Elevating Cybersecurity in Community Banks: Beyond Compliance to Resilience
Articles by: Richey May, Aug 14, 2025
The Evolving Threat Landscape for Community Banks
While cyberthreats and the compliance risks they pose are a consistent issue across the financial services sector, safeguarding your institution against these dangers is especially important for smaller organizations, namely, community banks.
Similar to credit unions, community banks should consider cybersecurity an outsized concern with two critical factors that all financial institutions should keep top-of-mind as they assess the strength of their security strategies:
- Bad actors will target smaller organizations because they imagine these organizations will have fewer and less robust safeguards in place than a major bank.
- Because community banks frequently have a greater stake in the experience and trust of their customers than other organizations, the reputational damage that can come with a major breach or regulatory violation will often be much greater, especially given how geographically focused their current and potential client pool is.
In major recent data breaches impacting community banks (even those which have ultimately been resolved without catastrophic long-term consequences), observers and experts noticed glaring issues with the preventative measures in place, prior to the attacks. Cyber threats endanger the operational framework, market viability, regulatory standing, and customer reputation of community banks across the country; and treating these problems as though they were fires to extinguish after the fact isn’t efficient in the short term nor sustainable in the long term.
With that in mind, this resource aims to help community banks examine their cybersecurity practices, identify critical gaps, and build a new approach to cybersecurity that’s active, preemptive, and resilient.
The Unique Cybersecurity Challenges Facing Community Banks
When looking at your cybersecurity infrastructure, remember that when clients opt to bank with a community institution, “community” plays as much a role in their calculus as “bank.” On the one hand, this frequently allows community banks to build closer and more loyal relationships with their customers. On the other hand, prioritizing those relationships can often reveal vulnerabilities that larger institutions may not have.
For instance, community banks will often funnel the majority of their money to improving customer experience, as opposed to updating technologies or introducing new solutions. The impact of this is that community banks tend to leverage legacy rather than cutting-edge systems, which may not be properly fortified against the ever-evolving tactics of security threats.
Some of the most popular of these are “trust-based” attacks. There are many different subcategories of “trust-based” exploitation, ranging from social engineering, to Open Source Intelligence (OSINT) practices, to pretext attacks; but all of them are designed to prey on one of community banks’ most vital resources: the hard-won confidence of their clientele.
Because community banks pride themselves on building close relationships with customers, it’s easier for bad actors to take advantage of those relationships to steal customer information. In the case of a pretext attack (wherein a cybercriminal texts or emails someone pretending to be an individual with the proper pretext to ask for sensitive information), while many would be suspicious if they received an email from a specific manager at Bank of America requesting PII because of, say, “an incongruence in bookkeeping,” a community bank customer might find this less odd. Consequently, they might be more willing to supply that information.
It’s of such high importance for community banks to be aware of these specific vulnerabilities when evolving their cybersecurity strategy because they must do so in a way that strengthens protections without stripping away the “community” experience that incentivizes customers to choose their institution.
Regulatory Compliance: Foundation, Not Finish Line
For community banks, regulatory compliance is an ever-present reality, shaping everything from daily operations to long-term strategy. But as the threat landscape evolves, compliance is only the starting point.
The regulatory environment for community banks is in a period of significant transition. The Federal Financial Institutions Examination Council (FFIEC) has announced the sunset of its Cybersecurity Assessment Tool (CAT), effective August 31, 2025. In its place, the FFIEC is directing institutions to leverage frameworks such as the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) 2.0 and the Cybersecurity and Infrastructure Security Agency’s (CISA) Cybersecurity Performance Goals.
Community banks should also be aware of the increasing emphasis on third-party risk management, data encryption, and incident response protocols. This transition from static, checklist-based tools like the CAT signals a broader expectation: regulators want to see dynamic, risk-based programs that go beyond the minimum requirements.
But effective compliance strategies cannot begin and end with the letter of the law, considering the ever-mounting sophistication of cyber threats. While compliance is definitionally reactive in nature (predominantly codifying threat responses after the threat has occurred), bad actors and cybercriminals work to stay one step ahead of these regulations, finding unaddressed weaknesses. It’s for this reason, among many, that the most successful community banks are forward-thinking, leveraging advanced frameworks, including:
These frameworks offer a more holistic, adaptive approach, emphasizing continuous improvement, supply chain risk management, and business resilience, especially with regards to governance and third-party oversight.
Building a Resilient Security Program
Keeping these conditions in mind, Richey May devised a four-pillar structure designed to help community banks assess and expand their cybersecurity. Each pillar harmonizes the strengths and potential struggles that community banks face, ensuring that you can tailor your cybersecurity to your needs and capabilities.
Proactive Risk and Security Assessments
Cybersecurity is the last area of your infrastructure where you should employ a “set it and forget it” approach. In fact, the banks who simply implement measures and wait until a threat arrives often realize that their security is not what it should be.
That’s why even annual risk assessments may not be sufficient to truly see how your cybersecurity strategy functions. Rather, continuous and holistic evaluations are the surest way to identify and address immediate and potential vulnerabilities, such as accounts which are overprivileged, long dormant, or improperly used.
These evaluations should not be generic or repeatedly testing the same things, either. Much like cyber threats, you need to adapt. Look for weak access controls or flaws in third-party integrations. Simulate living-off-the-land (LotL) attacks. Implement penetration testing and analyze every component of your stack, from legacy solutions to cloud products, for security issues.
Identity, Access, and Privilege Management
There are many vulnerabilities to look out for when conducting a risk assessment on access and account privileges. When personnel leave and their accounts are not properly deleted, it’s equivalent to closing up shop and forgetting to lock the door. That’s why, when conducting audits, it’s critical to make note of any accounts that are unused or have levels of privilege that don’t align with their purpose.
To further increase security, you should ensure that all accounts are locked behind strong multi-factor authentication (MFA) protocols and, whenever possible, abide by least-privilege principles. Simultaneously, take a look at your offboarding processes and see where there might be gaps that could lead to dormant accounts from previous personnel.
Remember: audits are not the endpoint of strengthening your security. They serve to catch problems, which should then be analyzed and addressed comprehensively rather than case-by-case.
Incident Response: Preparation and Practice
According to IBM’s 2024 Cost of a Data Breach Report, businesses with detailed and tested incident response strategies can save an average of $1 million for each data breach they may experience. Similarly, those organizations who regularly test their strategy reduce the cost of a breach by nearly $250,000 per incident.
Ensuring your incident response measures are as agile and comprehensive as possible isn’t just a cost-saver; it can prevent a devastating reputational blow, a crippling halt in your operational efficiencies, and a barrage of regulatory headaches.
It all starts with the basic components of your response plan: do you have measures in place to identify and categorize an incident; to contain the issue wherever possible and react quickly when it comes time to escalate; to promptly recover lost information, notify relevant parties, and review potential causes when the problem has abated?
Most importantly: does everyone within your organization know their role in the case of an incident? When breaches occur, you need all relevant team members on deck doing their jobs to alleviate the chaos. As such, Richey May recommends running regular tabletop exercises and simulations within your community bank, involving all departments—legal, IT, communications, and executive leadership.
In our experience, running these exercises frequently, for as many different outcomes as possible, is one of the best ways to guarantee, should the real thing occur, you’re ready to handle it.
Fostering a Culture of Cybersecurity
Ultimately, all of these practices are in service of doing two crucial things: fortifying the technical makeup of your cybersecurity and embedding cybersecurity into the very culture of your institution. The more regularly your bank thinks about how to address cybersecurity issues, the more innately you understand how cybersecurity affects your business.
Move beyond annual training to make security awareness a facet of daily operations. By doing so, you put accountability and vigilance at the forefront of every team member’s mind. Soon, no matter what someone’s job title is, they’ll feel as though cybersecurity is an overt responsibility in their role.
In many ways, that’s the end goal of any effective culture of cybersecurity: the clear understanding that ensuring its effectiveness is top of mind for everyone. Every action that’s taken or not taken, every piece of information that’s scrutinized or ignored, contributes to or detracts from your overall security and compliance posture.
Strategic Partnerships and Resource Optimization
Due to the nature of their business models, community banks often face resource constraints that make building a comprehensive cybersecurity program challenging. For this reason, partnerships that delegate certain responsibilities to outside experts can be these institutions’ greatest allies.
Managed Security Service Providers (MSSPs) offer specialized expertise, 24/7 monitoring, and regulatory readiness, making them valuable assets to community banks in their fight against cyber threats. To optimize these partnerships, institutions should prioritize MSSPs with experience in the financial services sector, proactive risk management, and transparent, auditable processes aligned with frameworks like the aforementioned NIST CSF 2.0.
Community banks should also leverage industry groups such as FS-ISAC for threat intelligence and collaboration. Making use of shared resources and investing in continuous staff training helps internal teams remain prepared and effective.
From Compliance to Competitive Advantage
As cyber threats become more advanced and bad actors more creative, the importance of robust, dynamic, and adaptive cybersecurity only grows among community banks. A simple data breach can cripple your operations, put you on the wrong side of regulatory agencies, and undo years of trust and goodwill you’ve accumulated. Moreover, resilient and proactive cybersecurity and compliance measures create a myriad of opportunities for institutions that put time, care, and resources into deploying them.
Because customers are aware of the danger that cyber threats pose, community banks that invest in cybersecurity stand out as more trusted and proficient. Leveraging your commitment to cybersecurity as a key differentiator underscores the promise that inherently attracts people to community banks in the first place. Furthermore, because preventative cybersecurity ensures you spend less time worrying about recovering from a breach, you have more time and confidence for innovation and growth.
Cybersecurity is your foundation for future success. This is why it’s imperative that your leadership champions a cybersecurity strategy that’s versatile, iron-clad, and risk-forward.