Capital

Tangible Common Equity

Also known as TCE

Tangible common equity (TCE) is total common equity less goodwill and other intangibles — the capital that would actually remain to absorb losses in a wind-down. It is the analyst's preferred 'hard' capital measure, especially for acquisitive banks.

Formula

Tangible Common Equity = Total Equity - Goodwill - Other Intangibles - Preferred Stock

Start from total equity capital on Schedule RC, subtract goodwill and other intangible assets (which have no liquidation value), and remove preferred stock to isolate the common stake. Dividing by tangible assets gives the TCE ratio.

Why it matters

TCE strips out the accounting items regulators and acquirers discount to zero, leaving the capital that genuinely backs depositors. A bank that has grown by acquisition can show healthy book equity while its TCE — the real cushion — is far thinner.

How to interpret

Compare TCE to total equity: a wide gap means reported equity leans on goodwill and intangibles. Then read the TCE ratio (TCE ÷ tangible assets) alongside CET1; unlike CET1 it is unweighted, so deep AOCI losses hit it directly.

Thresholds

Range	Label	Interpretation
TCE ≈ book equity	Strong	Little reliance on intangibles; hard capital intact.
Modest intangibles	Adequate	Tangible capital close to reported equity.
Sizable gap	Watch	Goodwill/intangibles meaningfully inflate book equity.
Thin TCE	Concern	Hard capital well below reported equity; limited true cushion.

Worked example

A bank reporting $250 million of total equity that includes $80 million of goodwill and intangibles has about $170 million of tangible common equity. Against $3 billion of tangible assets that is a 5.7% TCE ratio — a leaner picture than the headline equity implies.

Frequently asked

Why do analysts prefer tangible common equity?

Because goodwill and intangibles cannot absorb losses, TCE shows the capital that genuinely backs the bank. It is the standard measure in bank M&A and credit analysis, especially for acquisition-heavy institutions.

How is TCE different from CET1?

Both strip goodwill and intangibles, but CET1 is a risk-weighted regulatory measure with its own deduction rules, while TCE is a simpler book figure measured against tangible (unweighted) assets.

Direction: Higher is betterUnits: $Call report: Schedule RCBrowse banks

Sources

FFIEC Call Report Schedule RC (Balance Sheet)

See TCE across 4,335 US banks

BankRegReports ranks every FDIC-insured institution by TCE, refreshed quarterly within 48 hours of FFIEC release.

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