NEW YORK ( TheStreet) -- The future favors stocks of smaller, growing bank holding companies, judging by valuation based on earnings estimates.

This makes sense because so much of the regulatory pile-on is focused on larger banks.

The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act - signed into law by President Obama last July - severely limits the interchange fees that banks with over $10 billion in total assets can charge merchants to process debit card purchases.

As discussed in TheStreet's 10 Banks with Biggest Fee Worries, the Federal Reserve's initial proposal for implementing the Durbin Amendment would cut the interchange fees by an average over 70%, severely cutting into profits for some banks, including TCF Financial ( TCB) and Regions Financial ( RF).

The battle over Durbin is still being played-out, through TCF's court case against the Fed - saying, among other things, that the bias against larger banks' fee income is unconstitutional - as well as ongoing discussions in Congress.

Of course, Durbin is only one factor in the ongoing regulatory evolution following the passage of Dodd-Frank. For the largest banks, headline risks and major risks to earnings from buybacks of securitized mortgages, the regulatory onslaught over foreclosure processes and associated legal expenses, are having their effect. It is striking how cheap the "big four" appear, by forward price-to-earnings ratios:
  • For Bank of America (BAC), the forward price-to-earnings ratio was 7.5, based on Friday's closing price of $13.48 and the 2012 consensus earnings estimate of $1.79 a share.
  • For JPMorgan Chase (JPM), the forward P/E was 8.3, based on Friday's closing price of $46.84 and the 2012 consensus EPS estimate of $5.61.
  • For Citigroup (C), the forward P/E was 8.6, based on Friday's closing price of $4.53 and the 2012 consensus EPS estimate of 53 cents.
  • For Wells Fargo (WFC), the forward P/E was 8.8, based on Friday's closing price of $31.62 and the 2012 consensus EPS estimate of $3.59.

For this article, we selected a list of 10 stocks of bank holding companies with less than $5 billion in assets, with the most upside implied by mean 12-month price targets among analysts polled by FactSet. We pared the list by only including stocks with three-month average trading volume of over 20,000 shares, and those with at least two "buy" ratings from analysts.

For the most part, this group is held in higher regard by in investors than the big four, as all but two trade above 12 times their estimated 2012 earnings. The group clearly benefits from not facing the same threats to earnings as many larger banks. Some of the smaller banks are also expected by analysts to recover ground that was lost over the past year.

Here are the 10 small-bank picks, with all data supplied by SNL Financial with consensus earnings estimates provided by FactSet. Analyst sentiment is very strong for half the group.

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