By: Sherrie Shorten
CONROE, TX – After a series of mistakes and software issues within Montgomery County’s payroll system, the payroll function was removed from the Treasurer’s Office, leaving County Treasurer Melanie Bush focusing on her core statutory duties and county investments.
The role of Investment officer is not a statutory requirement of the Treasurer’s Office, but one which can be given or assigned to a Treasurer. However, one recent set of investments with the Spirit of Texas Bank highlights the need for the County Investment Officer Melanie Bush to investigate institutions before investing taxpayer dollars in them.
On February 28, 2020, the Spirit of Texas Bank assumed 5 branches of Simmons Bank. After the merger, the Spirit of Texas Bank needed to increase deposits and reduce overhead to help offset $123 million from Simmons Bank’s loan portfolio.
The Spirit of Texas Bank did the following things:
- Montgomery County deposited $7 million into their bank and invested in a certificate of deposit on the same day the Simmons Bank branches were acquired (February 28, 2020)
- On May 14, 2020, Montgomery County purchased two more certificates of deposit in the amount of $15 million and $10 million after the Spirit of Texas Bank issued a statement about potential adverse effects on the company due to the pandemic
- During June 2020, Montgomery County agreed to roll the interest on the CDs into each CD so the Spirit of Texas Bank could increase their deposits by keeping the interest at their bank
- On July 20, 2020, the Spirit of Texas Bank sold their Clear Lake branch to Moody National Bank to reduce overhead and expenses
- On July 24, 2020, the Spirit of Texas Bank sold $37 million in subordinate notes to raise capital
The timing of the county’s investments in the Spirit of Texas Bank brings up the question of whether taxpayer money was used to improve the bank’s financial position while the bank’s shareholders reaped the profits.
Since County Treasurer Bush began placing investments at the Spirit of Texas Bank, the bank’s share price has risen over 65% from $19.07 on February 27, 2020 (the day before the Spirit of Texas Bank assumed 5 branches of Simmons Bank and Montgomery County began investing CDs with Spirit of Texas Bank) to as high as $31.47 per share in January 2022.
As of January 31, 2022 over 25% of Montgomery County’s total investment portfolio is held at the Spirit of Texas Bank even though Simmons Bank has now circled back to purchase 100% of the Spirit of Texas Bank.
Since Treasurer Bush is the county investment officer, she writes the investment policies that decide how Montgomery County invests its money. The current policy assumes the investment committee will perform due diligence during their review of the broker applications. However, the county investment policy puts responsibility of approving the broker/dealer list on the Commissioners Court. Thereby, the Treasurer is authorized to use anyone on the approved list and does so without further review.
By Melanie Bush’s own admission, she had not considered the need for any extra due diligence when it came to the county’s placement of investments at the Spirit of Texas Bank and according to the county investment policy written by herself, she is not required to look any further than the last approved broker/dealer list.
Given errors recently found in the county’s payroll system, a hard look should be taken at the investments to ensure the county’s investments receive the required attention to detail and Treasurer Bush can better focus on the statutory duties of her office.