NEW YORK ( TheStreet) -- "Most regional bank stocks don't offer much upside given their current valuations," according to Citigroup analyst Keith Horowitz. Continuing what now seems to be an annual pattern for the banking space, with a strong first quarter, followed by a weakening outlook for the rest of the year, Citigroup on Friday cut its 2013 earnings estimates for 13 out of 16 large regional banks in the firm's coverage universe, while lowering price targets for 10 of the companies. In light of the "flattening of the yield curve that has taken place since 1Q12 earnings season," -- with short-term rates unable to go much lower, while the yield on 10-year U.S. treasuries slipped below 1.5% last week -- Citigroup said that "the primary driver of the lower estimates is, not surprisingly, net interest margin, or NIM compression, particularly from the substantially lower reinvestment rates banks will face as legacy loans and securities are repaid or mature." A bank's net interest margin is its average yield on loans and investments, less its average cost for deposits and wholesale borrowings. Horowitz said that bank treasurers attending Citigroup's annual conference for treasurers two months ago "expected the 10-year treasury to be in the 2.00% to 2.10% range by year-end - almost 50 bps higher than the current yield," and that the "mismatch between expectations and reality suggests that bank treasurers have their work cut out for them." Citigroup sees a "slow burn" for the regional banks, as "lower expectations for long rates only fully manifests itself over time as it lowers expected reinvestment rates, steadily reducing expected yields on fixed rate assets as loans and securities re-price ." If rates "were to stay flat through 2014, we estimate NIMs could fall by a further ~10 bps," said Horowitz. Most regional banks continue to see very strong deposit growth, and, of course, seek to avoid being locked into very long terms for their new securities investments, because of the low rates. Horowitz said that yields on mortgage-backed securities have generally "shrunk less than the recent move seen in Treasuries," because "an investor is much less willing to pay-up significantly above par for MBS pass throughs given risk the bond will be called back in a year or two at par." According to Citigroup, the average yield for a select group of Fannie Mae and Freddie Mac MBS with "effective durations of 1-3 years that are likely in the zone of plain vanilla options for bank treasurers," declined to 2.06% as of June 6, from 2.42% at the end of March. On the bright side, the Federal Reserve's new capital rules excluding trust preferred shares from Tier 1 capital will enable banks to "activate a contractual clause allowing them to redeem TruPS at par," according to Horowitz, allowing the banks "to redeem relatively expensive debt, which has an average cost of 7.4% for the group" or regional banks covered by Citi, "with some securities carrying a coupon in excess of 10%." Horowitz said that "redeeming TruPS will create a near term NIM lever for the group as they are able to replace the TruPS with alternative capital at a minimum, or preferably using debt or excess cash should create a modest tailwind near-term." The following are the three regional bank holding companies within the firm's coverage universe facing the "most significant" impact from compressed net interest margins through 2014, according to Citigroup's "flat rate scenario," followed by the three for which "flat rates have the least incremental impact,"