Capital
Tangible Common Equity / Tangible Assets
Also known as 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.
Formula
Goodwill and other intangible assets (acquired customer relationships, trade names, etc.) are excluded because they cannot be sold to absorb losses. Preferred stock is also excluded since it has a senior claim to common shareholders in resolution.
Why it matters
TCE/TA is not a regulatory metric but is heavily used by equity analysts as a 'real' capital ratio that strips out accounting constructs. It is unaffected by risk-weighting changes and reveals the true book equity cushion against a simple-asset base.
How to interpret
Most US community banks report TCE/TA between 7% and 11%. Below 6% indicates either heavy goodwill from past acquisitions or genuinely thin capital. Compare to leverage ratio: TCE/TA is typically 50–200bp below the leverage ratio at acquisitive banks because of goodwill, and within 50bp at organic-growth banks.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 9% | Strong | Comfortable equity cushion for common holders. |
| 7–9% | Adequate | Normal community bank range. |
| 5–7% | Watch | Thin equity buffer; common dividends may face pressure. |
| < 5% | Concern | Highly levered on a tangible basis. |
Worked example
Frequently asked
Why is TCE/TA preferred by equity analysts?
It strips out regulatory constructs (risk weighting, AT1 instruments, regulatory deductions) to show the true book equity backing each dollar of asset. It also penalizes acquisition-heavy strategies that build goodwill, which can mask thin underlying equity.
Does TCE/TA include AOCI?
Yes — TCE includes accumulated other comprehensive income, so unrealized losses on AFS securities flow through. This is why TCE/TA at AOCI-exposed banks fell sharply in 2022-2023.
Sources
- FFIEC Call Report Schedule RC (Balance Sheet)
- FFIEC Call Report Schedule RC-M (Memoranda — Intangibles)
See TCE/TA across 4,394 US banks
BankRegReports ranks every FDIC-insured institution by TCE/TA, refreshed quarterly within 48 hours of FFIEC release.