EXHIBIT 99
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[LOGO]
October 28, 2003
Dear Shareholder:
Enterprise Bancorp, Inc. reported net income of $1.9 million for the three
months ended September 30, 2003 compared to $1.6 million for the same period in
2002. Year-to-date net income amounted to $5.1 million compared to $4.6 million
for 2002.
As reported previously, on June 23, 2003 Enterprise Bank, along with
approximately sixty-five other Massachusetts banks, and the Massachusetts
Department of Revenue reached a final settlement regarding disputed retroactive
tax assessments concerning the bank's REIT subsidiary, for tax years 1999 -
2002. Under the terms of the settlement, the one-time tax impact to the bank was
approximately $1.1 million. Excluding the $1.1 million charge, net income for
the nine months ended September 30, 2003 was $6.2 million, an increase of 33%
over 2002.
The bank reported total assets of $758 million at September 30, 2003, an
increase of 7% from September 30, 2002. Total loans were $465 million, a 15%
increase versus one year ago. Deposits plus repurchase agreements amounted to
$679 million, up 5% over the prior year. In addition, the company's Investment
Management and Trust Group reported investment assets under management of $359
million, an increase of 11% versus one year ago. Total assets, investment assets
under management, and mortgage loans serviced for others amounted to $1.1
billion at September 30, 2003, an increase of 8% over September 30, 2002.
We recorded steady growth in many sectors of our loan portfolio. In particular,
impressive increases were evident in both our commercial real estate and
construction loan portfolios, with increases of 20% and 49% respectively, during
the past nine months. We feel strongly that the depth and experience of our
commercial lending team is unequaled in our region. Our lenders have over 400
years of combined lending experience, coupled with the skill and knowledge to
work with growing businesses in a challenging economic climate. SBA lending
continued to be an important component of our loan portfolio. The Boston
Business Journal (October 3, 2003) recently reported that Enterprise Bank now
ranks as the 8th largest SBA lender in Massachusetts, (statistics provided by
the Small Business Administration), up from #16 in similar rankings published in
the BBJ in May 2002.
Our 2003 business development campaigns are primarily team efforts utilizing our
lenders, branch personnel and senior management. Business development officers
call on prospective customers, as well as on existing customers of the bank,
which gives us an opportunity to showcase the wide range of products and
services Enterprise has to offer. On many occasions, cash-management specialists
and trust/investment personnel join in calling efforts to facilitate the
transfer of existing relationships to our bank. During the past several months,
seminars have been conducted that targeted various market segments, including
investment planning, start-up business strategies, and women's financial issues.
Such forums present additional opportunities for the bank to attract new
business relationships. We encourage all shareholders to contact us directly, or
any Enterprise Bank officer, should you be in a position to refer potential
business to the bank. We greatly appreciate all shareholder referrals.
During 2003, our Investment Management and Trust Group has made significant
strides in implementing a new and unique approach to delivering investment
management products and services to Enterprise clients. Our highly-personalized
"manager of managers" program incorporates a comprehensive group of competitive
mutual funds, enhanced investment analytics, access to world-class investment
firms, state-of-the-art technology and customized, easy-to-understand client
reporting. Reaction from existing customers is extremely positive. We anticipate
that our "manager of managers" concept will be a tremendous advantage in
attracting prospective clients in the years ahead.
We are pleased to announce the addition of Vice President/Relationship Manager
Linda MacLean to our investment team. Linda brings 22 years of experience in
investment management/brokerage and commercial lending to her new position. A
graduate of Wellesley College, Linda has completed graduate business courses at
Harvard University, and she is currently a candidate for the Certified Financial
Planner (CFP) Certification. Our investment management team has three CFPs
readily available to service our clients' needs. We feel this is an impressive
number for a community bank in Enterprise's peer group.
Although we are continuing to closely monitor economic news, we are cautiously
optimistic about encouraging trends both nationwide and in Massachusetts.
Headlines announcing job creation during third quarter and growth in the gross
domestic product are positive. On a statewide level, the recent statistics
published by the Associated Industries of Massachusetts indicate that
Massachusetts' companies are seeing a more stable business climate, and even a
slight upturn in sales. These indicators are truly welcome signs that we may
have turned the corner after more than two years of negative headlines. However,
local unemployment figures and manufacturing trends still give us some cause for
concern.
Enterprise Bank is soon to celebrate its 15th year anniversary. Throughout the
years, we have repeatedly expressed our deep appreciation to you, our
shareholders, for your loyalty. The importance of your support of Enterprise
Bank cannot be overstated. It has made all the difference, and we are extremely
grateful.
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/Treasurer of
Chief Executive Officer Chief Lending Officer Enterprise Bank and
of Enterprise Bank and of Enterprise Bank President of Enterprise
Enterprise Bancorp, Inc. Bancorp, Inc.
Enterprise Bancorp, Inc. and Subsidiaries
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2003 2002 2003 2002
-------------- -------------- ------------ --------------
INTEREST INCOME
Interest and fees on loans $ 7,065,675 $ 7,078,535 $ 20,986,500 $ 20,938,697
Interest on investment securities 1,428,128 2,649,364 5,986,458 7,880,663
Interest on federal funds sold 154,832 104,265 242,447 170,671
------------ ------------ ------------ ------------
Total interest income 8,648,635 9,832,164 27,215,405 28,990,031
------------ ------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits 1,597,241 2,463,635 5,168,502 7,159,899
Interest on repurchase agreements 2,491 13,045 8,559 279,379
Interest on Federal Home Loan Bank borrowings 24,129 7,596 69,764 30,799
Interest on Trust Preferred Securities (1) 285,469 -- 285,469 --
------------ ------------ ------------ ------------
Total interest expense 1,909,330 2,484,276 5,532,294 7,470,077
------------ ------------ ------------ ------------
NET INTEREST INCOME 6,739,305 7,347,888 21,683,111 21,519,954
Provision for loan losses 233,125 277,500 833,125 1,047,500
------------ ------------ ------------ ------------
Net interest income after provision for loan
losses 6,506,180 7,070,388 20,849,986 20,472,454
------------ ------------ ------------ ------------
------------
Operating expenses (1) (4,977,152) (5,950,614) (15,852,070) (17,471,746)
Depreciation (634,075) (670,686) (1,930,890) (1,898,224)
Amortization of intangible assets (33,193) (33,193) (99,577) (99,577)
Non-interest income 1,657,602 1,312,998 4,919,034 3,969,472
Net gains on sales of investment securities 314,235 476,469 1,869,130 1,341,475
------------ ------------ ------------ ------------
Income before provision for income taxes 2,833,597 2,205,362 9,755,613 6,313,854
Provision for income taxes 970,491 604,366 4,690,921 1,698,762
------------ ------------ ------------ ------------
NET INCOME $ 1,863,106 $ 1,600,996 $ 5,064,692 $ 4,615,092
============ ============ ============ ============
EARNINGS PER SHARE
Basic earnings per common share $ 0.52 $ 0.45 $ 1.42 $ 1.32
============ ============ ============ ============
Diluted earnings per common share $ 0.50 $ 0.44 $ 1.37 $ 1.28
============ ============ ============ ============
Dividend per common share (2) $ 0.38 $ 0.33 $ 0.38 $ 0.33
============ ============ ============ ============
Basic weighted average common shares outstanding (3) 3,591,374 3,522,603 3,556,541 3,485,067
============ ============ ============ ============
Diluted weighted average common shares outstanding 3,746,889 3,637,165 3,695,686 3,602,242
============ ============ ============ ============
(1) On July 1, 2003, the company began classifying it's trust preferred
securities expense as interest expense, as required by a new accounting
standard issued by the Financial Accounting Standards Board (FASB), the
designated organization in the private sector for establishing standards of
financial accounting and reporting. Prior to the new FASB standard, trust
preferred securities expense was recorded as a component of operating
expense. Interest on trust preferred securities recorded in operating
expense was $570,937 for nine months ended September 30, 2003 and $285,469
and $856,406, for the three and nine months periods ended September 30,
2002, respectively.
(2) Annual dividends are generally declared in the second quarter of each
fiscal year.
(3) 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)
September 30, December 31, September 30,
2003 2002 2002
----------------- ----------------- ------------------
ASSETS
Cash and due from banks $ 29,490,164 $ 45,778,048 $ 34,565,815
Federal funds sold 67,500,000 -- 29,159,620
Investment securities 170,188,654 239,096,327 220,890,376
Loans 465,409,286 414,123,485 406,086,734
Allowance for loan losses (10,285,206) (9,371,057) (9,276,461)
--------------- --------------- ---------------
Net loans 455,124,080 404,752,428 396,810,273
--------------- --------------- ---------------
Bank premises and equipment 12,826,476 13,143,900 12,981,337
Intangible assets 6,563,315 6,662,892 6,696,085
Other assets 16,406,885 9,262,084 8,943,568
--------------- --------------- ---------------
TOTAL ASSETS $ 758,099,574 $ 718,695,679 $ 710,047,074
=============== =============== ===============
LIABILITIES, TRUST PREFERRED SECURITIES
AND STOCKHOLDERS' EQUITY
Deposits $ 678,363,934 $ 638,031,838 $ 643,966,925
Repurchase agreements 935,785 762,737 797,447
Federal Home Loan Bank borrowings 5,470,000 16,470,000 470,000
Trust preferred securities (1) 10,500,000 -- --
Other liabilities 10,400,706 2,850,774 5,676,314
--------------- --------------- ---------------
Total liabilities 705,670,425 658,115,349 650,910,686
--------------- --------------- ---------------
Trust preferred securities (1) -- 10,500,000 10,500,000
Stockholders' equity 50,447,161 45,612,399 43,782,710
Net unrealized appreciation on
investment securities, net of taxes 1,981,988 4,467,931 4,853,678
--------------- --------------- ---------------
Total stockholders' equity 52,429,149 50,080,330 48,636,388
--------------- --------------- ---------------
TOTAL LIABILITIES, TRUST PREFERRED
SECURITIES AND STOCKHOLDERS' EQUITY $ 758,099,574 $ 718,695,679 $ 710,047,074
=============== =============== ===============
Investment assets under management $ 359,317,231 $ 317,394,210 $ 323,412,576
=============== =============== ===============
Mortgage loans serviced for others $ 15,886,238 $ 16,860,951 $ 18,780,141
=============== =============== ===============
Total assets, investment assets under management
and mortgage loans serviced for others $ 1,133,303,043 $ 1,052,950,840 $ 1,052,239,791
=============== =============== ===============
(1) As disclosed in the footnotes to the statements of income, on July 1, 2003
the company adopted a new FASB standard, which required that trust
preferred securities be classified as interest bearing liabilities. Prior
to the new FASB standard, trust preferred securities were recorded on the
balance sheet between liabilities and equity.