(Bloomberg) -- For US policymakers who have struggled to contain the month-old banking crisis, there are encouraging signs that investor confidence in regional banks may be starting to recover, at least for now. 

Even as First Republic Bank — one of the biggest regional banks, known for offerings aimed at wealthy clients — has sunk deeper into crisis this week, falling as much as 49% on one-day alone — shares of many of its peers, including names like PacWest Bancorp and UMB Financial Corp., have mostly held steady. This contrasts sharply with the way regional banks tumbled across the board last month as Silicon Valley Bank and Signature Bank collapsed. 

The stabilization suggests the worst fears of a contagion have receded. Recent bank deposit results, a closely watched gauge in the industry, has also provided some tentative relief for shell-shocked investors.

The SPDR S&P Regional Banking ETF, which includes First Republic and its cohorts, erased more than one-fifth of its value in March. This week the fund is down 2.2% and its 20-day volatility has peeled back from levels last seen in late 2020.

PacWest’s quarterly update showed deposits stabilized toward the end of March and rose in April, calming worries over the lender’s health. The Beverly Hills, California-based bank’s results were in-line with rivals KeyCorp, East West Bancorp and Bank OZK, which all recently reported quarterly deposit figures that met or topped analyst estimates.

“Regional banks’ first-quarter results highlight the resilience of the group, yet weaker earnings outlooks and market uncertainty could continue to weigh,” says Bloomberg Intelligence analyst Herman Chan.

To be sure, First Republic remains down 95% this year, while the share price of HomeStreet Inc. and PacWest have been cut in half. Those drops are stark when compared to big banks like Citigroup Inc. and JPMorgan Chase & Co., which have climbed in 2023.

Last month’s turmoil coupled with rising interest rates led to a surge of customer withdrawals, forcing banks to spend more to retain deposits. With rates expected to turn higher this year, bank profits will continue to take a hit. And investors will remain cautious. 

From a heightened risk of more credit events like bank failures to commercial real estate issues to rising rates, the problems are “far from over,” says Michael Landsberg, chief investment officer of Landsberg Bennett Private Wealth Management. “We think you will see a lot more problems in the banking sector.”

Failure to find a solution for beleaguered First Republic could also spook investors and depositors anew.

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