From: V. B. Leister
To the Chairman's Office of the SEC:
First Busey Corporation is a $2.3 billion community bank organization located in central Illinois/Indiana and southwest Florida. Our market capitalization approximates $440 million, which places us in the small cap category, and subject to the requirements of Sarbanes-Oxley section 404 for the past two years. We are a state chartered bank in Illinois and an OCC chartered bank in southwest Florida so we are regulated by the state of Illinois, the FDIC and the OCC, as well as the Federal Reserve for our holding company. As a public company traded on the NASDAQ, our company is also governed by the rules of the exchange which require significant corporate governance requirements.
First Busey Corporation is a well-managed, high performing, highly regulated bank holding company. Our independent auditors have never reported and our internal auditors have never found a material weakness in our internal controls and financial reporting practices. We have never received a memorandum of understanding in regards to our internal controls or financial reporting practices from any of our regulators. We perform annual risk assessments and routinely test transactions, operations and financial reporting practices. All findings are reported to our audit committee and require attention by our management team.
The management of First Busey Corporation maintains a major focus on adequate internal controls over its operations and financial reporting practices regardless of the section 404 rules requiring external auditor attestation. That focus results from management's culture and is continually addressed by our three different regulators and auditors, both internal and external. With the advent of section 404, we performed the required analysis of key processes and documentation of critical controls over those key processes. Our tests found that compliance was generally excellent. We found our external auditors chose to set very high standards for compliance with 404 which created additional effort on our part and significant fees to them. Our external auditors explained that the attestation process for larger company PCAOB rules were being applied. A great deal of time and effort was required to meet these standards.
The regulatory burden related to SOX 404 requirements cost First Corporation additional audit fees amounting to a 45% increase in 2004 and a 75% increase in 2005. In 2005 alone, the direct cost of SOX 404 compliance amounted to $250,000. That doesn't even include the "soft" costs of the allocation of our employee's time and efforts. We estimate that cost to amount to, at least, 2,000 hours. Basically, the cost associated with 404 compliance approached 2% of our net income. Granted, our internal audit teams and our external auditors found areas where we could improve our operations and controls. But the costs associated with those findings are far out of proportion to the meager benefits derived.
As a small public company, First Busey Corporation recognizes that certain costs of compliance are not justifiable from a shareholder value perspective. Certain laws, rules and regulations are necessary for protection of the public and ,therefore, outweigh a return on equity acid test. We believe our banking regulators and internal and external auditors fill the role and responsibility of enforcement of those compliance matters. However, if smaller companies are not provided some relief from the current SOX 404 implementation rules, the SEC will be providing a disincentive for smaller companies to operate within the public equity markets. We believe that less smaller public companies leads to fewer jobs, weaker economic growth and increased inflation. None of these is a positive for our nation's economy. When our nation's lawmakers passed this legislation, they did not understand the burden in dollars and resources required to attempt compliance.
Please consider adopting the recommendations of the SEC's Advisory Committee on Smaller Public Companies. First Busey Corporation believes their recommendations are reasonable for companies and do not seek change in the Sarbanes-Oxley legislation, only in the methods of implementation.
V. B. Leister, Director