Shares of US regional banks suffered deep losses on Wall Street Tuesday, dashing hopes that the resolution of First Republic's woes would end the crisis.

While large banks like Citigroup and Bank of America fell, the ugliest losses came at the same regional banks that have seen pressure since the March demise of Silicon Valley Bank the risks facing the group.

These include Los Angeles-based PacWest Bancorp (-24 percent), Western Alliance Bancorporation (-16 percent) of Phoenix, Zions Bancorporation (-11 percent) of Utah and Cleveland-based KeyCorp (-9 percent).

On May 1, First Republic Bank became the second-largest bank failure in U.S. history. Its failure is second to Washington Mutual (2008) and just ahead of Silicon Valley Bank recently. The result was another disruption in the banking industry.

Trouble was on the rise in February 2023 when First Republic’s shares had a 98 percent drop. They went from $147 per share to $3.50. But how did this happen? What contributed to the demise of First Republic Bank?

First Republic Bank was seized by state regulators and sold to JPMorgan Chase on Monday after months of struggles, adding to the uncertainty surrounding the financial market.

The takeover of the San Francisco-based bank was made by regulators in California after it was found to be "conducting its business in an unsafe or unsound manner" and "being in a 'condition that … is unsafe or unsound' to transact banking business," the California Department of Financial Protection and Innovation said.

“We experienced unprecedented deposit outflows,” said the First Republic Bank CFO on Monday. The news had just hit that First Republic suffered a massive $100 billion plunge in deposits in the aftermath of the meltdown of Silicon Valley Bank.

The U.S. bank turmoil is not over. First Republic just became the third major bank to fail this year, requiring a government takeover. Its stock was trading at less than $4 a share on Friday, a cliff-dive from nearly $150 in February, as depositors and investors fled the bank. This is a slow-moving crisis. There will almost certainly be more fallout to come.

The Federal Reserve raised a key interest rate Wednesday by a quarter percentage point, the 10th increase in just over a year that is hitting consumers with higher costs for home mortgages, auto loans and credit card balances.

The central bank said the action was needed to curb inflation that was at 5% in March. Inflation has come down from 8.5% a year ago, but is still more than twice the Fed’s target level.

When it comes to deposit insurance rules, the Federal Deposit Insurance Corporation (FDIC) only wants the US Congress to change what it absolutely must. In a new report issued in the wake of Silicon Valley Bank’s failure, the banking regulator posits that it’s only business banking accounts used for payroll that need extra deposit insurance, and not the entire system of deposits.