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Like many other regional banks, the value of PacWest’s loans and bond holdings have crumbled as interest rates have surged. Customers yanked their deposits in March out of fear that the bank could fail and they’d be left holding the bag. Although the Federal Deposit Insurance Corp. insures accounts holding up to $250,000, many businesses have a lot more money in their accounts, much of which is uninsured.

That left the bank and its competitors with a potential problem: If customers kept drawing down their accounts, the bank may run out of cash to pay them. That made investors nervous: PacWest’s stock has plunged 72% this year.

PacWest appeared to have stabilized in recent weeks since the March collapses of Silicon Valley Bank and Signature Bank. PacWest reported last week that customers have stopped withdrawing their money and 73% of the bank’s deposits were insured.

But when First Republic failed earlier this week, investors grew weary that another shoe could drop. The stock cratered 28% on Tuesday and another 2% Wednesday.
gpt
As interest rates have climbed, the value of PacWest's loans and bond holdings have gone down. Customers and investors are nervous about the bank's ability to pay for withdrawals made by individuals with accounts, resulting in a 72% decrease in the stock's value this year. With the increase in interest rates, investors are concerned that PacWest could fail. 