Holland, Michigan - Macatawa Bank Corporation Reports Record Third Quarter Earnings and Assets Over $2 Billion

Macatawa Bank Corporation today announced net income for the third quarter of 2006. Net income for the quarter was a record $6.01 million, an 8% increase over third quarter 2005 net income of $5.55 million. Diluted earnings per share totaled $0.36 for the quarter compared to $0.34 for the third quarter of 2005. The results for the third quarter represent a 1.20% ROA and a 15.69% ROE. Net income for the first nine months of 2006 increased 11% to $16.99 million, or $1.03 per diluted share, as compared to net income of $15.35 million, or $0.93 per diluted share, for the first nine months of 2005. The results for the first nine months of 2006 represent a 1.16% ROA and 15.20% ROE.

“Macatawa achieved two major milestones during the third quarter, as quarterly earnings exceeded $6 million for the first time and total assets passed the $2 billion mark. Surpassing $2 billion in total assets is especially significant considering we began less than nine years ago,” commented Ben Smith, Chairman and CEO. Macatawa now has over 460 employees, 24 full service branch locations, and a complete line of personal, business and investment services. Its market extends throughout Ottawa and Kent counties and into Allegan County. “In Ottawa County, we are now the #1 Bank in total deposit market share. We are proud of the lasting franchise we have developed,” added Mr. Smith.

Total assets increased $216.5 million from September 30, 2005 to $2.04 billion at September 30, 2006. Over the same twelve month period, total loans increased $170.9 million to $1.68 billion and total deposits increased $175.3 million to $1.63 billion at September 30, 2006. For the quarter, core deposits grew $86 million, 27% on an annualized basis. Macatawa also opened over 1,000 net new deposit accounts during the quarter. “Generating growth by gathering deposit balances within our markets remains a hallmark of our success,” stated Mr. Smith. “This outstanding growth in a difficult market is a tribute to the exceptional quality of our people and their commitment to community banking. Their focus on identifying the needs of our customers and recommending appropriate financial solutions has been the key to our success,” added Mr. Smith.

Third quarter net interest income totaled $17.0 million, an increase of $978,000 compared to the third quarter of 2005. The improvement in net interest income was driven primarily by an increase in average earning assets offset by a decline in the net interest margin. Average earning assets grew by 10% or $168.5 million from $1.70 billion for the third quarter of 2005 to $1.87 billion for the third quarter of 2006. The net interest margin was 3.62% for the quarter, down 12 basis points from 3.74% for the second quarter of 2006 and 14 basis points from 3.76% for the third quarter of 2005. The cost of funds rose more than the yield on assets and is the primary reason for the decline in net interest margin. Deposit customers continue to shift into higher costing deposit products within the generally high rate environment. At the same time, the increase in the yield on loans began to moderate during the quarter as the Federal Reserve Bank halted its series of 17 straight rate increases.

Non-interest income was $3.5 million for the third quarter of 2006 compared to $3.6 million for the third quarter of 2005. Non-interest income for the prior year quarter included a $148,000 gain on the sale of a commercial property. In addition, mortgage sale gains decreased by $332,000 compared to the prior year quarter resulting from both a challenging real estate market and interest rate environment. However, this decline was offset by increases in revenue from trust and other financial services as the Company continues to gain new customers in these service areas. Non-interest expense was $11.3 million for the quarter, remaining flat when compared to $11.3 million for the second quarter of 2006 and up slightly compared to $10.7 million for the third quarter of 2005. For the past three quarters, the Company has been able to manage its overhead costs at just over $11.0 million per quarter despite its continued commitment to expansion. Compared to the prior year quarter, the majority of the increase in non-interest expense relates to an increase of $438,000 in salaries and benefits. This increase included $174,000 in stock option compensation expense related to the adoption of FAS 123, Revised beginning January 1, 2006. The remainder of the increase was related to additional staffing in each line of business and in support departments consistent with growth of the Bank.

The provision for loan losses was $490,000 for the quarter, down from $855,000 for the third quarter of 2005. A decline in net charge-offs and slightly slower growth in total loans for the quarter resulted in the decline in the provision for loan losses. Annualized net charge-offs were 0.05% of average loans for the quarter, down from 0.09% for the third quarter of 2005. Non-performing assets to total assets increased slightly to 0.42% at September 30, 2006 compared to 0.38% at June 30, 2006 and 0.28% at September 30, 2005. The allowance for loan losses represents 1.33% of total loans at September 30, 2006.

The Company remained well-capitalized at September 30, 2006 with a total risk-based capital ratio of 10.95%.

“The banking environment continues to be challenging. Long-term rates are now lower than short-term rates, making it difficult to grow revenue through improved profit margins. Despite this challenging business climate, our third quarter results were favorable and we our confident our commitment to community banking will continue to ensure our long-term success,” concluded Mr. Smith.

Conference Call

Macatawa Bank Corporation will hold its quarterly earnings conference call on Tuesday, October 17, 2006, 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 and Macatawa Investment Services. Through its subsidiaries, the Corporation offers a full range of banking, investment and trust services to individuals, businesses, and governmental entities from a network of 24 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 September 30						Nine Months Ended September 30

	2006			2005			2006			2005

EARNINGS SUMMARY
Total interest income	$	34,779		$	27,752		$	97,916		$	76,308
Total interest expense		17,696			11,647			47,544			29,872

Net interest income		17,083			16,105			50,372			46,436
Provision for loan loss		490			855			1,990			2,880

Net interest income after provision for loan loss		16,593			15,250			48,382			43,556


NON-INTEREST INCOME
Deposit service charges		1,256			1,259			3,642			3,138
Gain on sale of loans		365			697			1,288			1,792
Trust fees		871			746			2,493			2,177
Other		1,011			947			2,903			2,584

Total non-interest income		3,503			3,649			10,326			9,691

NON-INTEREST EXPENSE
Salaries and benefits		6,193			5,755			18,524			16,590
Occupancy		910			797			2,630			2,387
Furniture and equipment		790			759			2,362			2,182
Other		3,364			3,377			10,160			9,452

Total non-interest expense		11,257			10,688			33,676			30,611

Income before income tax		8,839			8,211			25,032			22,636
Federal income tax expense		2,830			2,661			8,046			7,289


Net income	$	6,009		$	5,550		$	16,986		$	15,347


Basic earnings per share	$	0.37		$	0.35		$	1.05		$	0.96
Diluted earnings per share	$	0.36		$	0.34		$	1.03		$	0.93
Return on average assets		1.20	%		1.21	%		1.16	%		1.16	%
Return on average equity		15.69	%		16.02	%		15.20	%		15.17	%
Net interest margin		3.62	%		3.76	%		3.71	%		3.81	%
Efficiency ratio		54.68	%		54.11	%		55.48	%		54.54	%

BALANCE SHEET DATA

	September 30 2006		September 30 2005		December 31 2005

Assets Cash and due from banks	$	36,916	$	36,767	$	49,101
Federal funds sold		5,457		--		--
Securities available for sale		192,864		158,875		156,696
Securities held to maturity		2,713		3,909		3,907
Federal Home Loan Bank Stock		12,915		13,910		13,910
Loans held for sale		2,232		4,244		2,331
Total loans		1,682,359		1,511,458		1,547,879
Less allowance for loan loss		22,427		20,526		20,992

Net loans		1,659,932		1,490,932		1,526,887

Premises and equipment, net		57,853		51,347		53,028
Acquisition intangibles		25,571		25,955		25,856
Bank-owned life insurance		21,558		20,654		20,814
Other assets		23,020		17,890		17,460


Total Assets	$	2,041,031	$	1,824,483	$	1,869,990


Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	168,438	$	172,663	$	188,762
Interest-bearing deposits		1,464,378		1,284,821		1,319,010

Total deposits		1,632,816		1,457,484		1,507,772
Federal funds purchased		--		31,414		25,809
Other borrowed funds		202,055		147,196		145,161
Long-term debt		41,238		41,238		41,238
Other liabilities		9,797		7,820		8,266

Total Liabilities		1,885,906		1,685,152		1,728,246

Shareholders' equity		155,125		139,331		141,744


Total Liabilities and Shareholders' Equity	$	2,041,031	$	1,824,483	$	1,869,990

MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)

(Dollars in thousands except per share information)

	Quarterly															Year to Date

	3rd Qtr 2006			2nd Qtr 2006			1st Qtr 2006			4th Qtr 2005			3rd Qtr 2005			2006			2005

EARNINGS SUMMARY
Net interest income	$	17,083		$	16,975		$	16,314		$	16,401		$	16,105		$	50,372		$	46,436
Provision for loan loss		490			800			700			795			855			1,990			2,880
Total non-interest income		3,503			3,629			3,194			3,314			3,649			10,326			9,691
Total non-interest expense		11,257			11,333			11,085			10,813			10,688			33,676			30,611
Income taxes		2,830			2,715			2,501			2,565			2,661			8,046			7,289
Net income	$	6,009		$	5,756		$	5,222		$	5,542		$	5,550		$	16,986		$	15,347

Basic earnings per share	$	0.37		$	0.36		$	0.32		$	0.34		$	0.35		$	1.05		$	0.96
Diluted earnings per share	$	0.36		$	0.35		$	0.32		$	0.34		$	0.34		$	1.03		$	0.93

MARKET DATA
Book value per share	$	9.56		$	9.13		$	8.97		$	8.80		$	8.66		$	9.56		$	8.66
Market value per share	$	22.89		$	23.39		$	24.07		$	23.10		$	21.72		$	22.89		$	21.72
Average basic common shares		16,214,390			16,200,172			16,164,946			16,100,083			16,076,699			16,192,727			16,047,294
Average diluted common shares		16,557,849			16,542,131			16,568,345			16,520,970			16,507,189			16,568,633			16,457,667
Period end common shares		16,221,682			16,205,196			16,188,015			16,109,087			16,091,173			16,221,682			16,091,173

PERFORMANCE RATIOS
Return on average assets		1.20	%		1.18	%		1.11	%		1.20	%		1.21	%		1.16	%		1.16	%
Return on average equity		15.69	%		15.53	%		14.34	%		15.69	%		16.02	%		15.20	%		15.17	%
Net interest margin (FTE)		3.62	%		3.74	%		3.78	%		3.82	%		3.76	%		3.71	%		3.81	%
Efficiency ratio		54.68	%		55.00	%		56.82	%		54.85	%		54.11	%		55.48	%		54.54	%

ASSET QUALITY
Net charge-offs	$	208		$	46		$	300		$	329		$	339		$	554		$	1,605
Nonperforming loans	$	5,768		$	5,781		$	5,545		$	4,204		$	3,565		$	5,768		$	3,565
Other real estate and repossessed assets	$	2,758		$	1,725		$	1,401		$	692		$	1,632		$	2,758		$	1,632
Nonperforming loans to total loans		0.34	%		0.35	%		0.35	%		0.27	%		0.24	%		0.34	%		0.24	%
Nonperforming assets to total assets		0.42	%		0.38	%		0.36	%		0.26	%		0.28	%		0.42	%		0.28	%
Net charge-offs to average loans (annualized)		0.05	%		0.01	%		0.08	%		0.09	%		0.09	%		0.05	%		0.15	%
Allowance for loan loss to total loans		1.33	%		1.34	%		1.35	%		1.36	%		1.36	%		1.33	%		1.36	%

CAPITAL & LIQUIDITY
Average equity to average assets		7.62	%		7.61	%		7.76	%		7.66	%		7.56	%		7.66	%		7.65	%
Tier 1 capital to risk-weighted assets		9.59	%		9.49	%		9.69	%		9.54	%		9.65	%		9.59	%		9.65	%
Total capital to risk-weighted assets		10.95	%		10.85	%		11.06	%		11.07	%		11.02	%		10.95	%		11.02	%
Loans to deposits + Other borrowed funds		91.69	%		93.88	%		94.52	%		93.64	%		94.19	%		91.69	%		94.19	%

END OF PERIOD BALANCES
Total portfolio loans	$	1,682,359		$	1,653,035		$	1,590,138		$	1,547,879		$	1,511,458		$	1,682,359		$	1,511,458
Earning assets		1,897,447			1,841,812			1,776,486			1,725,832			1,691,699			1,897,447			1,691,699
Total assets		2,041,031			1,981,318			1,903,965			1,869,990			1,824,483			2,041,031			1,824,483
Deposits		1,632,816			1,573,101			1,542,567			1,507,772			1,457,484			1,632,816			1,457,484
Total shareholders' equity		155,125			147,899			145,153			141,744			139,331			155,125			139,331

AVERAGE BALANCES
Total portfolio loans	$	1,664,378		$	1,626,102		$	1,563,277		$	1,528,007		$	1,496,063		$	1,618,289		$	1,452,328
Earning assets		1,873,191			1,815,807			1,743,952			1,710,742			1,704,660			1,811,457			1,635,072
Total assets		2,010,840			1,949,399			1,876,713			1,843,737			1,833,571			1,946,142			1,762,574
Deposits		1,605,567			1,556,712			1,517,460			1,445,437			1,433,795			1,560,236			1,371,877
Total shareholders' equity		153,147			148,252			145,639			141,311			138,556			149,040			134,895