Once again, we have compiled this list in preparation for updating our normal board of directors’ awareness training PowerPoints and movies and such. This list is meant for community-based banks, but could apply to small businesses. Most of these items are not new, especially since we try to provide a high-level overview of the risks in general categories. An example of this is the first risk this year, AI-Powered Fraud. While AI is not new in 2026, nor is social engineering, the tools, tactics, and techniques used against us are rapidly evolving, and they are targeting us, our customers, and even our vendors. This compilation serves as a starting point for dialogues within your board and management circles, helping pinpoint specific risks and threats your entity faces.

AI-Powered Fraud  

Artificial intelligence is reshaping fraud in ways that are particularly challenging for smaller institutions. Synthetic identities, voice cloning, deepfake video, and highly personalized social engineering campaigns are increasing in sophistication and believability. Fraudsters are using AI to analyze social media and crafting convincing impersonation attempts targeting customers, employees, and even vendors. As these tactics blur the line between cyber and financial crime, institutions must strengthen controls to reduce exposure.

Evolving Cyber Threats and Ransomware  

Banks have always been, and remain, attractive targets due to their access to sensitive financial data and money. Unfortunately, Cyber threats continue to evolve faster than traditional defenses.  Ransomware is no longer just about encryption, attackers now combine data exfiltration, extortion, business email compromise, and third-party compromise to increase leverage. As these threats evolve, we need to ensure we have the defenses and awareness to match.

Third-Party & Cloud Concentration Risk 

Financial institutions are increasingly dependent on a small number of core processors, cloud providers, telecom carriers, and other third-parties. This concentration creates systemic exposure and visibility into subcontractors and fourth parties remain limited, while regulatory expectations for documented due diligence, monitoring, and contingency planning continue to rise.

IT Supply Chains 

Beyond traditional vendor risk, IT supply chain exposure continues to expand.  Software updates, managed service providers, open-source components, and hardware procurement channels can all introduce hidden vulnerabilities. Smaller banks may lack visibility into how software is developed, secured, and distributed by their vendors.

Separation of Duties & IT Governance Maturity Gaps  

As institutions transition away from the FFIEC CAT and align more closely with structured frameworks such as National Institute of Standards and Technology (NIST CSF 2.0) and the Cyber Risk Institute (CRI) Profile, governance expectations are becoming more explicit. Examiners increasingly expect clear separation between system administration, security monitoring, risk assessment, and audit functions. Many smaller institutions still rely on limited IT staff where one individual may administer systems and review logs, creating inherent conflicts of interest.

Staffing Constraints & Key Person Dependency Risk 

Technology complexity is growing faster than staffing at many banks. A single IT director or security officer is often responsible for infrastructure, cybersecurity, vendor management, business continuity, and regulatory reporting. This concentration of knowledge creates operational fragility and can quickly cause disruptions during unplanned absences. As institutions expand services or open additional locations, key person dependency becomes both a cybersecurity and safety and soundness concern. Formal succession planning, cross-training, and independent oversight are increasingly critical in 2026.

Digital Banking Expansion & Attack Surface Growth 

Community financial institutions continue to expand digital services, online account opening, real time payments, API integrations, and enhanced mobile capabilities. Each new integration increases the institution’s attack surface, introduces authentication challenges, and creates additional data-sharing exposure. Growth initiatives, especially for institutions opening new branches or markets, can outpace risk management maturity.

So, to summarize, the top seven risks community-based banks face in 2026 are:

• AI Powered Fraud
• Evolving Cyber Threats and Ransomware
• Third-Party & Cloud Concentration Risk
• IT Supply Chains
• Separation of Duties & IT Governance Maturity Gaps
• Staffing Constraints & Key Person Dependency Risk
• Digital Banking Expansion & Attack Surface Growth