Any number of big banks are mulling how to market their mutual funds through smaller institutions - but Premier Bancorp is making it happen.

Since last summer, 17 community banks have joined Premier's correspondent network to sell the bank's Paragon family of mutual funds.

The network already accounts for 15% of Premier's flourishing investment product sales, said Richard S. White Jr., executive vice president and chief trust officer at the $3.9 billion-asset banking company.

High Hopes

But within a few years, he said, the correspondent relationships could account for more than half of Premier's investment products business.

Premier, based in Baton Rouge, La., is still a relative newcomer to the mutual fund business, having launched its proprietary mutual funds in 1990.

But it has acclimated to the field quickly. Its investment product sales last year totaled $200 million, of which four-fifths came from selling the Paragon funds and a proprietary annuity.

Sales are now running at more than $1 million a day.

Help from Goldman, GE

The Paragon Funds, formed from a batch of converted trust accounts, now include seven portfolios with $1.2 billion in assets. Goldman, Sachs & Co. acts as distributor.

Premier sells investment products in its own branches and in its correspondent, network with the help of GNA Corp., a unit of GE Capital.

About 80% of the registered sales representatives were picked from Premier's own ranks and groomed as brokers.

The investment products program has been a crucial tool in stemming the outflow of deposits that has plagued banks since. interest rates tumbled to record lows.

Stemming Deposit Erosion

Less than 10% of Premier's deposits have gone elsewhere in the past few years, Mr. White said.

Indeed, he added, the mutual funds have actually attracted some customers to the bank.

About 50% of last year's sales came from investors who did not have a relationship with Premier.

"If we don't have the ability to satisfy these needs within our own confines, then we're going to see customers going somewhere else." he said.

Banc One's Option

Though convinced that Premier's investment program has a rich future, Mr. White acknowledges that there is one wild card: Banc One Corp. of Columbus, Ohio, has an option to purchase Premier and is widely expected to do so.

That could mean considerable restructuring. But Mr. White thinks Banc One will find much to admire in Premier's approach.

The program for delivering mutual fund services to community banks widens Premier's opportunities even further. Premier teamed up with GNA last year to form the program, dubbed the Investment Centre Network.

Under the program, Premier and GNA jointly recruit, train, and manage sales staff for the community banks. The staff sets up sales klosks in bank branches and provides product literature and other supporting materials.

Grim Warning

Premier distributes a videocassette to correspondent banks that express interest in the program.

The message: Banks could go the way of the railroads if they don't keep up with the times by offering mutual funds to their customers.

The community banks get less than 15% of the fees from products sold. But they get a program that helps them control disinter-mediation and limits their own business risk. Mr. White explained.

The small banks have been even more interested in the program than Premier had expected. Of 50 approached so far, only a couple said they were flat-out not interested, said John De-Graauw, senior vice president for retail investment services at Premier.

Early Customer

W. Page Ogden, president and CEO of Britton & Koontz First National Bank in Natchez, Miss., signed on with the Investment Centre Network last June.

The $90 million-asset bank serves a community of about 50,000 people.

"We had been looking at our market here in Natchez, and we had seen many customers asking about moving their money to mutual funds," Mr. Ogden said. He chose the Premier program because he thought its GNA sales representatives - most of them trained at Premier - were especially attuned to the needs of banks.

So far the Britton & Koontz Bank has sold about $250,000 a month, keeping 1% to 1.5% of gross sales, Mr. Ogden said.

The sales force has been especially good at helping the bank to cross-sell products, he added.

Jeffrey Lammers, GNA's regional vice president for the south-central region, praised Premier for giving high priority to mutual fund sales, both within its own branches and in those of its correspondent banks.

"The level of activity is a result of the vision of their management," Mr. Lammers said.

In training sessions, GNA routinely uses Premier as a case study of a top-notch bank sales effort.

Its success is particularly remarkable given the bank's location. "Louisiana is a fairly depressed economic environment," Mr. Lammers said.

Mr. White, 59, joined Premier Bancorp in 1988.

The Iowa native is a fixture on the bank mutual fund conference circuit. He offers tips on how to build profits and market share through mutual fund sales.

But Mr. White is quick to correct bankers who think the business is a no-brainer.

"They really think the world is going to beat a path to their doors because they have put up a sign," Mr. White said. "But you really have to sell these products."

Last year Premier averaged a profit of 162 basis points on sales of its proprietary mutual funds and annuity, Mr. White said.

Premier's typical mutual fund customers are married people in their mid-50s investing for retirement or to put children through college, he said. They invest an average of $15,000 to $17,000 at a time.

Relying on Word of Mouth

The bank does little advertising for these products, preferring word-of-mouth recommendations.

"We have found that people have been willing to discuss this and create referrals," Mr. White said.

Premier also sends representatives to local organizations like the Kiwanis Club to talk about investment strategies. Employees conducted about 30 such seminars last year.

It is hard to tell if such efforts pay off, but Mr. White thinks they do.

"You plant a lot of seeds, and you don't know when you're going to harvest them," he said. "We just get the word out there."

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