan officer involved really becomes a liability from a banking standpoint and not an asset anymore. So, you need to go back and retrain what we would call “workout officers” who come in, don’t have that existing relationship, won’t make any promises that the bank really won’t keep and helps get the loan into a position where — maybe you do keep the relationship but you’ve shored up the collateral and gotten repayment terms that the borrower can make in the short term, and a plan to help the borrower move forward or to help liquidate the collateral.

What we saw in the last round was that too many loan officers were involved and banks took those loan officers out of the picture too late, before they ended up with lender liability claims or really deteriorated collateral. We’re just encouraging our clients to learn some of the lessons from before to work us out of a job. We want you to get in there, get a hold of the issue as quickly as possible, get a plan in place and take us out of the picture and avoid protracted litigation. We’re trying to help re-educate the next generation about how to address those issues.

Moderator: There’s so much increased digitization of banking services, so how are institutions managing cybersecurity threats and fraud threats?

Dowdy: In some cases, we’re utilizing AI with algorithms and analysis to determine if a customer has a fraudulent activity on their account, if it’s out of their norm. There is software out there that can identify those threats. We have to manage it by utilizing those tools that are available to us. And in some cases, community banks are employing more in cybersecurity.

Brown: At German American, our head of technology is on our executive team, which for a bank our size is unusual. It is an issue that we take very seriously, and we have got a couple different approaches. The first is to invest in technology that we use on the back end to help try to identify threats. And then we try to make sure our clients have good technology tools too, such as multifactor authentication, Positive Pay, et cetera. I think the second piece of that is to try to create as much awareness as we can for our clients. For high volume treasury users, we do annual reviews with them at least once a year. Part of that review process is to make sure we understand their internal processes and then talk to them about some recommendations and best practices. We also make them aware of current threats because they are evolving, and we want to make sure that we’re talking to our customers about those so they’re aware.

And then coming up soon, for example, we’re doing a seminar for our business clients. We’ve got people from the IRS, from the FBI, from the Jeffersontown Police to talk about the most current things they’re seeing in the industry and then give their recommendations on best practices to stay secure. It’s really a combination of investing and technology that helps both on our end and on the client’s end and then try to make clients as aware as possible as different things that are going on.

Moderator: How is the use of AI evolving at your banks?

Pyles: Similar to Felisha, we’re using it to help fraud mitigation. And looking at the horizon as well in terms of what it can do on the opposite side. In other words, what kind of threat is it going to be not only now, but a year from now, two years from now. It’s evolving so quickly you just have to try your best to be up to date, and it’s somewhat daunting sometimes.

The other thing that we’re seeing, and something I’m sure the other bankers would echo here as well in the last couple of years, we’ve seen a resurgence in good old fashioned check fraud. That’s really been coming back. And as Adrian mentioned, Positive Pay is a product that we really encourage business owners to have. That’s where they look at outgoing transactions and they have to approve those before they’re cleared. Customers sometimes are not as receptive to that because there is a cost to it. But in terms of the risk factor, the cost is very minimal.

But back to AI, we’re using it in the short term for fraud mitigation. In the longer term, we are starting to research what the possibilities are down the road and also trying to stay ahead of the fraudsters using AI on the other side.

Mattingly: We do see check fraud increasing. I think the good news about check fraud is the law is well established in terms of who bears the liability there. We are seeing an increase in overall fraud on accounts, both from a wire ACH and a check transaction standpoint. Honestly, we used to see that occurring at the larger institutions. And we think that the fraudsters made their way through the larger institutions, and the larger institutions learn how to put up roadblocks. So, they’re just kind of working their way down with old game plans.

Poindexter: I would offer a theory on that, and it has to do with everybody’s answer to the first question about cyber fraud. I think the industry has gotten pretty good at this, from architecture and firewalls to different software that we’re using to mitigate fraud. Positive Pay, ACH alert, all those products are more effective right now. They’ve been enhanced to a commonsense approach. Adrian just mentioned a seminar on security. We’re doing it too. Look, they don’t pick on one bank, they pick on the industry, and we’re seeing a big increase in check fraud. I think it’s because it’s becoming harder to get into systems. I don’t know that it keeps me up at night, but it’s certainly one of those things we spend a lot of money on, making sure that the bank is secure because this is a trust business.

Mattingly: We’re working with our clients mostly to understand where they’re exploring those uses, what the options are and then the data governance. For us, internally, we’re still in exploration mode about where it works best for the firm. Where I see it a lot in my practice is in loan servicing. We have a data system; X gets put in and AA comes out. My job is to figure out where the system went wrong, where it didn’t work. A lot of where we advise our clients as they continue to explore AI is improvements and enhancements, because so long as your customers pay on the first and the exact amount they’re supposed to, nothing goes wrong with the system. It’s when they don’t do that, a percentage of the time things can go badly. More of our advice right now is enhancements in what the system can’t properly manage and how to figure out that issue and address it.

Moderator: Are you all seeing any signs of recession so far? Will it happen this year?

Brown: We’re not seeing really any systemic signs within our customer base at this point. Most of our customers had pretty good years in 2024 and are heading into this period of uncertainty on pretty good footing. I do think what we’re trying to do with tariffs is important. We need to be much more self-reliant in terms of chips and technology, defense items, pharmaceuticals. I don’t want to be a doomsday person here, but we’ve had two World Wars in the last 110 years, and the chance that we don’t have another one is not zero. We’re bankers; we’re in the risk management business. So to me, it doesn’t make a lot of sense to trust a military rival with our national security items. It’s been painful a little bit. It’s going to be painful for the next several months in terms of tariffs. But it does feel like it’s meaningful and important to be doing the things that we’re doing.

Pyles: In terms of predictions, I should probably take Phil’s path in that regard. I very clearly recall going into 2020 asking for a prediction about the economy and singing its praises about how it was hard to envision anything going wrong in the economy. And then came COVID. So nevertheless, I would say you could see a technical recession. We may be in one right now, right? As far as structural concerns of a prolonged recession, I don’t see it. I don’t see the signs right now. I’ve probably been someone who is a little more negative on the economy the past few years waiting for the recession and it hasn’t hit. We’re not seeing signs yet.

Moderator: What do you think the landscape of the banking industry is going to look like in the next year?

Poindexter: I don’t think it’s going to be very different. I think banks are doing well right now. Most banks just released their earnings in the last 30 days, and they’re pretty strong across the board. The larger banks have pulled back from lending a little bit, especially in the commercial real estate space. I think that might have to do with some prognostication of a recession, quite frankly. A lot of the big bank CEOs like Jamie Dimon said that the recession is likely. I think we’ll have a recession at some point, and the technical definition of recession is two quarters in a row of negative GDP growth. We’ve already had one — albeit it was 0.3% negative growth.

So, are we going to have a sustained recession? I doubt it. When you look at things like employment — employment is very strong in this country. It continues to be. A lot of our provisioning metrics are around national unemployment forecasts, which are still pretty good. Asset quality by any traditional metric is really, really good. Loan demand is pretty good. I do think you’re going to see continued consolidation in our industry. Valuations are back up. You’re seeing a lot more of that. There’s a lot fewer banks in the country than there were 20 years ago. I think that trend is going to continue. A lot of what’s going on with technology and fraud makes it harder for super?small banks to compete, and I think you need scale.

Dowdy: As far as the recession and economy, I agree with the others because we’re all looking at the same thing. As far as this time next year, I think we may see steady growth. Have we already had the recession? Maybe. Is it yet to come? Maybe. Our earnings have been good, and our asset quality is good. At Paducah Bank we’ll continue to see some steady growth.

Mattingly: I’ve been trying to evaluate the impact I think the residential housing market is going to have on the economy and the commercial market. Between 60% and 65% of the residential market is insured by the federal government, and the VA just lifted the moratorium it had put in place for foreclosures following COVID. So we’re seeing a swath of foreclosures start making their way through the system in the residential market. One of the things we saw following COVID were loan modifications to 30-year residential loans, moving them out to 40 years. The federal government wants to keep people in their houses, but they don’t want their monthly payment to go up.

So if you don’t pay your loan during COVID and rates go up when you get a mod, how do you stop the monthly payment from going up? You just extend the term, and you may have extended the term 40 years for a loan that’s 15 years already through the 30-year process. I’m just trying to grasp the impact of the changes in how we view the consumer market, and how we treat consumer loans and the wealth that may be taking out of the market and the potential impact it will have on a commercial market later. Because last recession, we had all these balloon loans in the residential market, all these unexpected things. We know how to do modifications to the residential market now, but we’re doing some really weird stuff. And it’s making the mortgages look a little bit more like long-term leases in the residential space. I’d just be interested in how that ultimately affects the economy.

The experts

Adrian Brown, Senior Regional President, German American Bank. Adrian Brown is the senior regional president for the local area for German American Bank. Brown holds a bachelor’s degree in finance from Indiana University Southeast and a master’s degree in banking from the University of Colorado. He has been in the banking industry since 2005 and maintains active involvement in several nonprofit organizations, including One Southern Indiana and Boys & Girls Club.

Felisha Dowdy, senior vice president, Louisville market president, Paducah Bank. Felisha Dowdy is the Louisville market president for Paducah Bank. Dowdy has a bachelor’s degree in corporate and organizational communications from Eastern Kentucky University and has been in the banking industry since 1998. She also serves as a board member for Norton’s Children’s Hospital Foundation, Gilda’s Club of Kentuckiana and Greater Louisville Inc.

Sarah Mattingly, partner, Dinsmore & Shohl LLP. Sarah Mattingly specializes in commercial litigation and banking and finance law, handling contested litigations, bankruptcies and real estate transactions. Mattingly regularly advocates for clients in state and federal courts, focusing on creditors’ rights, bankruptcy, workouts, foreclosures and retail banking disputes. She graduated from Centre College, earned her J.D. from the University of Kentucky College of Law and is admitted to numerous United States Bankruptcy Courts.

Phil Poindexter, president, Stock Yards Bank & Trust. Phil Poindexter joined Stock Yards Bank & Trust Co. in 2004 as its director of commercial lending. He was promoted to chief lending officer in 2008, was named president in 2018 and was elected to the board of directors in 2022. Stock Yards Bank & Trust is an $8.7 billion bank with locations throughout Kentucky, as well as Indianapolis and Cincinnati .

Andrew Pyles, president and CEO, Eclipse Bank. Andrew Pyles has over 20 years of banking experience. Pyles joined Eclipse Bank in 2016 as SVP and chief lending officer and was promoted to EVP, then president and CEO. Prior to Eclipse, Pyles served as market president for a multi-billion dollar publicly traded bank, where he oversaw one of the most profitable and fastest growing markets in the organization. Pyles is active in the community, serving on the boards of Actors Theatre of Louisville and The Arrow Fund.