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Stearns Bank's Tangible Common Equity Guide

Posted on: Mar 22, 2023


St. Cloud, Minn. (March 22, 2023) – What all bank customers – especially high-deposit and loan customers – are now asking is “How do I determine if my bank is financially strong?”

Tangible Common Equity is a clear measure of bank strength.

One single financial metric is the most comprehensive and reliable measure of a bank’s strength:  Tangible Common Equity (“TCE”). This ratio measures a bank’s overall financial strength and management by capturing key components of strength:

  • Strength of Capital – How much the bank has stored up as a “cushion” against unexpected losses.  More is better. Strong capital creates an incentive to manage a bank in a prudent manner because the bank owners’ equity is at risk in the event of a failure.
  • Unrealized Loss Exposure – The TCE calculation considers the level of exposure a bank has to its unrealized losses, including those from poor investment decisions.
  • Prudent Shareholder Dividends/Distributions: TCE will remain strong when a bank prudently manages distributions/dividends to shareholders, responsibly retaining earnings to boost its capital in tenuous economic times.
  • Strength of Earnings – TCE is built up by a bank’s net income. Consistently strong earnings and sound expense management by a bank are crucial.  Poor investment decisions (like heavy investments in long-term bonds that create “unrealized losses”) could impact a bank’s earnings, particularly when the bank is low on deposits and other sources of liquidity and those investments need to be liquidated to generate cash – unrealized losses then become “realized” as a loss expense.

A strong and stable bank will have a TCE of greater than 12%. 

A bank’s TCE ratio is commonly reported, and all banks of any size have an equal opportunity to maintain a strong TCE > 12%. However, many banks do not, including many of the “big” banks. The recently failed banks show the risk of failing to maintain a strong TCE: Silicon Valley Bank reported a 7.3% TCE on December 31, 2022; Signature Bank reported a 6.6% TCE; and First Republic Bank reported a TCE of 6.4%.

Where do banks rank in TCE?

Of the more than 4,800 banks in the nation, there are 676 banks (roughly 15%) that meet the >12% TCE standard of strength.  99% of those 676 strong banks are “smaller” banks with less than $10 billion in assets.  


Banks With Greater TCE > 12%

Based on Year-End Reports, December 31, 2022*

Bank Asset Size Number of Banks in U.S. Percentage of Banks in U.S.
< $500 million 520 out of 2,823 18%
 $500 million to $10 billion 150 out of 1,603 9%
> $10 billion 6 out of 189 3%

Where does Stearns Bank N.A. stand?

Stearns Bank’s TCE is 24% – a fortress of strength as a $2.2 billion asset-size bank.


FDIC insurance above $250,000 is available at all banks, no matter their size.

High-balance depositors know that 100% of their deposits in excess of the “standard” FDIC insurance amount of $250,000 can be fully FDIC insured by banks of any size. Stearns Bank obtains excess FDIC insurance for our high-balance depositors as a free service, as do many other banks across the country.


Learn more about our Fortress of Strength.

Learn more about high-balance deposits secured by FDIC.


*Source: Stearns Bank N.A. analysis of publicly available Bank Call Reports.


About Stearns Bank N.A.

Minnesota-based Stearns Bank National Association is a $2.2 billion, independently-owned financial institution with locations in Minnesota, Florida and Arizona, and over 35,000 small business customers nationwide, in every state across the U.S. Recognized as having a bullet-proof balance sheet with 25% capital and earning top rankings as one of the nation’s highest-performing banks by American Banker, and most recently ranked ninth in the U.S. among banks having more than $1 billion in assets by Independent Banker’s May 2022 Best of the Best ranking of banks with the highest 3-year average Return on Assets, Stearns Bank specializes in nationwide commercial construction lending, USDA and SBA lending, and small business and equipment financing. Driven by a passion to help others achieve their greatest ambitions, Stearns Bank's mission is to Get the Job Done! For more information, visit