Operating under a state cease and desist order to restore capital, the president/CEO of the ailing $140 million Bay Gulf CU of Tampa, Fla. said Tuesday his CU remains "open to merger opportunities " but is determined-and has regulator backing-to ride out loan loss problems in the interim.

Like other Tampa area CUs, said William DeMare, head of Bay Gulf, the recession continues to take a huge toll with real estate foreclosures still causing red balance sheets, but "we've changed our reserve accounting policies on restructured debt" in line with the Florida order following what he said was a "misinterpretation" of regulator rulings.

The order issued April 29 by Linda B. Charity, director of the Florida Division of Financial Institutions, directs Bay Gulf, which lost a restated $2.1 million last year and $823,000 in the first quarter, to increase its 5.2% capital ratio and restore its net worth. The regulator wants Bay Gulf to increase its capital to 7% within 10 quarters. The supervisory order cites Bay Gulf for operating without adequate polices for accounting for troubled debt restructures and loan modifications