Common Challenges for Community Banks

The FBI just dropped a sobering number: $262 million lost to account takeover fraud since January. Over 5,100 victims. But here's what the headlines aren't telling community bankers. The criminals behind these schemes are impersonating bank employees. They're calling customers, sending texts, creating fake websites that look exactly like your online banking portal. And they're good at it. Listen, this works because most banking relationships today are transactional. Customers don't know who works at their bank. They can't tell the difference between a real call and a scam. But you can. Community banks have something the fraudsters can't fake: real relationships. Your customers know your voice. They know Sarah at the branch. They know when something feels off because they know what "normal" actually looks like. That's not a quaint relic of old school banking. That's a fraud prevention superpower. Now, before anyone thinks I'm saying relationships alone will protect you, let me be clear. You still need strong technical controls. But here's the uncomfortable truth the security industry doesn't talk about enough: Believe it or not, in one recent study, 79% of business email compromise victims had multi factor authentication enabled. Another found that 90% of breached organizations had MFA in place. MFA matters. But it's not the silver bullet we've been sold. The human element, the ability to recognize when something doesn't feel right, is what catches the attacks that slip past the technology. And nobody does the human element better than community financial institutions. Warren Buffett said it best: "It takes 20 years to build a reputation and five minutes to ruin it." Your customers trust you with their financial lives. That trust took decades to build. One successful account takeover, where a customer loses their savings to someone pretending to be you, can shake that foundation. So what do leaders do? They don't wait for the fraud to hit their institution. They warn their communities now. They train their teams. They remind customers what real communication from your bank looks like. That's stewardship. That's what community banking is all about. #CommunityBanking #FraudPrevention #Cybersecurity #RiskManagement #AccountTakeover

Community banks control 57%+ of deposits in nearly 2,000 U.S. counties. Most people think community banks are losing ground everywhere. The data proves otherwise in rural America: This is structural market dominance across a significant portion of the country due to one word... Trust. You have built trust by playing the long game, investing in the relationship. When customers buy from you based on a complete value proposition, the difference is tangible. • Trusted customers bring 3-5x more deposits than rate-shopping customers. • They hold those deposits 40% longer on average. • Your cost of funds stays structurally lower without giving away margin across your entire book. The problem is that most banks treat trust as something they inherit, not something they actively scale. Traditional marketing feels like it betrays the relationship model. Billboards advertising rates feel desperate. Digital ads targeting demographics feel impersonal. So, most community banks under-invest entirely, relying on word-of-mouth. This cedes ground to competitors. Larger banks are actively marketing in these same markets, using sophisticated data to identify and target the exact households you've historically served. The Opportunity: Scale Trust with Data Data-driven marketing doesn't replace relationship banking; it scales it. You have the relationship. Data gives you the precision. Your transaction data reveals which households maintain significant balances at competing institutions. Instead of rate-bombing your entire market, you target those specific high-value households with relevant offers. For example, a farmer who uses you for equipment loans but banks elsewhere for operating capital is a known entity. Data helps you earn the rest of their business. Cross-sell becomes predictive rather than reactive. Retention campaigns focus on your most valuable relationships before they start shopping for alternatives. The result is a measurable balance sheet impact that reinforces trust, rather than compromising it. We’ve spent years solving this execution challenge for community banks. Our clients have generated $26 billion in balance sheet growth by treating marketing as a measurable balance sheet driver, not a brand exercise. The difference is our pay-for-performance model - we only get paid when actual accounts and balances are delivered. One client grew deposits by $497M with 87 basis points better cost of funds than their benchmark. Community banks already own local America's trust. The strategic question is whether you will use modern tools to defend and grow your rural dominance, or cede ground to larger competitors who are investing heavily in your markets. If you are leading a community bank with a strong rural presence and want to discuss how to defend and grow your deposit base in these markets, reach out to me. I will show you exactly how we are helping banks turn trust into measurable balance sheet impact.

Community banking is facing an existential crisis, even though some don'twant to see it yet. The question being asked by these thought leaders: what to do about it? The answer was in my childhood backyard and roots in dairy farming. The fact that big banks have substantially more resources is not new; that's always been the case. What changed was the adoption of customer facing digital technologies, first slowly, and then at an accelerating pace. Community banks could effectively compete with larger players and their superior economies of scale when banking needed to be conducted in the branch. Real estate was the moat that gave community banks an edge. In a world where geography and physical presence is no longer a competitive advantage, no community bank is safe from the threat posed by out of market competitors, new entrants that don't need to build branch networks, and substitutes that unbundle one part of the model. Community banks need to dig new moats to remain competitive. They need to defend old moats to survive long enough for the new moats to matter. Already strapped for resources, community banks need to more efficiently run the existing business and more effectively find new, defensible, forms of value. Consultants study adjacent markets and different models for clues to solve problem in front of them. In my case, the clue was 10 minutes north of my parent's house: Land O'Lakes. In 1921, 320 independent dairy farmers in Minnesota banded together to create what became Land O’Lakes — not just a brand, but a force. They knew they couldn’t compete alone with the rising tide of industrial dairy. So they cooperated, pooled resources, enforced quality standards, and built a trusted national brand. They needed to do this to survive when faced with changing market dynamics. The country was rapidly industrializing (think Sinclair's The Jungle chronicling the meat packing industry). Larger producers could spread fixed costs (like transport, packaging, marketing) over more volume. Vertical integration further drove down production costs. Railroads opened up the field of competition; local was less important when a refrigerated box car could move butter across markets. Railroads were the digitization threat of their day for agriculture. What those dairy farmers faced in 1921 mirrors what community banks face today: larger competitors with economies of scale, technology disrupting traditional distribution channels, and the need to rethink their operating models to survive. In October of 2019, leaders from 11 banks gathered for dinner at SoHo house in Chicago's meatpacking district to found Alloy Labs to ensure community banks not only survived, they thrived in a changing era. They understood what the dairy farmers knew a century earlier: survival required cooperation. The question isn't whether community banks can compete alone – they can't. The question is: will you join forces before it's too late?

Every bank says deposit growth is their top priority— especially regional and community banks. But the biggest thing holding them back isn’t rates. It’s friction. A theme I keep hearing from credit leaders: onboarding is still built for a different era. Most banks still require 3 years of financials just to open an account or process a loan. But many small businesses haven’t even closed last month’s books. That one outdated requirement alone can drag onboarding out for weeks—or months. And when onboarding slows down, deposits walk. Let’s say a business walks into a branch for an SBA loan—a major driver of new accounts and growth. They’re asked for 70 pages of documents they may or may not have, and a process that includes printing, faxing, chasing signatures… All before they even get a checking account. Meanwhile, the big banks offer a fully digital flow and have deposits in hand within 24 hours. Regional banks know deposits are the prize. But the playbook hasn’t caught up. It’s not that these institutions don’t care. It’s that their processes aren’t designed for the way modern businesses actually operate. And if that doesn’t change soon, no rate strategy will be enough to win.

The Hidden Risk Facing Community Financial Institutions Having served as the CEO of a de novo credit union, I’ve seen firsthand what it takes to build and lead a regulated financial institution from the ground up. One risk that deserves more attention is infrastructure dependency. Many small, mission-driven institutions operate on systems they do not fully control with limited data access, slow change cycles, high transition costs, and heavy reliance on third parties. Over time, this rigidity quietly compounds risk. Not because leaders are careless. But because the systems are inflexible. During my tenure, our team worked diligently to stabilize operations, modernize platforms, and protect member access. We raised concerns, explored alternatives, and acted in good faith under intense pressure. Yet when institutions face serious challenges, the narrative almost always centers on management rarely on vendor concentration, data lock-in, or structural technology constraints. That imbalance matters. Current supervisory frameworks do not always fully account for the operational risk created by vendor dependency and transition barriers. In many cases, institutions are encouraged to rely on established platforms that may limit long-term resilience. This creates tension between compliance expectations and modernization realities. If we care about financial inclusion and community ownership, we must ask harder questions about who controls the rails and at what cost. Strong leadership requires strong systems. This is not about blame. It’s about accountability, learning, and building better infrastructure for the communities we serve. I welcome thoughtful dialogue. #CommunityFinance #Leadership #VendorRisk #FinancialInclusion #CDFI #CreditUnions #Fintech #Resilience #Infrastructure

"The #OCC [Office of the Comptroller of the Currency] is aware that continued consolidation in the #core_service_provider and other essential third-party service provider markets can result in reduced competitive pressure to provide innovative and effective solutions for #community_banks; reduced negotiating power for many community banks vis-à-vis their core service providers, resulting in potentially #burdensome_contractual_provisions and bundled products that #raise_fees; and a sense that many community banks do not believe that their core service providers and other essential third-party service providers are partners committed to their long-term success. … Community banks that participated in these listening sessions almost unanimously voiced concerns about the ability of their core service providers to supply community banks, on a timely basis, with the products, services, and solutions they need to remain #competitive in a rapidly evolving marketplace, particularly with regard to the growing #stablecoin and #crypto_asset markets and to changes to the banking industry that may accompany recent and ongoing developments in #artificial_intelligence."   — From: Office of the Comptroller of the Currency (OCC), Bank Activities: Request for Information on Community Banks’ Engagement with Core Service Providers and Other Essential Third-Party Service Providers, OCC Bulletin 2025-39, November 24, 2025   The full RFI is here: https://lnkd.in/e8zidWDW

Since I'm still going through my old M.S. papers and projects, I thought I'd share another summary -- How Michael Porter's 5 Forces Can Be A Strategic Compass for Community Banks. Can you tell I worked at a bank when I was writing these? --- The background here was regarding how in the increasingly competitive landscape of community banking, understanding your strategic positioning is crucial. Michael Porter's Five Forces framework offers a powerful lens for banks to dissect their competitive environment and craft more targeted strategies. Let's break down how each force can provide insights: Threat of New Entrants Community: Banks aren't just competing with traditional banks anymore. Fintech startups, digital-only banks, and even tech giants are entering the financial services space. By analyzing barriers to entry, banks can identify their unique value propositions and fortify their market position. Bargaining Power of Suppliers: For banks, "suppliers" include funding sources, technology providers, and regulatory compliance services. Understanding these dynamics helps optimize cost structures and identify potential strategic partnerships or alternative solutions. Bargaining Power of Buyers: Today's customers are more informed and demanding than ever. Community banks can use this analysis to differentiate through personalized services, competitive rates, and exceptional customer experience that larger institutions might struggle to provide. Threat of Substitute Products: With emerging financial technologies like mobile payment platforms, cryptocurrency, and peer-to-peer lending, traditional banking services face unprecedented competition. This force challenges banks to innovate and expand their service offerings. Competitive Rivalry: The local banking ecosystem is dense with competition. Porter's framework helps banks understand the intensity of competition and develop strategies that leverage their strengths, whether it's community connections, faster decision-making, or niche market focus. By systematically analyzing these forces, community banks can: - Identify strategic vulnerabilities - Uncover new growth opportunities - Develop more resilient business models - Make ✨ data-driven ✨ strategic decisions Strategic planning is not about predicting the future, but planning for multiple scenarios with the current knowledge you have, and I thought Porter's 5 Forces provided the best analytical toolkit for it. #CommunityBanking #StrategicPlanning #BusinessStrategy #FinancialServices #MichaelPorter

🔴 Banks are facing a compounding problem of interconnected risks. Risks are not checklists. They are dynamic and elusive. When banks describe their operating environment as "off the map," something fundamental has shifted. ABA Banking Journal's 2026 risk survey reveals simultaneous disruptions that don't fit traditional risk frameworks - a stress test of institutional assumptions. 𝐓𝐡𝐞 𝐧𝐮𝐦𝐛𝐞𝐫𝐬: 48% of institutions are updating risk appetite statements, 62% investing in scenario analysis. 𝗕𝗮𝗻𝗸𝘀 𝗮𝗱𝗺𝗶𝘁 𝘁𝗵𝗲𝘆 𝗰𝗮𝗻'𝘁 𝗳𝗼𝗿𝗲𝗰𝗮𝘀𝘁 𝘄𝗵𝗮𝘁 𝗰𝗼𝗺𝗲𝘀 𝗻𝗲𝘅𝘁 𝘄𝗵𝗲𝗻 𝗔𝗜 𝗮𝗴𝗲𝗻𝘁𝘀 𝘁𝗿𝗮𝗻𝘀𝗮𝗰𝘁 𝗮𝘂𝘁𝗼𝗻𝗼𝗺𝗼𝘂𝘀𝗹𝘆, 𝗱𝗲𝗲𝗽𝗳𝗮𝗸𝗲𝘀 𝗱𝗲𝗳𝗲𝗮𝘁 𝗮𝘂𝘁𝗵𝗲𝗻𝘁𝗶𝗰𝗮𝘁𝗶𝗼𝗻, 𝗮𝗻𝗱 𝗿𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗳𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸𝘀 𝘀𝘄𝗶𝗻𝗴 𝗯𝗲𝘁𝘄𝗲𝗲𝗻 𝗲𝘅𝗽𝗮𝗻𝘀𝗶𝗼𝗻 𝗮𝗻𝗱 𝗿𝗼𝗹𝗹𝗯𝗮𝗰𝗸. 𝐓𝐡𝐫𝐞𝐞 𝐜𝐨𝐧𝐯𝐞𝐫𝐠𝐞𝐧𝐭 𝐩𝐫𝐞𝐬𝐬𝐮𝐫𝐞𝐬: ‣ 𝐓𝐡𝐞 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐥𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞 𝐢𝐬 𝐟𝐫𝐚𝐠𝐦𝐞𝐧𝐭𝐢𝐧𝐠. Federal deregulation (CRA rollback to 1995, reconsidering CFPB rules) meets state attorney general enforcement. Banks navigate 50 different enforcement philosophies while documenting every account decision to withstand scrutiny. ‣ 𝐓𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲 𝐜𝐫𝐞𝐚𝐭𝐞𝐬 𝐨𝐩𝐞𝐫𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐥𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐟𝐚𝐬𝐭𝐞𝐫 𝐭𝐡𝐚𝐧 𝐠𝐨𝐯𝐞𝐫𝐧𝐚𝐧𝐜𝐞 𝐤𝐞𝐞𝐩𝐬 𝐩𝐚𝐜𝐞. AI introduces ambiguity—who's liable when an AI agent executes a Reg E transaction? Legacy platforms force M&A among regionals and community banks who can't compete without scale. ‣ 𝐓𝐡𝐞 𝐭𝐡𝐫𝐞𝐚𝐭 𝐬𝐮𝐫𝐟𝐚𝐜𝐞 𝐡𝐚𝐬 𝐞𝐯𝐨𝐥𝐯𝐞𝐝 𝐛𝐞𝐲𝐨𝐧𝐝 𝐩𝐞𝐫𝐢𝐦𝐞𝐭𝐞𝐫 𝐝𝐞𝐟𝐞𝐧𝐬𝐞. Cyber intrusions arrive through vendor pathways, deepfake audio convinces staff to override protocols, sophisticated phishing defeats caller-ID trust. The old playbook of "trust but verify" breaks when verification signals themselves can be synthesized. Here's what makes 2026 different: these aren't isolated risks you can address sequentially. They're interconnected pressures that amplify each other in a dynamic system. AI deployments require clean data, but legacy systems produce messy data. Regulatory uncertainty discourages the technology investments needed to modernize those legacy systems. Cyber threats exploit the integration gaps between old and new infrastructure created during half-finished modernization efforts. Each pressure makes the others harder to solve. This is a compounding problem, not a checklist. Banks that treat 2026 as "business as usual with complications" are misreading the moment. The institutions updating their risk appetite statements are acknowledging something more fundamental—the rules of the game are being rewritten in real time, and nobody handed out the new rulebook. #banking #AI #riskmanagement Link to the article that triggered my analysis in the comments