EXHIBIT 99
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Dear Shareholder:
Enterprise Bancorp, Inc. reported year-to-date net income of $3.5 million for
the six months ended June 30, 2004 compared to $3.2 million for the 2003 period.
The increase was due primarily to lower tax expense in 2004(1) which was
partially offset by declines in net gains realized on sales of investment
securities and residential mortgage loans, and an increase in the first quarter
provision for loan losses compared to 2003. Net income for the three months
ended June 30, 2004 amounted to $1.7 million, compared to $2.7 million for the
same period in 2003. The primary factors contributing to the decrease in net
income, as compared to the second quarter of 2003, was the reversal in 2003 of
$0.8 million of tax provisions(1) reducing tax expense for that period, as well
as a decline in net gains realized on sales of investment securities during the
2004 quarter.
This quarter marked yet another milestone for Enterprise Bancorp, Inc. when
total assets surpassed the $800 million mark! At June 30, 2004 total assets
amounted to $809.8 million, an increase of 8% from June 30, 2003. Total loans
were $531.2 million at June 30, 2004, an increase of 19% over the prior year.
Deposits plus repurchase agreements grew to $738.3 million at June 30, 2004, an
increase of 9% over June 30, 2003. In addition, the Investment Management and
Trust Group reported investment assets under management of $394.6 million, a 12%
increase versus one year ago. Total assets, investment assets under management,
and mortgage loans serviced for others amounted to $1.2 billion at June 30,
2004, an increase of 9% from June 30, 2003.
As first reported to you at March 31, our new branch office at 63 Park Street,
Andover, has been very well received by the community. Our Andover team is
aggressively calling on potential customers throughout Andover, North Andover,
Lawrence, Methuen and Salem, New Hampshire. We continually hear about the
tremendous need in the market, due to mergers and acquisitions, for a strong
commercial bank with deep roots in the community. Our seasoned team of
well-known banking professionals, equipped with highly-competitive products and
personalized service, is creating strong business relationships for our bank. On
June 10, the bank hosted a "Thank You Andover" reception at Old Town Hall in
Andover, which attracted a large number of business owners and professionals.
Enterprise's potential in Andover is tremendous, and we look forward to moving
to our permanent location at 8 High Street, once extensive renovations to the
existing facility have been completed in the Spring of 2005.
Construction began recently on the new commercial building at 1120 Main Street
that will become the home of our second branch office in Tewksbury. As tenants
in the building, we expect to start our leasehold improvements within the next
few months. Tewksbury Center has attracted many thriving businesses, and we are
looking forward to opening our new office in Tewksbury's commercial center. We
anticipate moving into the new building during the first quarter of 2005.
Reflecting extensive comparative product research conducted earlier this year,
in May, the bank recently introduced a new line of highly competitive and
creative business products. We feel these new products will serve as additional
tools to attract commercial relationships. Senior management is currently
reviewing our retail product offerings, and we anticipate that a new line of
personal products will be rolled out during the next several months.
Our Investment Management and Trust Group reports strong growth in the brokerage
and investment management areas. Many new client relationships have been
established in 2004. To further assist our investment clients, in May, we
welcomed Vice President Daniel Burke to our investment team. Dan brings over
sixteen years of experience in the financial services, investment and legal
professions. A graduate of Boston College, Boston College Law School, and Babson
College, MBA program, Dan was previously associated with both Oppenheimer Funds
Inc. in Boston, and The Collaborative Wealth Advisors Inc. in Westford.
Since its inception, Enterprise Bank has been a strong advocate of the arts and
cultural activities in the communities we serve. We are proud to include many
such organizations as our customers and friends. We are delighted that downtown
Lowell has been recently recognized in the media throughout New England as a
true center of artistic endeavors. The creation of the artists lofts, the
vibrant museum community, and the increased support of cultural and artistic
activity overall, bodes well for the city's vibrant future. When you visit our
main office on Merrimack Street, take a moment to pause and enjoy the work of
very talented young artists that collaborated in creating a 30-foot mural on the
outer wall of the adjacent parking lot. Spearheaded by The Revolving Museum, a
neighboring artistic organization, the mural is a testament to the talent and
ingenuity of local students.
We are pleased to share news about two highly-respected directors of Enterprise
Bank. Director James F. Conway III, was recently named the President of
Associated Industries of Massachusetts (A.I.M.), in addition to his position as
President & CEO of Courier Corporation. With its strong commitment to improving
the region's business economy, A.I.M. is considered the premiere voice of the
business community in the Commonwealth, representing over 7,600 employers from
all industries on legislative and regulatory issues in Boston and Washington. In
addition, Director Nickolas Stavropoulos, formerly EVP of KeySpan and President
of KeySpan Energy Delivery New England, has recently been named President of
KeySpan Energy Delivery and assumed additional responsibilities for the
company's New York and Long Island regions. We are proud to have such
distinguished business leaders on our Bank's Board of Directors.
The Board of Directors joins us in expressing our appreciation to those
shareholders who participated in our 2004 annual meeting on May 4. Your loyalty
and support are key components in the bank's overall success.
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
(1) In March 2003, the company provided for $1.9 million in state tax expenses
due to retroactive assessments related to changes in Massachusetts tax laws
concerning the company's REIT subsidiary. In June 2003, the company subsequently
reversed $0.8 million of the March tax expense. The reversal was due to a
settlement agreement between the Massachusetts Department of Revenue and
Enterprise Bank, along with approximately sixty-five other Massachusetts banks,
regarding disputed retroactive assessments for 1999 through 2002. Under the
terms of the settlement, the net tax expense recorded in 2003 was approximately
$1.1 million.
Enterprise Bancorp, Inc. and Subsidiaries
STATEMENTS OF INCOME
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
-----------------------------
2004 2003 2004 2003
------------ ------------ ------------ -------------
INTEREST AND DIVIDEND INCOME
Loans $ 7,625,520 $ 7,031,103 $ 15,184,851 $ 13,920,825
Investment securities 1,757,756 2,056,734 3,481,543 4,558,330
Short term investments 70,759 63,595 85,117 87,615
------------ ------------ ------------ ------------
Total interest and dividend income 9,454,035 9,151,432 18,751,511 18,566,770
------------ ------------ ------------ ------------
INTEREST EXPENSE
3,571,261
Deposits 1,520,486 1,718,854 2,976,475
Repurchase agreements 15,450 3,142 25,991 6,068
Federal Home Loan Bank borrowings 11,530 23,036 68,183 45,635
Junior subordinated debentures 294,305 294,305 588,610 588,610
------------ ------------ ------------ ------------
Total interest expense 1,841,771 2,039,337 3,659,259 4,211,574
------------ ------------ ------------ ------------
NET INTEREST INCOME 7,612,264 7,112,095 15,092,252 14,355,196
Provision for loan losses 300,000 300,000 1,050,000 600,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 7,312,264 6,812,095 14,042,252 13,755,196
Non-interest income 1,578,794 1,688,231 3,127,970 3,276,929
Net gains on sales of investment securities 9,561 239,141 640,478 1,554,895
Operating expenses (6,174,862) (5,782,397) (12,373,952) (11,665,004)
------------ ------------ ------------ ------------
Income before provision for income taxes 2,725,757 2,957,070 5,436,748 6,922,016
Provision for income taxes 981,725 259,558 1,977,470 3,720,430
------------ ------------ ------------ ------------
NET INCOME $ 1,744,032 $ 2,697,512 $ 3,459,278 $ 3,201,586
============ ============ ============ ============
EARNINGS PER SHARE
Basic earnings per common share $ 0.48 $ 0.76 $ 0.96 $ 0.90
============ ============ ============ ============
Diluted earnings per common share $ 0.46 $ 0.73 $ 0.91 $ 0.87
============ ============ ============ ============
Dividend per common share (1) $ 0.43 $ 0.38 $ 0.43 $ 0.38
============ ============ ============ ============
Basic weighted average common shares outstanding (2) 3,625,914 3,544,125 3,615,629 3,538,836
============ ============ ============ ============
Diluted weighted average common shares outstanding 3,779,147 3,678,677 3,784,413 3,669,796
============ ============ ============ ============
(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)
June 30, 2004 December 31, 2003 June 30, 2003
----------------- ----------------- ---------------
ASSETS
Cash and due from banks $ 36,575,260 $ 31,101,961 $ 41,070,108
Short term investments 33,000,000 14,000,000 66,065,000
Investment securities 188,172,683 196,308,098 178,612,572
Loans 531,191,136 488,839,152 444,584,295
Allowance for loan losses (10,413,665) (9,986,425) (10,047,877)
--------------- --------------- ---------------
Net loans 520,777,471 478,852,727 434,536,418
--------------- --------------- ---------------
Bank premises and equipment 12,035,588 12,429,021 13,153,483
Intangible assets 6,463,738 6,530,123 6,596,508
Other assets 12,769,967 12,323,241 12,051,977
--------------- --------------- ---------------
TOTAL ASSETS $ 809,794,707 $ 751,545,171 $ 752,086,066
=============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 735,475,915 $ 660,824,382 $ 679,131,062
Repurchase agreements 2,875,282 953,924 952,965
Federal Home Loan Bank borrowings 1,932,500 20,470,000 5,470,000
Junior subordinated debentures 10,825,000 10,825,000 10,825,000
Other liabilities 2,920,171 3,721,291 4,068,600
--------------- --------------- ---------------
Total liabilities 754,028,868 696,794,597 700,447,627
--------------- --------------- ---------------
Stockholders' equity 55,708,391 52,511,133 48,563,183
Net unrealized appreciation on investment
securities, net of taxes 57,448 2,239,441 3,075,256
--------------- --------------- ---------------
Total stockholders' equity 55,765,839 54,750,574 51,638,439
--------------- --------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 809,794,707 $ 751,545,171 $ 752,086,066
=============== =============== ===============
Investment assets under management $ 394,551,585 $ 375,296,992 $ 352,815,990
=============== =============== ===============
Mortgage loans serviced for others $ 14,475,526 $ 15,077,295 $ 16,556,486
=============== =============== ===============
Total assets, investment assets under management
and mortgage loans serviced for others $ 1,218,821,818 $ 1,141,919,458 $ 1,121,458,542
=============== =============== ===============