In a sign the ongoing banking turmoil may not be completely over, shares of First Republic Bank (NYSE:FRC) are in free fall today. Following a number of trading halts during today’s session, FRC stock is down more than 40% in early afternoon trading.

This plunge took place following the company’s earnings report and conference call, which abruptly ended without a question-and-answer period for analysts. It appears the numbers reported, and the lack of visibility, have provided investors with too many questions today.

The company reported a much larger-than-expected decline in deposits in the company’s first quarter. Deposits at First Republic dropped more than $10 billion as customers took their deposits to competitors, or invested in Treasuries and other securities on their own. This significant decline shocked analysts, with one Wells Fargo analyst suggesting that these outflows could be at a “level that could prove very hard to come back from.”

Let’s dive into what led to this crisis and where investors are likely to go from here.

Why Is FRC Stock Plunging Today?

Like other regional banks, First Republic is a mid-tier bank servicing a specific clientele. One of the larger regional banks, the company has a prominent wealth-management division, in addition to a broad lending portfolio.

However, like so many of its peers, First Republic has seen the impact of duration risk materialize on its balance sheet. Via holding a significant amount of single-family mortgages on its books, First Republic’s assets (these loans) are worth significantly less than when they made the loans, many at historic low interest rates. As interest rates have risen, and the bank has been forced to raise its interest paid on deposits, this has squeezed the banks’ margins.

The company is now in a position where the bank can’t sell these loans without booking significant losses. Thus, as the company reportedly looks at asset sales, investors appear to be looking at other larger, more stable banks, as a way to play the financials space.

The company is reportedly pursuing strategic options, which often means a significant sale of the company’s business units or an outright sale. It remains to be seen how the company’s wealth-management division, in particular, will perform in light of the ongoing turmoil. Accordingly, I expect more news soon.

But in the absence of anything overtly positive in this earnings report, investors are in selling mode. Today, that seems like the prudent thing to do, all things considered.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.