** Shares of community bank Financial Institutions FISI.O rise as much as 3.5%; last up 2.4% at $27

** KBW upgrades FISI to "outperform" from "market perform"; raises PT to $34 from $29, a 28.9% upside to stock's last close

** Brokerage says the upgrade is predicated on a valuation reset being on the horizon for FISI

** Adds that discount is unwarranted and "now is the time to own FISI shares" as the bank's recent balance sheet restructuring has strengthened earnings forecast and profitability

** FISI in December raised $100 mln for balance sheet restructuring

** Recent capital raise and balance sheet restructuring helped remove overhangs of below-peer profitability and lower capital level, two factors that have long been viewed as valuation headwinds for the shares — KBW

** Two of three brokerages rate the stock "buy" and one "hold"; their median PT is $33 — LSEG

** FISI stock jumped 28.1% in 2024

(Reporting by Arasu Kannagi Basil in Bengaluru)

((ArasuKannagi.Basil@thomsonreuters.com))