It’s a stock picker’s market in the hard-hit world of midsized bank stocks, according to Wells Fargo.

Analyst Timur Braziler downgraded four firms to hold-equivalent ratings, saying that he’s become more selective because of earnings risks that outweigh cheap valuations. He flagged deposit competition and credit risks as key issues for the group. The downgrades came as Braziler assumed coverage of 15 midcap banks, on top of seven he’d previously covered.

“The group remains historically inexpensive but lacking major catalysts as a sector notwithstanding alpha opportunities among select names,” Braziler wrote in a note to clients. “The result is that we remain nimble in what has been above average volatility.”

The analyst downgraded Banc of California Inc. and First Horizon Corp. on idiosyncratic issues, saying the former’s deal with PacWest Bancorp will be positive in the long-run but it will take time for that to be reflected in the stock. He cuts First Horizon with the stock down 57% this year after its planned deal with Toronto-Dominion Bank fell through.

Meanwhile, the analyst also downgraded Associated Banc-Corp and First Interstate BancSystem Inc. on macro pressures. All four stocks rose on Wednesday alongside the broader sector.

Bank stocks broadly have come under pressure following the collapse of several regional lenders earlier this year, while investors have stayed wary of the space due to deposit cost pressures, proposed regulatory changes and concerns over credit. The KBW Regional Banking Index has dropped 25% in 2023.

The analyst also called out four stocks as top-picks, saying he likes Western Alliance Bancorp and FNB Corp. into earnings, and East West Bancorp Inc. and Pinnacle Financial Partners Inc. as core holdings.

(Updates throughout to market close.)