Two regional banks with branches in North Dakota and Minnesota have announced a merger, set to happen later this week.

Citizens State Bank Midwest and KodaBank will merge, as of Thursday, Feb. 13. KodaBank, the larger of the two by assets, has been named the surviving financial institution. The combined banks have assets estimated at $300 million. Most of the banks’ branches are located in northeast North Dakota and northwest Minnesota, with one branch located in Bemidji, Minn. Federal and state banking authorities recently approved the merger.

The two banks have locations in Kennedy, Stephen and Bemidji in Minnesota, and Cavalier, Minto, Neche, Pembina, Walhalla and Drayton in North Dakota.

“We are extremely excited to receive final approval to merge these two great institutions,” said Kodabank President Peter Anderson in a press release. “While each bank has been run separately, we have been working toward joining forces to create a more efficient operation so that we could better serve our customers and the communities in which we live.”

The merger has been in the works for about three years, said Anderson.

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North Dakota Bankers Association President and CEO Rick Clayburgh said this follows a nationwide trend in the banking industry, where smaller banks merge to save costs and stay competitive.

“Because of all the regulatory pressures that are on our banks, that have to do with things from the Dodd-Frank legislation that was passed by Congress, it puts so much burden on our smaller banks,” he said. “In order to compete, many of them are coming together and teaming up.”

Anderson said much the same in the press release, mentioning the banking landscape has changed in recent years, and now is a good time for the merger.

“There’s lots of activity in mergers and acquisitions. … You need to have the size to survive,” he said in a Monday, Feb. 10, phone call with the Herald. “Especially to provide the technology nowadays, it is so much more expensive than it was years ago.”

According to Anderson, both banks are heavily concentrated in the agricultural sector. Despite the recent poor harvest due to heavy rains and early snow in October, both banks are healthy, with capital levels above industry requirements.

While the merger aims to make the operation of the bank more efficient, a part of the goal is to add services, including a smartphone banking application and lower fees.

“With technology that the customers deserve and want nowadays, you just spread your costs over a bigger asset base,” Anderson said.

The bank will continue operations at all its branches and will retain all staff. President of Citizens State Bank Midwest Douglas Taylor will stay on as Bemidji market president and chief credit officer.

“We’ll remain an independent, community bank serving all of our customers’ banking needs,” said Taylor in the press release. “Our nine locations and the people in them will stay the same. Our ownership will be made up of the current owners of the respective banks. Our customers can count on the same personalized service they’ve grown to expect.”