Talk about a punch in the gut for community bankers.

Their nemeses, credit union executives, are beating them out for new loans — and getting paid a lot more than many bank execs to do it, according to the latest lending and compensation data.

Those realities add to the frustration of the banking industry, which has argued unsuccessfully for years that credit unions — which are tax-exempt — enjoy an unfair subsidy at a time when they are becoming more like banks.

"Fighting the credit unions' tax-exempt status is like trying to outlaw apple pie," David Hanrahan Sr., the president and chief executive of Capital Bank of New Jersey, said during a recent meeting in Washington hosted by the American Bankers Association. "It isn't going to happen."

They find the pay differentials especially galling.

Credit unions with $250 million or more in assets are paying CEOs more than banks of similar size, according to a recent study by enetrix, a Gallup division, prepared for the Credit Union Executives Society (see chart). For example, the median base salary of CEOs at banks with assets between $500 million and $1 billion was $221,000 earlier this year, compared with the $325,000 their counterparts at credit unions earned.

"Credit unions are paying their folks more than two times what I pay mine," Jeffrey Mozena, president and CEO of Premier Financial in Dubuque, Iowa, said during the meeting. "In many ways, we are losing to hyper-competitive credit unions," including performance, staffing and customer satisfaction.

Mozena discussed a recent visit he made to the Securities and Exchange Commission, where his son was an intern, in which he found a credit union branch in the agency's lobby. (The Federal Deposit Insurance Corp. and Federal Reserve System have their own credit unions, and employees of the Office of the Comptroller of the Currency share the same credit union with the Treasury Department, SEC and other workers.)

Meanwhile, loan growth at banks seems to be lagging.

Total credit union assets at Sept. 30 rose nearly 5% from a year earlier, to $1.08 trillion, according to CUNA Mutual Group's latest Trends Report. Loans are on pace to increase 6.2% this year compared to 2012, Dave Colby, CUNA Mutual chief economist, told the Credit Union Journal, a sister publication.

"On balance, our forecast shows annual gains averaging 6.5% through 2015," Colby said.

At June 30 loans at small banks grew at a 4.7% annual rate while they increased less than 1% at big banks, according to data from the Federal Reserve Board.

Competition is fierce for commercial loans. "We're seeing more activity from credit unions," says Susan Still, president and CEO at HomeTown Bankshares (HMTA) in Roanoke, Va., including a credit union that fought for a $5 million project.

Expansion is going beyond just making loans. R. Van Bogan, the chairman of Florida Bank of Commerce in Orlando, expressed concern that CFE Federal Credit Union, a $1.4 billion-asset institution in Lake Mary, Fla., had paid nearly $4 million for the naming rights at the arena that hosts basketball games for the University of Central Florida. Florida Bank of Commerce is a unit of FBC Bancorp.

Bankers say it is difficult to compete on price, and many say they are unwilling to compromise on credit standards. Many are content to let their trade groups fight the good fight against credit unions' tax-exempt status, while doing what they can to educate customers and prospects on the issue.

Community Bank & Trust, a unit of QCR Holdings (QCRH) in Moline, Ill., has simply tried to spread the word that, as tax-exempt organizations, credit unions are not doing their part to boost the community, said Stacey Bentley, the bank's president and CEO. "We are seeing ridiculous prices and less underwriting [discipline] from credit unions," she said.

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