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Capitol Bancorp Ltd.'s credit costs are shrinking, but its capital hole is only getting deeper.

The $2.5 billion-asset company, which has dual headquarters in Phoenix and Lansing, Mich., reported on Thursday a loss of $22.8 million for the third quarter, a 56% improvement from the loss it reported a year earlier. The loss was driven by a $17.5 million provision for loan losses, a 58% improvement from a year earlier.

Meanwhile, Capitol's equity sunk to negative $95.8 million. A year earlier, the company had nearly $36 million in equity remaining.

Since 2009, the company has aggressively tried to buffer losses through the sale of its bank units. It has sold 21 banks and has another five divestures pending. If completed, the company, which before the economic downturn aspired to have 100 bank units across the country, would have 11 banks.

Joseph D. Reid, the company's chairman and chief executive, said in a press release on Thursday that more sales are possible as the company searches for ways out of its negative equity position.

"Beyond the combined $2.2 billion of assets involved in these divestitures, ongoing discussions continue in both divestiture and capital reallocation activities to address the deterioration that has occurred in equity capital," Reid said in a press release. "We expect to communicate additional developments as they arise, as all strategic alternatives and prospective sources of support are being actively and aggressively explored."

Regulators have issued prompt corrective action directives against four of the company's banks, including its three largest units. Such directives are considered the last public warning to raise capital or risk being seized.