Roughly a year after announcing plans to halve itself to survive, Mercantile Bancorp Inc. in Quincy, Ill., is again in search of more capital.

The $999 million-asset company said Monday that two of its three bank units failed to meet the capital requirements in cease-and-desist orders and that it was working with its advisers to develop a plan by yearend to fix that.

Earlier this month Mercantile terminated a rights offering, something it had once described as a major part of its capital plan.

Experts said that overall the company is much healthier than it was a year earlier. Then, capital at its Royal Palm Bank in Naples, Fla., had dropped to critically undercapitalized. Selling half of its banks significantly boosted capital, but nine months of credit hits have taken capital back into dangerous territory. This time Mercantile has fewer options to replenish capital.

Mercantile and many other banking companies have contorted themselves in the past few years to survive, but poor credit quality has thwarted those efforts. Industry watchers said that, with most options exhausted, it might be time for these companies to consider a sale.

"The playbook for struggling banks who can't raise capital is to sell what you can, shrink as quickly as you can to boost those capital ratios and hope that the financial outlook stabilize," said Charles Crowley, a managing director at Paragon Capital Group, who declined to comment on Mercantile specifically.

"Depending on the severity of the asset-quality issues or the ability to raise capital," Crowley continued, "some boards are inevitably deciding that they are better off selling the company. Even if they don't get a great price."

It is unclear what Mercantile is planning. Ted T. Awerkamp, its president and chief executive, said by e-mail Tuesday that he was unable to comment.

In a press release issued late Monday, Awerkamp said the company was continuing to work with its advisors to develop a capital plan. "We have a tremendous opportunity to grow and prosper, but in the near term, it is important to enhance our capital base to enable the company and its subsidiary banks to meet their regulatory requirements and to give us an elevated level of financial strength as we work through selective asset-quality issues at our subsidiary banks," the release said.

Also Monday, Mercantile reported that its third-quarter loss widened by 435% from a year earlier, to $7.5 million. It cited losses at Royal Palm Bank, which has sustained significant losses from the downturn in the local real estate market, and at the Heartland Bank unit in Leawood, Kan., which has taken large writedowns on participation loans, most notably on those made in concert with a Georgia bank that failed.

In November 2009 Mercantile announced deals to shed three of its banks.

In Illinois, it sold Brown County State Bank in Mount Sterling and Marine Bank and Trust in Carthage to United Community Bancorp Inc. in Chatham, for $25.6 million.

It also transferred its HNB National Bank in Hannibal, Mo., to R. Dean Phillips, its largest shareholder, in exchange for $28 million in debt forgiveness. The deals reduced Mercantile's assets by 41%.

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