Community banking leaders live, work, and invest alongside the businesses, families, and individuals they serve. That’s a competitive advantage when a situation calls for high-touch banking, they say. When new technology can reinforce the local-banking touch—such as with mobile banking to reduce staffing burdens and encourage talent upskilling, or through data analysis that informs smarter branch footprints—leaders see even more strategic upside.
That was one of the key takeaways from a session held with members of ProSight’s Community Bank Council at the association’s Annual Risk, Compliance, and Fraud Virtual Conference. Panelists also dug into the results of the 2025 ProSight Community Bank Survey and provided insights into the current landscape and the challenges community bankers around the country will be focusing on in the year ahead.
Top Risks: Fraud and Cybersecurity
With fraud and cybersecurity among the top risks cited in the survey, potential current solutions and hope for stronger defenses in the future were at the heart of the discussion. Getting fraud and cyber risks under control, the panelists said, will allow banking leaders to devote more time to growth, attracting talent, and deepening local commitments.
The panelists stressed the need to respond to the speed and variety of fraud and cyber risk in banking. “As much as we’re doing to solve their current attempts to infiltrate our systems,” said Deanna Cavanaugh, chief credit and risk officer at Connecticut Community Bank, “they’re already developing the next, more sophisticated method.”
All banks, but especially banks with smaller operating budgets, feel challenged to direct fraud-fighting resources where they are needed most because of multiple exposures. Violators use sophisticated methods such as AI-generated deepfakes that impersonate a legitimate account holder. The interconnected network of the banking industry—and the world in general—means that individual institutions and the industry at large are vulnerable to cybersecurity data breaches, even with security precautions.
Dawn Mugford, chief risk officer at Norway Savings Bank in Maine, noted the persistent threat of old school fraud, with bad actors still finding it worth their energy to manipulate paper checks—sometimes plucked directly from mailboxes. “There are a lot of new things out there,” she said, “but what’s old is new again. So, we’ve got the double whammy in fighting against fraud.”
Melissa Torres, vice president of loan operations at Madison, Wisconsin-based Oak Bank, agreed. “Businesses and [individual] clients are still writing a good number of checks, and so fraudsters are finding ways to use programs to imitate those checks as well as wash them.” She shared examples of fraudsters posing as the bank’s fraud department to access account and personal information by reaching customers through mobile calls and texts.
All the panelists said they recognized that technology, including AI, is a multiplier for fraud’s speed and reach. And they know that AI is also a tool to help fraud prevention keep pace with the perpetrators. So far, however, most AI in practice comes through third parties, which requires an additional layer of bank risk management. They suggested stepping up education and awareness for business clients to stiffen fraud and cyber controls within their own operations, which they suggest can be too soft for today’s risks.
“We’re all asking more questions and requiring more information [of customers] and that’s across the board at all financial institutions,” said Robert Bender, chief lending officer at The First National Bank of Elmer in Southern New Jersey. “It is my opinion that collaboration within the financial services industry will be significant going forward.”
Today’s Banking Climate: Credit Risk, CRE, and Tariffs
The panelists said no obvious warning signs are yet flashing regarding credit quality. In this relative calm lies some concern—the length of the current positive cycle without a corrective pullback. Even the pandemic-related pause in economic activity didn’t create much of a reset for expansive lending over the past seven or so years, they said.
“We look at the credit cycle and right now we are in a long cycle,” said Mugford, “one of the longest we have seen. So, we’re waiting for the shoe to drop because at some point it will. I think we’re all being cautiously optimistic, but also thoughtful and preparing for what that might bring in the future.”
Bender said the outlook for the credit cycle timing depends on several uncertain factors, including the ultimate impact of tariffs, the performance of commercial real estate, and the path of interest rates. If a downturn or possibly a recession happens, he said, the industry has “a larger population of younger-generation bankers who haven’t experienced a significant economic downturn. That [unfamiliarity] is definitely a concern and will require discussion and ramped-up training.”
Cavanaugh said she and her colleagues are seeing that the CRE market is largely stabilized—that includes, she said, office buildings that can meet technological upgrade demands.
Most of the panelists noted steady-to-strong warehouse growth in their respective regions, and relative stability for multifamily housing. As for trade, tariff, and supply chain issues, the panelists said banking clients weren’t as nervous about market uncertainty as they were earlier in the year; however, they added, the global trade picture is still in flux.
Tariff costs for some clients have “been spread out along the supply chain,” said Cavanaugh. “The exporter is absorbing some,” she said, as well as “the importer, the distributor, then the end user. Everybody’s getting hit a little bit. But at some point, all of those costs will work into the pricing. So I think there’s still a lot yet to come.”
Strongest Opportunity to Capture Growth
Many respondents to the 2025 Community Bank Survey said the best area to capture growth lies with adding customers in their existing geographic areas, and with their current product mix. The panelists said they are seeing that approach in practice at least in part because they’ve made relationship banking a priority. Business development personnel push into the community, meeting business decision makers where they operate or at local events rather than waiting for them to enter the branch.
Torres said service can be a differentiator when products generally compare, both with other community banks and with larger banks.
“We may do what the larger regional banks don’t in our same market, and we need to prove that,” she said. “So it’s about differentiating our service, our expertise, and our advice, because our products may all offer basically the same thing.” What separates a particular bank, she added, depends on what technology, advice, service, or personality a customer is looking for.
Bender said his bank sees both a challenge and an opportunity in striking a balance between an existing customer demographic and a target for expansion.
“We have to continue to provide traditional products and services for the existing generations while also providing digital solutions to meet the needs of the next generation,” he said. “That requires technological expertise and available capital to invest into these new products and services. At our institution, management discusses this regularly. We have an older demographic in our defined market area, so [it’s an issue that] has become really important to us, [and] we are monitoring that balance of products and services closely.”
Read more: Themes and Insights From the 2025 ProSight Community Bank Survey – ProSight Financial Association
By: Rachel Koning Beals
