KBRA Assigns Ratings to Dickinson Financial Corporation II

KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Kansas City, Missouri based Dickinson Financial Corporation II ("Dickinson", "the company", or "DFCII") and intermediate holding company Dickinson Financial Corporation ("DFC"). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+ and short-term deposit and debt ratings of K2 to its subsidiaries, Academy Bank, N.A. ("AB") and Armed Forces Bank, N.A. ("AFB"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by Dickinson's stable earnings profile and solid capital position with a CET1 ratio of 16.2% at 3Q25 comparing very favorably to peers. We note that capital flexibility is somewhat constrained given that the company is unlikely to raise outside common equity and is therefore primarily dependent on internal generation of CET1 capital.

ROA has compressed somewhat over the last several years as a largely fixed rate asset portfolio created lag in repricing and funding costs increased through the Fed hiking cycle, though 3Q25 has shown a rebound in net income on normalizing provision expense and margin expansion. Additionally, the mortgage businesses provide a natural hedge to an asset sensitive balance sheet in falling rate scenarios, and total noninterest contribution provides stability to earnings, resulting in a consolidated ROA that tracks around 1%.

The NCO ratio is somewhat elevated relative to the KBRA-rated peer set, with consumer credit typically driving a large portion of charge-off activity, inflated by overdrafts on demand deposit accounts. As a result, Dickinson maintains elevated ACL coverage relative to peers, partially mitigating credit risk. While C&I, C&D, and investor CRE concentrations as a portion of total loans are approximately in line with the peer set, the elevated capital position results in ICRE/RBC and C&D/RBC ratios which compare favorably, at 219% and 30%, respectively, at 3Q25.

The noninterest bearing portion of deposits has declined in recent years in line with broader industry trends, though costs of deposits appear to have peaked, and core deposit funding is a relative strength. KBRA does note an elevated concentration in CDs, which can create lags in repricing on falling interest rates. Dickinson maintains on-balance sheet liquidity (cash and unpledged securities) representing ~17% of total assets and has access to liquidity at the FHLBs of Des Moines and Topeka. Holdco liquidity management at DFC and DFCII is appropriate, in our view.

Rating Sensitivities

Sustained improvement in profitability, improvement in asset quality metrics, and maintenance of the strong capital and funding positions could support positive rating momentum over time. A downgrade is not anticipated; however, aggressive capital management, including deterioration in regulatory capital ratios as a result of M&A without a credible plan to rebuild to or beyond peer levels, or sustained deterioration in asset quality or other financial metrics could drive negative rating action.

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Methodologies