Exhibit 99
Dear Shareholder:
Enterprise Bancorp, Inc. announced net income of $2.623 million for the quarter ended September 30, 2007 compared to $2.451 million during the quarter ended September 30, 2006, an increase of 7%. Diluted earnings per share were $0.33 for the third quarter compared to $0.31 for the same period in 2006, an increase of 6%. Net income for the nine months ended September 30, 2007 amounted to $7.163 million compared to $6.689 million for the same period in 2006, an increase of 7%. Diluted earnings per share were $0.91 for the nine months ended September 30, 2007 compared to $0.86 for the same period in 2006, an increase of 6%. The company also announced a quarterly dividend of $0.08 per share to be paid on December 3, 2007 to shareholders of record as of November 12, 2007. The quarterly dividend represents a 14% increase over the 2006 dividend rate.
Year-to-date net income growth resulted primarily from an increase in non-interest income and a decrease in the provision for loan losses, partially offset by an increase in non-interest expense and a decrease in net interest income. Net interest income for the nine months ended September 30, 2007 amounted to $30.4 million compared to $31.0 million for the same period in 2006, a decrease of 2%. Net interest margin, the spread earned between interest-earning assets and the company’s funding sources, primarily deposits, was 4.50% for the nine months ended September 30, 2007, compared to 4.79% for the same period in 2006. Net interest margin for the quarter ended September 30, 2007 was 4.40% compared to 4.51% and 4.76% for the quarters ended June 30, 2007 and September 30, 2006, respectively. The decrease in margin resulted from both the flat yield curve and a highly-competitive marketplace.
Non-interest income was $7.1 million for the nine months ended September 30, 2007, an increase of $2.0 million or 39% over the same period in 2006. The growth resulted primarily from an increase of $850 thousand in gains on security sales, which occurred mainly in the second and third quarters, and from increases of $376 thousand in investment advisory fees, $208 thousand in bank-owned life insurance income, and $334 thousand in deposit-service fees. Non-interest expense amounted to $26.1 million for the nine months ended September 30, 2007 compared to $24.6 million for the same period in 2006, an increase of 6%. The increases were predominantly in occupancy and compensation-related costs which support the company’s growth.
The provision for loan losses, which is impacted by asset quality and loan growth, amounted to $350 thousand for the nine months ended September 30, 2007 compared to $892 thousand for the same period in 2006, a decrease of $542 thousand. The reduced provision reflects favorable year-to-date net recoveries of $109 thousand of which $67 thousand occurred in the third quarter. The allowance for loan losses to total loans ratio was 1.65% at September 30, 2007 and June 30, 2007 as compared to 1.70% at December 31, 2006.
Total assets were $1.033 billion at September 30, 2007 as compared to $979.3 million at December 31, 2006, an increase of 6%. Total loans increased 7% since December 31, 2006, amounting to $812.1 million at September 30, 2007. Total deposits, excluding brokered deposits, were $808.3 million at September 30, 2007 and $802.6 million at December 31, 2006, an increase of 0.7%. Brokered deposits amounted to $90.0 million and $64.9 million on those respective dates. Investment assets under management increased to $546.0 million at September 30, 2007 compared to $502.1 million at December 31, 2006, an increase of 9%. Total assets under management amounted to $1.6 billion at September 30, 2007 as compared to $1.5 billion at December 31, 2006, an increase of 6%.
Business momentum remained strong throughout the third quarter. Construction began on our fifteenth branch at 255 Broadway, in downtown Methuen. Vice President Cheryl Parent, a highly–skilled professional with over 25 years of banking experience, was named branch manager, and she looks forward to welcoming customers to our new state-of-the-art banking office in the spring of 2008.
In addition, the bank further strengthened its long-term commitment to Lowell’s central business district with the recent acquisition of property located at 170 Merrimack Street/27 Palmer Street. The building, which houses the bank’s management offices, commercial mortgage lending and operations center among other uses, was renovated in 1984 and over the past 15 years, additional renovations have been made to accommodate the bank’s growth. We feel strongly that the purchase of 170 Merrimack/27 Palmer reflects the bank’s unrelenting commitment to the City of Lowell. Enterprise greatly values its role as the region’s only independent, commercial bank and this action further strengthens that position.
Creating strong, vibrant communities is a core principle at Enterprise. On September 6, Enterprise was recognized by the Boston Business Journal for both its charitable giving, and also for the commitment made by Enterprise employees. The award was presented at the second annual “Corporate Philanthropy Summit” held in Boston and attended by over 850 community and business leaders representing a wide range of local and national companies. Chairman George Duncan accepted special recognition as Enterprise was named the “# 1 Company in Massachusetts” with the highest average volunteer hours spent in civic endeavors.
To further position the bank to take advantage of business opportunities that lie ahead, J. Matthew Coggins will be joining the bank on October 29 as Vice President/Marketing Director. Most recently, Matt served as Assistant City Manager Division of Planning & Development for the City of Lowell. Matt brings extensive sales, business development and governmental relations skills to his new position. He will direct key marketing initiatives throughout the bank’s various markets, including the Merrimack Valley, North Central Massachusetts and Southern New Hampshire. In addition, Matt will spearhead marketing efforts as the bank continues its expansion into new markets, as well as new product lines and financial services.
In light of the recent publicity concerning the current credit crunch and sub-prime lending issues, we launched a marketing campaign to inform potential borrowers that money is readily available for business and mortgage lending at Enterprise. Community reaction has been very positive. We reminded the general public that Enterprise does not rely on the whims of “Wall Street” for mortgage and business loans. We gather our deposits locally, we lend locally, and we live locally. While consistent, sound and responsible lending may not make headlines, for us, it is business as usual.
To date, 2007 has provided many opportunities. Enterprise is strong and well positioned to achieve continued success.
Sincerely,
George L. Duncan | | John P. Clancy, Jr. | | Richard W. Main |
Chairman | | CEO | | President |
| | | | Chief Lending Officer |
SELECTED CONDENSED CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
| | For the three months ended September 30, | | For the nine months ended September 30, | |
CONDENSED CONSOLIDATED INCOME STATEMENTS | | 2007 | | 2006 | | 2007 | | 2006 | |
Net interest income | | $ | 10,279 | | $ | 10,487 | | $ | 30,373 | | $ | 30,987 | |
Provision for loan losses | | 215 | | 375 | | 350 | | 892 | |
Net interest income after provision for loan losses | | 10,064 | | 10,112 | | 30,023 | | 30,095 | |
Non-interest income | | 2,544 | | 1,868 | | 7,137 | | 5,139 | |
Non-interest expense | | 8,592 | | 8,092 | | 26,076 | | 24,566 | |
Income before income taxes | | 4,016 | | 3,888 | | 11,084 | | 10,668 | |
Income tax expense | | 1,393 | | 1,437 | | 3,921 | | 3,979 | |
Net Income | | $ | 2,623 | | $ | 2,451 | | $ | 7,163 | | $ | 6,689 | |
| | | | | | | | | |
Basic earnings per share | | $ | 0.33 | | $ | 0.32 | | $ | 0.92 | | $ | 0.88 | |
Diluted earnings per share | | $ | 0.33 | | $ | 0.31 | | $ | 0.91 | | $ | 0.86 | |
Basic weighted average common shares outstanding | | 7,846,563 | | 7,691,407 | | 7,797,682 | | 7,644,641 | |
Diluted weighted average common shares outstanding | | 7,921,918 | | 7,840,578 | | 7,899,919 | | 7,811,668 | |
CONDENSED CONSOLIDATED BALANCE SHEETS | | September 30, 2007 | | December 31, 2006 | | September 30, 2006 | |
Cash and cash equivalents | | $ | 33,042 | | $ | 50,887 | | $ | 49,264 | |
Investment securities at fair value | | 147,391 | | 131,540 | | 142,936 | |
Loans, net of allowance for loan losses | | 798,740 | | 748,173 | | 733,841 | |
Other assets | | 54,000 | | 48,659 | | 46,744 | |
Total assets | | $ | 1,033,173 | | $ | 979,259 | | $ | 972,785 | |
| | | | | | | |
Deposits | | $ | 898,336 | | $ | 867,522 | | $ | 867,917 | |
Borrowed funds | | 30,402 | | 15,105 | | 9,967 | |
Junior subordinated debentures | | 10,825 | | 10,825 | | 10,825 | |
Other liabilities | | 9,181 | | 8,764 | | 10,013 | |
Total stockholders’ equity | | 84,429 | | 77,043 | | 74,063 | |
Total liabilities and stockholders’ equity | | $ | 1,033,173 | | $ | 979,259 | | $ | 972,785 | |
| | At or for the nine months ended | | At or for the year ended | | At or for the nine
months ended | |
CONSOLIDATED FINANCIAL DATA AND RATIOS | | September 30, 2007 | | December 31, 2006 | | September 30, 2006 | |
Balance Sheet Items: | | | | | | | |
Total assets | | $ | 1,033,173 | | $ | 979,259 | | $ | 972,785 | |
Loans serviced for others | | 20,516 | | 21,659 | | 22,152 | |
Investment assets under management | | 546,030 | | 502,059 | | 462,811 | |
Total assets under management | | $ | 1,599,719 | | $ | 1,502,977 | | $ | 1,457,748 | |
| | | | | | | |
Book value per share | | $ | 10.74 | | $ | 9.98 | | $ | 9.62 | |
Dividends per common share | | $ | 0.24 | | $ | 0.28 | | $ | 0.21 | |
Allowance for loan losses to total loans | | 1.65 | % | 1.70 | % | 1.70 | % |
Non-performing loans to total loans | | 0.43 | % | 0.24 | % | 0.26 | % |
| | | | | | | |
Income Statement Items (annualized): | | | | | | | |
Return on average assets | | 0.97 | % | 0.98 | % | 0.95 | % |
Return on average stockholders’ equity | | 11.92 | % | 12.89 | % | 12.71 | % |
Net interest margin (tax equivalent) | | 4.50 | % | 4.78 | % | 4.79 | % |
