Peoples National Bank of Mora and Neighborhood National Bank in Alexandria are merging, the latest example of the squeeze on Minnesota's shrinking ranks of small community banks.

The cost of technology and regulatory compliance is driving the combination, said Doyle Jelsing, president of Peoples National, which has assets of $161 million.

"You are required to have compliance staff, and now you can share the cost of that," ­Jelsing said in an interview.

Minnesota, which has more banks per capita than most states, as well as a large crop of credit unions, still has more than 300 community banks, but the numbers are shrinking every year.

The two holding companies are merging, pending regulatory approval expected by the end of the month, Jelsing said. They aim to merge by June 30, with the surviving corporate entity being Peoples Bankshares in Mora.

The two banks plan to merge sometime in early 2015 although the name change may occur earlier, he said. The surviving bank will be called Neighborhood National Bank, and be based in Mora. Jelsing said he anticipates no layoffs.

His last three hires have all been in the compliance area, he said. Plus, customers are demanding mobile technology that Peoples can provide for Neighborhood National, which has assets of $47 million and the one location in Alexandria.

Karen Grandstrand, a banking lawyer at Fredrikson & Byron who is representing Peoples National's holding company in the deal, said she's seeing a steady flow of small community bank mergers.

"That really is where all the M&A activity is centered, at least right now," she said.

Jennifer Bjorhus • 612-673-4683