Hovde Group's Outperform Upgrade: A Fresh Look at Value in Regional Banking

In a market where regional banks are often overlooked, First Savings Financial Group, Inc (FSFG) has emerged as a compelling story. The company—a holding entity for First Savings Bank—operates as a community-focused lender, offering a suite of retail and commercial banking services across southern Indiana and beyond. Its business model hinges on personalized banking, real estate lending, and prudent asset management, positioning it as both a local economic driver and a potential value opportunity for investors.

This morning, boutique investment house Hovde Group upgraded FSFG from "Market Perform" to "Outperform," setting a new price target of $34, a notable premium to the current price of $27.53. Such analyst actions are critical for investors: they don’t just move markets, but often reflect deep, data-driven insights into a company’s prospects, especially when coming from sector specialists. With regional bank stocks recovering from macro headwinds and FSFG executing bold capital management moves, this upgrade warrants a closer look.

Key Takeaways:

• Potential Upside Return: Hovde Group’s new $34 price target represents a potential 23.5% upside from current levels.

• Stock Price Movements: FSFG’s shares have steadily climbed, recently trading near 52-week highs and up markedly from a May 2024 low of $16.12.

• Recent News Impact: The company’s $20M redemption of high-cost subordinated notes, reported May 1, has reinforced capital strength and flexibility.

• Momentum Signals: FSFG was recently listed as a top momentum stock by Zacks, supported by positive earnings estimate revisions and robust technicals (RSI above 90).

• Analyst Confidence: Hovde Group is a respected regional bank specialist, and their upgrade aligns with both sector momentum and FSFG’s operational improvements.

Hovde Group’s Upgrade: Sector Specialization Adds Weight

Who is Hovde Group?

Hovde Group is a highly respected boutique investment bank specializing in banking and financial institutions. With decades of experience, a deep M&A roster, and a reputation for sharp sector insights, their research often moves small-cap and regional banking stocks. The firm’s focus on regional banks means their analysts are attuned to sector-specific drivers—credit quality, capital ratios, local economic strength—and less likely to miss inflection points than generalist shops.

The New Target and Its Implications

The new $34 target, up from no previous published target, implies a 23.5% potential return from today’s price. Hovde’s rationale appears rooted in FSFG’s recent capital actions, strong risk-based capital ratios, and improved profitability outlook. Their upgrade from “Market Perform” to “Outperform” signals conviction that FSFG is not merely surviving macro stressors, but actively positioning for outperformance in the coming quarters.

“First Savings Financial Group’s capital management and momentum deserve recognition. We believe the current valuation underappreciates the company’s ability to navigate rate volatility and capitalize on regional lending opportunities.”

— Hovde Group Research Note, May 2025

Analyst Confidence and Alignment with Market Data

Hovde’s upgrade comes at a time when regional banks are regaining investor favor, and FSFG’s technicals reflect that: the stock is trading near its highest levels in a year, with sustained volume and momentum. The upgrade is thus not only a vote of confidence in FSFG’s fundamentals, but also in the sector’s ongoing rerating.

Stock and Financial Performance: Capital Moves, Momentum, and Resilience

Stock Price Action: Outperformance on All Fronts

• One-Year Range: Shares have rebounded from a 12-month low of $16.12 (May 2024) to a recent high of $30.94 (December 2024), with the stock currently at $27.53.

• Volume and Sentiment: FSFG has experienced a positive sentiment ratio (54% up days), with average daily volume above 11,500 shares. The stock’s RSI is an elevated 92.9, suggesting strong, sustained buying momentum.

• Volatility: Average daily volatility has been manageable at 0.64%, while trading activity has picked up alongside price gains.

Financial Health: Deleveraging and Flexibility

Recent news has highlighted FSFG’s balance sheet discipline:

• On May 1, the company redeemed $20 million of 5.95% fixed-to-floating subordinated notes, replacing high-cost debt with cheaper short-term borrowings (4.48%).

• Post-redemption, both the bank and holding company maintained leverage ratios above 9% and total risk-based capital ratios above 12%, underscoring regulatory strength and flexibility.

• This deleveraging move is expected to lower funding costs and improve net interest margins, directly benefiting future earnings.

Momentum and Earnings Revisions

Zacks recently spotlighted FSFG as a “#1 Rank (Strong Buy) momentum stock,” attributing its status to positive earnings estimate revisions and solid technical trends. As Zacks notes: “FSFG shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.” Source

Potential Upside: Quantifying the Opportunity

With the current share price at $27.53 and Hovde’s target at $34, the potential upside is 23.5%. For value investors, this is a rare premium in today’s banking sector, particularly for a company that has just demonstrated capital discipline and is riding positive estimate momentum.

• Why the Upside is Not Just Theoretical:

  • FSFG’s price is already reflecting renewed confidence, but the technicals suggest buying pressure is not yet exhausted.

  • Improved capital ratios and lower funding costs provide a clear path to earnings growth.

  • Analyst upgrades in regional banks can attract further institutional attention, especially when accompanied by high conviction price targets.

Recent News and Expert Opinions: The Market Narrative Shifts

Capital Redemption as a Catalyst

The recent redemption of $20M in subordinated notes is more than a balance sheet maneuver—it’s a strategic signal. By swapping higher-cost, floating-rate debt for cheaper funding, FSFG is locking in cost savings and demonstrating proactive financial management. The move was facilitated by a $19M dividend from the bank to the holding company, financed at a lower rate, with all regulatory capital ratios remaining robust.

“Subsequent to the redemption, the Company maintained leverage and total risk-based capital ratios in excess of 9.0% and 12.0%, respectively, as of April 30, 2025.”

— FSFG News Release, May 1, 2025 (GlobeNewswire)

Technical Momentum Recognized by Zacks

Zacks’ inclusion of FSFG in its “Best Momentum Stocks” list, alongside positive earnings estimate revisions, further validates the technical and fundamental case for the stock. A high RSI (92.9) typically signals overbought conditions, but in the context of recent upgrades and operational improvements, it could indicate a regime shift rather than a simple technical overshoot.

Risks and Considerations: What Could Go Wrong?

No investment is without risk. Key points for sophisticated investors to monitor:

• Interest Rate Sensitivity: While FSFG has reduced funding costs, further rate volatility could impact spreads.

• Credit Quality: As a regional lender, asset quality remains a variable to watch, especially if local economic conditions deteriorate.

• Liquidity and Volume: With average trading volumes modest by large-cap standards, liquidity risk is a factor for larger positions.

• Technical Overextension: The elevated RSI indicates momentum is strong, but can also precede short-term pullbacks.

Conclusion: A Conviction Upgrade Backed by Operational Execution

Hovde Group’s upgrade of FSFG to “Outperform” with a $34 price target is notable not just for the implied double-digit upside, but for the confluence of positive catalysts: disciplined capital management, positive estimate revisions, and sector momentum. For self-directed investors seeking overlooked value in regional banking, First Savings Financial Group now stands out as a rare combination of upside potential and operational resilience.

While risks remain—particularly around interest rates and credit quality—the latest upgrade is backed by both data and credible sector expertise. Investors should monitor upcoming earnings and local lending trends, but for now, FSFG’s rerating story is one the market cannot afford to ignore.