Macatawa Bank Corporation Reports Profitable Second Quarter, Improved Results

HOLLAND, Mich., July 29, 2010 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced a return to profitability and improvements in several key capital and operational ratios in the second quarter 2010. The Company's results for the quarter included:

  --  Pre-tax net income of $3.1 million
  --  After-tax net income of $1.7 million, compared to a loss of $30.4
      million in the same quarter of last year
  --  Net charge-offs of $6.3 million, down 54 percent from the first quarter
      2010 ($13.6 million), 72 percent less than the second quarter 2009
      ($22.1 million)
  --  Sixth consecutive quarter of improvement in net interest margin -- now
      at 3.29 percent
  --  Solid improvement in capital ratios -- remained categorized as
      "adequately capitalized" under applicable regulatory capital
      requirements
  --  Deposit accounts remain insured by the FDIC up to the maximum amount
      permitted by law

Macatawa reported net income available to common shares of $1.7 million, or $0.10 per diluted share, for the second quarter 2010, compared to a net loss available to common shares of $31.3 million, or ($1.82) per diluted share, for the second quarter 2009 and a net loss of $21.1 million for the first quarter 2010. For the first half of 2010, the Company's net loss available to common shares totaled $19.4 million in 2010 compared to $36.4 million for the same period in 2009.

"Eight months ago, in an extremely challenging environment, we began an all out effort to instill business discipline and sound banking principles throughout the entire organization," said Richard L. Postma, Chairman of Macatawa Bank Corporation. "The second quarter results and our first profitable period in almost two years, coupled with improvements in nearly every key capital and performance metric, certainly are positive steps, but we still have a great deal of work to do to return the Company to financial health."

Since taking the helm as chairman in late 2009 and with the full support of the Board of Directors, Mr. Postma has navigated the Company during a critical transition period. Under this leadership, the Bank implemented improved business and banking principles, added experienced personnel, bolstered the Bank's risk management functions by adding key individuals in its Special Assets and Loan Review departments, and implemented new and more disciplined lending and loan risk management policies and new procedures for loan administration and loan review. Macatawa continued this momentum during the second quarter by accelerating workout strategies with some of its more stressed loan customers and making significant progress towards completing an independent loan review of all commercial credits.

In addition to its focus on improving asset quality, the Company continued to implement strategic initiatives to improve core operating performance. "Our quarterly net interest margin continues to improve and is currently at its highest level in the past three years, while our quarterly controllable overhead costs are at their lowest level in over two years. In addition, we continue to efficiently manage our balance sheet. We have reduced out-of-market funding on our balance sheet by nearly $200 million as we continue to scale the organization to the current realities," commented Postma. "Even though the operating environment for banking is far from normal, we are confident that we are establishing a well-disciplined banking culture which will help us return to consistent and sustained profitability. However, it is realistic to expect that as the Company strives to return to sustained positive performance, it will experience uneven results on a quarterly basis. No one should assume that the second quarter results mean that the Company's problems are fully resolved. It is a very good start, but just that, a start. We have a long road to travel to regain our shareholder and depositor confidence," said Postma.

Operating Results

Net interest income for the second quarter 2010 totaled $12.8 million, a decrease of $210,000 from the first quarter 2010 and a decrease of $580,000 from the second quarter 2009. However, net interest margin increased to 3.29 percent, up 7 basis points from 3.22 percent on a consecutive quarter basis and up 50 basis points from 2.79 percent in the second quarter 2009.

"Future margin expansion will be dampened by the sale of the Company's securities portfolio but margin should be positively impacted by the continued payoff of higher costing wholesale funds," said Postma. "The sale of our securities portfolio was an important step at firming up our capital position during this depressed economic cycle, and despite this impact on margin in the short-term, we expect continued momentum toward margin expansion over the longer term."

Average interest earning assets for the second quarter 2010 declined $93.7 million from the first quarter 2010 and declined $385.0 million from the second quarter 2009, negatively impacting net interest income. However, the decline in assets continues to reflect the Bank's focus on liquidity improvement, capital ratio maintenance and reduction in credit exposure within certain segments.

Non-interest income of $6.3 million for the second quarter 2010 was up $2.9 million from the first quarter 2010 and up $2.1 million from the second quarter 2009. The increase was primarily driven by the $2.7 million in gains on sales of securities in the quarter, offset by continued reductions in income from mortgage banking activities. Mortgage loan sales volumes have decreased significantly from levels in the second quarter 2009, when mortgage refinancing activity was strong as a result of low interest rates.

Non-interest expense was $14.3 million for the second quarter 2010, compared to $17.9 million for the first quarter 2010 and $21.3 million for the second quarter 2009. Last year's second quarter total was unusually high as it included $5.5 million in expense associated with the Trade Partners litigation settlement. In the most recent quarter costs associated with the administration and disposition of problem loans and non-performing assets were $2.5 million compared to $5.5 million in the first quarter 2010 and $2.4 million in the second quarter 2009. FDIC insurance assessments remain elevated at $1.2 million in the most recent quarter compared to $1.3 million in the first quarter 2010 and $1.7 million in the second quarter 2009, as a result of higher assessment rates implemented by the FDIC.

When excluding nonperforming asset costs and FDIC assessments, non-interest expense was $10.6 million for the most recent quarter, down from $11.1 million in the first quarter 2010 and $17.1 million in the second quarter 2009. Salaries and employee benefits were down $104,000 compared to the first quarter 2010 and down $678,000 from the prior year quarter as a result of a reduction in overall staffing levels due to the Company scaling its operations to respond to the impact of the prolonged economic weakness.

Asset Quality

The provision for loan losses of $1.8 million for the second quarter 2010 declined 90 percent or $17.9 million, from the first quarter 2010 and, even more dramatically, down $18.8 million from the second quarter 2009. Net charge-offs were $6.3 million compared to $13.5 million for the first quarter 2010 and $22.1 million for the second quarter 2009. During the fourth quarter 2009 and into 2010, the Company continued to complete a full, independent re-evaluation of its loan portfolio at the direction of the Board of Directors. The elevated levels of provisions for loan losses and net charge-offs in the first quarter 2010 reflect these efforts.

The loan loss reserve of $56.3 million was 4.12 percent of total loans at June 30, 2010, compared with 4.23 percent at March 31, 2010 and 2.32 percent at June 30, 2009. The loan loss reserve coverage to nonperforming loans remains elevated at 59.2 percent of non-performing loans at June 30, 2010, compared to 59.3 percent at March 31, 2010 and 39.1 percent at June 30, 2009.

At June 30, 2010, the Company's non-performing loans were $95.1 million (6.96% of total loans) compared to $102.5 million (7.13% of total loans) at March 31, 2010 and $103.9 million (6.88% of total loans) at December 31, 2009. Sales of foreclosed properties continued to improve as compared to 2009, with the Bank selling nearly $10 million of real estate in the first six months of 2010 compared to sales of $7.5 million for all of 2009.

"We intend to continue to maintain a prudent and conservative level of loan loss reserves until we see a clear trend of significant reductions in our charge-off and non-performing loan levels. That being said, we are seeing signs of stabilization in the valuations of properties securing our assets, allowing us to accelerate sales and reduce non-performing asset expenses. We also are encouraged by our efforts to find workable solutions with our challenging accounts to mitigate the impact on our loan losses and are achieving credit upgrades in some instances. Going forward, our approach to loan loss reserves will be cautious as we remain focused on reflecting the values of these assets at appropriate levels and moving the non-performing assets out of the Bank," said Postma.

A break-down of non-performing loans is shown in the table below.


                                                           December     September
                                    June 30,   March 31,      31,         30,       June 30,
  Dollars in 000s                     2010       2010         2009        2009         2009
                                   ---------  ----------  -----------  ----------  ----------

  Commercial Real Estate            $ 81,319    $ 81,669    $  87,321   $  77,461   $  87,337

  Commercial and Industrial           10,418      17,782       12,713       8,477       5,657
                                   ---------  ----------  -----------  ----------  ----------
   Total Commercial Loans             91,737      99,451      100,034      85,938      92,994
  Residential Mortgage Loans           1,976       1,849        2,719         917       1,702

  Consumer Loans                       1,345       1,248        1,132       1,305       1,468
                                   ---------  ----------  -----------  ----------  ----------

   Total Non-Performing Loans       $ 95,058   $ 102,548   $  103,885   $  88,160   $  96,164
                                   =========  ==========  ===========  ==========  ==========


  Residential Developer Loans (a)   $ 37,939    $ 36,594    $  50,002   $  43,989   $  52,403
                                   =========  ==========  ===========  ==========  ==========

  (a) Represents the amount of loans to residential developers secured by single family
   residential property which is included in non-performing commercial loans secured by real
   estate

Total non-performing assets were $143.8 million, or 8.71 percent of total assets, at June 30, 2010. A break-down of non-performing assets is shown in the table below.


                                   June 30,            March 31,               December 31,               September 30,          June 30,
 Dollars in 000s                     2010                 2010                     2009                       2009                 2009
                                ---------------------------------------------------------------------------------------------------------

 Non-Performing Loans                                $ 95,058            $ 102,548            $ 103,885     $ 88,160             $ 96,164
 Other Repossessed Assets                                  81                   84                  124          224                  339

 Other Real Estate Owned                               48,672               45,790               37,184       33,419               23,516
                                ---------------------------------------------------------------------------------------------------------

  Total Non-Performing Assets                      $  143,811           $  148,422           $  141,193   $  121,803           $  120,019
                                =========================================================================================================

Balance Sheet, Liquidity and Capital

Total assets were $1.65 billion at June 30, 2010, a decrease of $179.1 million from $1.83 billion at December 31, 2009. Total loans were $1.36 billion at June 30, 2010, down $145.9 million from $1.51 billion at December 31, 2009.

Commercial loans decreased by $125.2 million representing the majority of the decrease since December 31, 2009. The commercial real estate portfolio was reduced by $69.7 million as the Company continues its efforts to reduce exposure in these segments. Commercial and industrial loans declined by $55.4 million due in part to a general decline in business activity.

Of the decline in commercial real estate loans, $33.0 million of the decrease was in loans to residential developers, the portfolio that has caused the majority of stress within the Company's loan portfolio.

The composition of the commercial loan portfolio is shown in the table below:


                                                                                       December
                                         June 30,                 March 31,               31,    September 30,       June 30,
 Dollars in 000s                           2010                     2010                 2009         2009             2009
                                    ---------------------------------------------------------------------------------------------

 Construction and development               $ 150,443        $ 156,867                $ 162,615       $  195,712        $ 211,247

 Other commercial real estate                 582,882          611,904                  640,437          638,952          653,058
                                    ---------------------------------------------------------------------------------------------
  Commercial Loans Secured by Real
   Estate                                     733,325          768,771                  803,052          834,664          864,305

 Commercial and Industrial                    314,087          344,294                  369,523          375,636          404,660
                                    ---------------------------------------------------------------------------------------------

  Total Commercial Loans                  $ 1,047,412     $  1,113,065              $ 1,172,575      $ 1,210,300      $ 1,268,965
                                    =============================================================================================


 Residential Developer Loans (a)           $  120,344       $  130,727               $  153,327        $ 164,852        $ 178,319
                                    =============================================================================================

 (a) Represents the amount of loans to residential developers secured by single family residential property which is included in
  commercial loans secured by real estate

The reduction in loans since year end 2009 allowed the Company to reduce wholesale funding, including out-of-market deposits acquired through brokers, by $93.2 million and to reduce other borrowed funds by $56.0 million. Total deposits were $1.31 billion at June 30, 2010, down $103.6 million from $1.42 billion at December 31, 2009, primarily from the run-off of brokered deposits. Customer deposit accounts remain fully insured to the highest levels available under the FDIC insurance programs.

Two of the three regulatory capital ratios for Macatawa Bank, including the tier one risk-based capital ratio and the tier one leverage capital ratio, were maintained at levels in excess of those ordinarily required to be categorized as "well capitalized" under applicable regulatory capital guidelines. Despite these ratios, the Bank was categorized as "adequately capitalized" as its total risk-based capital ratio of 8.71 percent was below the 10.0 percent minimum to be categorized as "well capitalized." In addition, because the Bank is subject to the Consent Order, the Bank cannot be categorized as "well capitalized" regardless of actual capital levels. At June 30, 2010, the Bank did not have capital at levels required by the Consent Order.

"Our goal remains to return to 'well-capitalized' status, and we continue to work closely with our regulators in our efforts to comply with the terms of the Consent Order. While we are encouraged by the results of the quarter and are cautiously optimistic about the prospects for the rest of 2010, we remain committed to building back profitability and improving our valuation. Although improvements in our operating results may be uneven during 2010, we continue to expect the overall profit trend to be positive," Postma said. "The Board of Directors and management team are determined to restore Macatawa Bank to sustained profitability and return to a position of capital strength. The second quarter was an important step in that direction."

About Macatawa Bank

Headquartered in Holland, Michigan, Macatawa Bank Corporation is the parent company for Macatawa Bank. Through its banking subsidiary, the Company 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, ATMs and Internet banking services, trust and employee benefit plan services, and various investment services. The Company emphasizes its local management team and decision making, along with providing customers excellent service and superior financial products.

"CAUTIONARY STATEMENT": This press release contains forward-looking statements that are based on management's current beliefs, expectations, assumptions, estimates, plans and intentions. Forward-looking statements are identifiable by words or phrases such as "will," "expect," "strategic," "strives," "assume," "long road to travel," "future," "longer term," "continue," "intend," "until," "going-forward," "prospects" and other similar words or phrases. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to the effect of new policies and practices, future net interest margin, trends in real estate valuations, conditions in the real estate markets, future levels of non-performing loans, the rate of asset dispositions, adequacy of our capital, future capital levels, capital raising activities, future growth and funding sources, future liquidity levels, future profitability levels, the effects on earnings of changes in interest rates and the future level of other revenue sources. All statements with references to future time periods are forward-looking. Management's determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including goodwill, mortgage servicing rights and deferred tax assets) and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involves judgments that are inherently forward-looking. Our ability to fully comply with our Consent Order, improve regulatory capital ratios, successfully implement new programs and initiatives, increase efficiencies, address regulatory issues, improve internal controls over financial reporting, maintain our current level of deposits and other sources of funding, maintain liquidity, respond to declines in collateral values and credit quality, continue as a going concern and improve profitability is not entirely within our control and is not assured. The future effect of changes in the real estate, financial and credit markets and the national and regional economy on the banking industry, generally, and Macatawa Bank Corporation, specifically, are also inherently uncertain. Failure to comply with the agreements in our Consent Order could result in further regulatory action which could have a material adverse effect on Macatawa Bank Corporation and its shareholders. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extend, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed in or implied by such forward-looking statements. Macatawa Bank Corporation does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009 and in "Part II, Item 1A -- Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010; changes in market interest rates, changes in FDIC assessment rates, changes in banking laws and regulations; changes in property values, asset quality, and the financial capability of borrowers; actions of bank regulatory authorities; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances and issues; the impact of possible future litigation; governmental and regulatory policy changes; changes in the quality and composition of our loan portfolio; changes in value and credit quality of investment securities; the local and global effects of current and future military actions; and current uncertainties and fluctuations in the financial markets and stocks of financial services providers due to concerns about credit availability and concerns about the Michigan economy in particular. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

  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                 2010        2009          2010          2009
                                ---------  ------------  ------------  ------------
  Total interest income          $ 19,537      $ 24,531      $ 40,475      $ 49,655

  Total interest expense            6,719        11,133        14,629        23,461
                                ---------  ------------  ------------  ------------
  Net interest income              12,818        13,398        25,846        26,194

  Provision for loan loss           1,800        20,630        21,510        31,160
                                ---------  ------------  ------------  ------------
  Net interest income after
   provision for loan loss         11,018       (7,232)         4,336       (4,966)

  NON-INTEREST INCOME
  Deposit service charges           1,063         1,210         2,128         2,439
  Net gains on mortgage loans         399           501           580         2,123
  Trust fees                          797           984         1,686         1,917
  Net gains on security sales       2,715            --         2,715            --

  Other                             1,348         1,529         2,681         3,068
                                ---------  ------------  ------------  ------------
  Total non-interest income         6,322         4,224         9,790         9,547

  NON-INTEREST EXPENSE
  Salaries and benefits             5,554         6,232        11,005        12,375
  Occupancy                           989         1,056         2,041         2,212
  Furniture and equipment             888         1,018         1,869         2,046
  FDIC assessment                   1,192         1,707         2,450         2,478
  Administration and
   disposition of problem
   assets                           2,464         2,439         7,999         4,598
  Trade Partners litigation
   settlement                          --         5,533            --         5,533

  Other                             3,202         3,279         6,851         6,503
                                ---------  ------------  ------------  ------------

  Total non-interest expense       14,289        21,264        32,215        35,745
                                ---------  ------------  ------------  ------------
  Income (loss) before income
   tax                              3,051      (24,272)      (18,089)      (31,164)

  Income tax expense (benefit)      1,303         6,134         1,303         3,384
                                ---------  ------------  ------------  ------------


  Net income (loss)               $ 1,748    $ (30,406)    $ (19,392)    $ (34,548)
                                ---------  ------------  ------------  ------------
  Dividends declared on
   preferred shares                    --           939            --         1,878
                                ---------  ------------  ------------  ------------
  Net income (loss) available
   to common shares               $ 1,748    $ (31,345)    $ (19,392)    $ (36,426)
                                =========  ============  ============  ============

  Basic earnings per common
   share                           $ 0.10      $ (1.82)      $ (1.10)      $ (2.12)
  Diluted earnings per common
   share                           $ 0.10      $ (1.82)      $ (1.10)      $ (2.12)
  Return on average assets          0.41%        -5.87%        -2.23%        -3.49%
  Return on average equity         10.32%       -86.53%       -51.25%       -50.03%
  Net interest margin               3.29%         2.79%         3.26%         2.72%
  Efficiency ratio                 74.66%       120.67%        90.40%       100.01%

  BALANCE SHEET DATA                          June 30     December 31     June 30

  Assets                                       2010          2009          2009
                                           ------------  ------------  ------------
  Cash and due from banks                      $ 26,311      $ 24,687      $ 23,057
  Federal funds sold and other
   short-term investments                       118,825        54,062        96,013
  Securities available for
   sale                                          20,112       129,090       159,194
  Securities held to maturity                        83           414           656
  Federal Home Loan Bank Stock                   12,275        12,275        12,275
  Loans held for sale                             1,431           649           811
  Total loans                                 1,364,881     1,510,816     1,621,895

  Less allowance for loan loss                   56,286        54,623        37,621
                                           ------------  ------------  ------------

  Net loans                                   1,308,595     1,456,193     1,584,274
                                           ------------  ------------  ------------
  Premises and equipment, net                    59,770        61,015        62,327
  Bank-owned life insurance                      24,675        24,395        23,932
  Other real estate owned                        48,672        37,183        23,516

  Other assets                                   28,998        30,209        25,884
                                           ------------  ------------  ------------


  Total Assets                              $ 1,649,747   $ 1,830,172   $ 2,011,939
                                           ============  ============  ============

  Liabilities and
   Shareholders' Equity
  Noninterest-bearing deposits                $ 263,324     $ 221,470     $ 219,229

  Interest-bearing deposits                   1,049,377     1,194,867     1,356,823
                                           ------------  ------------  ------------
  Total deposits                              1,312,701     1,416,337     1,576,052
  Other borrowed funds                          222,003       278,023       268,690
  Surbordinated debt                              1,650         1,650           950
  Long-term debt                                 41,238        41,238        41,238

  Other liabilities                               5,915         4,933         8,375
                                           ------------  ------------  ------------
  Total Liabilities                           1,583,507     1,742,181     1,895,305


  Shareholders' equity                           66,240        87,991       116,634
                                           ------------  ------------  ------------

  Total Liabilities and
   Shareholders' Equity                     $ 1,649,747   $ 1,830,172   $ 2,011,939
                                           ============  ============  ============
  MACATAWA BANK CORPORATION
  SELECTED CONSOLIDATED FINANCIAL DATA
  (Unaudited)

  (Dollars in thousands except per share information)

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

                           2nd Qtr       1st Qtr       4th Qtr       3rd Qtr       2nd Qtr

                            2010          2010          2009          2009          2009          2010          2009
                        ------------  ------------  ------------  ------------  ------------  ------------  ------------
  EARNINGS SUMMARY
  Net interest income       $ 12,818      $ 13,028      $ 13,406      $ 13,194      $ 13,398      $ 25,846      $ 26,194
  Provision for loan
   loss                        1,800        19,710        21,600        21,580        20,630        21,510        31,160
  Total non-interest
   income                      6,322         3,468         3,515         3,634         4,224         9,790         9,547
  Total non-interest
   expense                    14,289        17,926        15,915        15,731        21,264        32,215        35,745
  Federal income tax
   expense (benefit)           1,303            --      (11,385)         (600)         6,134         1,303         3,384
  Net income (loss)            1,748      (21,140)       (9,209)      (19,883)      (30,406)      (19,392)      (34,548)
  Dividends declared
   on preferred shares            --            --            --           991           939            --         1,878
  Net income (loss)
   available to common
   shares                    $ 1,748    $ (21,140)     $ (9,209)    $ (20,874)    $ (31,345)    $ (19,392)    $ (36,426)

  Basic earnings per
   common share               $ 0.10      $ (1.19)      $ (0.52)      $ (1.18)      $ (1.82)      $ (1.10)      $ (2.12)
  Diluted earnings per
   common share               $ 0.10      $ (1.19)      $ (0.52)      $ (1.18)      $ (1.82)      $ (1.10)      $ (2.12)

  MARKET DATA
  Book value per
   common share               $ 1.87        $ 1.91        $ 3.10        $ 3.64        $ 4.74        $ 1.87        $ 4.74
  Tangible book value
   per common share           $ 1.85        $ 1.88        $ 3.07        $ 3.62        $ 4.71        $ 1.85        $ 4.71
  Market value per
   common share               $ 1.20        $ 1.75        $ 2.09        $ 2.60        $ 2.82        $ 1.20        $ 2.82
  Average basic common
   shares                 17,692,231    17,696,922    17,699,552    17,669,440    17,260,269    17,694,269    17,211,524
  Average diluted
   common shares          17,692,231    17,696,922    17,699,552    17,669,440    17,260,269    17,694,269    17,211,524
  Period end common
   shares                 17,682,458    17,696,423    17,698,108    17,701,817    17,659,264    17,682,458    17,659,264

  PERFORMANCE RATIOS
  Return on average
   assets                      0.41%        -4.74%        -1.95%        -3.97%        -5.87%        -2.23%        -3.49%
  Return on average
   equity                     10.32%      -101.04%       -38.85%       -67.58%       -86.53%       -51.25%       -50.03%
  Net interest margin
   (fully taxable
   equivalent)                 3.29%         3.22%         3.04%         2.83%         2.79%         3.26%         2.72%
  Efficiency ratio            74.66%       108.67%        94.05%        93.48%       120.67%        90.40%       100.01%
  Full-time equivalent
   employees (period
   end)                          391           375           380           395           400           391           400

  ASSET QUALITY
  Gross charge-offs          $ 6,851      $ 14,235      $ 15,563      $ 11,758      $ 22,317      $ 21,087      $ 32,621
  Net charge-offs            $ 6,296      $ 13,550      $ 15,026      $ 11,152      $ 22,105      $ 19,847      $ 31,801
  Net charge-offs to
   average loans
   (annualized)                1.79%         3.68%         3.91%         2.79%         5.27%         2.75%         3.73%
  Nonperforming loans       $ 95,058     $ 102,548     $ 103,885      $ 88,160      $ 96,164      $ 95,058      $ 96,164
  Other real estate
   and repossessed
   assets                   $ 48,753      $ 45,874      $ 37,308      $ 33,643      $ 23,885      $ 48,753      $ 23,855
  Nonperforming loans
   to total loans              6.96%         7.13%         6.88%         5.66%         5.93%         6.96%         5.93%
  Nonperforming assets
   to total assets             8.72%         8.64%         7.71%         6.15%         5.97%         8.72%         5.97%
  Allowance for loan
   loss                     $ 56,286      $ 60,782      $ 54,623      $ 48,049      $ 37,621      $ 56,286      $ 37,621
  Allowance for loan
   loss to total loans         4.12%         4.23%         3.62%         3.09%         2.32%         4.12%         2.32%
  Allowance for loan
   loss to
   nonperforming loans        59.21%        59.27%        52.58%        54.50%        39.12%        59.21%        39.12%

  CAPITAL & LIQUIDITY
  Average equity to
   average assets
   (Consolidated)              4.02%         4.69%         5.01%         5.94%         6.79%         4.36%         6.99%
  Tier 1 capital to
   average assets
   (Consolidated)              5.25%         4.80%         6.01%         6.30%         7.44%         5.25%         7.44%
  Total capital to
   risk-weighted
   assets
   (Consolidated)              8.81%         8.27%         9.23%         9.46%        10.33%         8.81%        10.33%
  Tier 1 capital to
   average assets
   (Bank)                      6.31%         5.83%         6.58%         6.70%         7.43%         6.31%         7.43%
  Total capital to
   risk-weighted
   assets (Bank)               8.70%         8.14%         9.07%         9.32%        10.16%         8.70%        10.16%

  END OF PERIOD
   BALANCES
  Total portfolio
   loans                 $ 1,364,881   $ 1,438,107   $ 1,510,816   $ 1,556,903   $ 1,621,895   $ 1,364,881   $ 1,621,895
  Interest earning
   assets                  1,517,318     1,589,670     1,702,227     1,857,467     1,887,636     1,517,318     1,887,636
  Total assets             1,649,747     1,718,429     1,830,172     1,981,772     2,011,939     1,649,747     2,011,939
  Deposits                 1,312,701     1,370,767     1,416,337     1,546,311     1,576,052     1,312,701     1,576,052
  Total shareholders'
   equity                     66,240        66,917        87,991        97,674       116,634        66,240       116,634

  AVERAGE BALANCES
  Total portfolio
   loans                 $ 1,408,672   $ 1,473,337   $ 1,538,038   $ 1,598,743   $ 1,678,648   $ 1,440,826   $ 1,707,035
  Interest earning
   assets                  1,555,372     1,649,121     1,769,242     1,870,995     1,940,364     1,601,988     1,949,809
  Total assets             1,686,311     1,785,286     1,893,275     2,001,415     2,071,098     1,735,525     2,084,530
  Deposits                 1,341,243     1,394,701     1,467,497     1,554,127     1,611,922     1,367,824     1,616,018
  Total shareholders'
   equity                     67,733        83,692        94,819       117,687       140,556        75,669       145,623
CONTACT:  Macatawa Bank Corporation
          Jon Swets, SVP and CFO
          616.494.7645