EXHIBIT 99
[LOGO]
January 28, 2004
Dear Shareholder:
Enterprise Bancorp, Inc. reported net income of $6.9 million for the year ended
December 31, 2003, compared to $6.3 million for 2002, an increase of 10%. Net
income for the three months ended December 31, 2003 amounted to $1.9 million
compared to $1.7 million for the same period in 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.
The bank reported total assets of $751.5 million at December 31, 2003, an
increase of 4% from December 31, 2002. Total loans were $488.8 million, an 18%
increase versus one year ago. Deposits plus repurchase agreements amounted to
$661.8 million, up 4% over the prior year. In addition, the company's Investment
Management and Trust Group reported investment assets under management of $375.3
million, an increase of 18% versus one year ago. Total assets, investment assets
under management, and mortgage loans serviced for others amounted to $1.1
billion at December 31, 2003, an increase of 8% over December 31, 2002.
Enterprise Bank has achieved tremendous success in the past fifteen years. Our
strong financial position is a result of the loyalty, dedication and commitment
of our shareholders, employees and customers. On Monday, January 5 (January 3
was our actual anniversary date), we invited customers and friends to stop by
for refreshments in all our branch offices. The occasion provided us a special
opportunity to personally express our appreciation to many friends who have
helped build our "Enterprise." As shareholders, you are the true keys to our
success, and we are extremely grateful for your support.
At the December meeting of our Board of Directors, Enterprise Executive Vice
President/Treasurer Jack Clancy was named a Bank Director, in addition to his
position as President of Enterprise Bancorp, Inc. Jack has been a guiding force
in many strategic initiatives and has assumed additional responsibilities each
year, with a goal of continually increasing long-term shareholder value. A great
resource to our Board, Jack brings his business acumen, experience, leadership
skills and market knowledge to his new Board responsibilities.
The turmoil in the local banking environment (the acquisition of First Essex and
the Fleet/Bank of America merger to list but two examples) has provided us
additional market opportunities, and we are eager to accept the challenges that
2004 present. We are pleased to announce that Enterprise has received all
necessary approvals to locate a full-service financial services center at 63
Park Street in the Park Street Village Building in Andover. The Andovers
(Andover/North Andover) have been a high priority on our "wish list" for many
years. We believe this market is a prime site for us as we hear frequently about
the area's need for an independent community bank. With its vibrant professional
community, (Andover/North Andover boasts a large number of physicians,
attorneys, accountants, high-tech professionals), its proximity to highways,
good schools, ample commercial space and attractive housing market, Andover is a
community that fits well into Enterprise's target market. Many residents of
Greater Lowell have relocated to Andover in the past two decades, and we have
many personal and professional relationships there. We anticipate that trust and
investment services will be an important component of our new Andover location
in the years ahead. We will begin interior renovations at Park Street shortly,
and tentatively plan for a early spring opening.
Senior Vice President/Chief Commerical Real Estate Lender Steven Larochelle and
Vice President Marlene Hoyt, two valued members of our lending team, have many
years of experience in the Andover market. In addition, Donald Schroeder has
recently joined us as Senior Vice President/Commercial Lending, and he will be
working out of our Andover office. Bringing over 30 years of commercial lending
experience in the Merrimack Valley, Don will be a tremendous asset to our bank.
He has a strong customer base, built during his tenure at the former Arlington
Trust Company, and more recently, First Essex Bank in Andover. Don attended
UMass Lowell and Merrimack College, and is involved in a wide range of community
activities including the Board of Directors of the Andover Chamber of Commerce,
and the Board of Directors for the Andover Community Trust. He is also a member
of the Greater Lawrence Kiwanis Club, a Trustee for the Merrimack Valley YMCA,
and past Chairman of the Finance Committee for the Town of Andover.
During the past several years, our strategic goal has been to further expand the
Enterprise franchise in several key markets. The May 5, 2003 opening of our
Fitchburg office builds our franchise in the North Central region, and our move
to Andover brings the Enterprise name further down the Route 495 corridor, thus
beginning our expansion into Essex County. We continually seek additional
locations within these targeted regions, and we anticipate other branch openings
to further expand the footprint of Enterprise's market area.
In late March, we will be sending our 2003 annual report to all shareholders,
including a detailed analysis of the bank's progress, as well as proxy material
in preparation for Enterprise Bancorp, Inc.'s annual meeting which will be held
on Tuesday, May 4 at 4 p.m. at the American Textile Museum, 491 Dutton Street in
Lowell. Each year, we look forward to the opportunity to speak with shareholders
and discuss our plans for the bank's continued growth and profitability. We are
proud to be the region's largest independent community bank. 2003 has been a
successful year, and we look forward to pursuing many new business opportunities
in the year ahead.
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/Chief President/Chief Lending President/Enterprise
Executive Officer Officer/Chief Operating Bancorp Inc./EVP/
Officer Treasurer/Enterprise
Bank
Enterprise Bancorp, Inc. and Subsidiaries
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- ------------------------------
2003 2002 2003 2002
------------ ------------ ------------ -------------
INTEREST INCOME
Interest and fees on loans $ 7,287,466 $ 7,194,989 $ 28,273,966 $ 28,133,684
Interest on investment securities 1,727,457 2,707,486 7,713,915 10,588,148
Interest on federal funds sold 110,217 61,639 352,664 232,311
------------ ------------ ------------ ------------
Total interest income 9,125,140 9,964,114 36,340,545 38,954,143
------------ ------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits 1,551,214 2,239,384 6,719,716 9,399,284
Interest on repurchase agreements 2,462 3,400 11,021 282,778
Interest on Federal Home Loan Bank borrowings 11,139 9,751 80,903 40,550
Interest on subordinated debentures 294,305 294,305 1,177,219 1,177,219
------------ ------------ ------------ ------------
Total interest expense 1,859,120 2,546,840 7,988,859 10,899,831
------------ ------------ ------------ ------------
NET INTEREST INCOME 7,266,020 7,417,274 28,351,686 28,054,312
Provision for loan losses 241,875 277,500 1,075,000 1,325,000
------------ ------------ ------------ ------------
Net interest income after provision for loan
losses 7,024,145 7,139,774 27,276,686 26,729,312
------------ ------------ ------------ ------------
Operating expenses (5,380,262) (5,631,928) (20,657,920) (22,244,407)
Depreciation (620,559) (671,552) (2,551,449) (2,569,777)
Amortization of intangible assets (33,192) (33,192) (132,769) (132,769)
Non-interest income 1,638,415 1,584,598 6,580,482 5,577,719
Net gains on sales of investment securities 280,762 -- 2,149,892 1,341,475
------------ ------------ ------------ ------------
Income before provision for income taxes 2,909,309 2,387,700 12,664,922 8,701,553
Provision for income taxes 1,028,965 696,306 5,719,886 2,395,068
------------ ------------ ------------ ------------
NET INCOME $ 1,880,344 $ 1,691,394 $ 6,945,036 $ 6,306,485
============ ============ ============ ============
EARNINGS PER SHARE
Basic earnings per common share $ 0.52 $ 0.48 $ 1.95 $ 1.80
============ ============ ============ ============
Diluted earnings per common share $ 0.50 $ 0.46 $ 1.87 $ 1.75
============ ============ ============ ============
Dividend per common share (1) $ -- $ -- $ 0.38 $ 0.33
============ ============ ============ ============
Basic weighted average common shares outstanding (2) 3,593,015 3,523,752 3,565,734 3,494,818
============ ============ ============ ============
Diluted weighted average common shares outstanding 3,762,112 3,639,803 3,712,367 3,611,712
============ ============ ============ ============
(1) Annual dividends are generally declared in the second quarter of each
fiscal year.
(2) 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)
December 31, 2003 December 31, 2002
------------------ -----------------
ASSETS
Cash and due from banks $ 31,101,961 $ 45,778,048
Federal funds sold 14,000,000 --
Investment securities 196,308,098 239,096,327
Loans 488,839,152 414,123,485
Allowance for loan losses (9,986,425) (9,371,057)
--------------- ---------------
Net loans 478,852,727 404,752,428
--------------- ---------------
Bank premises and equipment 12,429,021 13,143,900
Intangible assets 6,530,123 6,662,892
Other assets 12,323,241 11,996,481
--------------- ---------------
TOTAL ASSETS $ 751,545,171 $ 721,430,076
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 660,824,382 $ 638,052,154
Repurchase agreements 953,924 762,737
Federal Home Loan Bank borrowings 20,470,000 16,470,000
Junior subordinated debentures (1) 10,825,000 10,825,000
Other liabilities 3,721,291 5,239,855
--------------- ---------------
Total liabilities 696,794,597 671,349,746
--------------- ---------------
Stockholders' equity 52,511,133 45,612,399
Net unrealized appreciation on investment
securities, net of taxes 2,239,441 4,467,931
--------------- ---------------
Total stockholders' equity 54,750,574 50,080,330
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 751,545,171 $ 721,430,076
=============== ===============
Investment assets under management $ 375,296,992 $ 317,394,210
=============== ===============
Mortgage loans serviced for others $ 15,077,295 $ 16,860,951
=============== ===============
Total assets, investment assets under management
and mortgage loans serviced for others $ 1,141,919,458 $ 1,055,685,237
=============== ===============
(1) Beginning on December 31, 2003, the Company has excluded its subsidiary,
Enterprise (MA) Capital Trust I ("Trust"), from the consolidated balance
sheet, as required by a recent accounting standard issued by the Financial
Accounting Standards Board (FASB). This new FASB standard required the
Company to exclude the $10.5 million of trust preferred securities issued
by the Trust, and instead report the $10.8 million liability owed to the
Trust (junior subordinated debentures). The Company has elected to restate
prior periods for comparability purposes.