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March 22, 2003


Dear Stockholder:

The Governor of  Massachusetts  recently  signed into law a supplemental  budget
bill  intended  to  close  a  projected  $650  million  budget  deficit  for the
Commonwealth of Massachusetts'  current fiscal year ending on June 30, 2003. The
new law contains a variety of different  revenue  raising  provisions,  one that
includes changes to the way banks in Massachusetts, such as Enterprise Bank, are
taxed. Specifically,  the state's tax laws have been legislatively changed, on a
retroactive  basis back to 1999,  to impose  taxes on income  earned by a bank's
real estate investment trust ("REIT")  subsidiary.  Additionally,  since October
2002, the Massachusetts  Department of Revenue has been challenging the taxation
of REITs, which was a precursor to this legislative action.

     Outside legal counsel has advised us that this retroactive provision may be
unconstitutional.  Nonetheless,  Enterprise  Bank,  along with an  estimated  50
Massachusetts  banks affected,  have been advised by their  accounting  firms to
immediately reserve for the entire amount of any possible  retroactive state tax
due. As a result,  we will record a one-time charge of $1.9 million in our first
quarter ending on March 31, 2003 to account for the maximum potential income tax
liability related to such retroactive taxes for 1999-2002.  We intend to protect
all of our available rights regarding our payment of state taxes in prior years,
however we cannot predict at this time whether we, or other banks,  will succeed
in  recouping  some or all of the income tax expense that we are now required to
charge to earnings.

The $1.9  million  one-time  income tax  expense  referred  to above will have a
significant  impact on our 2003  earnings.  Nonetheless,  after the $1.9 million
charge  that we will record as a result of the new law, we expect net income for
the first quarter of 2003 to be in the range of $475-500 thousand and net income
for the full year 2003 to be in the range of $6.0 million to $6.4 million  (2002
net income was $6.3  million).  This one-time  charge will have no effect on our
fundamental  financial strength,  our strong competitive  position in our market
area, our dividend policy (the Board of Directors sets the dividend at the April
Board meeting) or our continuing success and financial growth.

I have enclosed an informative  article from the American Banker which expresses
the banking community's reaction to this matter.

On behalf of our entire Enterprise organization, I thank you for your continuing
loyalty  and  support.   If  you  have  any  questions  please  call  either  me
(978-656-5501), Richard Main (978-656-5511) or Jack Clancy (978-656-5502).


Very truly yours,


/s/George L. Duncan
- ------------------------
   George L. Duncan
   Chairman and Chief
     Executive Officer

Enclosure