Two small Massachusetts mutual thrifts are planning to join forces in hopes of gaining the scale to better compete against larger banks.

Framingham Co-operative Bank and Natick Federal Savings Bank announced Wednesday that they intend to merge in a deal that would create an institution with more than $550 million of assets and three branches in communities west of Boston. Because both are mutuals and do not have shareholders,the assets of two institutions will simply be blended with no money changing hands.

Until recently mergers between mutuals were rare, but the twin challenges of increased regulation and relatively slow loan growth are forcing some to give up their independence. Two other deals between mutuals have been announced in Massachusetts since July and industry observers say more mergers are in the works, particularly in the Northeast, where most of the country's mutuals are clustered.

"Increasing regulatory and operational expenses make it very difficult for the small community bank to thrive," said Brian K. Peoples, Natick's president and chief executive, in a news release Wednesday. "The consolidation will maintain our strength as a well-capitalized mutual institution with the size necessary to compete in today's banking environment."

The deal would combine two thrifts in neighboring towns that have been serving their communities since the 1880s. Framingham, the larger of the two thrifts with nearly $400 million of assets, would be the surviving institution and its CEO, Mark R. Haranas, would become CEO of the combined company. Peoples and three other Natick directors would join Framingham's board. The deal is expected to close in the third quarter.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.