Norwich — A panel of local bank presidents who participated in a roundtable discussion Tuesday at Dime Bank said regulatory systems set up to deal with problems caused by large financial institutions are causing unnecessary headaches and diverting resources from small-business lending that is the lifeblood of the community.

While Bank of America is looking to finance $20 million projects, said Rheo A. Brouillard, president of Willimantic-based Savings Institute Bank & Trust, "We are the ones lending to the body shop down the street. ... It is a problem when community banks can't lend as much as they have in the past."

"Community banking is something we want to see live on," added Kevin C. Merchant, president of Jewett City Savings Bank.

Seven officials came together for the Community Bank President's Round Table during a 90-minute discussion of issues important to local financial institutions. Bankers said the idea of holding the discussion came out of frustration that the public — and politicians — aren't getting the message about the importance of community banking.

Among the issues are:

■ Increased competition from local credit unions, which bank officials say have an unfair business advantage because they can avoid federal taxes. Credit unions have increased their services and loosened membership restrictions, further cutting into local banks' markets, the presidents said.

■ The difficulty in making loans in competition with the federal government. While local banks require a 20 percent down payment on a mortgage, the Federal Housing Administration approves loans with only 3 percent to 5 percent down.

■ The burden of new federal regulations. Complying with new banking regulations promulgated after the 2007 financial crisis is time-consuming and expensive, the bankers said, costing the seven financial institutions together more than $1 million.

■ The cost of complying with state-mandated foreclosure mediation. Bankers said it can take up to four years to get someone to vacate a house, even when the owner has no means to stay current on a mortgage. Mediation doesn't make sense for small local banks that already are doing all they can to make sure people who fall on hard times get a chance to stay in their homes, the officials said.

Bank officials opposed a new proposal by Gov. Dannel P. Malloy that would penalize banks that do not comply with regulations intended to streamline the mediation process. For one, the measure doesn't address situations in which the homeowner fails to show up for mediation.

"The governor is absolutely going in the wrong direction," said Gregory R. Shook, president of Essex Savings Bank.

Brouillard said his bank has done more modifications than foreclosures because bankers don't want to be in the business of owning property. But foreclosures have the benefit of putting homes back on the market, rather than seeing them languish uncared for, bankers said.

Nicholas Caplanson, president of Dime Bank, said his employees have become aggressive about identifying problem loans and working with customers to find solutions before it is too late.

"We know our customers; we know our communities," Caplanson said. "These are our neighbors; these are our friends."

The seven local banks — including Norwich-based Eastern Savings Bank, Groton-based Chelsea Groton Bank and Putnam-based Putnam Bank — contributed $1.5 million in cash donations to the community last year. They also originated $928 million in loans, and their employees contributed 27,000 hours of voluntary services.

"All anyone needs to say is 'we need help,'" said Thomas A. Borner, president of Putnam Bank. "We're not seeing that with the big banks."

"We don't have whales making side bets of millions of dollars in investments," said B. Michael Rauh Jr., president of Chelsea Groton, referring to some of the outsized risks taken by big banks that have led to spectacular losses.

"We didn't create the problems, but we've had to deal with some of the problems," added Borner.

Among those problems is one of perception. Community banks tend to be lumped with multinational financial institutions in the public psyche, the bankers said, creating a bad taste that spans the industry.

Local bankers said, however, that the perception is undeserved — particularly the notion that lending standards have suddenly gotten tighter. This may have happened for big banks, but not for smaller institutions, they said.

"We have to lend," Brouillard said. "We don't make our money on other means of investment. Without it, we're out of business."