Grade: A — Strong Financial Health
Framework: Bank-specific credit quality analysis + Schilit principles (traditional manufacturing checks partially N/A for banks)
Data: SEC EDGAR 10-K (Filed 2026-02-23, FY ended December 31, 2025) + Yahoo Finance
Auditor: Ernst & Young LLP — Unqualified opinion
One-line verdict: U.S. Bancorp is the fifth-largest U.S. commercial bank and it screens clean. Revenue grew 4.4% to $28.5B, net income surged 20.1% to $7.57B, and CFFO/NI of 1.05x confirms earnings are cash-backed. The one watch item is cash of $46.9B covering 69% of $68.4B in total debt — standard for a large bank relying on deposits and wholesale funding. Goodwill and intangibles of $17.5B represent 27% of equity — reasonable for a bank that completed the MUFG Union Bank acquisition. The company exceeded all minimum capital ratio requirements as of December 31, 2025. The stress capital buffer (SCB) declined, indicating improved stress test performance.
| Metric | Result |
|---|---|
| Red Flags | **0** |
| Watch Items | **1** (cash-to-debt coverage 69%) |
| Checks Completed | **9/18** (9 N/A — standard checks inapplicable to banks) |
| Beneish M-Score | **N/A** (model does not apply to financial institutions) |
| F-Score (Fraud Probability) | **1.81** (0.67% probability — low) |
| Altman Z-Score | **N/A** (not applicable to banks) |
| Auditor | Ernst & Young LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
The Fifth-Largest U.S. Bank
Per the 10-K, U.S. Bancorp is a financial holding company with total assets exceeding $500B. The company operates through Wealth, Corporate, Commercial and Institutional Banking, Consumer and Business Banking, and Payment Services segments. The SCB applicable to the company is 2.6%, a decrease from prior year.
| Metric | 2022 | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|---|
| Total Revenue | $24.2B | $28.0B | $27.3B | **$28.5B** | +4.4% |
| Net Income | $5.83B | $5.43B | $6.30B | **$7.57B** | +20.1% |
| Net Margin | 24.1% | 19.4% | 23.0% | **26.5%** | Improving |
| ROE | 11.5% | 9.8% | 10.8% | **11.6%** | Improving |
| CFFO | $21.1B | $8.39B | $11.4B | **$7.97B** | -29.8% |
| CFFO/NI | 3.63x | 1.55x | 1.80x | **1.05x** | Normalizing |
| Total Debt | $69.4B | $62.9B | $65.6B | **$68.4B** | +4.2% |
CFFO declined from $11.4B to $7.97B, but CFFO/NI of 1.05x still shows earnings are fully cash-backed. The earlier elevated CFFO (2022's $21.1B at 3.63x) reflected post-MUFG Union Bank acquisition balance sheet dynamics. Normalization to ~1x is healthy.
Net income growing 20.1% is the standout metric — driven by NII growth, improving efficiency, and controlled provisions.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | N/A | Bank |
| A2 | AR vs Revenue Growth | N/A | Bank |
| A3 | Revenue vs CFFO | PASS | Both positive |
| B1 | Inventory vs COGS | PASS | No inventory |
| B2 | CapEx vs Revenue | N/A | Bank |
| B3 | SG&A Ratio | N/A | Bank |
| B4 | Gross Margin | N/A | Bank |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.05 |
| C2 | Free Cash Flow | PASS | FCF $7.97B |
| C3 | Accruals Ratio | PASS | -0.1% — near zero |
| C4 | Cash vs Debt | WATCH | Cash $46.9B covers 69% of $68.4B debt |
| D1 | Goodwill + Intangibles | PASS | $17.5B = 27% of equity |
| D2 | Leverage | N/A | Bank |
| D3 | Soft Asset Growth | N/A | Bank |
| D4 | Asset Impairment | N/A | No data |
| E1 | Serial Acquirer FCF | PASS | Positive |
| E2 | Goodwill Surge | PASS | -3% YoY — declining |
| F1 | Beneish M-Score | N/A | Bank |
Key Risks from the 10-K
1. MUFG Union Bank Integration
USB completed the acquisition of MUFG Union Bank's core operations. Goodwill of $17.5B (declining 3% YoY as intangibles amortize) reflects the acquisition premium. Integration risk continues in technology systems and branch operations.
2. Capital and Regulatory Requirements
Per the filing, USB is subject to minimum CET1 of 4.5%, the SCB (2.6%), and potentially a countercyclical capital buffer. While the SCB declined, the Federal Reserve proposed calculating it based on a two-year average of stress test results, introducing new methodology risk.
3. Interest Rate Sensitivity
NII is the largest revenue component and is directly sensitive to rate movements. USB's AOCI election (excluding unrealized securities losses from CET1) provides regulatory capital protection but masks economic exposure.
4. Credit Quality
As a diversified commercial bank, USB carries commercial, CRE, consumer, and credit card loan exposure. Credit cycle deterioration would increase provisions and charge-offs.
5. Payment Services Competition
The Payment Services segment faces competitive pressure from fintech companies and evolving payment technologies. Per Item 1A, disruption in payments could affect fee income.
Summary
Grade: A. Strong financial health. A well-run diversified bank with clean earnings, improving profitability, and no screening red flags.
U.S. Bancorp passes all applicable checks cleanly. CFFO/NI of 1.05x, accruals of -0.1%, goodwill declining to 27% of equity. Net income surged 20.1% to $7.57B. The one watch item (cash covering 69% of debt) is standard for a large bank. The SCB declining to 2.6% signals improved stress test performance. Watch credit quality trends and NII sensitivity as rates evolve.
**Disclaimer**: This report is based on U.S. Bancorp's fiscal year 2025 10-K filed with the SEC on February 23, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade A means strong financial health with no significant concerns.