Two central Minnesota banks are merging to bolster the size and resources of the community institutions.

First State Bank of Sauk Centre and Little Falls-based Pine Country Bank will operate as Pine Country Bank, according to a Monday announcement. Regulatory authorities have already approved the merger, which will complete in January.

"We'd be considered an agricultural bank," said Rob Ronning, CEO of Pine Country Bank. "It makes up the largest portion of our portfolio."

Ronning said the merged bank's lending limit will likely increase from $4.1 million to $6.2 million. As of June 30, Pine Country Bank had assets of $244 million and First State Bank had assets of $157 million.

Holding company MidCountry Acquisition, based in Minneapolis, owned and operated both banks and drove their merger.

"They were just looking to get more efficient," Ronning said of MidCountry's motivation to combine the financial entities.

Pine Country Bank — which began in 1927 as the Royalton State Bank — has branches in Little Falls, Rice and Royalton. First State Bank has locations in Sauk Centre and downtown Minneapolis. Pine Country has 40 employees while First State employs 15.

Last week, the Federal Reserve cut interest rates by half a percentage point. Ronning is optimistic about the impact of that on the banking industry.

"Hopefully, it will start to drum up a little more loan activity," Ronning said. "People will feel like borrowing."

Michael Bick, CEO of First State Bank, said in a prepared statement his bank is "excited to join forces to create an even stronger financial institution" and expand its coverage area.

"Together, we will be well positioned to navigate the evolving financial landscape and drive long-term growth," Blick said.