---
title: "Tangible Common Equity: definition, formula, and thresholds"
description: "Tangible common equity (TCE) is a bank's total equity minus preferred stock, goodwill and other intangible assets. It is the common shareholders' capital that would remain if the intangible assets were written off, and the measure analysts use to compare banks that grew by acquisition with banks that did not."
canonical_url: https://www.bankregreports.com/glossary/tangible-common-equity/
source: BankRegReports
category: "Capital"
units: "$"
schedule: "Schedule RC"
---

# Tangible Common Equity

> Tangible common equity (TCE) is a bank's total equity minus preferred stock, goodwill and other intangible assets. It is the common shareholders' capital that would remain if the intangible assets were written off, and the measure analysts use to compare banks that grew by acquisition with banks that did not.

## Formula

```
Tangible Common Equity = Total Equity - Preferred Stock - Goodwill - Other Intangible Assets
```

Start from total bank equity capital on Call Report Schedule RC. Subtract perpetual preferred stock to leave the common stake, then subtract goodwill and other intangible assets, such as core deposit intangibles, which have no value apart from the bank. Many analysts leave mortgage servicing assets in, because they can be sold. Dividing TCE by tangible assets (total assets less the same intangibles) gives the TCE ratio.

## Why it matters

Goodwill and intangibles cannot absorb losses: in a failure or a forced sale they are worth little or nothing. A bank built by acquisition can show healthy book equity while its tangible capital is much thinner. Regulators deduct the same items from common equity tier 1, and analysts and acquirers use TCE as the plain-language test of loss-absorbing capital.

## How to read it

Compare TCE with total equity first; a wide gap means reported equity leans on goodwill from past deals. Then read the TCE ratio alongside CET1. TCE counts unrealized losses on available-for-sale securities in full, while many banks may exclude them from CET1, so a sharp drop in TCE with a steady CET1 usually means rate-driven securities losses.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| TCE ≈ book equity | Strong | Little reliance on intangibles. |
| Modest intangibles | Adequate | Tangible capital close to reported equity. |
| Sizable gap | Watch | Goodwill and intangibles meaningfully inflate book equity. |
| Thin TCE | Concern | Hard capital well below reported equity. |


## Worked example

At June 30, 2026, JPMorgan Chase Bank, N.A. reported total equity of $341,580 million, no preferred stock, $40,620 million of goodwill and $729 million of other intangible assets. TCE = $341,580 million - $40,620 million - $729 million = $300,231 million. Divided by tangible assets of $4,049,966 million ($4,091,315 million of total assets less $41,349 million of intangibles), its TCE ratio was 7.41%.

## Questions

### What is tangible common equity?

Tangible common equity is the common shareholders' equity left after removing goodwill and other intangible assets. It is the part of equity backed by assets that could be sold or used to absorb losses.

### What is the TCE formula?

TCE = total equity - preferred stock - goodwill - other intangible assets. The TCE ratio divides TCE by total assets less the same intangibles.

### How is TCE different from CET1?

Both remove goodwill and intangibles, but CET1 is a regulatory measure with its own deductions and is divided by risk-weighted assets. TCE is a book measure divided by tangible assets, with no risk weighting.

### Is tangible common equity the same as tangible book value?

They are the same dollar amount. Tangible book value is the name used when the figure is expressed per share; tangible common equity is the name used in capital analysis.

## Sources

- [FFIEC Call Report Schedule RC (Balance Sheet), items 10 and 23 to 27](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)
- [12 CFR Part 217, section 217.22 (deductions from common equity tier 1)](https://www.ecfr.gov/current/title-12/part-217)

## Related metrics

- [Tangible Book Value](https://www.bankregreports.com/glossary/tangible-book-value/): Tangible book value (TBV) is a bank's common shareholders' equity minus goodwill and other intangible assets. It is the book value of the common equity once the assets that cannot be sold separately are taken out. Divided by common shares outstanding, it gives tangible book value per share.
- [Tangible Common Equity / Tangible Assets](https://www.bankregreports.com/glossary/tce-ta/): TCE/TA measures common shareholders' equity excluding goodwill and intangibles, divided by total assets excluding the same. It is the purest measure of a bank's capital cushion to common shareholders and is not subject to risk-weighting choices.
- [Return on Tangible Common Equity](https://www.bankregreports.com/glossary/return-on-tangible-common-equity/): Return on tangible common equity (ROTCE) is a bank's annual net income available to common shareholders divided by its average tangible common equity. It shows the return on the equity that would remain if goodwill and other intangible assets were written off.
- [Common Equity Tier 1 Capital](https://www.bankregreports.com/glossary/common-equity-tier1-capital/): Common equity tier 1 (CET1) capital is the highest-quality, most loss-absorbing capital a bank holds: common stock, retained earnings, and qualifying AOCI, less regulatory deductions. It is the dollar base behind the CET1 ratio, the single most-watched capital measure.
- [Goodwill](https://www.bankregreports.com/glossary/goodwill/): Goodwill is the premium a bank paid over the fair value of net assets in an acquisition. It is an intangible asset that is fully deducted from common equity tier 1 capital and from tangible common equity, so it inflates book equity but counts for nothing in regulatory capital.
- [Intangible Assets](https://www.bankregreports.com/glossary/intangible-assets/): Intangible assets are non-physical assets other than goodwill: core deposit intangibles, customer relationships, and certain servicing rights. Most are deducted from regulatory capital, so like goodwill they widen the gap between book and tangible equity.

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