Capital
Tangible Common Equity
Also known as TCE, Tangible 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.
How to calculate tangible common equity (TCE formula)
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.
- Take total bank equity capital from Schedule RC.
- Subtract perpetual preferred stock and related surplus.
- Subtract goodwill and other intangible assets, both reported on Schedule RC.
- For the TCE ratio, divide the result by total assets minus goodwill and other intangibles, and multiply by 100.
Worked example
Source: FFIEC Call Report Schedule RC, quarter ended June 30, 2026: total bank equity capital (RCFD3210), perpetual preferred stock (RCFD3838), goodwill (RCFD3163), other intangible assets (RCFDJF76) and total assets (RCFD2170).
Why does Tangible Common Equity matter?
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 do you interpret Tangible Common Equity?
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.
How to read tangible common equity
| Range | Label | Interpretation |
|---|---|---|
| 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. |
Frequently asked
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
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