Contagion has been a central theme in episodes of bank fragility over the years. Yet, it is challenging to identify in the data. We provide evidence from the universe of banks in the US over the last three decades, showing how deposit outflows are associated with performance deterioration in peer banks. We then demonstrate how this is amplified by panic that is caused by the liquidity transformation in focal banks, peer banks, and the interaction between them. Our analysis speaks to the important role of liquidity transformation, generating panic that is amplifying and spreading financial fragilities across banks.