(Bloomberg) -- Regional banks were dragged down Tuesday by First Republic Bank’s plunge to a record low, after the beleaguered lender said deposits sank last quarter.

The KBW Regional Banking Index fell by the most in a month and hit its lowest level since November 2020 — as First Republic’s drop dented sentiment across the sector that has been slammed by the collapses of Silicon Valley Bank and Signature Bank. The regional bank gauge was led to the downside by PacWest Bancorp, which fell 8.9% ahead of reporting earnings after the market’s close Tuesday.

First Republic’s difficulty retaining deposits embodies the challenges facing smaller banks in getting past last month’s crisis. The San Francisco-based lender’s report appears unique among earnings results so far because of the scale of its deposit declines, while regional peers face earnings pressures as the cost of keeping deposits rises.

There was general pessimism across bank stocks after First Republic’s miss in deposits, Janney Montgomery Scott LLC analyst Tim Coffey said by phone. He cut the rating on First Republic to sell after the bank’s earnings report. 

First Republic’s selloff deepened to 49% Tuesday afternoon, after a Bloomberg News report said the bank is exploring divesting $50 billion to $100 billion of long-dated mortgages and securities as part of a rescue plan.

The bank is not a member of the regional bank gauge, but it was the worst performer in the broader KBW Bank Index, with almost all of its 22 members in the red. KeyCorp, Western Alliance Bancorp and Zions Bancorp all sank by more than 5%.

Read More: First Republic Shares Plunge as Deposit Drop Renews Concern

The largest US lenders fell as well, with Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Morgan Stanley all down by more than 2%. 

First Republic has been a standout laggard even within the hard-hit sector as deposits fled the San Francisco-based lender, making it the worst performer not only in the bank gauge but also the S&P 500 Index this year. The bank’s earnings rout took its selloff this year to 93%, triggering multiple trading volatility halts on Tuesday.

(Updates throughout to market close.)

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