Premier Bancorp is adding back-end loads to its proprietary mutual fund family, becoming the latest bank to offer investors another payment option.

Premier will add the deferred payment option to all seven of its Paragon mutual funds this summer, said Richard S. White Jr., senior executive vice president at the Baton Rouge, La., banking company.

Back-end loads enable investors to defer payment of sales commissions on mutual funds until they redeem their shares. Th charges are levied on a sliding scale, based on how long investors hold on to the funds.

5% in First Year

In Premier's case, the fee will start at 5% of fund assets in the first year and decrease to zero in the fifth year.

Premier will offer the new fee structure as an alternative to front-end loads of 4.5% that the bank has charged since rolling out the Paragon funds.

The funds, which Premier launched four years ago, had $1.3 billion in assets under management as of March 31, according to Lipper Analystical Services, Summit, N.J.

By giving customers more payment options, Premier hopes to boost proprietary fund sales, Mr. White said.

In a branch sales program operated by GNA Corp., Premier makes available to customers both the Paragon Funds and some nonproprietary funds.

Competitive Move

Mr. White said sales have been split pretty evenly between the Paragon Funds and the outside funds. And some customers have been choosin outside funds simply because they carry back-end loads.

Now that the Paragon Funds will be similarly structured "we should be more competitive," Mr. White said. Premier expects securities reguators to give their nod to the new pricing option by July, he said.

The bank is also working out how it will pay brokers to sell the back-end funds. Front-end loads aren't a problem, since brokers are paid with the up-front fees these products generate.

Covering Commissions

But back-end funds don't have an immediate charge, so banks must line up money to cover commissions.

Mr. White said Primier is arranging financing through a major bank. He declined to identify the lender until all contracts are signed, but he did say the source is no Goldman Sachs, which distributes the Paragon Funds.

Primier is joining a growing list of banks that offer back-end loads on proppietary funds. Barnett Banks Inc., Banc One Corp., Chase Manhattan Corp., and First Union Corp., have all gone this route.

The step is generally a good one, said Ann Figureredo, senior consultant at the Spectrem Group, a mutual fund consulting firm in San Francisco.

But there is also a chance the move can backfire, expecially as interest rates rise, she said. "It's a pricing strategy that locks cusomers out of moving back into deposit products."

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