The market for credit union mergers remains in the doldrums with few signs it will perk up soon, a leading merger consultant said Monday.

“After seven straight years of slowing consolidation numbers, we are definitely seeing a bottoming of the credit union merger market,” observed David Bartoo, head of Oregon-based Merger Solutions Group. 

The trend, Bartoo said, underscores the reluctance of larger CUs to take on added balance sheet, equity or underwriting woes which may be tied to bad debts of the CUs being merged.

“With these and many other emotional issues on both sides of the equation, it has created a significant decline in credit union industry consolidation in the first half,” Bartoo said. “The same can be said of the banking industry as well, as they have seen a dramatic slowing in merger activity.”

Five years ago, there were as many as 300 CU mergers a year and so far there have been 189, including a sharp drop to 37 in the second quarter. That is one of the lowest quarterly rates, Bartoo said.

Acquiring CUs, he noted, are less eager to deplete capital and net worth ratios by taking on weaker CUs “and certainly that is the case now as compared to five years ago when that was not a particularly strong concern.” 

With assessments and corporate uncertainties, CUs are less willing to take on additional risks, he said.

The consultant also noted that the lead time for mergers to occur has lengthened significantly in many cases in recent months.  Whereas mergers might be completed in three or four months, the lead time in some cases has stretched out to a year or more.  

Bartoo's comments on merger conditions came in a status report “2011 Mid Year Credit Union Merger Activity Report and Forecast” issued by his Forest Grove, Ore. firm.