Wedbush lowered its earnings-per-share estimates for more than half of the banks the firm covers late Wednesday, citing reduced expectations for loan growth, net interest margin and mortgage-banking performance.

In a note to clients, the firm said it sees linked-quarter EPS growth moderating to 3% in Q3 for regional banks and 1% for mid-cap banks “as some of the macro tailwinds are slowing.” It added: “Banks need a rebound in loan growth to drive stronger earnings growth as the earnings benefit from rate hikes is moderating.”

Still, the firm said excluding the benefit of lower tax rates, it is forecasting Q3 core EPS growth year-over-year of 13% for the regional banks and 5% for mid-cap banks. Including the expected impact of the tax cuts, it sees Q3 year-over-year EPS growth at 33% for regional banks and 28% for mid-cap banks.

The firm highlighted that credit quality “continues to improve driving down credit costs to near unsustainable low levels, a meaningful contributor to earnings growth.” However, it added, “at this point in the cycle, lower credit costs and reserve releases are not being rewarded with higher stock prices.”

Meanwhile, the firm noted year-over-year growth in net interest income has slowed for three quarters in a row — it was 6.1% in Q2 after being 6.6% in Q1, 7.7% in Q4, and 8.8% in last year’s Q3. It is expected to moderate further in the latest Q3 to 5.1%, Wedbush said, citing “slowing margin expansion and stagnating average earning asset growth.”

Wedbush said it is focusing on growth in pretax preprovision net revenue or PPNR, which slowed in H1 of this year versus the same period last year. The firm is predicting Q3 PPNR will slow to 5.9% year-over-year growth for regional banks and to 6.8% year-over-year growth for mid-cap banks.

Still, based on the firm’s price targets, it is forecasting 11% upside for the regional bank group it covers over the next 12 months, 10% upside for mid-cap banks, and 6% upside for Texas banks.

Its top picks among regional banks include Fifth Third Bancorp (FITB), Regions Financial (RF), Citizens Financial (CFG), KeyCorp (KEY), Huntington Bancshares (HBAN) and Comerica (CMA). The firm’s top picks among mid-cap banks are Cathay General Bancorp (CATY), East West Bancorp (EWBC), Western Alliance (WAL), Webster Financial (WBS), First Republic (FRC) and Wintrust Financial (WTFC).

Finally, Wedbush highlighted one top pick among Texas banks — BOK Financial (BOKF) — which the firm said “is well positioned for solid organic growth as loan headwinds abate, net interest margins have consistently come in better than guidance and focus on expense management is setting the stage for very strong positive operating leverage.”