Macatawa Bank Corporation Reports Second Quarter Earnings

HOLLAND, Mich., July 16, 2007 (PRIME NEWSWIRE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced net income for the second quarter of 2007. Net income for the quarter was $4.59 million, or $0.26 per diluted share, compared to net income of $5.76 million, or $0.33 per diluted share, for the second quarter of 2006. Net income for the first six months of 2007 totaled $9.43 million, or $0.54 per diluted share, compared to net income of $10.98 million, or $0.63 per diluted share, for the six months ended June 30, 2006.

"We are disappointed with the decline in our earnings. The weak economic conditions in our markets continue to affect our operating performance," commented Ben Smith, Chairman and CEO. In particular, a noticeable deterioration in residential land development has had a profound affect on many banks throughout Michigan. "We knew these factors would challenge our earnings and asset growth, but the extent of weakness in this sector and its impact on our performance is greater than expected. While we are seeing signs of increased residential real estate activity, we recognize a sustained improvement will take time to fully benefit the businesses involved with land development," added Mr. Smith.

Non-performing loans are up $12 million since the end of the first quarter and $24 million since June of last year. Most of these increases were in loans to residential land developers. At June 30, 2007, non-performing loans were approximately $29 million and represented about 1.71% of total loans. "We have instituted additional controls over our credit administration process and have been focused on reviewing our entire commercial portfolio. We continue to work diligently on addressing these loan difficulties to put them behind us," stated Mr. Smith. Other than residential land development, the Company's loan portfolios continue to perform well.

The Company opened its 26th branch during the quarter in Cascade on the east side of the greater Grand Rapids metropolitan market. "We are very pleased with the progress of our branch network and other retail delivery systems. We continue to see strong levels of new customers as we expand our market share," added Mr. Smith. Deposits within the Company's markets grew $31 million during the quarter, or 9% on an annualized basis, allowing the Company to reduce balances of higher costing deposits from outside its market.

Second quarter net interest income totaled $16.3 million, a decrease of $640,000 compared to the second quarter of 2006. The decrease in net interest income was primarily from a decline in the net interest margin partially offset by an increase in average earning assets. Average earning assets grew by 8% or $151.2 million from the second quarter of 2006 to the second quarter of 2007. The net interest margin was 3.32% for the quarter, down only three basis points from 3.35% for the first quarter of 2007 and 42 basis points from 3.74% for the second quarter of 2006. On a consecutive quarter basis, the decline was primarily from a decrease in the yield on loans related to reduced loan interest associated with non-accrual loans. The cost of funds remained flat on a consecutive quarter basis. The decline in net interest margin from the prior year quarter is primarily because the cost of funds has risen more than the yield on assets.

Non-interest income was $4.0 million for the second quarter of 2007, an increase of $391,000 or 11% compared to the second quarter of 2006. The increase was largely from higher trust fees, partially offset by lower gains on sales of loans. The increase in trust fees primarily relates to customer relationships added from the acquisition of Asset Management Services from Smith & Associates on January 1. Other types of non-interest income grew as well, reflecting continued momentum in various service delivery areas.

Non-interest expense was $12.6 million for the quarter as compared to $11.3 million for the second quarter of 2006. The slight increases in salaries and benefits, occupancy and furniture and equipment primarily relate to operating costs associated with the new Asset Management Services group and the opening of four new facilities since the beginning of the year. Despite these significant investments for the future, the Company has been able to successfully manage these overhead components within a tight range. The $876,000 increase in other expense also includes operating costs associated with these new service and facility additions, as well as increases in legal and other carrying costs associated with non-performing assets and an increase of $228,000 in FDIC assessments. The additional FDIC assessments relate to a change by the FDIC in the rate for all banks effective January 1.

The provision for loan losses was $965,000 for the quarter compared to $800,000 for the second quarter of 2006. Annualized net charge-offs were 0.16% of average loans for the quarter compared to 0.01% for the second quarter of 2006. Non-performing assets to total assets were 1.69% at June 30, 2007 compared to 0.98% at March 31, 2007 and 0.38% at June 30, 2006. Of the $35.8 million of non-performing assets at June 30, approximately $6.3 million is other real estate or repossessed assets in which collateral held is considered collectible. The remaining $29.5 million are non-performing loans of which approximately two-thirds are associated with residential land development. The allowance for loan losses was 1.39% of total loans at June 30, 2007 compared to 1.36% at December 31, 2006.

Total assets increased $135.0 million or 7% from June 30, 2006 to $2.12 billion at June 30, 2007. Over the same twelve month period, total loans increased $71.7 million and total deposits increased $88.9 million. Since December 31, 2006, total loans increased $13.3 million and total deposits declined by $6 million. However, deposits within the Company's market increased $31 million during the quarter and $43 million since December 31, 2006. The Company remained well-capitalized at June 30, 2007 with a total risk-based capital ratio of 10.9%.

"Despite the challenging operating environment, we are gaining market share, continuing to invest in people and technology and constantly improving our operations to become an even stronger bank," concluded Mr. Smith.

Conference Call

Macatawa Bank Corporation will hold its quarterly earnings conference call on Tuesday, July 17, 2007, at 10:00 A.M. Persons who wish to access the call may do so via the Internet by visiting www.macatawabank.com and clicking on the webcast link in the Investor Information section. It may also be accessed by logging on to www.streetevents.com. A replay of the call will be available for 30 days following the call.

Headquartered in Holland, Michigan, Macatawa Bank Corporation is the parent company for Macatawa Bank. Through its banking subsidiary, the Corporation offers a full range of banking, investment and trust services to individuals, businesses, and governmental entities from a network of 26 full service branches located in communities in Kent County, Ottawa County, and northern Allegan County. Services include commercial, consumer and real estate financing; business and personal deposit services, ATM's and Internet banking services, trust and employee benefit plan services, and various investment services. The Corporation emphasizes its local management team and decision making, along with providing customers excellent service and superior financial products.

"CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, and pricing. These statements include, among others, statements related to future growth and funding sources, future profitability levels, the effects on earnings of changes in interest rates and the future level of other revenue sources. Annualized growth rates are not intended to imply future growth at those rates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Further information concerning our business, including additional factors that could materially affect our financial results, is included in our filings with the Securities and Exchange Commission."



 MACATAWA BANK CORPORATION
 CONSOLIDATED FINANCIAL SUMMARY
 (Unaudited)

 (Dollars in thousands
  except per share information)

                           Three Months Ended     Six Months Ended
                                 June 30              June 30
                           ------------------    ------------------
 EARNINGS SUMMARY            2007       2006       2007       2006
                           -------    -------    -------    -------
 Total interest
  income                   $35,683    $32,896    $70,615    $63,137
 Total interest
  expense                   19,348     15,921     38,220     29,848
                           -------    -------    -------    -------
  Net interest
   income                   16,335     16,975     32,395     33,289
 Provision for
  loan loss                    965        800      1,840      1,500
                           -------    -------    -------    -------
  Net interest
   income after
   provision for
   loan loss                15,370     16,175     30,555     31,789


 NON-INTEREST INCOME
 Deposit service charges     1,306      1,300      2,448      2,386
 Gain on sale of loans         370        511        813        923
 Trust fees                  1,209        796      2,406      1,622
 Other                       1,135      1,022      2,088      1,892
                           -------    -------    -------    -------
  Total non-interest
   income                    4,020      3,629      7,755      6,823

 NON-INTEREST EXPENSE
 Salaries and benefits       6,345      6,293     12,475     12,330
 Occupancy                   1,020        835      2,075      1,720
 Furniture and equipment       933        774      1,825      1,572
 Other                       4,307      3,431      8,018      6,796
                           -------    -------    -------    -------
  Total non-interest
   expense                  12,605     11,333     24,393     22,418
                           -------    -------    -------    -------
 Income before income
  tax                        6,785      8,471     13,917     16,194
 Federal income tax
  expense                    2,195      2,715      4,492      5,217
                           -------    -------    -------    -------

  Net income               $ 4,590    $ 5,756    $ 9,425    $10,977
                           =======    =======    =======    =======

 Basic earnings per
  share                    $  0.27    $  0.34    $  0.55    $  0.65
 Diluted earnings per
  share                    $  0.26    $  0.33    $  0.54    $  0.63
 Return on average
  assets                      0.87%      1.18%      0.90%      1.15%
 Return on average
  equity                     11.08%     15.53%     11.56%     14.94%
 Net interest margin          3.32%      3.74%      3.33%      3.76%
 Efficiency ratio            61.93%     55.00%     60.75%     55.89%




 BALANCE SHEET DATA               June 30      June 30    December 31
                                    2007        2006         2006
 Assets                         ----------   ----------   -----------
 Cash and due from
  banks                         $   33,192   $   43,346   $   39,882
 Federal funds sold                 30,123           --           --
 Securities available
  for sale                         194,066      165,964      198,546
 Securities held to
  maturity                           1,921        2,715        2,711
 Federal Home Loan Bank
  Stock                             12,275       13,910       12,275
 Loans held for sale                 1,597        2,346        1,547
 Total loans                     1,724,773    1,653,035    1,711,450
 Less allowance for
  loan loss                         23,943       22,145       23,259
                                ----------   ----------   ----------
   Net loans                     1,700,830    1,630,890    1,688,191
                                ----------   ----------   ----------
 Premises and equipment,
  net                               64,202       56,569       60,731
 Acquisition
  intangibles                       29,166       25,663       25,478
 Bank-owned life
  insurance                         22,258       21,279       21,843
 Other assets                       26,665       18,636       23,612
                                ----------   ----------   ----------

 Total Assets                   $2,116,295   $1,981,318   $2,074,816
                                ==========   ==========   ==========

 Liabilities and
  Shareholders' Equity
 Noninterest-bearing
  deposits                      $  170,308   $  174,516   $  180,032
 Interest-bearing
  deposits                       1,491,378    1,398,585    1,487,525
                                ----------   ----------   ----------
   Total deposits                1,661,686    1,573,101    1,667,557
 Federal funds
  purchased                             --       25,701       11,990
 FHLB advances                     244,760      187,722      192,018
 Other borrowings                   41,238       41,238       41,238
 Other liabilities                   5,087        5,657        5,164
                                ----------   ----------   ----------
 Total Liabilities               1,952,771    1,833,419    1,917,967

 Shareholders' equity              163,524      147,899      156,849
                                ----------   ----------   ----------
 Total Liabilities
  and Shareholders'
  Equity                        $2,116,295   $1,981,318   $2,074,816
                                ==========   ==========   ==========




 MACATAWA BANK CORPORATION
 SELECTED CONSOLIDATED FINANCIAL DATA
 (Unaudited)

 (Dollars in thousands except per share information)

                                   Quarterly
          -----------------------------------------------------------

            2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr
              2007        2007        2006        2006        2006
          ----------- ----------- ----------- ----------- -----------
 EARNINGS
  SUMMARY
 Net
  interest
  income  $    16,335 $    16,059 $    17,045 $    17,083 $    16,975
 Provision
  for loan
  loss            965         875       5,725         490         800
 Total
  non-
  interest
  income        4,020       3,735       3,851       3,503       3,629
 Total
  non-
  interest
  expense      12,605      11,787      11,237      11,257      11,333
 Income
  taxes         2,195       2,297       1,089       2,830       2,715
 Net
  income  $     4,590 $     4,835 $     2,845 $     6,009 $     5,756

 Basic
  earnings
  per
  share   $      0.27 $      0.28 $      0.17 $      0.35 $      0.34
 Diluted
  earnings
  per
  share   $      0.26 $      0.28 $      0.16 $      0.35 $      0.33

 MARKET
  DATA
 Book
  value
  per
  share   $      9.52 $      9.49 $      9.20 $      9.11 $      8.69
 Market
  value
  per
  share   $     15.91 $     17.52 $     20.25 $     21.80 $     22.28
 Average
  basic
  common
  shares   17,191,063  17,221,595  17,038,967  17,025,110  17,010,181
 Average
  diluted
  common
  shares   17,405,018  17,499,098  17,380,901  17,385,741  17,369,238
 Period
  end
  common
  shares   17,170,235  17,226,564  17,044,838  17,032,766  17,015,456

 PERFORMANCE
  RATIOS
 Return on
  average
  assets         0.87%       0.93%       0.56%       1.20%       1.18%
 Return on
  average
  equity        11.08%      12.06%       7.17%      15.69%      15.53%
 Net
  interest
  margin
  (FTE)          3.32%       3.35%       3.55%       3.62%       3.74%
 Efficiency
  ratio         61.93%      59.55%      53.78%      54.68%      55.00%

 ASSET
  QUALITY
 Net
  charge-
  offs    $       711 $       445 $     4,894 $       208 $        46
 Nonperforming
  loans   $    29,470 $    16,985 $    22,290 $     5,768 $     5,781
 Other
  real
  estate
  and
  repossessed
  assets  $     6,302 $     3,891 $     3,293 $     2,758 $     1,725
 Nonperforming
  loans to
  total
  loans          1.71%       0.99%       1.30%       0.34%       0.35%
 Nonperforming
  assets
  to total
  assets         1.69%       0.98%       1.23%       0.42%       0.38%
 Net
  charge-offs
  to
  average
  loans
  (annualized)   0.16%       0.10%       1.16%       0.05%       0.01%
 Allowance
  for loan
  loss to
  total
  loans          1.39%       1.38%       1.36%       1.33%       1.34%

 CAPITAL &
  LIQUIDITY
 Average
  equity
  to
  average
  assets         7.83%       7.71%       7.77%       7.62%       7.61%
 Tier 1
  capital
  to risk-
  weighted
  assets         9.57%       9.53%       9.49%       9.59%       9.49%
 Total
  capital
  to risk-
  weighted
  assets        10.93%      10.89%      10.85%      10.95%      10.85%
 Loans to
  deposits
  + other
  borrowings    90.47%      90.26%      92.03%      91.69%      93.88%

 END OF
  PERIOD
  BALANCES
 Total
  portfolio
  loans   $ 1,724,773 $ 1,721,192 $ 1,711,450 $ 1,682,359 $ 1,653,035
 Earning
  assets    1,966,563   1,972,111   1,921,735   1,897,447   1,841,812
 Total
  assets    2,116,295   2,120,043   2,074,816   2,041,031   1,981,318
 Deposits   1,661,686   1,639,332   1,667,557   1,632,816   1,573,101
 Total
  shareholders'
  equity      163,524     163,406     156,849     155,125     147,899

 AVERAGE
  BALANCES
 Total
  portfolio
  loans   $ 1,732,553 $ 1,713,204 $ 1,686,139 $ 1,664,378 $ 1,626,102
 Earning
  assets    1,967,055   1,937,392   1,903,566   1,873,191   1,815,807
 Total
  assets    2,114,974   2,078,501   2,042,005   2,010,840   1,949,399
 Deposits   1,645,849   1,645,806   1,616,606   1,605,567   1,556,712
 Total
  shareholders'
  equity      165,702     160,348     158,716     153,147     148,252

                                                   Year to Date
                                             ------------------------

                                                2007         2006
                                             -----------  -----------
 EARNINGS SUMMARY
 Net interest income                         $    32,395  $    33,289
 Provision for loan loss                           1,840        1,500
 Total non-interest income                         7,755        6,823
 Total non-interest expense                       24,393       22,418
 Income taxes                                      4,492        5,217
 Net income                                  $     9,425  $    10,977

 Basic earnings per share                    $      0.55  $      0.65
 Diluted earnings per share                  $      0.54  $      0.63


 MARKET DATA
 Book value per share                        $      9.52  $      8.69
 Market value per share                      $     15.91  $     22.28
 Average basic common shares                  17,195,050   16,990,802
 Average diluted common shares                17,443,100   17,390,749
 Period end common shares                     17,170,235   17,015,456


 PERFORMANCE RATIOS
 Return on average assets                           0.90%        1.15%
 Return on average equity                          11.56%       14.94%
 Net interest margin (FTE)                          3.33%        3.76%
 Efficiency ratio                                  60.75%       55.89%


 ASSET QUALITY
 Net charge-offs                             $     1,156  $       346
 Nonperforming loans                         $    29,470  $     5,781
 Other real estate and repossessed assets    $     6,302  $     1,725
 Nonperforming loans to total loans                 1.71%        0.35%
 Nonperforming assets to total assets               1.69%        0.38%
 Net charge-offs to average loans (annualized)      0.13%        0.04%
 Allowance for loan loss to total loans             1.39%        1.34%


 CAPITAL & LIQUIDITY
 Average equity to average assets                   7.78%        7.68%
 Tier 1 capital to risk-weighted assets             9.57%        9.49%
 Total capital to risk-weighted assets             10.93%       10.85%
 Loans to deposits + other borrowings              90.47%       93.88%


 END OF PERIOD BALANCES
 Total portfolio loans                       $ 1,724,773  $ 1,653,035
 Earning assets                                1,966,563    1,841,812
 Total assets                                  2,116,295    1,981,318
 Deposits                                      1,661,686    1,573,101
 Total shareholders' equity                      163,524      147,899


 AVERAGE BALANCES
 Total portfolio loans                       $ 1,722,932  $ 1,594,863
 Earning assets                                1,952,305    1,780,078
 Total assets                                  2,096,838    1,913,257
 Deposits                                      1,645,828    1,537,194
 Total shareholders' equity                      163,040      146,953
CONTACT:  Macatawa Bank Corporation
          Jon Swets, CFO
          616.494.7645