EXHIBIT 99
[LOGO]
July 25, 2003
Dear Shareholder:
Enterprise Bancorp, Inc. reported net income of $2.7 million for the second
quarter of 2003 compared to $1.5 million for the same period in 2002.
Year-to-date net income amounted to $3.2 million compared to $3.0 million for
2002. As reported in the first quarter of this year, the bank recorded a charge
to earnings of $1.9 million to reserve for tax liabilities arising from
legislative changes in Massachusetts tax laws, enacted in March, which were
retroactive to 1999. Also, as previously reported, on June 23, 2003 Enterprise
Bank, along with approximately sixty-five other Massachusetts banks, entered
into a final settlement agreement with the Massachusetts Department of Revenue
regarding the disputed tax assessments. Under the terms of the settlement, the
one-time tax impact to the bank is approximately $1.1 million. Consequently, the
current quarter includes a credit to earnings of approximately $825 thousand to
adjust the reserve recorded in the first quarter. Excluding the $825 thousand
credit recorded in June, net income for the second quarter of 2003 is $1.9
million, an increase of 23% over 2002. Excluding the net one-time charge of $1.1
million, net income for the six months ended June 30, 2003 is $4.3 million, an
increase of 42% over 2002.
Total assets, investment assets under management, and mortgage loans serviced
for others amounted to $1.1 billion at June 30, 2003, an increase of 9% over the
prior year. Individually, the bank reported total assets of $751 million, loans
of $445 million, deposits plus repurchase agreements amounting to $680 million,
and investment assets under management totaling $353 million, at June 30, 2003,
increases of 11%, 12%, 10%, and 7%, respectively, versus one year ago.
Growth, as described above, requires periodic modifications to our senior
management structure. As reported in our December 30, 2002 quarterly, Executive
Vice President John P. Clancy assumed new and expanded responsibilities as
President of Enterprise Bancorp, Inc. Jack's previous responsibility as Chief
Financial Officer was transferred to James A. Marcotte in May 2003. The former
Chief Financial Officer of The DeWolfe Companies, Inc., the largest residential
real estate brokerage and financial services firm in New England, Jim brings
twenty-four years of banking and financial services expertise to Enterprise. A
certified public accountant, Jim is a native of Tewksbury and a graduate of the
University of Massachusetts at Amherst.
In spite of the lagging economy, loan growth remained strong. Our lenders
aggressively seek solid lending opportunities for the bank. Steady growth was
seen in both our commercial mortgage and construction mortgage portfolios.
Enterprise's SBA lending portfolio saw continued increases, and we recently
introduced a new "express loan" line of credit to our product offerings. In
addition, our Mortgage Center reported a high volume of residential mortgage
activity, as well as a brisk refinancing and home equity market due in part to
the favorable rate environment.
Our newly-constructed branch office opened at 420 John Fitch Highway in
Fitchburg on May 5, 2003. We are extremely pleased about the warm and
enthusiastic welcome we received from the Fitchburg community. An aggressive
customer-call effort and targeted newspaper and direct mail campaign, helped us
officially launch our new branch office. Customer reaction to our branch has
been extremely positive. Business has been steady and Branch Manager Cheryl
Gaudreau and her staff report that the Fitchburg office has exceeded business
projections for their first two months in operation. With its highly-visible
location on Fitchburg's main business corridor, we anticipate that Fitchburg
will be a very successful addition to our branch network. Our customers from the
North Central region are now able to do business at two convenient locations -
Fitchburg and Leominster.
Enterprise Bank directors and officers continue to play a lead role in the
communities we serve. During the second quarter, five members of the Enterprise
family were recognized for outstanding community involvement: Dr. Carole Cowan,
director, was the first receipient of the "Legacy of Commitment" award presented
by the United Way of Merimack Valley; Director John Clementi was recognized at
commencement ceremonies at Fitchburg State College's 100th anniversary
celebration where he was presented an honorary degree; Director Kathleen Bradley
was one of three individuals receiving honorary degrees at commencement
exercises at Middlesex Community College. This was the first time in the
school's history that Middlesex has presented honorary degrees; With over 500
business and community leaders in attendance, Director Nancy Donahue, and her
husband Richard, were presented with the prestigious "Tsongas Award" by the
Merrimack Repertory Theatre at a black-tie gala held at the Lowell Memorial
Auditorium on June 21. This award represented twenty-five years of dedication by
the Donahues to the arts and to the MRT; and Senior Vice President Mary Ellen
Fitzpatrick was also recognized for her community leadership and involvement
when she received the "Celebration of Today's Woman" award presented by Girls
Incorporated of Greater Lowell. Mary Ellen joins a group of ten women, including
Directors Donahue and Cowan, who have been honored with this annual award during
the past decade. The entire Enterprise Bank family takes pride in the
accomplishments of our directors and employees and congraulate each on their
special recognition.
We are grateful to the shareholders who joined us for Enterprise Bancorp's
annual meeting on May 6. It was a pleasure to have had the opportunity to speak
with you in person about the success of our bank, and the wisdom of your
investment in Enterprise Bancorp. Inc.
Sincerely,
/s/ George L. Duncan /s/ Richard W. Main /s/ John P. Clancy, Jr.
- -------------------- ------------------- -----------------------
George L. Duncan Richard W. Main John P. Clancy, Jr.
Chairman/ President/Chief Operating/ EVP/Enterprise Bank
Chief Executive Officer Chief Lending Officer and President of
of Enterprise Bank and of Enterprise Bank Enterprise Bancorp, Inc.
Enterprise Bancorp, Inc.
Enterprise Bancorp, Inc. and Subsidiaries
STATEMENTS OF INCOME
(unaudited) (unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -----------------------------
2003 2002 2003 2002
-------------- -------------- -------------- -------------
INTEREST INCOME
Interest and fees on loans $ 7,031,103 $ 6,979,197 $ 13,920,825 $ 13,860,161
Interest on investment securities 2,056,734 2,649,398 4,558,330 5,231,299
Interest on federal funds sold 63,595 29,711 87,615 66,406
------------ ------------ ------------ ------------
Total interest income 9,151,432 9,658,306 18,566,770 19,157,866
------------ ------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits 1,718,854 2,446,339 3,571,261 4,952,426
Interest on repurchase agreements 3,142 5,706 6,068 10,172
Interest on Federal Home Loan Bank borrowings 23,036 16,219 45,635 23,203
------------ ------------ ------------ ------------
Total interest expense 1,745,032 2,468,264 3,622,964 4,985,801
------------ ------------ ------------ ------------
NET INTEREST INCOME 7,406,400 7,190,042 14,943,806 14,172,065
Provision for loan losses 300,000 380,000 600,000 770,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 7,106,400 6,810,042 14,343,806 13,402,065
------------ ------------ ------------ ------------
Operating expenses (5,402,124) (5,793,794) (10,874,918) (11,521,127)
Depreciation (633,850) (649,893) (1,296,815) (1,227,538)
Amortization of intangible assets (33,192) (33,192) (66,384) (66,384)
Non-interest income 1,680,695 1,299,173 3,261,432 2,656,471
Net gains on sales of investment securities 239,141 448,979 1,554,895 865,006
------------ ------------ ------------ ------------
Income before provision for income taxes 2,957,070 2,081,315 6,922,016 4,108,493
Provision for income taxes 259,558 556,647 3,720,430 1,095,396
------------ ------------ ------------ ------------
NET INCOME $ 2,697,512 $ 1,524,668 $ 3,201,586 $ 3,013,097
============ ============ ============ ============
EARNINGS PER SHARE
Basic earnings per common share $ 0.76 $ 0.44 $ 0.90 $ 0.87
============ ============ ============ ============
Diluted earnings per common share $ 0.73 $ 0.42 $ 0.87 $ 0.84
============ ============ ============ ============
Dividend per common share * $ 0.38 $ 0.33 $ 0.38 $ 0.33
============ ============ ============ ============
Basic weighted average common shares outstanding ** 3,544,125 3,469,705 3,538,836 3,465,988
============ ============ ============ ============
Diluted weighted average common shares outstanding 3,678,677 3,590,515 3,669,796 3,584,469
============ ============ ============ ============
* Annual dividends are generally declared in the second quarter of each
fiscal year.
** Weighted average common shares outstanding have increased due to the
exercise of employee stock options and reinvestment of dividends from the
dividend reinvestment plan.
Enterprise Bancorp, Inc. and Subsidiaries
BALANCE SHEETS
(unaudited) (unaudited)
December 31,
June 30, 2003 2002 June 30, 2002
------------------ ----------------- ----------------
ASSETS
Cash and due from banks $ 41,070,108 $ 45,778,048 $ 33,845,025
Federal funds sold 66,065,000 -- 24,500,000
Investment securities 178,612,572 239,096,327 202,605,244
Loans 444,584,295 414,123,485 396,454,606
Allowance for loan losses (10,047,877) (9,371,057) (8,900,468)
--------------- --------------- ---------------
Net loans 434,536,418 404,752,428 387,554,138
--------------- --------------- ---------------
Bank premises and equipment 13,153,483 13,143,900 13,341,109
Intangible assets 6,596,508 6,662,892 6,729,277
Other assets 11,001,869 9,262,084 9,535,425
--------------- --------------- ---------------
TOTAL ASSETS $ 751,035,958 $ 718,695,679 $ 678,110,218
=============== =============== ===============
LIABILITIES, TRUST PREFERRED SECURITIES
AND STOCKHOLDERS' EQUITY
Deposits $ 679,098,274 $ 638,031,838 $ 613,224,242
Repurchase agreements 952,965 762,737 2,982,578
Federal Home Loan Bank borrowings 5,470,000 16,470,000 470,000
Other liabilities 3,376,280 2,850,774 4,703,757
--------------- --------------- ---------------
Total liabilities 688,897,519 658,115,349 621,380,577
--------------- --------------- ---------------
Trust preferred securities 10,500,000 10,500,000 10,500,000
Stockholders' equity 48,563,183 45,612,399 42,169,035
Net unrealized appreciation on
investment securities, net of taxes 3,075,256 4,467,931 4,060,606
--------------- --------------- ---------------
Total stockholders' equity 51,638,439 50,080,330 46,229,641
--------------- --------------- ---------------
TOTAL LIABILITIES, TRUST PREFERRED
SECURITIES AND STOCKHOLDERS' EQUITY $ 751,035,958 $ 718,695,679 $ 678,110,218
=============== =============== ===============
Investment assets under management $ 352,815,990 $ 314,095,210 $ 328,872,586
=============== =============== ===============
Mortgage loans serviced for others $ 16,556,486 $ 16,860,951 $ 20,063,574
=============== =============== ===============
Total assets, investment assets under management
and mortgage loans serviced for others $ 1,120,408,434 $ 1,049,651,840 $ 1,027,046,378
=============== =============== ===============