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

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

The order issued April 29 by Linda B. Charity, director of theFlorida Division of Financial Institutions, directs Bay Gulf, whichlost a restated $2.1 million last year and $823,000 in the firstquarter, to increase its 5.2% capital ratio and restore its networth. The regulator wants Bay Gulf to increase its capital to 7%within 10 quarters. The supervisory order cites Bay Gulf foroperating without adequate polices for accounting for troubled debtrestructures and loan modifications