It started as a discussion between the chief financial officer and the chief executive about Chinese art and "the myth of permanence."

Out of this conversation between officers at People's Bank, Bridgeport, Conn., came a Zen-like annual report - a compendium of quoted wisdom and cryptically beautiful art illustrating a discussion of back-office technology and "the art of managing change."

Thus was born one of the more interesting annual reports of the 1994 crop, even as the year produced more than its fair share of slick, expensive yearend testimonials.

Each year, it seems, more midsize banks take risks in their annual reports to try to reach a wider audience and distinguish themselves from the other 12,000 financial institutions. And in an era when a good annual report can carry a price tag upward of $200,000, it's a constant fight to do it on the cheap.

Take Zions Bancorp. of Salt Lake City. In prior years it had been conservative in its annual report. But this year, said chief financial officer Gary Anderson, "we certainly took a different road."

Zions' report looks like a 1950s travelogue for the western states. Inside is a trip through the land of Elvis impersonators, fake dinosaurs, and a scene from the O.K. Corral in Tombstone, Ariz. The photos were used to demonstrate Zions' belief in the vibrancy of the states where it does business: Nevada, Utah, and Arizona.

The "look at our market" theme is becoming more prevalent than the "look at our bank" approach. For example, CCB Financial Corp., Durham, N.C., blares from the cover of its report: "Welcome to Central Carolina."

Mr. Anderson said Zions would likely depart from its usual mailing list this year and send the report to some nontraditional financial statement users.

"The cover and the theme are the creation and development of our chief executive officer, Harris Simmons," Mr. Anderson said, highlighting a maxim in the business: The annual report is unique in direct relation to the time devoted to it by top management.

Citizens Bancorp, Laurel, Md., has produced an annual report that looks like a personal finance magazine. Here, too, the ideas were generated at the top level under the direction of chief executive Jeffrey Springer.

"We always try to do something different," said Mr. Springer, whose bank last year produced an annual that echoed the "Just Do It" mantra of the Nike shoe ads. "This year we wanted to produce something user-friendly. So we produced articles about the company as a way not to get bogged down in annual report gobbledygook."

But not all annual report users are thrilled at the trend toward glossiness. Savvy investors look at cost-control measures, said John Bailey, a bank analyst and connoisseur of annual reports, and a slick, expensive annual report could put off some people.

"Annual reports have a large number of uses," he said. "You can use it to sell yourself not only to investors but (also) to suppliers, customers, prospective employees. Having a lot of pictures of smiling faces can work really well then.

"But when I see a plain-vanilla annual report, I'm interested. It's not always indicative of a turnaround company, but it's a good hint. It's indicative of a company with a cost-consciousness."

Mr. Bailey, who works at Friedman Billings Ramsey & Co. in Washington, sees more banks producing two distinct annual reports. One is a glossy marketing tool. The other is a meaty 10k, perhaps inserted into a folder in the annual.

Such was the approach of Amcore Financial Inc., a bank holding company in Rockford, Ill. In past years, it had produced annuals of 60 pages or more. This year, management halved that length.

"We're finding that shareholder communication is becoming more difficult," said Bill Hippensteel, senior vice president of communications at Amcore. "The company is becoming more complex, but the time the audience has to read an annual report is shrinking."

The most recent study on annual reports said 10 minutes was the average time spent reading them.

So Amcore punched up its first few pages, including its cover, with quotes from senior management over warm pictures of the top brass. The first quote, on the cover over a picture of CEO Carl Dargene, says: "Which do you want to hear first? The good news, the good news, or the good news?" It is indistinguishable from an advertisement.

"Then we put into just a summary section" management's discussion, Mr. Hippensteel said. "We also printed an expanded 10k. This way, we felt we were pleasing both analysts and our general shareholder."

People's Bank, however, takes the cake.

The brainchild of CEO and arts enthusiast David Carson and chief financial officer George Morriss, its annual report was created entirely in-house and printed on lighter, rougher stock to save money. The result was a cheaper - but more distinctive - annual report.

The first page has a rhapsodic message from Mr. Carson about art, change, and Michelangelo. In its discussion of services and technological advances, People's peppers the report with pithy quotes from the fiction writer Amy Tan, folk singer Bob Dylan, and others.

"We kept our fingers crossed on the whole thing," said Mr. Morriss. "It was a big risk. We were prepared for some criticism. Luckily, it's all been good."

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