Cash earnings per share are finding their way onto more quarterly earnings reports this season.

Two years after Wells Fargo & Co. pioneered the practice of reporting earnings before subtracting for goodwill and other intangibles, bankers say investors are warming to the added disclosure.

"Maybe a few small shareholders have questions about what we do, but among institutional shareholders it's pretty well accepted." said Richard J. Heller, chief financial officer at Albank Financial Corp., Albany, N.Y.

Mr. Heller's company, which has $3.6 billion in assets, began including "cash earnings" along with earnings calculated under generally accepted accounting principles in its quarterly income statements in the fourth quarter of last year.

He said that's because its balance sheet has taken on a lot of goodwill through many acquisitions of smaller banks. It will take on another big chunk of goodwill in the fourth quarter upon completing its biggest deal to date, the acquisition of some KeyCorp branches.

All these acquisitions have been accounted for as "purchases," Mr. Heller said. Banks prefer to account for acquisitions this way nowadays because they can continue to buy back stock from shareholders while the acquisitions are pending.

But purchase accounting also means the bank must put whatever it paid over book value-called goodwill-onto its balance sheet and amortize it over time.

So long as this goodwill remains on the bank's books, accountants subtract it from earnings. At a time when banks are paying ever-higher multiples of book value for acquisitions, goodwill can take a big bite out of earnings.

For example, Wells Fargo, which absorbed an enormous amount of goodwill acquiring First Interstate Bancorp, reported second quarter "cash earnings" of $3.79, but conventional earnings of only $2.49. Advest Inc. estimates Banc One Corp.'s 1997 "cash earnings" will be $3.60 per share, while its reported earnings will be only $2.90.

This gap in earnings is inconvenient for bankers who want to be able to report impressive earnings and also make acquisitions.

Bankers argue that since goodwill amortization doesn't actually cost the bank money, it shouldn't be held against earnings.

This view has won a good deal of support on Wall Street, but it is not universally endorsed.

"In our experience, cash earnings come into fashion only in periods when managements are trying to justify overpaying for acquisitions," wrote Ryan, Beck & Co. bank analyst Lawrence W. Cohn in a recent report.

A number of banks that have made pricey acquisitions recently have started to report "cash earnings." They include NationsBank Corp. and Mellon Bank Corp. Some thrifts that recently converted from mutual ownership have also started reporting "cash earnings" because stock plans for employees must be accounted for as intangibles.

David Berry, director of research at Keefe, Bruyette & Woods Inc., said the concept of "cash earnings" is now accepted enough that, since the summer, his investment bank has been estimating "cash earnings" and conventional earnings for all the banks it follows.

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