One of Florida's ailing credit unions, the $140 million Bay Gulf CU of Tampa, insisted it is on a path to financial recovery despite a state cease-and-desist order to restore capital in 10 quarters and change how it handles reserves on restructured debt.

Bay Gulf President/CEO William DeMare said the CU now has regulator backing to ride out its loan loss problems, though it does remain "open to merger opportunities."

Like other Tampa area CUs, Bay Gulf continues to feel the effects of the recession with real estate foreclosures still causing red balance sheets, but DeMare said the CU has changed its reserve accounting policies on restructured debt in line with the Florida order following what he said was a "misinterpretation" of regulator rulings.

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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 to 7% within 10 quarters.

The supervisory order chastises Bay Gulf for operating without adequate policies for accounting for troubled debt restructures and loan modifications.

Regarding the latter, DeMare said his CU so far has modified about 700 of them. Of those, 66% are still active, 14% have been paid off and 20% have been charged off.

"Tampa has simply been hit harder than other parts of the state," he said. "There are a number of credit unions in this market that are in the 6%-7% range."

DeMare said his CU has no plans to close any of its eight branches or reduce its 50-employee payroll.

In a message posted on Bay Gulf's website, DeMare assured members of their accounts' safety and wrote that "like many of you," the credit union is "struggling during this recession and what some are calling a 'depression in disguise.'"

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