Grand River Commerce : Q4 Earnings Release

March 24, 2021

To Our Valued Shareholders:

We are pleased to provide this 2020 performance summary for Grand River Commerce, Inc. (the "Company") and its subsidiary, Grand River Bank (the "Bank").

At this time last year, we were preparing our annual audited statements for 2019, assessing our progress implementing a three year strategic financial plan, and adjusting our expectations for improved earnings, growth and profitability in 2020. Our market, our team and our customers provided ample reasons for continued optimism. We looked forward to another year of double-digit growth, positive performance metrics and exceptional asset quality. Our confidence was reinforced by our January and February results, and by our large pipeline of loans in process. Virtually all of our customers were doing well and we expected another year supporting their success.

In early March, however, we, along with everyone else, found ourselves facing the unknown and the unnerving. Confronting the early stages of a global pandemic, we adjusted quickly to new health and safety protocols and procedures, made sweeping changes designed to allow the majority of our team to work remotely and digested dire predictions about the short-and-long-term impact upon our economy, our Bank and our way of life. Against a backdrop of uncertainty, we assessed the ability of our borrowers to honor their commitments and we shored up our defenses in the event of significant pressure upon our earnings and a corresponding erosion in the performance of our historically-pristine loan portfolio. Financial stocks were being pummeled and many pundits were predicting impending doom for our economy as a whole. It was an unsettled time, in no small part because we had no prior pandemic experience or reference points.

Fortunately, however, we had a comprehensive and rock-solid business continuity plan, with detailed pandemic- related action steps. Thanks to the effectiveness of that plan, the commitment of our outstanding team members, the resilience of our customers and the lift from government safety net programs, the pandemic impacted our 2020 activities, but did not dominate them. While it wasn't "business as usual" from a functional perspective, we adjusted quickly and smoothly to a different operating model and produced another record- setting year of financial performance and meaningful strategic achievements.

As of December 31, 2020, total assets of the Company stood at $452 million, an increase of $131 million, or 41%, over year-end 2019. As is typical, the bulk of the increase was attributable to loan growth. During the twelvemonth period ended December 31,2020, total loans grew $73.3 million, or 25%. In addition to normal loan demand, the Bank was an active participant in the Paycheck Protection Program ("PPP"), a comprehensive effort to support businesses and nonprofits during the pandemic. The Bank originated 374 PPP loans in 2020 with total proceeds of $61.2 million. PPP loan balances outstanding at year end were $47.9 million. Correspondingly, total deposits grew by $111.9 million, or 41%. This growth was attributable to a significant increase in new banking relationships, the expansion of existing relationships and PPP loan proceeds received by our customers.

Despite the impact of the pandemic, asset quality at year-end remained exceptionally strong, with no non- performing loans, no charge-offs and negligible delinquency. As has always been our practice, we continue to rigorously monitor our portfolio and communicate frequently with our customers. The vast majority of our commercial customers continue to report high demand for their products and services and are performing well, with many posting record performance. At the outset of the pandemic, and in accordance with regulatory guidelines, we made interest-only or deferred payments available to a number of our customers. Most of the

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borrowers who took advantage were commercial customers and nearly all have now successfully transitioned back to their contractual payment schedules. The hospitality industry continues to experience stress, but our exposure to that sector is minimal and largely supported by guarantees from the U.S. Small Business Administration. Despite the absence of performance issues within our portfolio, we believe that unsettled overall economic conditions support our increased loan loss reserve allocation. At year-end, our allowance stood at 1.49% (net of fully guaranteed PPP loans), compared to 1.10% a year earlier. On a gross basis, the allowance was 1.30% at December 31, 2020.

The Company and the Bank reported pre-tax net income of $3,873,000 and $4,311,000, respectively, in 2020. The Company's pre-tax/pre-provision income of $5,404,000 compared favorably to 2019's pre-tax/pre-provision income of $2,501,000.

Net interest income increased $2,337,000 year-over-year. Key factors contributing to the increase were loan growth, pre-payment penalties as borrowers refinanced to take advantage of lower market rates and the recognition of PPP-related loan fee income, which is being recognized over the life of the loans, in accordance with accounting standards. As a result of the previously-mentioned allocation adjustments, loan loss provision expense increased $995,000 year over year. Pervasively low interest rates continue to impact both sides of the balance sheet, resulting in overall reductions in both earning asset yields and the cost of funds.

Non-interest income increased $2,525,000, or 141% over the comparable year-ago period. The

increase was primarily attributable to gains resulting from the sale of residential mortgage loans. Mortgage production and the associated revenue reached record levels in 2020, driven by both substantive refinance demand and strong purchase activity. Although we expect significant mortgage volume in 2021, interest rate fluctuations and supply-related constraints may result in some moderation from 2020 levels.

Non-interest expense increased $1,959,000, or 24% year over year. The increase was due to pre-planned and previously-disclosed expenditures for critical operating systems, technology and team members necessary to support the continued growth in deposits, loans and related revenue.

Maintaining capital ratios that meet or exceed the regulatory definition of well-capitalized continues to be a priority. As has been the case since its inception, the Bank again met those requirements as of December 31, 2020. To support the Bank's continued growth and fulfilling its role as a source of financial strength the Company injected $3,000,000 of additional capital into the Bank during the 3rd quarter of the year. In addition, the Company completed an $8.25 million subordinated debt offering in October 2020. The offering was well- received and oversubscribed. Offering proceeds are intended to further support the growth of the Bank and the Company and to provide a cushion for the Company in the event of worsening pandemic-related economic stress.

In addition to addressing pandemic-related considerations, supporting our customers and growing our core business, we also completed a number of important strategic initiatives during 2020. Key among those initiatives was the construction of our new facility at 50 Crahen Avenue, N.E. Located at the highly-visible and heavily- traveled intersection of Crahen and Fulton Street East in Grand Rapids Township, this impressive new facility, which appears on the cover of this report, will allow us to more effectively serve our growing customer population in the Ada/Cascade area. We had planned to occupy the building early in the third quarter, but pandemic-related construction delays pushed completion to late December. We began operating out of the facility in late January of this year and are confident that it will exceed our expectations.

Speaking of exceeding expectations, that description was even more appropriate than usual for the efforts of our team during 2020. Always the foundation for our success and the key differentiator from our competitors, our exceptional team members rose to the challenges of 2020 and did so with grace, goodwill and a concern

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for others that was truly inspiring. We simply can't thank them enough for their unselfish and unrelenting efforts to provide support, reassurance and resources for all who depend upon our Bank as their trusted financial partner.

Our financial results are also available via the Investor Relations section of our website, www.grandriverbank.com. We encourage you to use this comprehensive resource to track our performance and to gain valuable information about your investment in our Company.

We remain committed to taking full advantage of our many opportunities, pleased with our overall trajectory and confident in our future. Thank you for your investment and your support.

Sincerely,

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