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Time to bet on regional banks?

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Federal Reserve Chair Janet Yellen thinks America's small banks are getting crushed by Dodd-Frank.

Testifying before Congress Thursday, Yellen called for ways to reduce the regulatory burden on regional players.

Read MoreJanet Yellen takes issue

Appearing on CNBC's "Power Lunch" Friday, Paul Miller, managing director & head of financial institutions research with FBR Capital Markets, called regional banks "overvalued." right now.

"Banks are undoubtebly facing regulatory overload, and regionals, like all banks, remain overvalued," said Miller. "But that doesn't mean you should avoid owning a basket of financials in your portfolio. You can't afford not to be on this side of the trade. If rates go up, you run with it, if they don't, it won't hurt that much."

Miller's top regional bank pick is Dallas-based Comerica, the 22nd largest financial holding company in the United States, with $70 billion in total assets.

Miller also favors Zions Bancorporation, a bank holding company headquartered in Salt Lake City, Utah. The multi-holding company operates in 11 Western U.S. markets including Arizona, California and Nevada, and is included in the S&P 500 and Nasdaq 100 indices.

Miller's third regional pick is Regions Financial, a member of the S&P 500 Index, provides retail and commercial banking, trust securities, brokerage, mortgage and insurance services. It is the only member of the Fortune 500 based in Alabama and is the state's largest deposit holder, with $22.8 billion in local deposits.

Neither Miller nor his family or firm has a stake in Comerica, Zions or Regions.