EXHIBIT 99
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Dear Shareholder:
Enterprise Bancorp, Inc. reported net income for the three months ended
September 30, 2004 of $2.044 million compared to $1.863 million for the 2003
period, an increase of 10%. The growth was due primarily to an increase in net
interest income, partially offset by declines in net gains realized on sales of
investment securities and residential mortgage loans, and increases in
non-interest expense.
Net income for the nine months ended September 30, 2004 was $5.503 million
compared to $5.065 million for the 2003 period, an increase of 9%. The increase
was due primarily to net interest income growth and lower tax expenses(1), which
were partially offset by decreased net gains on sales of investment securities
and residential mortgage loans, and increases in non-interest expenses and the
provision for loan losses.
The company continued to experience strong growth over the prior year. Total
assets at September 30, 2004 amounted to $826.0 million, an increase of 9% since
September 30, 2003. Total loans grew to $552.0 million at September 30, 2004, an
increase of 19% over the prior year. Deposits plus repurchase agreements
amounted to $743.0 million at September 30, 2004, an increase of 9% over
September 30, 2003. In addition, the Investment Management and Trust Group
reported investment assets under management of $406.0 million, a 13% increase
versus one year ago. Total assets, investment assets under management, and
mortgage loans serviced for others amounted to $1.2 billion at September 30,
2004, an increase of 10% from September 30, 2003.
Commercial lending continued strong growth, reporting an increase of $53 million
in outstanding commercial loan balances for the first nine months of 2004. It is
interesting to note that in New England commercial loans for the acquisition of
equipment and new machinery have increased this quarter, a hopeful sign that the
"regional economy is regaining traction," as described by the Federal Reserve
Chairman Alan Greenspan. To further service our commercial customers, the bank
recently introduced a creative new product, the Business Payment Connection SM.
Business owners now have an innovative cash management solution that creates
positive cash flow for growing businesses. This product provides customers the
opportunity to use a convenient paperless, management tool for purchasing,
invoicing, payment, and tracking purposes. We welcome shareholder inquiries to
Vice President Stephen Dolan concerning this new internet-based service, as it
is a very attractive addition to our commercial product line.
We are pleased to report that our North Central region (Fitchburg & Leominster
branches) has exceeded combined deposits and investment assets under management
of $100 million. This is a significant milestone, and a tribute to the hard work
and effort of our North Central team. Directors Ken Ansin and John Clementi, in
conjunction with the North Central staff, hosted a reception on October 20 to
thank our current business customers for their past support, and to encourage
customers to refer potential new business relationships to the bank.
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Business Payment Connection SM is a registered service mark.
Our business development team has been further enhanced by the addition of Juan
Gomez. Juan recently joined Enterprise's Sales Department having served as
Director of Business Development for Central Mass ACCION USA. Juan brings an
extensive network of commercial relationships to his new responsibilities. A
graduate of Assumption College, Juan currently serves as Vice Chairman of the
City Council in Worcester, and is co-founder of the WNC-Minority Business
Council. Juan will be involved in business development efforts in both the
Merrimack Valley and the North Central regions.
The bank is committed to its steady expansion plans, seeking to select
attractive new opportunities within a thirty-mile radius of our main office. In
August we filed all necessary applications to open a full-service commercial
branch at 130 Main Street (East Point Plaza) in Salem, NH. With a
well-established branch network throughout the Merrimack Valley, Salem will mark
Enterprise's entry into the southern New Hampshire market. Salem is recognized
for its thriving business climate, and is the home to a large number of medical,
legal and professional practices. The Salem market presents a great opportunity
for an independent commercial bank like Enterprise, as area businesses and
professionals have been the victims of recent bank merger and acquisition fever.
Enterprise presents a strong alternative to mega-regional banking and we are
well positioned to enter the Salem market. Joining the Enterprise Bank family in
September, VP/Branch Manager Susan Covey brings over 17 years of banking
experience in the Salem area. We will be announcing additional Salem team
members shortly. Renovations to a former bank facility are currently in progress
and we anticipate a late 2004 opening.
The Enterprise Bank family continues to receive recognition on a regional and
local level. On October 22, Enterprise Bank was the recipient of the prestigious
"Organization of the Year" award presented by the Boys & Girls Club of
Billerica. This highly-regarded community event attracts a large group of civic
and business leaders. We are proud of the many contributions the staffs of our
Billerica branches have made to civic and charitable activities in the Billerica
area. On a more personal level, we also share news with you about a member of
the Dracut office. Sandi Cunha, along with her husband Ken, was honored on
October 27 at Community Teamwork's annual "Local Heroes" event. Sandi has a long
history of involvement in civic activities and currently serves as President of
the Dracut Lions Club, and as a member of Dracut's Annual Old Home Day
committee.
Kindly take a moment to review the enclosed business brochure. In the past, we
have shared information with you about Enterprise's commitment to Lowell's
revitalization, and we thought this piece is one more example of the role our
bank plays in the life of the city. We are indeed proud to be part of the city's
cultural, educational and economic rebirth as Lowell has truly become a
destination city for growing businesses, and an attractive place for all to live
and work.
To date, 2004 has brought many business opportunities for our bank. Enterprise
Bank is strong and vibrant. Our business development culture, our reputation for
service excellence, and our unwavering commitment to the bank's independence,
are the cornerstones for future success.
Sincerely,
/s/ George L. Duncan /s/ Richard W. Main /s/ John P. Clancy, Jr.
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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 related to prior
periods was approximately $1.1 million.
Enterprise Bancorp, Inc. and Subsidiaries
STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
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2004 2003 2004 2003
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INTEREST AND DIVIDEND INCOME
Loans $ 8,391 $ 7,065 $ 23,576 $ 20,987
Investment securities 1,830 1,428 5,311 5,986
Short term investments 147 155 232 242
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Total interest and dividend income 10,368 8,648 29,119 27,215
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INTEREST EXPENSE
Deposits 1,681 1,597 4,657 5,168
Repurchase agreements 11 3 37 9
Federal Home Loan Bank borrowings 13 24 81 70
Junior subordinated debentures 294 294 883 883
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Total interest expense 1,999 1,918 5,658 6,130
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NET INTEREST INCOME 8,369 6,730 23,461 21,085
Provision for loan losses 300 233 1,350 833
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Net interest income after provision for loan losses 8,069 6,497 22,111 20,252
Non-interest income 1,508 1,666 4,636 4,943
Net gains on sales of investment securities (2) 314 638 1,869
Operating expenses (6,373) (5,643) (18,746) (17,308)
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Income before provision for income taxes 3,202 2,834 8,639 9,756
Provision for income taxes 1,158 971 3,136 4,691
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NET INCOME $ 2,044 $ 1,863 $ 5,503 $ 5,065
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EARNINGS PER SHARE
Basic earnings per common share $ 0.56 $ 0.52 $ 1.51 $ 1.42
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Diluted earnings per common share $ 0.53 $ 0.50 $ 1.45 $ 1.37
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Dividend per common share (1) $ 0.00 $ 0.00 $ 0.43 $ 0.38
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Basic weighted average common shares outstanding (2) 3,676,922 3,591,374 3,636,209 3,556,541
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Diluted weighted average common shares outstanding 3,824,270 3,746,889 3,797,848 3,695,686
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(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
(Dollars in thousands)
(unaudited)
September 30, December 31, September 30,
2004 2003 2003
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ASSETS
Cash and due from banks $ 27,902 $ 31,102 $ 29,490
Short term investments 39,170 14,000 67,500
Investment securities 187,955 196,308 170,189
Loans 551,955 488,839 465,409
Allowance for loan losses (10,744) (9,986) (10,285)
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Net loans 541,211 478,853 455,124
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Bank premises and equipment 11,645 12,429 12,826
Intangible assets 6,430 6,530 6,563
Other assets 11,713 12,323 16,785
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TOTAL ASSETS $ 826,026 $ 751,545 $ 758,477
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 740,423 $ 660,824 $ 678,414
Repurchase agreements 2,605 954 936
Federal Home Loan Bank borrowings 6,932 20,470 5,470
Junior subordinated debentures 10,825 10,825 10,825
Other liabilities 5,405 3,722 10,403
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Total liabilities 766,190 696,795 706,048
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Stockholders' equity 57,770 52,511 50,447
Net unrealized appreciation on investment
securities, net of taxes 2,066 2,239 1,982
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Total stockholders' equity 59,836 54,750 52,429
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 826,026 $ 751,545 $ 758,477
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Investment assets under management $ 405,953 $ 375,297 $ 359,317
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Mortgage loans serviced for others $ 14,862 $ 15,077 $ 15,886
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Total assets, investment assets under management
and mortgage loans serviced for others $ 1,246,841 $ 1,141,919 $ 1,133,680
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