The country’s booming economy appears to be a boon for large banks, but institutions with less than $100 million in assets have not fared as well in the economic expansion.

A third-quarter earnings report released last month by the Federal Deposit Insurance Corp. showed that while only 6.7 percent of all banks lost money in the period, 9.6 percent of the nation’s smallest banks went into the red.

About half of the institutions in the under $100 million category are start-ups, which usually take a few years to become profitable. But in a tough competitive environment, the statistics also highlight the difficulty smaller institutions may have as banks compete as much with technology as interest rates.

Here we are in an era of probably the highest prosperity and yet we see more players that aren’t enjoying the party, said Warren Heller, research director at Wakefield-based Veribanc.

During the third quarter, banks earned a total of $21.05 billion, a record amount tied to strong performances by the country’s largest banks, Heller notes. The Financial Services Modernization Act could further fuel their profitability.

In a quarter in which almost everything went right, strong growth in non-interest income combined with fewer expenses related to mergers and restructurings helped lift commercial bank earnings to new heights, said FDIC Chairman Donna Tanoue.

When banks tally up their year-end numbers, most will report record earnings, including smaller banks, said James Moynihan of Advest. The strong earnings will precipitate dividend increases. That should please shareholders, as bank stocks have not kept pace with the rest of the market, he said.

Not making much money are some of the recent start-ups, Moynihan said. It takes a while before they can fund their newfound capital in the market properly without too much risk.

When measured by asset size, fewer of the larger institutions posted losses in the third quarter. In the $100 million to $1 billion in assets category, 2.3 percent of banks lost money. Just 1.3 percent of banks with more than $1 billion in assets lost money during the period.

The problem is variability and volatility of earnings, Heller said. It’s just tougher for smaller institutions to have the management prowess and keep the earnings on an even keel.

Community banker Robert H. Gaughen Jr. said the high number of start-up banks skewed the statistics. His bank, the $285 million-asset Hingham Institution for Savings, recorded earnings growth of 17 percent in the third quarter compared to the year before. The bank has posted double-digit earnings for the past few years, he said.

We’re experiencing strong growth on both the deposit and loan side, Gaughen said.

Many smaller banks achieved earnings growth, but not without a lot of hard work and cost cutting measures, said Thomas Caron, president of Easton Co-operative Bank. Increasing regulatory burdens have made it harder for community banks to be profitable, he said, as well as the high cost of keeping computers up to date. Banks commonly replace computers every two or three years, and many are making sizable investments to offer Internet banking to their customers.

There’s no question that the challenge to continue with the profitability we’ve seen over the last couple years will be great, especially with interest rates [rising], Caron said.

Not only do the larger banks have more customers, but more products to offer and fees to collect. Fleet Bank and its peers have started or acquired businesses in investment banking, securities and insurance, making it possible to cross-sell more products to their existing customers.

The competition for loan business and, of course, the deposits to fund them, is probably as intense as it’s ever been, Heller said. There is pressure on interest margins, and all eyes turn to fee income. The big guys seem to have the ability to make the higher fees stick.

By contrast, a number of community banks lure customers with free products, like checking accounts and automated teller machines. Easton Co-operative Bank recently introduced telephone banking to its customers. The bank bore the major expense of adding telephone lines and contracting with a service provider, while customers can use the service at no cost.

People come to us because we don’t charge, Caron said. That comes with a cost. Banks under $100 million might be more challenged than the other banks because we’re giving the product away for free. It’s starting to have an impact on our bottom line.

To remain competitive, community banks may adopt another pricing model, such as relationship banking, he said. Large institutions have long courted wealthy customers by offering them free services if they keep a set amount of funds in the bank. Smaller institutions may follow suit and making it more difficult for other customers to receive free services.

That’s where community banks, I think, are headed, Caron said. Relationship banking has definitely become a buzzword.

In the Bay State, mergers have left customers with a few large institutions and many smaller banks. Mergers have also created some opportunities for smaller banks to hire away talented bankers, but most bankers from large institutions have specialized skills, while small banks need someone that can work as a jack-of-all-trades, Caron said. Competition for good employees has added to the overhead expenses.

We compete for talent with big institutions, and have to pay up for talent to get quality people in and retain them, Caron said.

Mergers have given community bankers larger competitors, but many small banks have benefited from the recent string of deals.

The consolidation trend is still acting as a boost to us, Gaughen said. Customers are disappointed in the service level of some of the regional banks. We don’t see that service level improving, at least in the near term.

Some banks have taken to marketing directly to customers of merging banks, trying to benefit from the customer runoff that comes with most mergers.

No matter what community bank I talk with, they all in unison say they have business walking in the door because of consolidation, Moynihan said.

State and federal legislation has opened the doors for banks to expand into the insurance and securities industries. But diversification can have a downside, Gaughen points out, citing the losses BankOne suffered because of its credit card business.

It’s a two-edged sword, Gaughen said. What’s happening is, at the higher end of the scale, the larger banks are realizing some efficiencies and, at the low end, you’ve got some unprofitable startups. The folks in the middle seem to be doing pretty well.