--- title: "Why TCE and Regulatory Capital Disagree: Lessons From 2023" description: "Why tangible common equity can tell a different story than CET1: goodwill, the AOCI opt-out and unrealized securities losses, with the 2023 failures." canonical_url: https://www.bankregreports.com/blog/tangible-common-equity/ source: BankRegReports published: "2026-07-06" updated: "2026-10-28" --- This post is about why tangible common equity can disagree with regulatory capital. In March 2023, Silicon Valley Bank had a CET1 ratio above 15 percent, technically well-capitalized by every regulatory threshold. Its tangible common equity ratio, adjusted for the unrealized losses in its held-to-maturity portfolio, told a different story. Those losses never appeared in reported equity, because HTM securities are carried at amortized cost, but when you subtracted them (a non-GAAP adjustment) and looked at the tangible cushion actually available to absorb real losses, the picture was considerably thinner. Regulatory capital said "fine." Tangible common equity said "watch out." That gap is exactly why analysts and investors have tracked **tangible common equity** (TCE) for decades. It is not a replacement for the regulatory ratios. It is a check on them. ![Tangible Common Equity Ratio Distribution - U.S. Banks, Q1 2026](figures/tangible_common_equity-1.svg) The distribution above is worth sitting with. Most banks cluster in the 8–12 percent range, but the left tail is long and the banks in it often look healthier on a risk-based basis than their tangible capital position warrants.
Distribution of tangible common equity ratios across U.S. banks
Tangible common equity to tangible assets across U.S. banks.
## What TCE Removes, in One Paragraph Tangible common equity is total equity less preferred stock, goodwill and other intangible assets: the common shareholders' capital that would remain if the intangibles were written off. Scaled by tangible assets it becomes the [TCE ratio](/glossary/tce-ta/), and per share it is [tangible book value](/glossary/tangible-book-value/). The formulas, the call report items and a worked example are on the [tangible common equity](/glossary/tangible-common-equity/) glossary page. What matters here is what the deductions take away, and why that can leave a bank looking very different from its regulatory capital. ## Why Goodwill Is the Real Problem Goodwill appears on a bank's balance sheet when it acquires another institution for more than the fair value of net assets. Pay $150 million for a bank worth $130 million in tangible terms, and $20 million goes on the books as goodwill. Accounting rules require it. The problem is what goodwill cannot do. It cannot absorb loan losses. It cannot be liquidated quickly. And if the acquired business underperforms, the goodwill gets written down, which *reduces* equity at exactly the moment a bank can least afford it. The bank that grew by buying things at a premium now has less capital precisely when the credit cycle turns. This is why the [Texas Ratio](/glossary/texas-ratio/), another blunt capital stress tool, uses tangible common equity in its denominator. Both measures are designed to work in worst-case scenarios, where accounting headroom disappears and only genuinely hard assets and genuine equity matter. Two banks can report identical equity ratios. One grew organically; the other made three acquisitions at 1.6× book. The organic grower's TCE ratio is meaningfully higher. That difference only shows up when you strip the goodwill. ## TCE vs. the Regulatory Capital Ratios The [regulatory capital ratios](https://www.bankregreports.com/blog/bank-capital-ratios-explained/) (CET1, Tier 1, total risk-based capital, and the leverage ratio) exist for a different purpose. They determine prompt corrective action thresholds. They drive capital planning and stress testing requirements. Regulators use them to make formal supervisory determinations. Those ratios are calculated against risk-weighted assets, which means holding a pool of agency MBS gets treated very differently from holding commercial real estate loans. Low-risk assets create "room" in the ratio that does not exist in the TCE calculation. The divergence matters. A bank can build a balance sheet heavy in zero- or low-risk-weighted instruments, post strong CET1 numbers, and still run a thin TCE ratio because the total asset base is large relative to tangible equity. 2023 showed this dynamic plainly: duration risk in held-to-maturity portfolios did not flow through risk-weighted assets, and it did not reach reported tangible equity either. HTM losses stay off the balance sheet at amortized cost and hit equity only when the securities are sold or reclassified. ![CET1 vs. TCE Ratio - U.S. Banks, Q3 2021 to Q1 2026](figures/tangible_common_equity-2.svg) Read them together. Either one alone misses something. ## Pulling TCE Data for Any U.S. Bank The inputs are all in the public record. Common equity, goodwill, and intangibles appear on Schedule RC of the quarterly FFIEC 051 (most community banks), FFIEC 041 (larger domestic banks) or FFIEC 031 (banks with foreign offices or $100 billion or more in assets). The [UBPR](https://www.bankregreports.com/blog/how-to-read-ubpr-report/) publishes peer ratios. The [FDIC](https://www.fdic.gov)'s call report database goes back to 1984. Doing this at scale (computing TCE for thousands of banks, tracking it across 25 years of quarters, building peer benchmarks) is the tedious part. [BankRegReports](https://www.bankregreports.com) calculates TCE and the TCE ratio for every FDIC-insured institution and makes the full history accessible. The ratio is built directly from RCON3210 (total bank equity), RCON3163 (goodwill), RCONJF76 (all other intangible assets), and RCON2170 (total assets), the same call report line items, validated against UBPR peer ratios. You can also pull peer group medians in the same call to benchmark against institutions of similar size and charter type. ## Frequently Asked Questions **Why is goodwill excluded from tangible common equity?** Goodwill cannot absorb losses. It cannot be sold quickly in a stress scenario, and it may be written down, *reducing* equity, if an acquired business underperforms. Excluding it reflects what equity is actually available when things go wrong. **What is the difference between TCE and CET1?** CET1 is a regulatory ratio measured against risk-weighted assets that determines whether a bank is well-capitalized under Basel III rules. The TCE ratio is measured against total tangible assets with no risk-weighting adjustment. Both matter; they measure different things. **Where can I find a bank's tangible common equity data?** The raw inputs (RCON3210, RCON3163, RCONJF76, RCON2170) are in the public call report filings. [BankRegReports](https://www.bankregreports.com) computes TCE and the TCE ratio for every U.S. bank across 25 years of quarterly history and surfaces peer group benchmarks alongside the regulatory capital ratios. --- If you are doing this analysis manually, the main thing to watch for is timing: goodwill impairments often lag the credit problems that caused them. A bank's TCE can look stable for several quarters after an acquisition goes bad, then drop sharply when the write-down finally hits. Build in the forward expectation, not just the current balance sheet number. --- BankRegReports publishes call report, UBPR, FDIC, Federal Reserve, NCUA, and SEC EDGAR data for every U.S. bank and credit union, with peer benchmarks and quarterly history. [Look up a bank](https://www.bankregreports.com/banks/) ## About this document This is the markdown twin of the page named in `canonical_url` above. Source filings are public record; the cleaning, normalization, cross-source linkage, and derived metrics are BankRegReports' own. Attribute with a link to the canonical URL. Markdown twins are published for editorial content only. Institution data pages do not have them. For data at scale use the API, which is documented at https://www.bankregreports.com/api/ and specified at https://www.bankregreports.com/openapi.json. It returns typed JSON with explicit units and periods, and one call replaces hundreds of page fetches. ## Sitemap - [Glossary](https://www.bankregreports.com/glossary/): every metric, with formula and thresholds - [Blog](https://www.bankregreports.com/blog/): analysis and explainers - [API documentation](https://www.bankregreports.com/api/): the programmatic way to get this data - [XML sitemap](https://www.bankregreports.com/sitemap.xml): the complete crawlable index