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Two 'Top Picks' Among Mid-cap Bank Stocks

First Horizon's shares closed at $11.34 Tuesday, down 3% this year, after a return of 20% during 2012. The shares trade for 1.4 times tangible book value and for 12.6 times the consensus 2015 EPS estimate of 87 cents. The consensus 2014 EPS estimate is 71 cents.

"We believe FHN has two significant mortgage related settlements on the horizon: 1) FHA Investigation and 2) Private Label Securitization, but even after absorbing the losses, we estimate FHN remains 10% cheaper on P / TBV and P/E vs. peers.," Siegnthaler wrote. He also sees the bank as one of the best positioned to see a significant rise in net interest income once the federal funds rate begins to rise.

The analyst's price target for First Horizon is $13, or 14.4 times his 2015 EPS estimate of 90 cents, and 1.6 times year-end 2014 tangible book value, "in line with peers."

This chart shows the stock performance of KeyCorp and First Horizon against the KBW Bank Index and the S&P 500 since the end of 2011:

KEY Chart data by YCharts

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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