Two more Minnesota banks are merging as the state’s community banks continue consolidating amid the slow economic recovery.

KleinBank, one of the state’s largest community banks, is buying Prior Lake State Bank. The cash deal is subject to regulatory approval, expected this summer, the banks said Tuesday. The purchase price is not being disclosed.

Doug Hile, president and chief executive of Chaska-based KleinBank, called Prior Lake State Bank “a great bank in great condition.” The purchase gives KleinBank three locations in Prior Lake, adding to KleinBank’s existing offices in Savage and Shakopee.

“It really gives us a dominant position in that part of town,” Hile said in an interview.

With assets of $1.6 billion, KleinBank currently has 19 locations statewide, primarily in the second and third rings of the Twin Cities. The acquisition will bring that to 22.

Prior Lake State Bank, with assets of about $207 million and 35 employees, is headed by well-known banker Bob Barsness and owned by the Barsness family.

Barsness, 69, said his father purchased the bank in 1965, and that with the family aging, it seemed like the right time to sell. “I’ve got six grandkids that I should spend more time with,” he said. “That’s going to be my first goal.

“If I want to be brutally honest, I should have done this about five years ago,” he added. “Timing is everything.”

Barsness served as president of the Independent Community Bankers of America national organization from 1999-2000, and also headed the Independent Community Bankers of Minnesota in the past.

The recession and new regulatory demands born of the financial crisis hit community banks hard, and with loan demand still slack many are struggling to find new ways to grow revenue. Bankers describe fierce competition for loan opportunities that arise. The number of community banks statewide continues to shrink amid the pressures.

“It’s a little bit like running in mud right now,” Hile said. “There’s not as much demand as you would typically have in a recovery, which is a challenge.”

Hile said he expects more momentum in the economy by the end of the year, and as interest in housing thaws throughout Minnesota following a brutal winter.