WASHINGTON - In a third quarter when the banking industry posted record earnings, nearly one in 10 banks with assets of less than $100 million lost money, the Federal Deposit Insurance Corp. said Wednesday.

Though regulators cautioned that about half these institutions are start-ups, which are typically unprofitable in their first few years of operation, they said the rate of unprofitability must still be considered high, reflecting an increasingly tough environment for small banks. "Small banks are facing more pressures than large institutions and in some instances have fewer options in terms of dealing with competitive pressures," FDIC analyst Ross Waldrop said. "They don't have the same ability to generate fee income; they are much more dependent on the traditional intermediation - and there is a lot of competition in that area."

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