This is straight from Goldman Sachs, courtesy The Daily Shot:

Let’s take another look at the banking turmoil that caught the markets off guard this year. The post-COVID quantitative easing period marked a significant shift in the banking landscape, as financial institutions experienced a surge in deposits. This influx of liquidity was difficult for banks to manage, as they struggled to lend at a pace that matched the growth of deposits. Consequently, they sought alternative methods to deploy excess liquidity, turning to the purchase of Treasuries, agency mortgage-backed securities (MBS), and other liquid fixed-income products. However, these assets were acquired at yields approximately 3.5% below current levels, making them vulnerable to an increase in interest rates.

As the Federal Reserve proceeded to hike rates, the value of these securities dropped precipitously, leading to losses amounting to 34% of Common Equity Tier 1 (CET1) capital. This situation was further exacerbated by accelerated deposit withdrawals from smaller banks, a phenomenon facilitated by the convenience of modern banking applications. In a bid to maintain liquidity, some institutions were compelled to sell their securities, incurring substantial mark-to-market losses and leaving them severely undercapitalized.