FORM 10-KSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                                                OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR
                                         [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                                                OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number 000-25927

MACATAWA BANK CORPORATION
                                        (Exact name of registrant as specified in its charter)

|MICHIGAN
(State of other jurisdiction of
incorporation or organization) |  | 38-3391345
(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------- |  | -----------------------------------------------

10753 Macatawa Drive, Holland, Michigan 49424(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (616) 820-1444

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock.

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Indicate by check mark whether the
issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YesX No ____

Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form
and no disclosure will be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendments to this Form 10-K. [ ]

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
YesX.

The registrants revenues for
2003 were $74,078,000. The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the Registrant, based on a per share price of $24.18 as
of June 30, 2003, was $182,110,000 (common stock, no par value). As of March 4, 2004,
there were outstanding 8,375,972 shares of the Companys common stock (no par value).
Portions of the Companys Proxy Statement for the Annual Meeting of Shareholders to
be held April 21, 2004 are incorporated by reference into Part II and Part III of this
Report.

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PART I

# ITEM 1: Business

As
used in this Annual Report, the terms we, us, our and
Macatawa mean Macatawa Bank Corporation and its subsidiaries, unless the
context indicates another meaning.

# General

Macatawa
Bank Corporation is a Michigan corporation and is a financial holding company and the bank
holding company for its wholly owned banking subsidiary, Macatawa Bank, as well as
Macatawa Investment Services, Inc. and Macatawa Statutory Trust I. Effective January 9,
2002, Macatawa Bank Corporation elected to become a financial holding company pursuant to
Title I of the Gramm-Leach-Bliley Act. Macatawa Bank commenced operations on November 25,
1997. Grand Bank was formed in 1987 and operated from a single location in Grand Rapids,
Michigan. Grand Bank became a wholly owned subsidiary effective April 1, 2002 upon the
completion of the acquisition of Grand Bank Financial Corporation (GBFC), and its results
are included in the consolidated statements of income since this effective date. To
achieve further synergies from the Grand Bank acquisition, we merged Grand Bank into
Macatawa Bank effective January 1, 2003 with the combined bank named Macatawa Bank. At the
same time, Grand Bank Mortgage Company was merged into Macatawa Bank Mortgage Company.

Macatawa
Bank is a Michigan chartered bank with depository accounts insured by the Federal Deposit
Insurance Corporation. The bank operates twenty branch offices and a lending and
operational service facility offering commercial and personal banking services, including
checking and savings accounts (including certificates of deposit), safe deposit boxes,
travelers checks, money orders, trust services and commercial, mortgage and consumer loans
in Kent County, Ottawa County, and northern Allegan County, Michigan. Macatawa Investment
Services was formed in October 2001 and gained approval in June 2002 from the NASD to
commence operations as a broker/dealer. Macatawa Investment Services provides various
brokerage services including discount brokerage, personal financial planning and
consultation regarding mutual funds. Macatawa Statutory Trust I is a grantor trust that
issued a pooled trust preferred security in July, 2003. Macatawa Bank Mortgage Company, a
subsidiary of Macatawa Bank, originates and sells residential mortgage loans into the
secondary market on a servicing released basis. As of December 31, 2003, we had total
assets of $1.4 billion, total deposits of $1.1 billion, approximately 71,000 deposit
accounts and shareholders equity of $121.9 million.

Our
headquarters and administrative offices are located at 10753 Macatawa Drive, Holland,
Michigan 49424, and our telephone number is (616) 820-1444. Our internet website
address is www.macatawabank.com. We make available free of charge through this website our
annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on
Form 8-K and amendments to those reports as soon as reasonably practicable after filing
such reports with the Securities and Exchange Commission. The reference to our website
address does not constitute incorporation by reference of the information contained on the
website, and the information contained on the website is not part of this document.

# Products and Services

Deposit
Services. We offer a broad range of deposit services, including checking
accounts, savings accounts and time deposits of various types. Transaction accounts and
time certificates are tailored to the principal market area at rates competitive with
those offered in the area. All deposit accounts are insured by the FDIC up to the maximum
amount permitted by law. We solicit these accounts from individuals, businesses,
associations, churches, nonprofit organizations, financial institutions and government
authorities. We may also use alternative funding sources as needed, including advances
from Federal Home Loan Banks, conduit financing and the packaging of loans for
securitization and sale.

Deposits
are gathered primarily from the communities we serve through our network of 20 branches.
We offer business and consumer checking accounts, regular and money market savings
accounts, and certificates of deposits having many options in their terms.

2

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We
set our deposit pricing to be competitive with other banks in our market area. This has
enabled us to increase deposits from new, as well as existing customers, while maintaining
a healthy net interest margin. We periodically purchase brokered deposits to supplement
funding needs. These are time accounts originated outside of our local market area.
Brokered deposits comprised approximately 10% of total deposits at December 31, 2003 and
approximately 12% at December 31, 2002. We operate in a very competitive environment,
competing with other local banks similar in size and with significantly larger regional
banks. We monitor rates at other financial institutions in the area to ascertain that our
rates are competitive with the market. We also attempt to offer a wide variety of products
to meet the needs of our customers.

Deposit
Portfolio Composition.The following table sets forth the average deposit
balances and the weighted average rates paid thereon.

|                           |  |  |   |                      |  |     
|-------------------------- |  |  | - | -------------------- |  | ----
|
|(Dollars in thousands)     |  |  |   |                      |  |     
|                           |  |  |   | Average for the Year
|                           |  |  |   |                     
|                           |  |  |   | 2003                 |  | 2002
|                           |  |  |   |                     
|                           |  |  |   | Amount               |  |     
|                           |  |  |   |                     
|Noninterest bearing demand |  |  | $ | 110,670              |  |     
|NOW accounts               |  |  |   | 137,361              |  |     
|MMDA/savings               |  |  |   | 293,509              |  |     
|Time                       |  |  |   | 432,230              |  |     
|                           |  |  |   |                     
|Total deposits             |  |  | $ | 973,770              |  |     
|                           |  |  |   |                     

The
following table summarizes time deposits in amounts of $100,000 or more by time remaining
until maturity as of December 31, 2003:

(Dollars in thousands)

|                               | 
|------------------------------ | 
|
|                               | 
|                               | 
|                               | 
|Three months or less           | 
|Over 3 months through 6 months | 
|Over 6 months through 1 year   | 
|Over 1 year                    | 
|                               | 
|Total                          | 
|                               | 

3

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Lending
Activities.

Loan
Portfolio Composition. The following table reflects the composition of our
loan portfolio and the corresponding percentage of our total loans represented by each
class of loans as of the dates indicated.

Loan Portfolio
Composition

|                            |                        |  |   |           |   |  |      |  |   |        
|--------------------------- | ---------------------- |  | - | --------- | - |  | ---- |  | - | -------
|
|                            |                        |  |   |           |   |  |      |  |   |        
|(Dollars in thousands)      | Year Ended December 31
|                            |                        | 
|                            |                        |  |   | 2003      |   |  |      |  |   | 2002   
|                            |                        | 
|                            |                        |  |   | Amount    |   |  | %    |  |   | Amount 
|                            |                        | 
|Commercial real estate      |                        |  | $ | 467,918   |   |  | 40%  |  | $ | 356,310
|Residential real estate     |                        |  |   | 172,647   |   |  | 15%  |  |   | 133,843
|Other commercial            |                        |  |   | 381,097   |   |  | 33%  |  |   | 341,370
|Consumer                    |                        |  |   | 135,445   |   |  | 12%  |  |   | 129,515
|                            |                        | 
|Total loans                 |                        |  | $ | 1,157,107 |   |  | 100% |  | $ | 961,038
|                            |                        | 
|Less:                       |                        | 
|Allowance for loan losses   |                        |  |   | (16,093   | ) |  |      |  |   | (13,472
|                            |                        | 
|Total loans receivable, net |                        |  | $ | 1,141,014 |   |  |      |  | $ | 947,566
|                            |                        | 

Nonperforming Assets.  The following
table shows the composition and amount of our nonperforming assets.

|(Dollars in thousands)                              | December 31
|--------------------------------------------------- | -----------
|                                                    |            
|
|                                                    |            
|Nonaccrual loans                                    |            
|Loans 90 days or more delinquent and still accruing |            
|Restructured loans                                  |            
|                                                    |            
|Total nonperforming loans                           |            
|                                                    |            
|Foreclosed assets                                   |            
|Repossessed assets                                  |            
|                                                    |            
|Total nonperforming assets                          |            
|                                                    |            
|Nonperforming loans to total loans                  |            
|Nonperforming assets to total assets                |            

4

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Loan Loss Experience
The following is a summary of our
loan balances at the end of each period and the daily average balances of these loans. It
also includes changes in the allowance for loan losses arising from loans charged-off and
recoveries on loans previously charged-off, and additions to the allowance which we have
expensed.

|(Dollars in thousands)                                     | December 31
|---------------------------------------------------------- | -----------
|
|
|
|Loans:                                                     |            
|Average daily balance of loans for the year                |            
|Amount of loans outstanding at end of period               |            
|Allowance for loan losses:                                 |            
|Balance at beginning of year                               |            
|Balances from GBFC acquisition                             |            
|Addition to allowance charged to operations                |            
|Loans charged-off:                                         |            
|Commercial                                                 |            
|Residential Real Estate                                    |            
|Consumer                                                   |            
|Recoveries:                                                |            
|Commercial                                                 |            
|Residential Real Estate                                    |            
|Consumer                                                   |            
|
|Balance at end of year                                     |            
|
|Ratios:                                                    |            
|Net charge-offs to average loans outstanding               |            
|Allowance for loan losses to loans outstanding at year end |            

Allocation of the
Allowance for Loan Losses 
The following table shows the
allocation of the allowance for loan loss at the dates indicated to the extent specific
allocations have been determined relative to particular loans.

(Dollars in thousands)

|                                        | Year Ended December 31
|--------------------------------------- | ----------------------
|                                        |                       
|
|                                        |                       
|
|                                        |                       
|Commercial and   commercial real estate |                       
|Real estate mortgages                   |                       
|Consumer                                |                       
|Unallocated                             |                       
|                                        |                       
|Total                                   |                       
|                                        |                       

5

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Maturities
and Sensitivities of Loans to Changes in Interest Rates.The following
table shows the amount of total loans outstanding as of December 31, 2003 which, based on
remaining scheduled repayments of principal, are due in the periods indicated.

(Dollars in thousands)

|                            |  | Maturing    
|--------------------------- |  | ------------
|                            |  |             
|
|                            |  |             
|Commercial real estate      |  | $    129,493
|Residential real estate     |  | 47,700      
|Other commercial            |  | 221,936     
|Consumer                    |  | 6,409       
|                            |  |             
|Totals                      |  | $    405,538
|                            |  |             
|Allowance for loan losses   |  |             
|                            | 
|Total loans receivable, net |  |             
|                            | 

Interest
Sensitivity.Below is a schedule of the loan amounts maturing or repricing
which are classified according to their sensitivity to changes in interest rates at
December 31, 2003.

(Dollars in thousands)

|                                      |  |              
|------------------------------------- |  | -------------
|
|                                      |  |              
|Due within 3 months                   |  | $      37,294
|Due after 3 months, but within 1 year |  | 55,240       
|Due after one but within five years   |  | 260,845      
|Due after five years                  |  | 47,932       
|                                      |  |              
|Total                                 |  | $    401,311 
|                                      |  |              
|Allowance for loan losses             |  |              
|                                      |  |              
|Total loans receivable, net           |  |              
|                                      |  |              

Residential
Real Estate Loans. We originate residential mortgage loans, which are
generally long-term with either fixed or variable interest rates. Our general policy,
which is subject to review by our management as a result of changing market and economic
conditions and other factors, is to sell in the secondary market the majority of
residential mortgage loans originated. Residential mortgage loan originations derive from
a number of sources, including advertising, direct solicitation, real estate broker
referrals, existing borrowers and depositors, builders and walk-in customers. Loan
applications are accepted at most of our offices. The substantial majority of these loans
are secured by properties in our market area.

6

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Our
variable rate mortgage loans are fully amortizing loans with contractual maturities of up
to 30 years. These loans generally carry interest rates which are reset to a stated margin
over an independent index, generally the one-, three- or five-year constant maturity
treasury index. Increases or decreases in the interest rate of our variable rate mortgage
loans are generally limited to 2% annually with lifetime interest rate caps of 6% over the
initial interest rate. Our variable rate mortgage loans may be convertible into fixed rate
loans upon payment of a fee, do not contain prepayment penalties and do not produce
negative amortization. Initial interest rates offered on our variable rate mortgage loans
may be below the fully indexed rate, although borrowers are generally qualified at the
fully indexed rate.

We
also offer fixed rate mortgage loans to owner occupants with maturities up to 30 years,
which conform to secondary market standards. Interest rates charged on these fixed rate
loans are priced on a daily basis according to market conditions. These loans generally do
not include prepayment penalties. We currently sell in the secondary market, long-term,
conforming fixed-rate loans with terms of 15 years or greater which we originated.

Generally
we originate residential mortgage loans with loan-to-value ratios not to exceed 80%. For
loans with loan-to-value ratios in excess of 80%, we require private mortgage insurance in
an amount sufficient to reduce our exposure to 80% or less of the lower of the appraised
value or purchase price of the underlying collateral. In underwriting one- to four-family
residential real estate loans, we evaluate both the borrowers ability to make
monthly payments and the value of the property securing the loan. Properties securing one-
to four-family residential real estate loans that we made are appraised by independent fee
appraisers. We require borrowers to obtain title insurance and fire, property and, if
necessary, flood insurance.

Multi-Family
and Commercial Real Estate Loans. We originate permanent loans secured by
multi-family and commercial real estate. Our permanent multi-family and commercial real
estate loan portfolio includes loans secured by apartment buildings, condominiums, small
office buildings, small business facilities, medical facilities and other non-residential
building properties, substantially all of which are located within our primary market
area.

Permanent
multi-family and commercial real estate loans have a maximum maturity of 10 years with an
amortization period of up to 20 years. Most of these loans, however, have maturities of 5
years or less with amortization periods of 15 and 20 years. Multi-family loans and
commercial real estate loans are written in amounts of up to 80% of the lesser of the
appraised value of the property or the purchase price, and borrowers are generally
personally liable for all or part of the indebtedness.

Appraisals
on properties securing multi-family and commercial real estate loans that we originate are
primarily performed by independent appraisers who we designate at the time the loan is
made. Management reviews all appraisals on multi-family and commercial real estate loans.
In addition, our underwriting procedures generally require verification of the
borrowers credit history, income and financial statements, banking relationships,
references, and historical and projected cash flows for the property that indicate minimum
debt service coverage ratios.

Multi-family
and commercial real estate loans generally present a higher level of risk than loans
secured by one- to four-family residences. This greater risk is due to several factors,
including the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties and the increased
difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment
of loans secured by multi-family and commercial real estate is typically dependent upon
the successful operation of the related real estate project. If cash flow from the project
is reduced, the borrowers ability to repay the loan may be impaired. For example, if
leases are not obtained or renewed, or a bankruptcy court modifies a lease term, or a
major tenant is unable to fulfill its lease obligations, cash flow from the project will
be reduced.

Construction
and Development Loans. We make construction loans to individuals for the
construction of their residences. Construction loans are also made to builders and
developers for the construction of one- to four-family residences and the development of
one- to four-family lots, residential subdivisions, condominium developments and other
commercial developments.

7

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Construction
loans to individuals for their residences are structured to be converted to permanent
loans at the end of the construction phase, which typically runs six to nine months. These
construction loans have rates and terms which generally match one- to four-family loans
then offered by us, except that during the construction phase, the borrower pays interest
only. Residential construction loans are generally underwritten pursuant to the same
guidelines used for originating permanent residential loans.

Construction
loans to builders of one- to four-family residences generally require the payment of
interest only for up to one year with adjustable rates. These loans may also provide for
the payment of loan fees from loan proceeds. We also make loans to builders for the
purpose of developing one- to four-family lots and residential condominium projects. These
loans typically have terms of two years or less with maximum loan to value ratios of 80%.
These loans may provide for the payment of loan fees from loan proceeds. Loan principal is
typically paid down as lots or units are sold.

Construction
and development loans are obtained principally through continued business from developers
and builders who have previously borrowed from us, as well as referrals from existing
customers. As part of the application process, the applicant must submit accurate plans,
specifications and costs of the project to be constructed or developed to us. These items
are used as a basis to determine the appraised value of the subject property. Loans are
based on the lesser of current appraised value and/or the cost of construction (land plus
building). Construction and development loans to borrowers other than owner-occupants
involve many of the same risks discussed above regarding multi-family and commercial real
estate loans and tend to be more sensitive to general economic conditions than many other
types of loans. Further, because of the uncertainties inherent in estimating development
and construction costs and the market for the project upon completion, it is relatively
difficult to evaluate accurately the total loan funds required to complete a project, the
related loan-to-value ratios and the likelihood of ultimate success of the project.

Commercial
Business Loans. Our commercial business lending portfolio contains loans
with a variety of purposes and security, including loans to finance operations and
equipment. Generally, our commercial business lending has been limited to borrowers
headquartered, or doing business, in our primary market area.

Unlike
residential mortgage loans, which generally are made on the basis of the borrowers
ability to make repayment from his or her employment and other income, and which are
secured by real property whose value tends to be more easily ascertainable, commercial
business loans are of higher risk and typically are made on the basis of the
borrowers ability to make repayment from the cash flow of the borrowers
business. As a result, the availability of funds for the repayment of commercial business
loans may be substantially dependent on the success of the business itself. Further, the
collateral securing the loans may depreciate over time, may be difficult to appraise and
may fluctuate in value based on the success of the business.

Consumer
Loans. We originate a variety of different types of consumer loans,
including automobile loans, home equity lines of credit and installment loans, home
improvement loans, deposit account loans and other loans for household and personal
purposes. Our automobile loans typically are originated at fixed interest rates with terms
up to 60 months for new and used vehicles. Loans secured by automobiles are generally
originated for up to 80% of the National Automobile Dealers Association book value of the
automobile securing the loan.

Our
home equity installment loans are written so that the total commitment amount, when
combined with the balance of the first mortgage lien, generally will not exceed the
greater of 80% of the appraised value of the property or 80% of two times the Michigan
real estate assessment value. These loans have a maximum maturity of 5 years with an
amortization period of up to 15 years, and carry fixed rates of interest.

We
also originate home equity lines of credit utilizing the same underwriting standards as
for home equity installment loans. Home equity lines of credit are revolving line of
credit loans. The majority of our existing home equity line of credit portfolio has
adjustable rates, interest only payments and a maximum maturity of ten years.

8

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The
underwriting standards that we employ for consumer loans include a determination of the
applicants payment history on other debts and ability to meet existing obligations
and payments on the proposed loan. Although creditworthiness of the applicant is of
primary consideration, the underwriting process also includes a comparison of the value of
the security, if any, in relation to the proposed loan amount. Consumer loans may entail
greater credit risk than do residential mortgage loans, particularly in the case of
consumer loans which are unsecured or are secured by rapidly depreciable assets, such as
automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may
not provide an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrowers continuing financial stability, and thus
are more likely to be affected by adverse personal circumstances. Furthermore, the
application of various federal and state laws, including bankruptcy and insolvency laws,
may limit the amount which can be recovered on such loans.

Securities.       
          Our security portfolio is classified as either available for sale or
          held to maturity. Securities classified as available for
          sale may be sold to meet our liquidity needs. The primary objective of our
          investing activities is to provide for the safety of the principal invested. Our
          secondary considerations include earnings, liquidity and decreased overall
          exposure to changes in interest rates.

# Securities Portfolio

(Dollars in thousands)

|                                            | Year Ended December 31
|------------------------------------------- | ----------------------
|                                            |                       
|
|                                            |                       
|U. S. Treasury and U.S. Government Agencies |                       
|State and municipal bonds                   |                       
|                                            |                       
|Total                                       |                       
|                                            |                       

Excluding
our holdings of the investment portfolio in U.S. Treasury and U.S. Government Agency
Securities, we had no investments in securities of any one issuer which exceeded 10% of
shareholders equity.

Schedule
of Maturities of Investment Securities and Weighted Average Yields.The following
is a schedule of maturities and their weighted average yield of each category of
investment securities we held at December 31, 2003.

(Dollars in thousands)

|                                           | Due Within
One Year | One to
Five Years | Five to
Ten Years | After
Ten Years | Investments With
No Contractual
Maturity
|------------------------------------------ | ------------------- | ----------------- | ----------------- | --------------- | ----------------------------------------
|                                           |                    
|
|                                           |                    
|U.S. Treasury and U.S. Government Agencies |                     |                   | $                 | 7,252           |                                         
|Tax-exempt State and municipal bonds       |                     |                   |                   | -               |                                         
|                                           |                    
|Total                                      |                     |                   | $                 | 7,252           |                                         
|                                           |                    

9

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Trust
Services.We began offering trust services in January 1999, to
further provide for the financial needs of our customers. With the acquisition of Grand
Bank in April 2002 our trust assets increased by over $500 million and as of December 31,
2003, the Trust Department had assets of approximately $1.00 billion. Our types of service
include both personal trust and employee benefit plans.

# Market Area

Our
market area of Ottawa, Kent and northern Allegan Counties are located in western Michigan.
This area consists of two mid-sized cities, Grand Rapids and Holland, and rural areas.
Grand Rapids is the second largest city in Michigan and Holland the largest city in Ottawa
County. Both cities and surrounding areas have a solid and diverse economic base, which
includes tourism, office furniture, automotive components and assemblies, pharmaceutical,
transportation, equipment, food and construction supplies. Companies operating in the
market area include Steelcase, Herman Miller, Alticor, Haworth, Johnson Controls, General
Motors, Gerber, SPX, Magna Donnelly, and Meijer.

Much
of our success as a retail and small to mid-sized business lender has been due to our
market areas favorable population, housing and income demographics. Population
within our three county market area grew by 20.6% from 1990 to 2002. Household income
levels in our market area exceed state and national levels while unemployment levels are
below state but above national levels.

# Competition

Our
primary market area includes Ottawa County, northern Allegan County and southwestern Kent
County, all located in Western Michigan. There are many bank, thrift and credit union
offices located within our market area. Most are branches of larger financial
institutions. We also face competition from finance companies, insurance companies,
mortgage companies, securities brokerage firms, money market funds and other providers of
financial services. Many of our competitors have been in business a number of years, have
established customer bases, are larger and have higher lending limits than we do. We
compete for loans principally through our ability to communicate effectively with our
customers and to understand and meet their needs. Our management believes that our
personal service philosophy enhances our ability to compete favorably in attracting
individuals and small businesses. We actively solicit customers and compete for deposits
by offering our customers personal attention, professional service, and competitive
interest rates.

10

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# Environmental Matters

We
do not believe that existing environmental regulations will have any material effect upon
our capital expenditures, our earnings or our competitive position.

# Employees

As
of December 31, 2003, we had 282 full-time and 105 part-time employees. We have assembled
a staff of experienced, dedicated and highly qualified professionals whose goal is to
provide outstanding service. The majority of our management team has at least 10 years of
banking experience, and several key personnel have more than 20 years of banking
experience. None of our employees is represented by collective bargaining agreements with
us.

# Acquisition of Grand Bank

On
April 1, 2002, Grand Bank Financial Corporation was merged into Macatawa Bank Corporation.
Macatawa Bank Corporation became the holding company for Grand Bank. Effective January 1,
2003, Grand Bank was merged into Macatawa Bank.

11

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# SUPERVISION AND
REGULATION

The
following is a summary of certain statutes and regulations affecting Macatawa Bank
Corporation and Macatawa Bank. This summary is qualified in its entirety by such statutes
and regulations. A change in applicable laws or regulations may have a material effect on
us and our business.

# General

Financial
institutions and their holding companies are extensively regulated under federal and state
law. Consequently, our growth and earnings performance can be affected not only by
management decisions and general economic conditions, but also by the statutes
administered by, and the regulations and policies of, various governmental regulatory
authorities. Those authorities include, but are not limited to, the Board of Governors of
the Federal Reserve System (the Federal Reserve Board), the FDIC, the
Commissioner of the Michigan Office of Financial and Insurance Services
(Commissioner), the Internal Revenue Service, and state taxing authorities.
The effect of such statutes, regulations and policies can be significant, and cannot be
predicted with a high degree of certainty.

Federal
and state laws and regulations generally applicable to financial institutions and their
holding companies regulate, among other things, the scope of business, investments,
reserves against deposits, capital levels relative to operations, lending activities and
practices, the nature and amount of collateral for loans, the establishment of branches,
mergers, consolidations and dividends. The system of supervision and regulation applicable
to us and our bank establishes a comprehensive framework for our respective operations and
is intended primarily for the protection of the FDICs deposit insurance funds, our
depositors, and the public, rather than our shareholders.

Federal
law and regulations establish supervisory standards applicable to the lending activities
of our bank, including internal controls, credit underwriting, loan documentation and
loan-to-value ratios for loans secured by real property.

Macatawa
Bank Mortgage Company, a subsidiary of Macatawa Bank, and Macatawa Investment Services,
Inc., a subsidiary of Macatawa Bank Corporation, are subject to various state and federal
regulations.

# Macatawa Bank Corporation

General.       
          On January 9, 2002, Macatawa Bank Corporation became a financial holding
          company, within the meaning of the Gramm-Leach-Bliley Act of 1999 (GLB
          Act), and is registered with, and subject to regulation by, the Federal
          Reserve Board under the Bank Holding Company Act, as amended (the
          BHCA). Under the BHCA, we are subject to periodic examination by the
          Federal Reserve Board, and are required to file with the Federal Reserve Board
          periodic reports of our operations and such additional information as the
          Federal Reserve Board may require.

In
accordance with Federal Reserve Board policy, we are expected to act as a source of
financial strength to Macatawa Bank and to commit resources to support Macatawa Bank in
circumstances where we might not do so absent such policy. In addition, if the
Commissioner deems Macatawa Banks capital to be impaired, the Commissioner may
require Macatawa Bank to restore its capital by a special assessment upon us as the
banks sole shareholder. If we were to fail to pay any such assessment, the directors
of Macatawa Bank would be required, under Michigan law, to sell the shares of the
banks stock owned by us to the highest bidder at either a public or private auction
and use the proceeds of the sale to restore the banks capital.

Investments
and Activities. In general, any direct or indirect acquisition by us of any
voting shares of any bank which would result in our direct or indirect ownership or
control of more than 5% of any class of voting shares of such bank, and any merger or
consolidation between us and another financial holding company or bank holding company,
will require the prior written approval of the Federal Reserve Board under the BHCA. No
Federal Reserve Board approval is required for us to acquire a company, other than a bank
holding company or bank, engaged in activities that are financial in nature as determined
by the Federal Reserve Board.

12

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The
merger or consolidation of an existing bank subsidiary of ours with another bank, or the
acquisition by such a subsidiary of assets of another bank, or the assumption of liability
by such a subsidiary to pay any deposits in another bank, will require the prior written
approval of the responsible Federal depository institution regulatory agency under the
Bank Merger Act. In addition, in certain such cases an application to, and the prior
approval of, the Federal Reserve Board under the BHCA and/or the Commissioner under the
Michigan Banking Code, may be required.

Financial
holding companies, like us, may engage in various lending, advisory, insurance and
insurance underwriting, securities underwriting, dealing and market making, and merchant
banking activities (as well as those activities previously approved for bank holding
companies by the Federal Reserve Board) together with such other activities as may be
determined by the Federal Reserve Board (in coordination with other regulatory
authorities) to be financial in nature, incidental to any such financial activity, or
complimentary to any such financial activity, and which do not pose a substantial risk to
the safety or soundness of depository institutions or the financial system generally. In
order to maintain the benefits and flexibility of being a financial holding company, each
of our subsidiary depository institutions must continue to be well-capitalized
and well-managed under applicable regulatory standards and each subsidiary
depository institution must maintain at least a satisfactory or above Community
Reinvestment Act rating.

Capital
Requirements. The Federal Reserve Board uses capital adequacy guidelines in
its examination and regulation of bank holding companies. If capital falls below minimum
guidelines, a bank holding company may, among other things, be denied approval to acquire
or establish additional banks or non-bank businesses.

The
Federal Reserve Boards capital guidelines establish the following minimum regulatory
capital requirements for bank holding companies: (i) a leverage capital requirement
expressed as a percentage of total average assets, and (ii) a risk-based requirement
expressed as a percentage of total risk-weighted assets. The leverage capital requirement
consists of a minimum ratio of Tier 1 capital (which consists principally of
shareholders equity) to total average assets of 3% for the most highly rated
companies, with minimum requirements of 4% to 5% for all others. The risk-based
requirement consists of a minimum ratio of total capital to total risk-weighted assets of
8%, of which at least one-half must be Tier 1 capital.

Dividends.       
          Macatawa Bank Corporation is a corporation separate and distinct from Macatawa
          Bank. Most of our revenues are dividends paid by our bank. Thus, our ability to
          pay dividends to our shareholders is indirectly limited by statutory
          restrictions on our banks ability to pay dividends described below.
          Further, in a policy statement, the Federal Reserve Board has expressed its view
          that a bank holding company experiencing earnings weaknesses should not pay cash
          dividends exceeding its net income or which can only be funded in ways that
          weaken the bank holding companys financial health, such as by borrowing.
          Additionally, the Federal Reserve Board possesses enforcement powers over bank
          holding companies and their non-bank subsidiaries to prevent or remedy actions
          that represent unsafe or unsound practices or violations of applicable statutes
          and regulations. Among these powers is the ability to proscribe the payment of
          dividends by banks and bank holding companies. Similar enforcement powers over
          our bank are possessed by the FDIC. The prompt corrective action
          provisions of federal law and regulation authorizes the Federal Reserve Board to
          restrict the payment of dividends by us for an insured bank which fails to meet
          specified capital levels.

In
addition to the restrictions on dividends imposed by the Federal Reserve Board, the
Michigan Business Corporation Act provides that dividends may be legally declared or paid
only if after the distribution a corporation, like us, can pay its debts as they come due
in the usual course of business and its total assets equal or exceed the sum of its
liabilities plus the amount that would be needed to satisfy the preferential rights upon
dissolution of any holders of preferred stock whose preferential rights are superior to
those receiving the distribution.

Federal
Securities Regulation.Our common stock is registered with the Securities
and Exchange Commission (SEC) under the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended. On July 30, 2002, President Bush
signed into law the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act provides for
numerous changes to the reporting, accounting, corporate governance and business practices
of companies as well as financial and other professionals who have involvement with the
U.S. public markets. The SEC continues to issue new and proposed rules implementing
various provisions of the Sarbanes-Oxley Act.

13

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# Macatawa Bank

General.       
          Macatawa Bank is a Michigan banking corporation, and its deposit accounts are
          insured by the Bank Insurance Fund (the BIF) of the FDIC. As a BIF
          insured Michigan chartered bank, Macatawa Bank is subject to the examination,
          supervision, reporting and enforcement requirements of the Commissioner, as the
          chartering authority for Michigan banks, and the FDIC, as administrator of BIF.
          These agencies and the federal and state laws applicable to our bank and its
          operations, extensively regulate various aspects of the banking business
          including, among other things, permissible types and amounts of loans,
          investments and other activities, capital adequacy, branching, interest rates on
          loans and on deposits, the maintenance of non-interest bearing reserves on
          deposit accounts, and the safety and soundness of banking practices. Grand Bank
          was also subject to the same supervision and regulation until its merger into
          Macatawa Bank effective January 1, 2003.

Deposit
Insurance. As an FDIC-insured institution, we are required to pay deposit
insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment
system under which all insured depository institutions are placed into one of nine
categories and assessed insurance premiums, based upon their respective levels of capital
and results of supervisory evaluation. Institutions classified as well-capitalized (as
defined by the FDIC) and considered healthy pay the lowest premium while institutions that
are less than adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.

The
Federal Deposit Insurance Act (FDIA) requires the FDIC to establish assessment
rates at levels which will maintain the Deposit Insurance Fund at a mandated reserve ratio
of not less than 1.25% of estimated insured deposits. For several years, the BIF reserve
ratio has been at or above the mandated ratio and assessments have ranged from 0% of
deposits for institutions in the lowest risk category to .27% of deposits in the highest
risk category. However, there is speculation that the reserve may fall below the mandated
ratio resulting in increased assessments in 2003.

FICO
Assessments. Our bank, as a member of the BIF, is subject to assessments to
cover the payments on outstanding obligations of the Financing Corporation
(FICO). FICO was created to finance the recapitalization of the Federal
Savings and Loan Insurance Corporation, the predecessor to the FDICs Savings
Association Insurance Fund (the SAIF) which insures the deposits of thrift
institutions. From now until the maturity of the outstanding FICO obligations in 2019, BIF
members and SAIF members will share the cost of the interest on the FICO bonds on a pro
rata basis. It is estimated that FICO assessments during this period will be less than
0.025% of deposits.

Commissioner
Assessments. Michigan banks are required to pay supervisory fees to the
Commissioner to fund the operations of the Commissioner. The amount of supervisory fees
paid by a bank is based upon the banks total assets, as reported to the
Commissioner.

Capital
Requirements. The FDIC has established the following minimum capital
standards for state-chartered, FDIC insured non-member banks, such as Macatawa Bank: a
leverage requirement consisting of a minimum ratio of Tier 1 capital to total average
assets of 3% for the most highly-rated banks with minimum requirements of 4% to 5% for all
others, and a risk-based capital requirement consisting of a minimum ratio of total
capital to total risk-weighted assets of 8%, at least one-half of which must be Tier 1
capital. Tier 1 capital consists principally of shareholders equity. These capital
requirements are minimum requirements. Higher capital levels will be required if warranted
by the particular circumstances or risk profiles of individual institutions.

14

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Federal
law provides the federal banking regulators with broad power to take prompt corrective
action to resolve the problems of undercapitalized institutions. The extent of the
regulators powers depends on whether the institution in question is well
capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, or critically undercapitalized.
Federal regulations define these capital categories as follows:

|                               | Risk-Based Capital Ratio | Risk-Based Capital Ratio | Leverage Ratio
|------------------------------ | ------------------------ | ------------------------ | --------------
|Well capitalized               |                          |                          | 10% or above  
|Adequately capitalized         |                          |                          | 8% or above   
|Undercapitalized               |                          |                          | Less than 8%  
|Significantly undercapitalized |                          |                          | Less than 6%  
|Critically undercapitalized    |                          |                          | --            

As
of December 31, 2003, each of Macatawa Banks ratios exceeded minimum requirements
for the well capitalized category.

Depending
upon the capital category to which an institution is assigned, the regulators
corrective powers include: requiring the submission of a capital restoration plan; placing
limits on asset growth and restrictions on activities; requiring the institution to issue
additional capital stock (including additional voting stock) or to be acquired;
restricting transactions with affiliates; restricting the interest rate the institution
may pay on deposits; ordering a new election of directors of the institution; requiring
that senior executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest certain
subsidiaries; prohibiting the payment of principal or interest on subordinated debt; and
ultimately, appointing a receiver for the institution.

In
general, a depository institution may be reclassified to a lower category than is
indicated by its capital levels if the appropriate federal depository institution
regulatory agency determines the institution to be otherwise in an unsafe or unsound
condition or to be engaged in an unsafe or unsound practice. This could include a failure
by the institution, following receipt of a less-than-satisfactory rating on its most
recent examination report, to correct the deficiency.

Dividends.       
          Under Michigan law, our bank is restricted as to the maximum amount of dividends
          it may pay on its common stock. Our bank may not pay dividends except out of net
          income after deducting its losses and bad debts. A Michigan state bank may not
          declare or pay a dividend unless the bank will have surplus amounting to at
          least 20% of its capital after the payment of the dividend.

Federal
law generally prohibits a depository institution from making any capital distribution
(including payment of a dividend) or paying any management fee to its holding company if
the depository institution would thereafter be undercapitalized. The FDIC may prevent an
insured bank from paying dividends if the bank is in default of payment of any assessment
due to the FDIC. In addition, the FDIC may prohibit the payment of dividends by our bank,
if such payment is determined, by reason of the financial condition of our bank, to be an
unsafe and unsound banking practice.

Insider
Transactions. Our bank is subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to us or our subsidiaries, on investments
in the stock or other securities of our or our subsidiaries and the acceptance of the
stock or other securities of us or our subsidiaries as collateral for loans. Certain
limitations and reporting requirements are also placed on extensions of credit by our bank
to its directors and officers, to our directors and officers, the directors and officers
of our bank, to our principal shareholders and to related interests of such
directors, officers and principal shareholders. In addition, federal law and regulations
may affect the terms upon which any person becoming a director or officer of our company
or one of its subsidiaries or a principal shareholder in our company may obtain credit
from banks with which our bank maintains a correspondent relationship.

Safety
and Soundness Standards. The federal banking agencies have adopted
guidelines to promote the safety and soundness of federally insured depository
institutions. These guidelines establish standards for internal controls, information
systems, internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

15

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Investments
and Other Activities. Under federal law and FDIC regulations, FDIC insured
state banks are prohibited, subject to certain exceptions, from making or retaining equity
investments of a type, or in an amount, that are not permissible for a national bank.
Federal law, as implemented by FDIC regulations, also prohibits FDIC insured state banks
and their subsidiaries, subject to certain exceptions, from engaging as principal in any
activity that is not permitted for a national bank or its subsidiary, respectively, unless
the bank meets, and continues to meet, its minimum regulatory capital requirements and the
FDIC determines the activity would not pose a significant risk to the deposit insurance
fund of which the bank is a member. Impermissible investments and activities must be
divested or discontinued within certain time frames set by the FDIC in accordance with
federal law. These restrictions are not currently expected to have a material impact on
the operations of our bank.

Consumer
Protection Laws. Our banks business includes making a variety of
types of loans to individuals. In making these loans, we are is subject to State usury and
regulatory laws and to various federal statutes, including the privacy of consumer
financial information provisions of the Gramm-Leach-Bliley Act and regulations promulgated
thereunder, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in
Lending Act, the Real Estate Settlement Procedures Act, and the Home Mortgage Disclosure
Act, and the regulations promulgated thereunder, which prohibit discrimination, specify
disclosures to be made to borrowers regarding credit and settlement costs, and regulate
the mortgage loan servicing activities of our bank, including the maintenance and
operation of escrow accounts and the transfer of mortgage loan servicing. In receiving
deposits, our bank is subject to extensive regulation under State and federal law and
regulations, including the Truth in Savings Act, the Expedited Funds Availability Act, the
Bank Secrecy Act, the Electronic Funds Transfer Act, and the Federal Deposit Insurance
Act. Violation of these laws could result in the imposition of significant damages and
fines upon our bank and its directors and officers.

Branching
Authority. Michigan banks have the authority under Michigan law to
establish branches anywhere in the State of Michigan, subject to receipt of all required
regulatory approvals. Banks may establish interstate branch networks through acquisitions
of other banks. The establishment of de novo interstate branches or the acquisition of
individual branches of a bank in another state (rather than the acquisition of an
out-of-state bank in its entirety) is allowed only if specifically authorized by state
law.

Michigan
permits both U.S. and non-U.S. banks to establish branch offices in Michigan. The Michigan
Banking Code permits, in appropriate circumstances and with the approval of the Michigan
Office of Financial and Insurance Services, Division of Financial Institutions, (1)
acquisition of Michigan banks by FDIC-insured banks, savings banks or savings and loan
associations located in other states, (2) sale by a Michigan bank of branches to an
FDIC-insured bank, savings bank or savings and loan association located in a state in
which a Michigan bank could purchase branches of the purchasing entity, (3) consolidation
of Michigan banks and FDIC-insured banks, savings banks or savings and loan associations
located in other states having laws permitting such consolidation, (4) establishment of
branches in Michigan by FDIC-insured banks located in other states, the District of
Columbia or U.S. territories or protectorates having laws permitting a Michigan bank to
establish a branch in such jurisdiction, and (5) establishment by foreign banks of
branches located in Michigan.

16

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# ITEM 2: Properties.

We
own or lease facilities located in Ottawa County, Allegan County and Kent County,
Michigan. Our administrative offices are located at 10753 Macatawa Drive, Holland,
Michigan 49424. Our administrative offices are approximately 49,000 square feet and
contain our administration, human resources, trust, loan underwriting and processing, and
proof and deposit operations.

Our
facilities as of March 1, 2004, were as follows:

|Location of Facility                         | Use | 
|-------------------------------------------- | --- | 
|                                            
|10753 Macatawa Drive, Holland                |     | 
|51 E. Main Street, Zeeland*                  |     | 
|125 Ottawa Avenue N.W., Grand Rapids*        |     | 
|126 Ottawa Avenue, N.W., Grand Rapids*       |     | 
|139 E. 8th Street, Holland*                  |     | 
|489 Butternut Dr., Holland                   |     | 
|701 Maple Avenue, Holland                    |     | 
|699 E. 16th Street, Holland                  |     | 
|41 N. State Street, Zeeland                  |     | 
|2020 Baldwin Street, Jenison                 |     | 
|6299 Lake Michigan Dr., Allendale            |     | 
|132 South Washington, Douglas                |     | 
|4758 - 136th Street, Hamilton*               |     | 
|3526 Chicago Drive, Hudsonville              |     | 
|20 E. Lakewood Blvd., Holland                |     | 
|3191 - 44th Street, S.W., Grandville         |     | 
|8233 Byron Center Avenue S.W., Byron Center* |     | 
|5271 Clyde Park Avenue, S.W., Wyoming        |     | 
|4590 Cascade Road, Grand Rapids              |     | 
|3177 Knapp Street, N.E., Grand Rapids        |     | 
|16986 Robbins Road, Suite 180, Grand Haven*  |     | 
|12415 Riley Street, Holland                  |     | 
|2750 Walker, N.W., Walker                    |     | 
|                                            
|* Leased facility                            |     | 

We
believe our facilities are well-maintained and adequately insured. Because of our growth,
we are continually evaluating the need for additional space and branches.

17

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# ITEM 3: Legal
Proceedings.

Please
refer to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, (Part II, Item 1 Legal Proceedings) for information concerning legal proceedings
related to Trade Partners, Inc.

A
lawsuit was filed in April 2003 by John and Kathryn Brand in Oklahoma state court against
Grand Bank, the Company, Trade Partners and certain individuals and entities associated
with Trade Partners. The complaint seeks damages for the asserted breach of certain escrow
agreements for which Grand Bank served as custodian and escrow agent. The Company and
Grand Bank have answered this complaint, denying the material allegations and raising
certain affirmative defenses. No trial date has been set in this matter. In May 2003, a
purported class action complaint was filed by Forrest W. Jenkins and Russell S. Vail
against the Company and against LaSalle Bank Corporation in the United States District
Court for the District of Western Michigan. The purported class included investors who
invested in limited liability companies formed by Trade Partners. On November 6, 2003, the
court permitted the plaintiffs to amend their complaint to expand the purported class to
include all individuals who invested in Trade Partners viatical investments. The class has
not been certified. The court stayed this action to avoid interference with the process of
the receivership proceedings, though plaintiffs may apply to the Court for relief from the
stay after May 6, 2004. The plaintiffs allege that Grand Bank breached certain escrow
agreements, breached its fiduciary duties, acted negligently or grossly negligently with
respect to the plaintiffs investments and violated the Michigan Uniform Securities
Act. The amended complaint seeks certification of the action as a class action,
unspecified damages and other relief. The Company has answered this complaint denying the
material allegations and raising certain affirmative defenses. The Company believes it has
meritorious defenses and intends to vigorously defend both cases.

On
April 15, 2003, the United States District Court for the Western District of Michigan
appointed a receiver for Trade Partners. In order to prevent or minimize any loss to
investors in the viaticals sold by Trade Partners to investors, the court appointed
receiver has been coordinating the payment of premiums on the approximately 1,000
outstanding viaticated insurance policies in the Trade Partners portfolio so that the
policies do not lapse. The receiver informed the Company that nine policies with a total
face value of approximately $1.4 million has lapsed for failure to pay premiums prior to
the receivers coordination efforts. In addition, about $700,000 is being contested
as to lapses.

The
receiver has estimated that approximately $13.4 million will be needed to pay premiums on
the Trade Partners viaticals for the next two years. The receiver has received court
permission to pool the death benefits of any of the Trade Partners viaticated policies
that mature and use the benefits to pay premiums on other viaticated policies. In January
2004, the Receiver reported that he had received since the inception of the receivership
cash payments for death benefit claims aggregating about $12.1 million, and had claims
pending for an additional $3.8 million. He reported at the same time that he had paid
premiums on the portfolio totaling approximately $3.9 million since the inception of the
receivership. As of January 15, 2004, the receiver reported cash on hand in excess of
$8,200,000. As additional viaticated policies mature, death benefits from those policies
could provide a source of funding for continued premium payments.

In
addition, on July 1, 2003, the United States District Court for the Western District of
Michigan authorized the receiver to borrow money from Macatawa Bank to pay premiums, if
needed. Macatawa Bank has agreed to extend a $4 million line of credit to the receiver,
conditioned upon obtaining a security interest in the viaticals. As of December 31, 2003
no draws had yet been made on the line of credit.

In
April 2004 the receiver is to propose a plan of distribution of the assets of Trade
Partners. We understand that the receiver is presently investigating a sale of the
portfolio of insurance policies, but we do not know whether such a sale will take place or
what the terms of any such sale would be. We do not know the amount of distributions the
receiver may propose to make to investors, or when such distributions might begin.

It
is possible that one or more additional legal actions may be initiated involving the
custodial and escrow agent services provided by Grand Bank in connection with Trade
Partners. If any such legal actions are commenced, the Company intends to defend them
vigorously. To the extent any pending or future claims allege errors or omissions on the
part of Grand Bank or Macatawa Bank, Management believes that some or all liability, if
any is proven or established, will be covered by errors and omissions insurance maintained
by Grand Bank and Macatawa Bank.

18

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As
the date hereof, except as disclosed above there were no material pending legal
proceedings, other than routine litigation incidental to the business of banking to which
we or any of our subsidiaries are a party of or which any of our properties are the
subject.

# ITEM 4: Submission of
Matters to a Vote of Security Holders.

No
matters were submitted during the fourth quarter of 2003 to a vote of our shareholders.

# ADDITIONAL ITEM:
Executive Officers of the Registrant.

The
list below identifies those persons designated as executive officers of Macatawa Bank
Corporation and Macatawa Bank.

|Name                | Age | Year Electedan ExecutiveOfficer | Positions Held
|------------------- | --- | ------------------------------- | --------------
|                   
|Benj. A. Smith, III |     |                                 |               
|                   
|Philip J. Koning    |     |                                 |               
|                   
|Jon W. Swets        |     |                                 |               
|                   
|Ray D. Tooker       |     |                                 |               

19

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# PART II

# ITEM 5:      
          Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.

Our
common stock has been quoted on the Nasdaq National Market since May 17, 2001.
From December 27, 1999 through May 16, 2001, our common stock was
quoted on the Nasdaq SmallCap Market. From the completion of our initial public offering
in April 1998 through December 27, 1999, our common stock was quoted on the OTC Bulletin
Board. High and low sales prices (as reported on the Nasdaq National Market) for each
quarter are included in the following table. The information in the following table has
been retroactively adjusted to reflect the effect of all stock dividends paid.

|               | 2003   | 2002  
|-------------- | ------ | ------
|
|
|First Quarter  | $21.49 | $18.57
|Second Quarter | $24.74 | $19.68
|Third Quarter  | $25.60 | $22.25
|Fourth Quarter | $29.35 | $23.15

On
February 25, 2004, there were approximately 814 owners of record and, in addition,
approximately 5,367 beneficial owners of our common stock.

The
Company declared its first cash dividend, amounting to $.06 per share, during the fourth
quarter of 2000. Quarterly cash dividends totaling $.26 were paid during 2001, and a 3%
stock dividend was declared during the second quarter of 2001. Quarterly cash dividends
totaling $.32 were paid during 2002, and a 4% stock dividend was declared during the
second quarter of 2002. Quarterly cash dividends totaling $.42 were paid during 2003, and
a 5% stock dividend was declared during the second quarter of 2003. All of these cash
dividend amounts have been retroactively adjusted to reflect the effect of the stock
dividends.

We
intend to continue to declare quarterly cash dividends in the future. We may also consider
declaring stock dividends on an annual basis. We are expecting to obtain the funds for the
payment of future cash dividends from the dividends we receive from Macatawa Bank out of
its earnings. However, there can be no assurance that we will have the financial resources
to continue to pay dividends in the future.

# ITEM 6:   Selected
Financial Data.

The
information set forth under the caption Selected Consolidated Financial Data
in our Annual Report to Shareholders for the year ended December 31, 2003, is incorporated
by reference and is filed as part of Exhibit 13 to this form 10-K Annual Report.

20

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# ITEM 7:   Management's Discussion and Analysis of Financial Condition and Results of Operations.

The
information set forth under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations, in our Annual Report to Shareholders
for the year ended December 31, 2003, is hereby incorporated by reference and is filed as
part of Exhibit 13 to this Form 10-K Annual Report.

# ITEM 7A:   Quantitative
and Qualitative Disclosures About Market Risk.

The
information set forth under the captions Managements Discussion and Analysis
of Financial Condition and Results of Operations  Market Risk Analysis in our
Annual Report to Shareholders for the year ended December 31, 2003, is hereby incorporated
by reference and is filed as part of Exhibit 13 to this Form 10-K Annual Report.

# ITEM 8:   Financial
Statements and Supplementary Data.

The
information set forth under the captions Quarterly Financial Data,
Report of Independent Auditors, Consolidated Balance Sheets,
Consolidated Statements of Income, Consolidated Statements of Changes in
Shareholders Equity, Consolidated Statements of Cash Flow, and
Notes to Consolidated Financial Statements in our Annual Report to
Shareholders for the year ended December 31, 2003, is hereby incorporated by reference and
is filed as part of Exhibit 13 to this Form 10-K Annual Report.

# ITEM 9:    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

There
have been no disagreements with our independent public accountants.

# ITEM 9A:   Controls and
Procedures.

| | (a) | Evaluation of Disclosure Controls and Procedures. The companys
          Chief Executive Officer and Chief Financial Officer, after evaluating the
          effectiveness of the companys disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
          period covered by this Report, have concluded that as of the end of the period
          covered by this Report the companys disclosure controls and procedures
          were adequate and effective to ensure that material information relating to the
          company would be made known to them by others within the company, particularly
          during the period in which this Form 10-K Annual Report was being prepared.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Changes in Internal Controls. There were no significant changes in the
          companys internal controls over financial reporting during the fiscal year
          ended December 31, 2003, that have materially affected, or are reasonably likely
          to materially affect, the Companys internal control over financial
          reporting.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

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# PART III

# ITEM 10: Directors and
Executive Officers of the Registrant.

The
information set forth on pages 4-5, under the caption Information About
Directors and on page 13  under the caption Section 16(a) Beneficial
Ownership Reporting Compliance in our definitive Proxy Statement dated
March 10, 2004, relating to our 2004 Annual Meeting of Shareholders and the
information within that section is incorporated by reference. Information relating to our
Executive Officers is included in Part I hereof entitled Executive Officers of the
Registrant. There are no family relationships between or among the above-named
executive officers. There are no arrangements or understandings between any of the
above-named officers pursuant to which any of them was named an officer.

We
have adopted a Senior Officer Code of Ethics. A copy of our Senior Officer Code of Ethics
is available upon request by writing to the Chief Financial Officer, Macatawa Bank
Corporation, 10753 Macatawa Drive, Holland, Michigan 49424.

# ITEM 11:   Executive
Compensation.

Information
relating to compensation of our executive officers and directors is contained under the
captions Director Compensation and Executive Compensation, in our
definitive Proxy Statement dated March 10, 2004, relating to our 2004 Annual Meeting of
Shareholders and the information within those sections is incorporated by reference.

# ITEM 12:            Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information
relating to security ownership of certain beneficial owners and management is contained on
Page 2 under the caption Voting Securities and Principal Holders Thereof and
on page 11 under the caption Security Ownership of Management in our
definitive Proxy Statement dated March 10, 2004, relating to our 2004 Annual Meeting
of Shareholders and the information within that section is incorporated by reference.

22

---



# Equity Compensation
Plan Information

We maintain certain equity
compensation plans under which common stock is authorized for issuance to employees,
consultants and directors in exchange for services, including our Stock Compensation Plan,
1998 Directors Stock Option Plan, the Grand Bank Financial Corporation 1988 Stock
Option Plan and the Grand Bank Financial Corporation Stock Option Plan of 1997.

The following table sets forth
certain information regarding the above referenced equity compensation plans as of
December 31, 2003. The following information has been adjusted to reflect the effect of
all stock dividends.

# Equity Compensation
Plan Information

|                                                           | (a)     | (b)    | (c)    
|---------------------------------------------------------- | ------- | ------ | -------
|
|Equity compensation plans approved by security holders     | 432,799 | $17.31 | 255,781
|Equity compensation plans not approved by security holders | 0       | NA     | 0      
|Total                                                      | 432,799 | $17.31 | 255,781

(1)    
          We had not granted warrants or rights applicable to this chart.

# ITEM 13: Certain
Relationships and Related Transactions.

Information
relating to certain relationships and related transactions is contained on page 12, under
the caption Transactions Involving Management in our definitive Proxy
Statement dated March 10, 2004, relating to our 2004 Annual Meeting of
Shareholders and the information within that section is incorporated by reference.

# ITEM 14: Principal
Accountant Fees and Services.

Information
relating to principal accountant fees and services is contained on page 15, under the
caption Principal Accounting Firm Fees in our definitive Proxy Statement dated
March 10, 2004, relating to our 2004 Annual Meeting of Shareholders and the information
within that section is incorporated by reference.

23

---



# PART IV

# ITEM 15: Exhibits,
Financial Statement Schedules, and Reports on Form 8-K.

(a)    
          Financial Statements.

|1. |  | The following documents are filed as part of Item 8 of this report: 
                  Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 2003 and 2002 
Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001 
Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001 
Notes to Consolidated Financial Statements
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Schedules to the consolidated financial statements required by Article 9 of
               Regulation S-X are not required under the related instructions or are
               inapplicable, and therefore have been omitted.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | The following exhibits are filed as part of this report: Reference is made to
               the exhibit index which follows the signature page of this report.
The
Registrant will furnish a copy of any exhibits listed on the Exhibit Index to any
shareholder of the Registrant without charge upon written request to Chief Financial
Officer, Macatawa Bank Corporation, 10753 Macatawa Drive, Holland, Michigan 49424.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)    
          Reports on Form 8-K

| | During
the quarter ended December 31, 2003, the Company furnished a Current Report on Form 8-K
dated October 20, 2003, pursuant to Item 12 that attached a press release announcing the
Companys financial results for the quarter ended September 30, 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---



# SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, dated March 10, 2004.

# MACATAWA BANK
CORPORATION

| | 
| | 
| | 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below on March 10, 2004, by the following persons on behalf of the Registrant and in the
capacities indicated. Each director of the Registrant, whose signature appears below,
hereby appoints Benj. A. Smith, III and Philip J. Koning, and each of them severally,
as his attorney-in-fact, to sign in his name and on his behalf, as a director of the
Registrant, and to file with the Commission any and all Amendments to this Report on Form
10-K.

|Signature                                                       | 
|--------------------------------------------------------------- | 
|                                                               
|/s/ Benj. A. Smith, III                                         | 
|Benj. A. Smith, III, Principal Executive Officer and a Director | 
|                                                               
|/s/ Jon W. Swets                                                | 
|Jon W. Swets, Principal                                         | 
|Financial and Accounting Officer                                | 
|                                                               
|/s/ G. Thomas Boylan                                            | 
|G. Thomas Boylan, Director                                      | 
|                                                               
|/s/ Robert E. DenHerder                                         | 
|Robert E. DenHerder,                                            | 
|Director                                                        | 
|                                                               
|/s/ John F. Koetje                                              | 
|John F. Koetje, Director                                        | 
|                                                               
|/s/ Philip J. Koning                                            | 
|Philip J. Koning, Director and President                        | 
|                                                                | 
|                                                               
|/s/ Arend D. Lubbers                                            | 
|Arend D. Lubbers, Director                                      | 

25

---



# EXHIBIT INDEX Exhibit
Number and Description

| | 2 | Consolidation
 Agreement dated December 10, 1997,  incorporated by reference to
                  Exhibit 2 to the Macatawa Bank Corporation  Registration Statement on
Form SB-2                   (Registration No. 333-45755).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.1 | Articles
of Incorporation of Macatawa Bank Corporation, as amended, incorporated by reference to
Exhibit 3.1 to the Macatawa Bank Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | Bylaws
of Macatawa Bank  Corporation,  incorporated by reference to Exhibit 3.2
                  to  the  Macatawa  Bank  Corporation   Registration   Statement  on
 Form  SB-2                   (Registration No. 333-45755).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4 | Specimen
 stock  certificate  of Macatawa  Bank  Corporation,  incorporated  by
                  reference to Exhibit 4 to the Macatawa Bank Corporation  Registration
Statement                   on Form SB-2 (Registration No. 333-45755).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Macatawa
Bank Corporation Stock Compensation Plan, incorporated by reference to Exhibit 10.1 to
the Registrants Form SB-2 Registration Statement (No. 333-45755), as amended by the
First Amendment included as Appendix B to the Macatawa Bank Corporation Proxy Statement
dated March 5, 1999, for the Annual Meeting of Shareholders held April 15, 1999, as
further amended by the Second Amendment included as Appendix A to the Macatawa Bank
Corporation Proxy Statement dated March 7, 2002, for the Annual Meeting of Shareholders
held April 18, 2002, both of which amendments are incorporated herein by reference.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Macatawa
Bank Corporation 1998 Directors Stock Option Plan incorporated by reference to
Exhibit 10.2 to the Registrants Form SB-2 Registration Statement (No. 333-45755),
as amended by the First Amendment included as Appendix B to the Macatawa Bank Corporation
Proxy Statement dated March 7, 2002, for the Macatawa Bank Corporation Annual Meeting of
Shareholders held April 18, 2002, which is incorporated herein by reference.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | Employment
Agreement between Benj. A Smith III and Macatawa Bank Corporation dated December 10, 2003.
| | ---- | -----------------------------------------------------------------------------------------------------

| | 10.4 | Form
of Indemnity Agreement between Macatawa Bank Corporation and each of its directors,
incorporated by reference to Exhibit 10.2 to the Macatawa Bank Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 | Investment
 Management  Agreement  between  Macatawa  Bank and Smith &  Associates  Investment
 Management                   Services dated March 11, 2004.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 13 | Annual
Report to Shareholders for the year ended December 31, 2003. This exhibit, except for
those portions expressly incorporated by reference in this filing, is furnished for the
information of the Securities and Exchange Commission and is not deemed filed as
part of this filing. This information was delivered to the Companys shareholders in
compliance with Rule 14a-3 of the Securities Exchange Act of 1934, as amended.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

---



| | 21 | Subsidiaries
of the Registrant
| | -- | ------------------------------

| | 23 | Consent
of Crowe Chizek and Company LLC, independent public accountants
| | -- | -----------------------------------------------------------------------

| | 24 | Power
of  Attorney  (included  on the  signature  page on page 25 of the Annual
                  Report on Form 10-K)
| | -- | ----------------------------------------------------------------------------------------------------------------------

| | 31.1 | Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | -----------------------------------------------------------------------

| | 31.2 | Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | -----------------------------------------------------------------------

| | 32.1 | Certificate
of the Chief Executive Officer and Chief Financial Officer of Macatawa Bank Corporation
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

---



# Exhibit 10.3

# EMPLOYMENT AGREEMENT

This
Employment Agreement (Agreement) is entered into as of this December 10, 2003,
by and between BENJ. A SMITH III, a Michigan resident (Smith), and MACATAWA
BANK CORPORATION, a Michigan corporation (Company). This Agreement supersedes
and totally replaces a Consulting Agreement between the parties dated May 8, 2003. That
prior agreement is terminated and is null and void.

RECITALS

Smith
is the founder of Macatawa Bank (the Bank) and the Company. He currently
serves as the Chairman and Chief Executive Officer of the Company and the Chairman of the
Bank and is employed by the Bank. He has been in the banking and investment business for
many years and is knowledgeable in all phases of the business of the Company and the Bank,
including financial, management and operational matters and is a key employee who has
played a major role in the success of the Company and the Bank. Smith is planning to
resign his position as Chief Executive Officer of the Company. However, it is expected
that Smith will continue to be actively engaged as an employee of the Bank or the Company
for some period of time and the Company wishes to have the benefit of Smiths
expertise and experience. The Company has also agreed that in the event of Smiths
death his family should have the benefit of the compensation provided in this Agreement
even though Smith would not be available to serve the Company.

References
to a Macatawa Entity in this Agreement include the Company, the Bank and any
other entity controlled by the Company or the Bank.

Accordingly,
the parties have entered into this Agreement.

1.       
          Commitment. At such time as Smith resigns as the Chief Executive Officer
          of the Company, the Company shall cause the Bank to continue Smith as an
          employee on the terms set forth in this Agreement.

2.       
          Term. The term of the employment arrangement shall begin on the date
          (Commencement Date) that Smith resigns as the Chief Executive
          Officer of the Company. This arrangement will expire six (6) years after the
          Commencement Date (Expiration Date) unless terminated earlier as
          provided in this Agreement.

3.       
          Services. During the term that the services are to be performed, Smith
          shall provide services to the Bank and the Company as requested by the Board of
          Directors or senior management of the Bank or the Company from time to time.
          Such services may include advice and consultation with respect to any and all
          phases or aspects of the Banks or the Companys business or
          operations. Neither the Company nor the Bank has an obligation to use such
          services.

4.       
          Availability. Smith shall make himself available to perform services at
          reasonable times during ordinary business hours. It is understood and agreed,
          however, that such performance of such services shall not require Smiths
          full-time or his physical presence at the Bank or Company offices but shall be
          sufficient if provided by telephone, by letter or e-mail advice or by meetings
          with Bank or Company officials and others at such place or places as may be
          mutually convenient and acceptable to the Bank or the Company and Smith.

5.       
          Compensation. As compensation for Smith holding himself available for and
          performing services during the term of this Agreement, the Company shall pay or
          cause the Bank to pay to Smith, Twelve Thousand Five Hundred Dollars ($12,500)
          per month beginning as of the Commencement Date. In the event of Smiths
          death before the Expiration Date, these payments shall continue to be made until
          the Expiration Date to Smiths wife, or if she is deceased to Smiths
          living children in equal shares. The Company or the Bank shall also promptly
          reimburse Smith for reasonable expenses that he incurs in connection with
          performing his services upon submission of proper verification to the Company as
          to the nature and amount of those expenses. Smith shall not be entitled to
          participate in the Companys or the Banks health, medical,
          hospitalization, dental or disability plans. Smith shall be eligible to
          participate in the Companys Stock Compensation Plan.

6.       
          Termination. The service obligations of Smith and the Companys
          payment obligations shall terminate:

| | (a)        Immediately
upon the Expiration Date;
| | ------------------------------------------------

| | (b)       
               Immediately upon mutual written agreement of Company and Smith; or
| | --------------------------------------------------------------------------------------------

| | (c)       
               At the option of Company for cause as defined below. For purposes of
               this Agreement, cause shall be any of the following reasons:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)       
               Smiths personal dishonesty materially and adversely affecting a Macatawa
               Entity;
| | --------------------------------------------------------------------------------------------------------------------------

| | (ii)       
               Willful misconduct materially and adversely affecting a Macatawa Entity;
| | ---------------------------------------------------------------------------------------------------

| | (iii)       
               Willful breach of a fiduciary duty to a Macatawa Entity involving personal
               profit; or
| | --------------------------------------------------------------------------------------------------------------------------------

| | (iv)       
               The order of any supervising agency with jurisdiction over the affairs of a
               Macatawa Entity or a court order obtained at the request of any such agency.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For
purposes of this Agreement, no act or failure to act on Smiths behalf shall be
considered willful unless done, or admitted to be done, by him not in good
faith and unless he knew or should have known that his action or admission was not in, or
was opposed to, the best interests of a Macatawa Entity; provided, that any act or
omission to act on Smiths behalf in reliance upon an opinion of counsel to the
Company or counsel to Smith shall not be deemed to be willful. Smith shall not be deemed
to have been terminated for cause unless or until there shall have been delivered to him a
copy of the certification of a majority of the non-officer members of the Companys
Board of Directors finding that, in the good faith opinion of such majority, Smith was
guilty of conduct deemed to be cause and specifying the details thereof, after reasonable
notice to Smith and an opportunity for him, together with his counsel, to be heard before
such majority.

Notwithstanding
any other provision of this Agreement, if this Agreement is terminated pursuant to this
Section 6, the Company shall not be liable to Smith for any cost or obligation, except as
may have been earned by Smith prior to the date of the termination.

7.       
          Severability. The parties believe that every provision of this Agreement
          is effective and valid under applicable law, and whenever possible, each
          provision of this Agreement shall be interpreted in such a manner as to be
          effective and valid. If any provision of this Agreement is held, in whole or in
          part, to be invalid, the remainder of such provision and this Agreement shall
          remain in full force and effect, with the offensive term or condition being
          stricken to the extent necessary to comply with any conflicting law.

8.       
          Waiver. No provision of this Agreement shall be waived by any party
          hereto, unless such waiver is in a writing, signed by a duly authorized
          representative of the party against whom such waiver is sought to be enforced. A
          waiver by either party of any breach or failure to comply with any provision of
          this Agreement by the other party shall not be construed as or constitute a
          continuing waiver of such provision or a waiver of any other breach of or
          failure to comply with any other provision of this Agreement.

9.       
          Successors and Assigns. This Agreement shall inure to the benefit of and
          be binding upon the parties and their respective heirs, personal
          representatives, successors and assigns.

10.       
          Amendment. This Agreement may not be amended or modified except by the
          further written agreement of Company and Smith.

11.       
          Notice. All notices hereunder shall be sent by telefax or by U.S. Mail,
          by mailing such notice in the Untied States mail, first-class postage prepaid,
          registered or certified mail, return receipt requested to the other party at the
          last known address of such party or at such other address as a party shall from
          time to time designate in writing to the other party.

12.       
          Applicable Law; Jurisdiction; Venue. The terms and conditions of this
          Agreement shall be governed, construed, interpreted and enforced in accordance
          with the domestic laws of the State of Michigan, without giving effect to any
          choice of law or conflict of law provision or rule (whether of the State of
          Michigan or any other jurisdiction) that would cause the application of the laws
          of any jurisdiction other than the State of Michigan. Any and all actions
          concerning any dispute arising hereunder shall be filed and maintained in the
          Circuit Court of Ottawa County, Michigan or the federal district court for the
          Western District of Michigan. The parties specifically consent and submit to the
          jurisdiction and venue of such state or federal court.

13.       
          Entire Agreement. This Agreement constitutes the entire agreement between
          the parties with respect to the subject matter of this Agreement. The provisions
          of this Agreement shall supersede all contemporaneous oral agreements,
          communications and understandings and all prior oral and written communications,
          agreements and understandings between the parties with respect to the subject
          matter of this Agreement. Each party acknowledges that no representation,
          inducement or condition not set forth herein has been made or relied upon by
          either party.

IN
WITNESS WHEREOF, Company and Smith have executed this Agreement as of the Effective Date,
intending to be legally bound.

| | SMITH
  /s/ Benj. A. Smith III
Benj. A. Smith III
| | ----------------------------------------------------------------

| | MACATAWA BANK CORPORATION
By:   /s/ Philip J. Koning         

         Its:   Secretary/Treasurer
| | -----------------------------------------------------------------------------------------------------------------



---



# Exhibit 10.5

# INVESTMENT MANAGEMENT
AGREEMENT

This
INVESTMENT MANAGEMENT AGREEMENT (the Agreement) is made and entered by and
between SMITH & ASSOCIATES INVESTMENT MANAGEMENT SERVICES, a Michigan corporation of
Holland, Michigan (referred to as the Adviser), and the undersigned (referred
to as the Client).

The
Adviser is registered with the Securities and Exchange Commission as an investment adviser
pursuant to the Investment Adviser Act of 1940, as amended (The Advisers Act).
The Adviser renders investment advisory and supervisory services.

The
Client is a bank formed under the laws of the State of Michigan.

The Client
desires to obtain the Advisers services. The parties have, therefore, entered into
this Agreement which describes all of the terms and conditions under which the
Advisers services will be rendered to the Client.

In
consideration of the mutual covenants and agreements contained in this Agreement, the
parties agree as follows:

# APPOINTMENT AND
AUTHORITY OF THE ADVISER

1.       
          The Client hereby appoints and engages the Adviser, and the Adviser hereby
          accepts the appointment and engagement, as an investment adviser and investment
          manager with respect to the assets set forth in Exhibit A to this Agreement
          (referred to as the Fund) together with assets added to the Fund and
          excepting assets deleted from the Fund.

2.       
          In order to perform its services under this Agreement, the Adviser is hereby
          granted, and shall have and exercise in its sole discretion, the power and
          authority to do the following with regard to the Fund without the prior approval
          of the Client; provided, however, that all actions by the Adviser shall be
          consistent with the Clients Asset Liability Policy and any other
          applicable policies of the Bank:

| | (a)       
               Direct the investment and reinvestment of all or any portion of the Fund in any
               of the following types of investments: corporate obligations; common, preferred,
               and convertible stock and securities; bonds; limited partnership interests;
               interest in common trust funds or mutual funds; options; financial futures;
               annuities; obligations of the United State of America or any state or political
               subdivision; other securities whether registered or exempt unregistered issues;
               certificates of deposit; demand deposits; insurance; and any other property
               whether tangible or intangible, real personal, or mixed, or any interest in such
               property.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)       
               Direct the subscription, purchase, sale, exchange, conveyance, transfer,
               assignment, lease, or other acquisition or disposition of all or any portion of
               the Fund; to exercise any conversion privileges, subscription rights, or similar
               rights or options; and to determine the price, terms, and conditions of any of
               the foregoing transactions.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)       
               Place orders for the execution of securities transactions with such brokers,
               dealers, agents, financial institutions, or issuers in such markets, at such
               times, such prices, and such commission rates as the Adviser may deem
               appropriate in its sole discretion.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)       
               Take any and all action which is necessary, convenient, or useful to the
               performance of any of the foregoing powers.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

Notwithstanding the foregoing, the
Client shall have the final authority over investment decisions and the Adviser will
comply with instructions given by the Client.

# SERVICES OF THE ADVISER

3.       
          Based upon the information provided by the Client and other information
          available to the Adviser, the Adviser may from time to time prepare and update
          investment guidelines for consideration by the Client. The Client has the
          ultimate responsibility and authority to approve its Asset Liability Policy and
          related guidelines.

4.       
          Adviser agrees to manage the Fund and exercise the powers and authority granted
          under this Agreement in accordance with the then current Asset Liability Policy
          of the Client or other applicable Client policies. If the Client instructs the
          Adviser to make specific investments or to follow specific investment guidelines
          other than those recommended by the Adviser, then the Adviser shall be relieved
          from responsibility for prudency, suitability, and diversification of
          investments made pursuant to such instructions.

5.       
          The Adviser shall use its best efforts to obtain the best rate of return on the
          Fund that is consistent with applicable law, the Clients Asset Liability
          Policy, any other investment guidelines of the Client then in effect and the
          Advisers duties or responsibility to the Client. The Adviser shall
          maintain a true and accurate account of all transactions made with respect to
          the Fund. The Adviser shall render to the Client a periodic written statement at
          least monthly of investment activity and current investments at fair market
          values determined in accordance with Section 16 of this Agreement.

6.       
          The Adviser shall advise the Client regarding interest rates, current trends and
          forecasts of future interest rates.

7.       
          The Adviser shall attend regularly scheduled Asset Liability Committee (ALCO)
          meetings of the Client to review investment activity and to consult regarding
          interest rates, investments and related matters.

8.       
          The Adviser will perform required regulatory investment testing.

2

---



9.       
          The duties, responsibilities, and obligations of the Adviser are limited to
          those expressly provided in this Agreement or imposed by law. The Adviser shall
          not be liable for the accuracy of any information furnished by the Client, by
          the Clients custodian, or by any other person not a party to this
          Agreement. The Client hereby appoints the Adviser as the agent of the Client
          with full power during the continuance of this Agreement to vote as proxy all
          Fund assets that are subject to the Employee Retirement Income Security Act. The
          Adviser shall not be required to take any action or render any advice with
          respect to shareholder voting rights with regard to Fund assets that are not
          subject to the Employee Retirement Income Security Act. The Adviser shall not
          have custody or possession of any of the Funds cash, securities, property,
          or evidences of ownership.

# TRANSACTION PROCEDURES

10.       
          The Adviser is required to obtain the prior approval of the Client to take any
          action regarding the assets listed in Exhibit B to this Agreement or interest,
          dividends or proceeds therefrom. Instructions, approvals or authorizations by
          the Client may be communicated to the Adviser in accordance with Section 29 of
          this Agreement (mail or facsimile) or verbally, by telephonic communication or
          e-mail to the Adviser. Verbal or telephonic instructions, approvals or
          authorizations by the Client regarding Exhibit B assets shall be promptly
          confirmed by the Adviser. Upon receipt of such confirmation, the Client shall
          immediately raise any objection. The Clients failure to so object shall be
          deemed to be final and conclusive approval of the transaction described in the
          confirmation. The Advisor may communicate with the Client regarding
          confirmations or changes in the assets of the Fund in accordance with Section 29
          of this Agreement (mail or facsimile) or by e-mail to the Client.

11.       
          The Adviser shall have discretion as to the selection of securities brokers,
          real estate brokers, securities dealers, insurance agents, banks, financial
          institutions, securities issuers, and the like, for the execution of
          transactions on behalf of the Client, unless otherwise directed by the Client in
          Exhibit C to this Agreement. In the event that the Client directs the Adviser to
          use a particular broker or dealer, the Adviser may not have the ability to
          negotiate commissions and may not be able to obtain volume discounts or best
          execution. In addition, under those circumstances, a disparity may exist between
          the commissions charged to Clients who direct the Adviser to use a particular
          broker or dealer and other Clients who do not direct the Adviser to use a
          particular broker or dealer.

12.       
          Securities transactions for the Client may be aggregated with securities
          transactions for other clients of the Adviser in order to obtain a better
          execution. The Adviser may cause the Client and other clients to pay a brokerage
          commission which is higher than commissions generally available in recognition
          of the value of services provided to the Adviser by a particular broker or
          dealer; provided, that such services shall be obtained in accordance with Rule
          28 (e) promulgated under the Securities Exchange Act of 1934, as amended.
          Services obtained in connection with securities transactions for the client may
          also benefit other clients of the Adviser.

3

---



13.       
          All transactions for the Fund will be consummated by payment to or from, or
          delivery to or from, the Client or the Clients custodian. The Client or
          the Clients custodian shall have custody and possession of all the
          Funds cash, securities, property, or evidences of ownership. The Adviser
          shall issue instructions for the settlement of transactions initiated pursuant
          to this Agreement in writing or orally and promptly confirmed in writing. The
          Adviser shall instruct all brokers, dealers, and issuers executing orders on
          behalf of the Fund to forward to the Client or the Clients custodian
          copies of all transaction confirmations.

# COMPENSATION

14.       
          In consideration for its services under this Agreement, the Adviser shall be
          compensated based on the aggregate fair market value of the Fund as determined
          in accordance with Section 13. The fee schedule is as follows:

| | (a)       
               0.05% (five basis points) per annum on the first $50,000,000 of aggregate fair
               market value; and
| | -----------------------------------------------------------------------------------------------------------------------------------------

| | (b)       
0.03% (three basis points) per annum on aggregate fair market value above
          $50,000,000.
| | -----------------------------------------------------------------------------------------------------------

The
minimum annual fee is $5,000, however exceptions may be made at the discretion of the
Adviser. Fees may differ from the published schedule if agreed upon by the Client and the
Adviser. The aggregate fair market value of assets in related accounts may be combined
when fees are calculated. The above fee schedule may be modified by mutual agreement.
Clients invested in mutual funds may pay multiple Advisory fees i.e., fees and expenses of
the mutual fund as disclosed in the funds prospectus in addition to the Advisory
fees of the Adviser for managing the assets invested in mutual funds. The client or the
Clients custodian shall be responsible for all commissions and fees of brokers,
dealers, agents, issuers and the like. Such commissions and fees are not the
responsibility of the Adviser and are not included in the above fee schedule.

15.       
          Fees shall be computed and billed quarterly in advance. The fee due will be paid
          7 days after receipt of the Advisers invoice, unless an objection has been
          received from the Client. Compensation for advice with respect to matters not
          directly involving the management of the Fund is not included in these
          management fees and shall be billed separately at a rate of $300 per hour
          payable within 10 days of receipt of the Advisers invoice. The Adviser
          will notify Client in advance if the Adviser believes any requested advice does
          not relate to management of the Fund.

16.       
          For all purposes of this Agreement, the aggregate fair market value of
          investments in the Fund shall be the sum of the following as determined on the
          last day of each fiscal quarter:

| | (a)       
               Each security listed on any national securities exchange shall be valued based
               on the last quoted sale price on the exchange on which such security is traded;
               and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)       
               Any other security or assets shall be valued by the Adviser to best reflect its
               fair market value in the opinion of the Adviser, including original or adjusted
               cost if no other method may be readily employed. The Adviser shall not be
               obligated to obtain an appraisal of any assets. Any appraisal of assets shall be
               at the Clients sole expense.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

---



# REPRESENTATIONS AND
WARRANTIES

17.       
          The Client represents and warrants to the Adviser that:

| | (a)       
               The terms and conditions of this Agreement are authorized by, and do not
               violate, the provisions of the instruments governing the Fund, if any, or any
               other agreement or obligation by which the Client is bound, whether arising by
               contract, operation of law, or otherwise.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)       
               This Agreement has been duly authorized and is binding upon the Client in
               accordance with its terms and conditions. The Client shall deliver to the
               Adviser such evidence of this authorization as the Adviser may reasonably
               request from time to time.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18.       
          The Adviser represents and warrants to the Client that:

| | (a)       
               It is an investment adviser registered with the Securities and Exchange
               Commission pursuant to the Advisers Act.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)       
               It will continue to meet the qualifications applicable to an investment adviser
               and an investment manager as prescribed by the Advisers Act.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# COMPLIANCE WITH LAWS

19.       
          The Client and the Adviser each represent and warrant to the other that its
          actions with respect to the Fund are and shall be in accordance with all
          applicable law and regulation, including without limitation, the Advisers Act.

# LIABILITY AND
INDEMNIFICATION

20.       
          The Adviser shall not be liable for any loss or diminution of the Fund, except
          to the extent that such loss or diminution results from any act or omission of
          the Adviser which is judicially determined to be a breach of its duties under
          this Agreement or under applicable law and regulation. The Client understands
          that there can be no assurance of the success or profitability of particular
          investments or investment strategies. The Client acknowledges that the Adviser
          has not made any express or implied representation, warranty, promise, or
          guaranty of the rate of return that may be earned with respect to the Fund.

21.       
          The Adviser and its directors, officers, employees, and agents shall not be
          liable for any act or omission by the Client, its agents, or any person not a
          party to this Agreement, or any act or omission by the Adviser at the direction
          of the Client or its agents, including, without limitation, the use or
          withdrawal of funds from the Fund for any purpose, except as prescribed by law.

22.       
          The Client shall indemnify and hold harmless the Adviser or its directors,
          officers, employees, and agents from any liability incurred by the Adviser or
          its directors, officers, employees, and agents by reason of any direct or
          indirect act, omission, or instruction of the Client or its agents.

5

---



# TERMINATION AND
ASSIGNMENT

23.       
          This Agreement may be terminated at any time by either party upon written notice
          of termination. Termination shall be effective 30 days following receipt of such
          notice. Fees paid in advance will be prorated to the date of termination, and
          any unearned portion will be refunded to the Client.

24.       
          Neither this Agreement nor the Advisers responsibilities under this
          Agreement shall be assigned or delegated by the Adviser without the written
          consent of the Client.

# MISCELLANEOUS

25.       
          This Agreement shall be binding upon and inure to the exclusive benefit of the
          parties to this Agreement and their successors. No person not a party to this
          Agreement shall derive any benefit whatsoever from this Agreement except as
          provided by law.

26.       
          Nothing in this Agreement shall prevent the Adviser from rendering services to
          any person other than the Client. The Client understands that the Adviser and
          its directors, officers, employees, and agents may from time to time recommend,
          hold, buy, sell, or trade securities and other investments for their own
          respective accounts or the accounts of others. These investments may be the same
          or different from those investments recommended, held, bought, sold or traded by
          or on behalf of the Client.

27.       
          In the event that the Adviser or its directors, officers, employees, or agents
          should obtain so-called inside information with respect to an issuer
          of securities, the Adviser shall have no obligation to use such information for
          the benefit of the Client which would violate any federal or state securities
          laws or regulations. The Client agrees to keep, and to cause its agents to keep,
          any of the Advisers recommendations and advice confidential.

28.       
          The Adviser shall be entitled to presume the validity and due authorization of
          any approval, instruction, notice, authorization or communication by and on
          behalf of the Client if given in accordance with Section 10 by the person or
          persons identified in Exhibit D to this Agreement.

29.       
          With the exception of communications between the Client and the Adviser pursuant
          to Section 10 of this Agreement, all communications with respect to this
          Agreement shall be in writing and shall be deemed made when (a) hand delivered
          to the address below or in Exhibit D, (b) sent by first-class mail, postage
          prepaid, addressed to the other party at the address appearing below or in
          Exhibit D, or (c) sent by facsimile transmission to the number appearing below
          or in Exhibit D. The addresses and numbers shown below or in Exhibit D may be
          modified by written instructions given in accordance with the forgoing
          requirements. Notice by hand delivery shall be effective upon delivery. Notice
          by mail shall be effective upon mailing. Telefax communications shall be
          effective upon receipt.

6

---



Notices to Smith & Associates:
                SMITH & ASSOCIATES
                106 E. 8th Street
                Holland, Michigan 49423
                Telephone:    (616) 396-0119
                Facsimile:    (616) 396-2381
        Notices to Client:
                Macatawa Bank
                Attn: Chief Financial Officer
                10753 Macatawa Drive
                Holland, Michigan  49424
                Telephone:    616-494-7645
                Facsimile:    616-494-7644

30.       
          Federal and State securities laws may impose liabilities under certain
          circumstances on persons who act in good faith. Nothing in this Agreement will
          waive or limit any rights that Client may have under Federal and State
          securities laws.

31.       
          The parties agree that any action or proceeding arising out of this Agreement or
          the services of the Adviser pursuant to this Agreement shall be commenced, if at
          all, in the Circuit Court for the County of Ottawa and State of Michigan or in
          the Federal District Court for the Western District of Michigan. The parties
          agree and consent to such courts exercising personal jurisdiction over each of
          them with respect to any such action or proceeding. The construction, validity,
          enforcement, and performance of this Agreement shall be governed by the laws of
          the State of Michigan, including the period of limitations provided thereby,
          subject to any superseding federal law.

32.       
          If any provision of this Agreement is rendered unenforceable under applicable
          law, the remaining provisions of this Agreement shall continue in effect as
          though the invalid provision were not part of this Agreement. In this Agreement
          wherever a word is used in the singular form, it may also be construed as though
          used in the plural form. Headings are inserted for convenience of reference only
          and shall not affect the meaning of any provision.

33.       
          The Agreement constitutes the entire agreement and understanding of the parties.
          The Agreement shall control as between the Client and the Adviser over any other
          agreement affecting the rights and obligations between the parties whether
          executed before or after this Agreement, excepting written amendments to this
          Agreement. Except to the extent provided in the Agreement, the Agreement may
          only be amended in a writing executed by both parties. The Agreement may be
          executed in any number of counterparts. Each counterpart shall be deemed to be
          an original and all of which shall constitute one and the same instrument.

7

---



34.       
          The Client hereby acknowledges receipt of a copy of the Advisers
          investment adviser disclosure statement. This disclosure statement generally
          describes the nature and scope of the Advisers services as an investment
          adviser. This is the information required by Part II of Form ADV which is on
          file with the Securities and Exchange Commission.

35.       
          The Client shall, upon request, execute and deliver to the Adviser letters of
          authority, substantially in the form as contained in Exhibit E to this
          Agreement, evidencing the Advisers powers and authority under this
          Agreement. The Client consents to the disclosure of this Agreement to any person
          with whom the Adviser may transact business on behalf of the Client.

IN
 WITNESS   WHEREOF,   the   parties   have   executed   this   Agreement   as  of  the
 11th  day  of March, 2004.

|SMITH & ASSOCIATES INVESTMENT
MANAGEMENT SERVICES
By: /s/ Duane J. Carpenter        | MACATAWA BANK
By: /s/ Jon Swets       
    Name: Jon Swets    Title: Chief Financial Officer
|-------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------

8

---



EXHIBIT A

ASSETS CONSTITUTING THE
FUND

The
following assets constitute the Fund for purposes of this Agreement:

|Description | Custodian | Address
|----------- | --------- | -------

---

Investment securities of Macatawa
Bank, excluding the stock of the Federal Home Loan Bank (FHLB)

---

---

---

---

---

---

---

Other Assets

---

---

---

9

---



EXHIBIT B

TRANSACTIONS REQUIRING
PRIOR APPROVAL

The
following transactions or kinds of transactions shall require the prior approval of the
Client:

---

---

---

---

---

---

---

10

---



EXHIBIT C

DESIGNATED PERSONS TO
EFFECT TRANSACTIONS

The
Adviser is hereby directed to use the following brokers, dealers, or agents for the
transactions described below:

|Name | Address | Transaction
|---- | ------- | -----------

---

All brokers, dealers and agents
must be approved under the policies of Macatawa Bank

---

---

---

---

---

---

---

11

---



EXHIBIT D

PERSONS AUTHORIZED TO
ACT FOR THE CLIENT

The
Client does hereby appoint the following person, persons or entities as Clients
attorney-in-fact to do all things that Client could do if personally present with regard
to all matters arising under the Investment Management Agreement:

|Name | Address | Telephone No.
|---- | ------- | -------------

---

The Chief Financial Officer of
Macatawa Bank and any other persons designated by the Chief Financial Officer.

---

---

---

---

---

---

---

---

12

---



EXHIBIT E

(Date)

---

---

---

|RE: | Authority of Smith & Associates Investment Management Services
With Respect to ______________________
Account No. ______________________
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

Gentlemen:

This shall
confirm the appointment of Smith & Associates Investment Management Services, a
Michigan corporation (the Adviser), as investment adviser and investment
manager for the above-noted account (the Account). The Adviser has
discretionary authority as agent and attorney-in-fact on behalf of the Account to execute
and deliver any order for the purchase, sale, exchange, or conversion or other transaction
for securities or other investments with any registered representative of any brokerage
firm, bank, or other financial institution authorized to purchase or sell securities on
the New York Stock Exchange, American Stock Exchange, Midwest Stock Exchange, or any other
stock exchange or market, including the over-the-counter market, and to act in private
transactions, as the Adviser deems to be in the best interests of the Account.

Very truly yours,

13

---



# EXHIBIT 13

# Selected Consolidated
Financial Data

The following selected consolidated
financial and other data are derived from the Companys Financial Statements and
should be read with the Consolidated Financial Statements and Notes thereto, and
Managements Discussion and Analysis of Financial Condition and Results of
Operations. The Consolidated Balance Sheets as of December 31, 2003 and 2002, and the
Consolidated Statements of Income for the years ended December 31, 2003, 2002, and 2001,
are included elsewhere in this Annual Report.

(Dollars in thousands, except share
and per share data)

|                                             | At or For the Year Ended December 31
|-------------------------------------------- | ------------------------------------
|
|
|
|Financial Condition                          |                                     
|Total assets                                 |                                     
|Securities                                   |                                     
|Loans                                        |                                     
|Deposits                                     |                                     
|FHLB Advances                                |                                     
|Shareholders' equity                         |                                     
|Share Information*                           |                                     
|Basic earnings/(loss) per common share       |                                     
|Diluted earnings/(loss) per common share     |                                     
|Book value per common share                  |                                     
|Dividends per share                          |                                     
|Weighted average dilutive                    |                                     
|shares outstanding                           |                                     
|Shares outstanding at end of period          |                                     
|Operations                                   |                                     
|Interest income                              |                                     
|Interest expense                             |                                     
|Net interest income                          |                                     
|Provision for loan losses                    |                                     
|Net interest income after provision          |                                     
|for loan losses                              |                                     
|Total noninterest income                     |                                     
|Total noninterest expense                    |                                     
|Income/(loss) before tax                     |                                     
|Federal income tax                           |                                     
|Net income/(loss)                            |                                     
|Performance Ratios                           |                                     
|Return on average equity                     |                                     
|Return on average assets                     |                                     
|Yield on average interest-earning assets     |                                     
|Cost on average interest-bearing liabilities |                                     
|Average net interest spread                  |                                     
|Average net interest margin                  |                                     
|Efficiency ratio                             |                                     
|Capital Ratios                               |                                     
|Equity to assets                             |                                     
|Total risk-based capital ratio               |                                     
|Credit Quality Ratios                        |                                     
|Allowance for loan losses to total loans     |                                     
|Nonperforming assets to total assets         |                                     
|Net charge-offs to average loans             |                                     

*Retroactively adjusted to reflect
the effect of all stock dividends

---

# Quarterly Financial Data
(unaudited)

A summary of selected quarterly results
of operations for the years ended December 31, 2003 and 2002 follows:

(Dollars in thousands, except per
share data)

|                              | Three Months Ended
|----------------------------- | ------------------
|
|
|
|2003                          |                   
|Interest income               |                   
|Net interest income           |                   
|Provision for loan losses     |                   
|Income before income tax expe |                   
|Net income                    |                   
|                             
|Net income per share          |                   
|Basic                         |                   
|Diluted                       |                   
|2002                         
|Interest income               |                   
|Net interest income           |                   
|Provision for loan losses     |                   
|Income before income tax expe |                   
|Net income                    |                   
|                             
|Net income per share         
|Basic                         |                   
|Diluted                       |                   

2

---



# Managements
Discussion and Analysis of Financial Condition and Results of Operations

Managements discussion and
analysis of financial condition and results of operations contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Actual results could differ materially from those projected in such forward-looking
statements.

The following section presents
additional information to assess the financial condition and results of operations of the
Company. This section should be read in conjunction with the consolidated financial
statements and the supplemental financial data contained elsewhere in this Annual Report.

# Overview

Macatawa Bank Corporation is a
Michigan corporation and is the holding company for three wholly owned subsidiaries,
Macatawa Bank, Macatawa Investment Services, Inc., and Macatawa Statutory Trust I.
Effective January 9, 2002, Macatawa Bank Corporation elected to become a financial holding
company pursuant to Title I of the Gramm-Leach-Bliley Act. Macatawa Bank commenced
operations on November 25, 1997. On April 1, 2002 Macatawa Bank Corporation acquired Grand
Bank Financial Corporation (GBFC) and its wholly owned banking subsidiary,
Grand Bank. Its results are included in the consolidated statements of income since this
effective date. Grand Bank was formed in 1987 and operated from a single location in Grand
Rapids, Michigan. To achieve further synergies from the Grand Bank acquisition, the
Company merged Grand Bank into Macatawa Bank effective January 1, 2003 with the combined
bank named Macatawa Bank. Macatawa Bank is a Michigan chartered bank with depository
accounts insured by the Federal Deposit Insurance Corporation. The bank operates twenty
branch offices and a lending and operational service facility, providing a full range of
commercial and consumer banking and trust services in Kent County, Ottawa County, and
northern Allegan County, Michigan. Macatawa Investment Services was formed in October 2001
and gained approval in June 2002 from NASD to commence operations as a broker/dealer.
Macatawa Investment Services provides various services including discount brokerage,
personal financial planning, and consultation regarding mutual funds and annuities.
Macatawa Statutory Trust I is a grantor trust that issued a pooled trust preferred
security in July, 2003. Macatawa Bank Mortgage Company, a subsidiary of Macatawa Bank,
originates and sells residential mortgage loans into the secondary market on a servicing
released basis.

While maintaining asset quality and
improving profitability, we have experienced rapid and substantial growth since opening
Macatawa Bank in November 1997. We first became profitable in 1999 and have increased
earnings each year since then with 2003 net income reaching $11.8 million. Since our
inception in 1997 we have raised approximately $80.6 million in capital through private
and public common stock offerings and a trust preferred offering to facilitate our growth
and progress over these years. In conjunction with the acquisition of GBFC we issued
2,472,000 shares of common stock in exchange for all of the outstanding stock of GBFC.

We believe that growth in core
deposits is key to our long-term success and is our primary funding source for asset
growth. As such, establishing a branching network in our markets has been of high
importance in order to facilitate this core deposit growth. We have gained community
awareness and acceptance in our markets through this expanding branch network and our high
service quality standards. Since our inception in 1997, core deposits have increased
between $100 million and $150 million each year. During 2003 core deposits grew by 23% to
a total of $996.8 million.

3

---



The West Michigan markets within
which we operate are growing markets. Because of their growth and our ability to provide
highly personalized service, these markets have provided significant expansion
opportunities for us. In addition, acquisitions of banks within our markets by large
banking institutions headquartered far away have provided us additional opportunity to
gain market share. Grand Rapids is the largest market within West Michigan. It is also
where we hold the lowest percent share of the market relative to the other markets within
which we operate, and therefore we believe presents great opportunity. With our foundation
now established in Grand Rapids, further expansion here will remain a high priority. We
opened our new branch on the northeast side of the city during the fourth quarter,
bringing our total number of branches in the greater Grand Rapids area to seven. We plan
to open at least three more branches in this area within the next 18 months. Also, we
enjoy continuing success in the Holland/Zeeland area in building new and existing
relationships, and our entrance into the Grand Haven market during the third quarter has
produced excellent growth results.We anticipate that we will
continue to experience growth in our balance sheet and in our earnings due to these
expansion opportunities.

# Financial Condition

Summary.
The consolidated financial statements
include the effect of the acquisition of GBFC which was effective April 1, 2002. A
schedule of the significant GBFC assets and liabilities acquired is contained in Note 2 to
the Consolidated Financial Statements.

The acquisition was accounted for
using the purchase method of accounting. As a result, certain purchase accounting
adjustments were required to record the acquired assets and liabilities at market value.
The value of the purchase accounting adjustments is being amortized over the respective
lives of the varying assets and liabilities.

Based on SFAS 142, Goodwill and
Other Intangible Assets, we have recorded intangible assets for the estimated value
of core deposit accounts and trust customer accounts acquired in the acquisition. The
intangible values represent the present value of the estimated net revenue streams
attributed to the respective intangibles. The intangible assets acquired are valued using
certain assumptions for alternative cost of funds, lives of respective core deposits or
trust customers, discount rates and other applicable assumptions. The total of both core
deposit intangibles and trust customer intangibles was $3.7 million, and is being
amortized on an accelerated basis over 10 years.

The balance of the acquisition price
in excess of the fair market value of assets and liabilities acquired, including
intangible assets, was recorded as goodwill and totaled $23.9 million. Under SFAS 142,
goodwill is defined as an intangible asset with an indefinite useful life, and as such, is
not amortized, but is required to be tested annually for impairment of the value. If
impaired, an impairment loss must be recorded for the value equal to the excess of the
assets carrying value over its fair value.

4

---



The amount of goodwill recorded in
this transaction relative to the smaller amounts of identified intangible assets and lack
of intangibles related to loan and deposit customer lists reflects that the value of GBFC
related primarily to the foundation it provides to further build our presence in the Grand
Rapids market. The value of this foundation lies with the GBFC workforce, their customer
service orientation and their relationships within the community. The amount of the core
deposits intangible asset recorded is small relative to the total purchase price and
reflects that the GBFC deposit portfolio was weighted towards higher interest rate account
types.

Our total assets were $1.40 billion
at December 31, 2003, an increase of $224.5 million from $1.18 billion in total assets at
December 31, 2002. We believe the continued strong asset growth reflects the acceptance of
our community banking philosophy in the growing communities we serve. Our asset growth
consists primarily of growth in our loan portfolio as we continue to attract new loan
customers despite the strong competition from other locally based community banks and
larger regional banks. The asset growth was primarily in earning assets of loans and
securities, but also included increased cash, premises, and equipment. The increase in
total assets was principally funded by strong deposit growth. Deposits grew by $188.5
million during 2003, a 20% growth rate. Additional borrowings were used to a lesser extent
to supplement the funding provided by deposits. We attribute the strong deposit growth to
our quality customer service, the desire of our customers to bank with a local bank, and
convenient accessibility through the expansion of our branch network.

5

---



Cash and Cash
Equivalents.  Our cash and cash equivalents, which
include federal funds sold and short-term investments, were $60.0 million at December 31,
2003, as compared to $47.9 million at December 31, 2002. The increase was a result of high
customer deposit activity right at the end of 2003 causing an investment in federal funds
sold until these funds are deployed into higher yielding assets.

Securities.Securities increased $19.5 million to
$109.7 million at December 31, 2003 from $90.2 million at December 31, 2002. Securities
increased due to purchasing additional securities as a means of balancing our interest
rate risk. Primarily fixed rate securities were purchased to offset growth in variable
rate loans. These securities were also purchased to support our liquidity. We expect
continued growth of our securities portfolio generally consistent with the growth of our
company in order to help balance our interest rate risk and maintain appropriate levels of
liquidity.

Loan Portfolio. Our total loan portfolio increased to
$1.16 billion at December 31, 2003, from $961.0 million at December 31, 2002. We also had
loans held for sale of $4.1 million at December 31, 2003, as compared to $18.7 million at
December 31, 2002. Loans grew by $196.1 million during 2003 continuing our consistent
pattern of growth. The majority of loans we make are to small and mid-sized businesses in
the form of commercial and commercial real estate loans. Our combined commercial loans
accounted for approximately 73% of our total portfolio loans at both December 31, 2003 and
2002. Our residential real estate loan portfolio, which also includes residential
construction loans made to the individual homeowners, comprised approximately 15% of
portfolio loans. However, our residential loan origination volume is significantly higher,
with only a small portion of residential home loans retained for our own portfolio. We
sell the majority of fixed-rate obligations and do not retain servicing. We originated for
sale $305.6 million in residential mortgages in 2003, $240.8 million in 2002, and $135.6
million in 2001. The lower overall market interest levels experienced during 2003 and 2002
resulted in significantly higher levels of residential refinancing and loan originations
during these years as compared to 2001. Our consumer loan portfolio includes both loans
secured by personal property, as well as home equity fixed term and line of credit loans.
Consumer loans comprised approximately 12% of our portfolio loans as of December 31, 2003.
Approximately 89% of our home equity loans are underwritten at terms of a loan to value
ratio of less than 90%, and are considered well collateralized. The types of loans and mix
of the GBFC portfolio was very similar to our portfolio and as a result the overall mix of
the combined loan portfolio did not change significantly upon acquisition in 2002. We
anticipate further growth in the loan portfolio due to continuing opportunities within our
market area.

6

---



Nonperforming Assets. 
Nonperforming assets are comprised of
nonperforming loans and foreclosed assets. Our nonperforming loans include loans on
non-accrual status, restructured loans, as well as loans delinquent more than 90 days, but
still accruing. Nonperforming loans as of December 31, 2003 totaled $4.0 million compared
to $2.8 million at December 31, 2002. One credit relationship comprised approximately one
half of the balance in nonperforming loans at the end of 2003. While still paying, this
borrowers weak financial condition warranted concern, and therefore the loan was
placed in non-accrual in 2002 and remained in this status throughout 2003. For the
remaining portion of our nonperforming loans we are well-collateralized or we have written
the loan down to a level commensurate with the estimated value of the underlying
collateral. Our loan performance is reviewed regularly by an external loan review team,
our own loan officers, and our senior management. When reasonable doubt exists concerning
collectibility of interest or principal of one of our loans, that loan is placed in
non-accrual status. Any interest previously accrued but not collected at that time is
reversed and charged against current earnings. Foreclosed assets include assets acquired
in settlement of loans. As of December 31, 2003 foreclosed assets totaled $468,000
compared to $446,000 as of December 31, 2002. Total nonperforming assets amounted to $4.5
million as of December 31, 2003 and represented .32% of total assets, a level well below
historical peer averages.

The following table shows the
composition and amount of our nonperforming assets. (Dollars in thousands)

|                                                    | December 31
|--------------------------------------------------- | -----------
|
|
|
|Nonaccrual loans                                    |            
|Loans 90 days or more delinquent and still accruing |            
|Restructured loans                                  |            
|
|Total nonperforming loans                           |            
|
|Foreclosed assets                                   |            
|Repossessed assets                                  |            
|
|Total nonperforming assets                          |            
|
|                                                   
|Nonperforming loans to total loans                  |            
|Nonperforming assets to total assets                |            

Loan Loss Experience  The following is a summary of our
loan balances at the end of each period and the daily average balances of these loans. It
also includes changes in the allowance for loan losses arising from loans charged-off and
recoveries on loans previously charged-off, and additions to the allowance which we have
expensed.

7

---



(Dollars in thousands)

|                                                           | For the Year Ended December 31
|---------------------------------------------------------- | ------------------------------
|
|
|
|Loans:                                                     |                               
|Average daily balance of loans for the year                |                               
|Amount of loans outstanding at end of period               |                               
|Allowance for loan losses:                                 |                               
|Balance at beginning of year                               |                               
|Balances from GBFC acquisition                             |                               
|Addition to allowance charged to operations                |                               
|Loans charged-off:                                         |                               
|Commercial                                                 |                               
|Residential Real Estate                                    |                               
|Consumer                                                   |                               
|Recoveries:                                                |                               
|Commercial                                                 |                               
|Residential Real Estate                                    |                               
|Consumer                                                   |                               
|
|Balance at end of year                                     |                               
|
|Ratios:                                                    |                               
|Net charge-offs to average loans outstanding               |                               
|Allowance for loan losses to loans outstanding at year end |                               

Allowance for Loan LossesOur allowance for loan losses as of
December 31, 2003 was $16.1 million, representing approximately 1.39% of total portfolio
loans outstanding, compared to $13.5 million or 1.40% of total loans at December 31, 2002.
Our allowance for loan losses is maintained at a level management considers appropriate
based upon our regular, quarterly assessments of the probable estimated losses inherent in
the loan portfolio. Our methodology for measuring the appropriate level of allowance
relies on several key elements, which include specific allowances for identified problem
loans, formula allowance for graded loans, and general allocations based on historical
trends for pools of similar loan types.

Specific allowances are established
in cases where senior credit management has identified significant conditions or
circumstances related to an individually impaired credit that we believe indicates the
probability that a loss has been incurred. This amount is determined by methods prescribed
by SFAS No. 114, Accounting by Creditors for Impairment of a Loan. The
specific allowance was $792,000 at December 31, 2003 and $883,000 at December 31, 2002.

The formula allowance is calculated
by applying loss factors to outstanding loans based on the internal risk grade of such
loans. We use a loan rating method based upon an eight point system. Loans are assigned a
loss allocation factor for each loan classification category. The lower the grading
assigned to a loan category, the greater the allocation percentage that is applied.
Changes in risk grade of both performing and nonperforming loans affect the amount of the
formula allowance. Loss factors are based on our loss experience, the banking
industrys historical loan loss experience, and may be adjusted for significant
factors that, in managements judgement, affect the collectibility of the portfolio
as of the analysis date. The formula allowance was $13.4 million at December 31, 2003 and
$10.1 million at December 31, 2002.

8

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Groups of homogeneous loans, such as
residential real estate, open- and closed-end consumer loans, etc., receive a general
allowance allocations based on loss trends. In lieu of an established loan loss trend for
Macatawa Bank, we use historical loss trends based on industry experience and peers in
determining an adequate allowance for these pools of loans. General economic and business
conditions, credit quality trends, collateral values, seasoning of the portfolios and
recent loss experience are conditions considered in connection with allocation factors for
these similar pools of loans. The general allowance was $1.6 million at December 31, 2003
and $1.5 million at December 31, 2002.

During 2003 the allowance for loan
losses increased by $2.6 million due to continuing growth in the commercial loan portfolio
causing an increase in the formula allowance. Asset quality was stable during the year
with the ratio of nonperforming loans to total loans of .35% at December 31, 2003 compared
to .29% at December 31, 2002. The continued increase in the allowance was deemed necessary
despite the stability in nonperforming loans to total loans given the growth in loans, the
unseasoned nature of our portfolio and current soft economic conditions both on a national
basis and locally.

Net charge-offs for 2003 totaled $1.5
million compared to $1.0 million for 2002. While our net charge-off experience was higher
during the current year, our credit losses on loans continue to be low relative to
comparable banks. However, we recognize that our loan portfolios remain relatively
unseasoned, and no material trend of losses has been established. Given the newness of the
portfolios and potential economic weakness, in our judgment, we have provided adequate
allowances for loan losses, although there can be no assurance that the allowance for
losses on loans will be adequate to cover all losses.

Allocation of the
Allowance for Loan Losses The following table shows the
allocation of the allowance for loan loss at the dates indicated to the extent specific
allocations have been determined relative to particular loans. (Dollars in thousands)

|                                         | For the Year Ended December 31
|---------------------------------------- | ------------------------------
|                                         |                               
|
|                                         |                               
|
|                                         |                               
|Commercial and commercial    real estate |                               
|Real estate mortgages                    |                               
|Consumer                                 |                               
|Unallocated                              |                               
|                                         |                               
|Total                                    |                               
|                                         |                               

9

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The above allocations are not
intended to imply limitations on usage of the allowance. The entire allowance is available
for any loan losses without regard to loan type. The allocated portion of the allowance
amounted to $15.8 million at December 31, 2003. Of this total, 5% related to specific
allocations, 85% related to formula allocations and 10% related to general allocations.

Premises and Equipment.  Premises and equipment totaled $38.7
million at December 31, 2003, an increase of $12.9 million from December 31, 2002. The
increase resulted from costs incurred with the completion of our new headquarters building
and three new branch locations opened during 2003. The new headquarters location has
allowed us to consolidate our administration, human resources, trust, loan underwriting
and processing, and proof and deposit operations at one location. The new branch sites
allowed us to replace a leased storefront branch site in Grandville with a full service
branch in a more favorable location, and establish a presence both on the northeast side
of Grand Rapids and on the north side of Holland.

Deposits.Total deposits
increased $188.5 million to $1.11 billion at December 31, 2003, as compared to $920.9
million at December 31, 2002. Categories of deposit accounts experiencing the most growth
included noninterest-bearing demand deposits and money market accounts. As discussed
above, this growth in deposits was substantially a result of our focus on quality
customer service, the desire of customers to deal with a local bank, and convenient
accessibility through our growing branch network. Our further branch expansion activities
are expected to continue this trend of growth.

During 2003, the mix of our deposit
portfolio remained relatively consistent showing a slight shift from higher costing
categories of deposits such as time deposits, to lower costing categories such as interest
bearing demand and savings accounts. Noninterest bearing demand accounts comprised
approximately 13% of total deposits at December 31, 2003, as compared to approximately 11%
of total deposits at the end of 2002. Interest bearing demand and savings accounts
comprised approximately 49% of total deposits at December 31, 2003, as compared to 44% at
the end of last year. Time accounts as a percentage of total deposits were approximately
38% at December 31, 2003, and were approximately 45% at December 31, 2002.

Borrowed Funds. Borrowed
funds consist principally of advances from the Federal Home Loan Bank. Borrowed funds
also include federal funds purchased, which are utilized to settle our daily cash letter
position with our correspondent banks. Additionally, we have a $10.0 million credit
facility available for general corporate needs including contributing capital to the
subsidiary bank to enable it to maintain regulatory capital at well-capitalized levels.
Borrowed funds totaled $165.3 million at December 31, 2003 including $145.7 million of
Federal Home Loan Bank advances and $19.6 million in long-term debt comprised of a trust
preferred security offering issued in July 2003. Borrowed funds totaled $131.8 million at
December 31, 2002 including $106.9 million of Federal Home Loan Bank advances, $20.0
million of federal funds purchased and $4.9 million in borrowing on the credit facility.
Borrowed funds increased during 2003 due to additional borrowing needs to fund our
continued growth in assets. In addition the trust preferred security offering qualified
as Tier I capital allowing us to further grow our assets while maintaining our regulatory
capital at a well-capitalized level.

10

---



ShareholdersEquity.
Total shareholders equity was $121.9 million at December 31, 2003 compared to
$114.0 million at December 31, 2002. The increase of $7.9 million was primarily the
result of net earnings less cash dividends paid to shareholders. A 5% stock dividend was
paid in May 2003, resulting in a transfer of $8.9 million from retained earnings to
common stock.

# Results of Operations

Summary of Results.Net
income totaled $11.8 million for 2003 as compared to $9.5 million in 2002, and $5.1
million in 2001. The increase in net income principally reflects growth in our net
interest income due to our continuing growth in interest earning assets, but also
reflects improvement in noninterest income. Earnings per share on a diluted basis were
$1.39 for 2003 compared to $1.21 for 2002 and $1.02 for 2001. Diluted earnings per share
increased by 15% for 2003 reflecting the increase in earnings. Diluted earnings per share
increased by 19% for 2002 compared to 2001 despite a 45% increase in shares outstanding
for the acquisition of GBFC in the second quarter of 2002.

The effective date of the GBFC
acquisition was April 1, 2002 and therefore the results of operations for 2001 and the
first quarter of 2002 did not include the effect of GBFC and Grand Bank. For pro forma
information concerning the GBFC acquisition, please refer to Note 2 of the Consolidated
Financial Statements.

11

---



Analysis of Net
Interest Income.The following schedule presents, for the periods indicated,
information regarding:

| | our
total dollar amount of interest income from average earning assets and the resultant
average yields;
|- | --------------------------------------------------------------------------------------------------------

| | our
total dollar amount of interest expense on average interest-bearing liabilities and the
resultant average cost;
|- | -------------------------------------------------------------------------------------------------------------------

| | our
net interest income;
|- | ------------------------

| | our
interest rate spread; and
|- | -----------------------------

| | our
net yield on average earning assets.
|- | ----------------------------------------

|                                      | For the years ended December 31,
|------------------------------------- | --------------------------------
|                                      |                                 
|
|                                      |                                 
|
|                                      |                                 
|
|Assets:                              
|Taxable securities                    |                                 
|Tax-exempt securities (1)             |                                 
|Loans (2)                             |                                 
|Federal funds sold                    |                                 
|Short-term investments                |                                 
|Federal Home Loan Bank stock          |                                 
|                                      |                                 
|Total interest earning assets         |                                 
|Noninterest earning assets:           |                                 
|Cash and due from banks               |                                 
|Other                                 |                                 
|                                      |                                 
|Total assets                          |                                 
|                                      |                                 
|Liabilities and Shareholders' Equity: |                                 
|Deposits                              |                                 
|NOW and money market accounts         |                                 
|Savings                               |                                 
|IRAs                                  |                                 
|Time deposits                         |                                 
|Short-term borrowings:                |                                 
|Federal funds borrowed                |                                 
|Other borrowings                      |                                 
|                                      |                                 
|Total interest bearing liabilities    |                                 
|Noninterest bearing liabilities       |                                 
|Noninterest bearing demand accounts   |                                 
|Other noninterest bearing liabilities |                                 
|Shareholders' equity                  |                                 
|                                      |                                 
|Total liabilities and                 |                                 
|Shareholders' equity                  |                                 
|                                      |                                 
|Net interest income                   |                                 
|                                      |                                 
|Net interest spread                   |                                 
|Net interest margin                   |                                 
|Ratio of interest earning             |                                 
|assets to interest bearing            |                                 
|liabilities                           |                                 

---

|(1) | Yields are adjusted for tax-exempt interest.
|--- | --------------------------------------------

|(2) | Loan fees included in interest income are not material. Nonaccrual loans are
          included in average loans outstanding.
|--- | -----------------------------------------------------------------------------------------------------------------------------

12

---



Net interest income totaled $42.1
million during 2003, compared to $34.4 million during 2002 and $21.8 million during 2001.
The 23% growth in net interest income during 2003 was driven by growth in average interest
earning assets which increased by $224.4 million, or 24%, to $1.15 billion for 2003.
Despite an increase in net interest spread to 3.36% for 2003 from 3.34% in 2002, net
interest margin declined slightly offsetting a small portion of the effect of growth in
earning assets on net interest income. Net interest margin for 2003 was 3.63%, down six
basis points from 2002. The decrease in margin while spread increased was a result of the
decline in the ratio of interest earning assets to interest bearing liabilities to 113.37%
for 2003 compared to 114.45% for 2002. The decline in this ratio was due to our continued
leveraging of capital during 2003.

Several factors helped mitigate some
of the decline in net interest margin during 2003. Growth in noninterest bearing deposits
had a positive effect. Average noninterest bearing deposits grew by $27.9 million or 34%
during 2003. Further, we accomplished a shift in the mix of the interest bearing deposit
portfolio from the higher costing time deposits to the lower costing demand and money
market deposit accounts as discussed in the Depositssection under Financial
Condition in this Managements Discussion and Analysis. Also, our time deposits
continued to reprice downward during the year as higher costing deposits matured and
renewed at lower interest rates. Finally, continued use of derivative instruments as
discussed in Note 18 to the Consolidated Financial Statements also helped mitigate some of
the decline in net interest margin.

The 58% increase in net interest
income during 2002 was also driven by growth in earning assets. Average earning assets for
2002 totaled $926.4 million, as compared to $543.5 million for 2001. The acquisition of
GBFC contributed $210.2 million to this increase in earning assets, however, the remaining
$172.7 million was a result of our continued growth. Net interest margin on earning assets
was 3.69% for 2002, down from 3.98% for 2001. The contraction in the net interest margin
relates primarily to the lower net interest margin that GBFC carried compared to Macatawa,
but also reflects a decrease in yield on earning assets resulting from the low and
declining interest rate environment during 2002. We saw strong loan growth during 2002,
but customer preferences were for floating rate loans that bore interest rates on average
of 225 basis points lower than fixed rate commercial loans. This preference altered our
mix of variable versus fixed rate commercial loans and also contributed to the decline in
net interest margin from 2001 to 2002.

In 2002 several initiatives helped
counteract the decline in net interest margin. During the latter half of 2002,
approximately $5 million in noninterest earning assets were converted into interest
earning assets and lower yielding assets were converted into higher yielding assets by
investing some of our short-term investable funds into loans. In addition, growth in
noninterest bearing deposits and continued downward repricing of higher costing time
deposits mitigated some of the margin compression in this time period. Derivative
instruments were also used during 2002 to help stabilize net interest margin.

Anticipated growth in earning assets
is expected to continue to increase levels of net interest income, however, net interest
margin is not expected to increase until short-term market interest rates begin to
increase.

13

---



Rate/Volume Analysis
of Net Interest IncomeThe following schedule presents the dollar amount of changes
in interest income and interest expense for major components of earning assets and
interest-bearing liabilities, distinguishing between changes related to outstanding
balances and changes due to interest rates.

(Dollars in thousands)

|                       | For the Year Ended December 31
|---------------------- | ------------------------------
|                       |                               
|
|                       |                               
|
|
|
|Interest Income        |                               
|Taxable securities     |                               
|Tax-exempt securities  |                               
|Loans                  |                               
|Fed funds sold         |                               
|Short term investments |                               
|FHLB stock             |                               
|                       |                               
|Total interest income  |                               
|                       |                               
|Interest Expense       |                               
|NOWs and MMDAs         |                               
|Savings                |                               
|IRAs                   |                               
|Time deposits          |                               
|Fed funds purchased    |                               
|Other borrowings       |                               
|                       |                               
|Total interest expense |                               
|                       |                               
|Net interest income    |                               
|                       |                               

14

---



Provision for Loan Losses
Our provision for loan losses for 2003 was $4.1 million as compared to $3.3 million for
2002 and $2.3 million for 2001. Some of the increase in provision was due to the increase
in charge-offs in 2003 compared to 2002. However, the amount of the loan loss provision
in all periods is a byproduct of establishing our allowance for loan losses at levels
deemed necessary in our methodology for determining the adequacy of the allowance. For
more information about our allowance for loan losses and our methodology for establishing
its level, see the earlier discussion under Financial Condition. Along with other
financial institutions, management shares a concern for the possible continuing weak
economic conditions. Should the economic climate remain soft, borrowers may experience
more difficulty in making loan payments, and the level of non-performing loans,
charge-offs, and delinquencies could rise and require further increases in the provision.

While we sustained higher loan
charge-offs during 2003 as compared to prior years, our losses as a percent of average
loans totaled only 14 basis points, a level far below historic peer averages.

Noninterest IncomeNoninterest
income totaled $9.6 million during 2003, as compared to $7.3 million in 2002, and $3.7
million for 2001. Noninterest income increased 32% over 2002 with all individual
components showing improvement. The increased deposit service charge income in 2003 is
reflective of our expanded customer account base. Our mortgage banking function was
well-positioned to capitalize on the favorable mortgage refinance environment caused by
low interest rates during most of 2003 and achieved high loan sales volume resulting in
loan production revenue of $3.7 million for the year. This was up from $2.4 million for
the prior year. Since mortgage interest rates increased slightly from the middle of 2003
to the end of the year, our loan sales volume decreased in the latter part of the year.
This change in interest rates will likely result in a decline in loan sale volume in 2004
compared to 2003 levels.

Net Gains on the Sale
of Residential Real Estate Mortgage Loans(Dollars in thousands)

|                                                          | For the Year Ended December 31
|--------------------------------------------------------- | ------------------------------
|                                                          |                               
|
|                                                          |                               
|Real estate mortgage loan originated for sale             |                               
|Real estate mortgage loan sales                           |                               
|                                                          |                               
|Net gains on the sale of real estate mortgage loans       |                               
|                                                          |                               
|Net gains as a percent of real estate mortgage loan sales |                               

We sell the majority of the
fixed-rate mortgage loans we originate. We do not retain the servicing rights for the
loans we sell.

15

---



Revenues from trust services grew to
$2.5 million for 2003 compared to $2.1 million for 2002. Trust fees are, to a great
extent, based on the underlying values of trust assets managed. The upward trend in the
market valuation of securities in the latter half of 2003 contributed to the increase in
trust fees, in addition to increased fees due to gaining new trust customers during the
year. We believe trust fee income will continue to increase as the amount of trust assets
under our management increases.

The level of noninterest income for
2002 was up 99% over 2001. All components of noninterest income increased compared to
2001. The low interest rates during 2002 resulted in higher loan sales volume and loan
production revenue in 2002 compared to 2001. Revenues from trust services grew to $2.1
million for 2002 compared to $659,000 for 2001. Despite a generally downward trend in
market valuation of securities during 2002, trust fees increased as compared to the prior
year due to our success in gaining new trust customers and the addition of Grand
Banks trust services.

Noninterest ExpenseNoninterest
expense totaled $30.1 million for 2003, as compared to $24.2 million for 2002, and $15.5
million for 2001. For 2003, salaries and benefits increased by $3.5 million comprising
most of the increase in non-interest expenses over 2002. Almost 30% of this increase
related to the addition of the Grand Bank workforce effective with the GBFC acquisition
on April 1, 2002. However, our growth in 2003 has required additional staff in various
areas including new branches, lending departments, and operations which are all necessary
to support increased customer activity. The increased costs reflect our attention to
properly managing and supporting our growth and our interest in creating a platform for
strong future growth. All other areas of noninterest expense have increased in 2003
partially due to the GBFC acquisition, but also due to the increase in size and
complexity of our organization. In addition, occupancy as well as furniture and equipment
expenses have increased along with our branch expansion and partially due to the new
corporate headquarters. The increase in legal and professional fees relates primarily to
legal fees associated with Trade Partners. For further information regarding litigation
related to Trade Partners, please refer to Note 17 to the Consolidated Financial
Statements. Until further developments transpire, we do not expect additional increases
in legal expenses related to Trade Partners.

As indicated above, we made
significant investments in future growth during 2003 with additional branches and
increased staffing. These investments create an initial cost burden until their full value
materializes in growth in future earnings. However, during 2003 we were able to increase
our revenue by a greater amount than these increased costs, thereby achieving higher net
earnings. In addition, the percent increase in our revenues was consistent with the
percent increase in noninterest expense resulting in a stable efficiency ratio of 58.11%
compared to 58.04% for 2002.

16

---



In comparing 2002 to 2001, salaries
and benefits increased by $4.5 million and was the primary category of increase in
noninterest expense. Most of this increase related to the addition of the Grand Bank
workforce, however, our continued growth required additional staff as compared to 2001.
Other increases included occupancy and equipment expense, data processing, and other
support related expenses, such as courier, telephone, postage, and outside services, all
of which increased partially due to the GBFC acquisition. All of these costs relate to
customer activity and branch infrastructure, and increased as a result of new customer
activity being generated. Total noninterest expense increased by 56% for 2002 whereas net
interest income and noninterest income in total grew by 64%. The greater revenue growth
versus expense growth resulted in an improved efficiency ratio of 58.0% for 2002 as
compared to 61.1% for 2001. This improvement was a direct result of synergies achieved in
the GBFC acquisition as well as continued better capacity usage of the branch network and
operations.

We integrated the systems and
operations of Grand Bank into ours during the second quarter of 2002. By utilizing the
same systems at both Macatawa Bank and Grand Bank, we realized operational efficiencies,
primarily in data processing, during the year. On January 1, 2003 we completed the final
step of the integration with the name change of Grand Bank to Macatawa Bank by merging the
two bank charters into one. This charter merger allowed for more operational efficiencies
and simplified service to our customers.

17

---



# Liquidity and Capital
Resources

Equity Capital. At December
31, 2003, our Tier I Capital as a percent of average assets was 8.8%, and our total
capital to risk-weighted assets was 10.9%, as compared to 7.6% and 9.9% respectively at
December 31, 2002. By completing the $20.0 million trust preferred securities offering in
July 2003, we were able to strengthen our regulatory capital ratios. Additional capital
may be necessary within the next two years if our growth continues at its current pace.
Capital sources include additional common stock offerings, trust preferred securities
offerings and subordinated debt. Macatawa Bank Corporation and Macatawa Bank were
categorized as well capitalized for regulatory capital purposes.

We began paying cash dividends at the
end of 2000 and have increased the amount of the dividend each year since then. In the
fourth quarter of 2003 we increased the cash dividend by 20% to $.12 per share. It is
anticipated that we will continue to pay quarterly cash dividends in the future. In May
2003, we distributed a 5% stock dividend to our shareholders. This was the third
consecutive annual stock dividend, and was an increase over the 4% dividend paid in May of
2002.

One stock repurchase transaction in
the amount of 115,000 shares took place during the third quarter of 2002. Further stock
repurchase activity is not anticipated in the foreseeable future.

The following table shows various
capital ratios as of December 31, 2003.

# Capital Resources

|                                                    | Tier 1
Leverage
Ratio | Tier 1
Capital
Ratio | Total
Risk-Based
Capital Ratio
|--------------------------------------------------- | --------------------- | -------------------- | ------------------------------
|Minimum regulatory requirement for capital adequacy |                       |                      |                               
|Well capitalized regulatory level                   |                       |                      |                               
|Consolidated                                        |                       |                      |                               
|Macatawa Bank                                       |                       |                      |                               

Liquidity.The liquidity of a financial institution reflects its ability to provide
          funds to meet loan requests, to accommodate possible outflows of deposits and to
          take advantage of interest rate market opportunities. Our sources of liquidity
          include our borrowing capacity with the Federal Home Loan Bank and federal funds
          purchased lines with our correspondent banks, loan payments by our borrowers,
          maturity and sales of our securities available for sale, growth of our deposits
          and deposit equivalents, federal funds sold, and the various capital resources
          discussed above. Liquidity management involves the ability to meet the cash flow
          requirements of our customers. Our customers may be either borrowers with credit
          needs or depositors wanting to withdraw funds. We feel our liquidity position is
          sufficient to meet these needs.

18

---



Market Risk AnalysisOur
primary market risk exposure is interest rate risk and, to a lesser extent, liquidity
risk. All of our transactions are denominated in U.S. dollars with no specific foreign
exchange exposure. Macatawa Bank has only limited agricultural-related loan assets, and
therefore has no significant exposure to changes in commodity prices. As a result, our
market risk exposure is mainly comprised of our sensitivity to interest rate risk. Our
balance sheet has sensitivity, in various categories of assets and liabilities, to
changes in prevailing rates in the U.S. for prime rate, mortgage rates, U.S. Treasury
rates and various money market indexes. Our asset/liability management process aids us in
providing liquidity while maintaining a balance between interest earning assets and
interest bearing liabilities.

We use two interest rate risk
measurement techniques in our interest rate risk management. The first is static gap
analysis. This measures the difference between the dollar amounts of interest sensitive
assets and liabilities that will be refinanced or repriced during a given time period. A
significant repricing gap could result in a negative impact to our net interest margin
during periods of changing market interest rates.

The following table illustrates our
interest rate repricing gaps for selected maturity periods at December 31, 2003.

19

---



Static Gap Analysis
(Dollars in thousands)

|                                | 0 to 3 Months | 4 to 12 Months | 1 to 5 Years | Over 5 Years | Total
|------------------------------- | ------------- | -------------- | ------------ | ------------ | -----
|                                |              
|Assets:                         |               |                |              |              |      
|Loans-fixed                     |               |                | $            | 37,294       |      
|Loans-variable                  |               |                |              | 715,857      |      
|Taxable securities              |               |                |              | 4,025        |      
|Tax exempt securities           |               |                |              | -            |      
|Short term investments          |               |                |              | -            |      
|Fed funds sold                  |               |                |              | 18,414       |      
|Other securities                |               |                |              | -            |      
|Loan loss reserve               |               |                |              | -            |      
|Cash & due from banks           |               |                |              | -            |      
|Acquisition intangibles         |               |                |              | -            |      
|Loans held for sale             |               |                |              | -            |      
|Fixed assets                    |               |                |              | -            |      
|Other assets                    |               |                |              | -            |      
|                                |              
|Total assets                    |               |                | $            | 775,590      |      
|Liabilities:                    |               |               
|Time deposits                   |               |                | $            | 92,616       |      
|Savings                         |               |                |              | 37,004       |      
|Other interest bearing deposits |               |                |              | 503,953      |      
|Other borrowings                |               |                |              | 34,581       |      
|Noninterest bearing deposits    |               |                |              | -            |      
|Other liabilities & equity      |               |                |              | -            |      
|                                |              
|Total liabilities & equity      |               |                | $            | 668,154      |      
|                               
|Period gap                      |               |                | $            | 107,436      |      
|Cumulative gap                  |               |                | $            | 107,436      |      
|Cumulative gap/total assets     |               |                |              | 7.67         | %    

The above table shows that total
assets maturing or repricing within three months exceed liabilities maturing or repricing
within three months by $107.4 million indicating that we are asset sensitive in this time
horizon. Offsetting the asset sensitivity in this time horizon, the interest rate swaps
discussed in Note 18 of the Consolidated Financial Statements are not reflected in the
table above, and have the effect of converting $60.0 million in variable rate loans
repricing in less than three months into fixed rate loans repricing in one to five years.

The above gap analysis is limited in
that the repricing and cash flows of various categories of assets and liabilities are
subject to competitive and other influences that are beyond our control. Gap analysis also
does not reflect the magnitude of interest rate changes on net interest income as a result
of the various assets and liabilities shown as repriceable within any of the time
horizons. As a result, various assets and liabilities indicated above as maturing or
repricing within a stated period may, in fact, mature or reprice in other periods or at
different volumes.

The second interest rate risk
measurement used is simulation analysis. We use a computer-based earnings simulation model
to estimate the effects of various interest rate environments on the balance sheet
structure and net interest income. The simulation model assesses the direction and
magnitude of variations in net interest income resulting from potential changes in market
interest rates. Key assumptions in the model include repayment speeds on various loan and
investment assets, cash flows and maturities of interest-sensitive assets, cash flows and
maturities of interest-sensitive liabilities, and changes in market conditions impacting
loan and deposit pricing. We also include pricing caps and floors on discretionary priced
liability products which limit both how low various checking and savings products could go
under declining interest rates, as well as how high they could go in a rising interest
rate environment. These caps and floors reflect our pricing philosophy in response to
changing interest rates.

20

---



In running the simulation model, we
first forecast the next twelve months of net interest income under an assumed environment
of constant market interest rates. Next, immediate and parallel interest rate shocks are
constructed in the model. These rate shocks reflect changes of equal magnitude to all
market interest rates. The next twelve months of net interest income are then forecast
under each of the rate shock scenarios. The resulting change in net interest income is an
indication of the sensitivity of our earnings to directional changes in market interest
rates. This model is based solely on parallel changes in market rates and does not reflect
the levels of interest rate risk that may arise from other factors such as changes in the
spreads between key market rates or in the shape of the Treasury yield curve. The net
interest income sensitivity is monitored by the Asset/Liability Committee which evaluates
the results in conjunction with acceptable interest rate risk parameters. The quarterly
rate simulation results are reported to the board of directors. The simulation also
measures the change in the Economic Value of Equity. This represents the change in the net
present value of our assets and liabilities under the same parallel shifts in interest
rates, as calculated by discounting the estimated future cash flows using a market-based
discount rate. Cash flow estimates incorporate anticipated changes in prepayment speeds of
loans and securities.

The following table shows the
suggested impact on net interest income over the next twelve months and Economic Value of
Equity based on our balance sheet as of December 31, 2003.

Changes in Economic
Value of EquityAnd Net Interest Income(Dollars in thousands)

|                         | Economic Valueof Equity(EVE) | PercentChange | Net InterestChange | PercentChange
|------------------------ | ---------------------------- | ------------- | ------------------ | -------------
|
|Change in Interest Rates |                              |               |                    |              
|200 basis point rise     |                              |               | $                  | 115,434      
|100 basis point rise     |                              |               |                    | 119,287      
|Base-rate scenario       |                              |               |                    | 118,995      
|100 basis point decline  |                              |               |                    | 118,368      
|200 basis point decline  |                              |               |                    | 123,530      

The net interest income fluctuations
in the above table reiterate our asset sensitive position identified by the gap table. If
interest rates were to increase, this analysis suggests that we are well positioned for
improvements in net interest income. Further, our balanced sensitivity in time horizons
beyond one year results in little fluctuation in economic value of equity in the various
rate shock scenarios.

In addition to changes in interest
rates, the level of future net interest income is also dependent on a number of other
variables, including: the growth, composition and absolute levels of loans, deposits, and
other earning assets and interest-bearing liabilities; economic and competitive
conditions; potential changes in lending, investing and deposit gathering strategies; and
client preferences.

21

---



Forward-Looking
StatementsThis report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to
be covered by the safe harbor provisions for forward-looking statements contained in the
Private Securities Reform Act of 1995, and are including this statement for purposes of
these safe harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe our future plans, strategies, and expectations are generally
identifiable by use of the words believe, expect, intend, anticipate, estimate, project,
may or similar expressions. The presentation and discussion of the provision and
allowance for loan losses, statements concerning future profitability or future growth or
increases, are examples of inherently forward-looking statements in that they involve
judgements and statements of belief as to the outcome of future events. Our ability to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on our operations and
future prospects include, but are not limited to, changes in: interest rates, general
economic conditions, legislative/regulatory changes, monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board,
the quality or composition of the loan or investment portfolios, demand for loan
products, deposit flows, competition, demand for financial services in our market area
and accounting principles, policies, and guidelines. These risks and uncertainties should
be considered in evaluating forward-looking statements and undue reliance should not be
placed on such statements. Further information concerning us and our business, including
additional factors that could materially affect our financial results, is included in our
filings with the Securities and Exchange Commission.

22



---



# INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS

|                                                           |    
|---------------------------------------------------------- | ---
|REPORT OF INDEPENDENT AUDITORS                             | F-2
|                                                          
|CONSOLIDATED FINANCIAL STATEMENTS                         
|                                                          
|CONSOLIDATED BALANCE SHEETS                                | F-3
|                                                          
|CONSOLIDATED STATEMENTS OF INCOME                          | F-4
|                                                          
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | F-5
|                                                          
|CONSOLIDATED STATEMENTS OF CASH FLOWS                      | F-6
|                                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 | F-7



---



REPORT OF INDEPENDENT
AUDITORS

Board of Directors and
ShareholdersMacatawa Bank CorporationHolland, Michigan

We have audited the accompanying
consolidated balance sheets of Macatawa Bank Corporation as of December 31, 2003 and 2002
and the related consolidated statements of income, changes in shareholders equity
and cash flows for each of the three years in the period ended December 31, 2003.
These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance
with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Macatawa Bank Corporation at December 31, 2003 and 2002, and the
results of its operations and its cash flows for each of the three years in the period
ended December 31, 2003 in conformity with accounting principles generally accepted in the
United States of America.

| | /s/ Crowe Chizek
and Company LLC
| | --------------------------------

Grand Rapids, MichiganJanuary
23, 2004

F-2

---



MACATAWA BANK CORPORATION 
CONSOLIDATED BALANCE SHEETS 
December 31, 2003 and 2002
(Dollars in thousands)

---

|                                                       | 2003 | 2002
|------------------------------------------------------ | ---- | ----
|ASSETS                                                 |      |     
|Cash and due from banks                                |      |     
|Federal funds sold                                     |      |     
|                                                       |      |     
|Total cash and cash equivalents                        |      |     
|                                                       |      |     
|Securities available for sale, at fair value           |      |     
|Securities held to maturity (fair value 2003 - $2,701, |      |     
|2002 - $4,140)                                         |      |     
|Federal Home Loan Bank stock                           |      |     
|Loans held for sale                                    |      |     
|Total loans                                            |      |     
|Allowance for loan losses                              |      |     
|                                                       |      |     
|                                                       |      |     
|                                                       |      |     
|                                                       |      |     
|Premises and equipment - net                           |      |     
|Accrued interest receivable                            |      |     
|Goodwill                                               |      |     
|Acquisition intangibles                                |      |     
|Other assets                                           |      |     
|                                                       |      |     
|                                                       |      |     
|                                                       |      |     
|Total assets                                           |      |     
|                                                       |      |     
|                                                       |      |     
|LIABILITIES AND SHAREHOLDERS' EQUITY                   |      |     
|Deposits                                               |      |     
|Noninterest-bearing                                    |      |     
|Interest-bearing                                       |      |     
|                                                       |      |     
|Total                                                  |      |     
|Federal Home Loan Bank advances                        |      |     
|Other borrowings                                       |      |     
|Long-term debt                                         |      |     
|Federal funds purchased                                |      |     
|Accrued expenses and other liabilities                 |      |     
|                                                       |      |     
|Total liabilities                                      |      |     
|                                                       |      |     
|Shareholders' equity                                   |      |     
|Preferred stock, no par value, 500,000 shares          |      |     
|authorized; no shares issued and outstanding           |      |     
|                                                       |      |     
|Common stock, no par value, 20,000,000 shares          |      |     
|authorized; 8,370,073 and 7,891,502 shares             |      |     
|issued and outstanding at  December 31, 2003           |      |     
|and 2002, respectively                                 |      |     
|Retained earnings                                      |      |     
|Accumulated other comprehensive income                 |      |     
|                                                       |      |     
|Total shareholders' equity                             |      |     
|                                                       |      |     
|                                                       |      |     
|Total liabilities and shareholders' equity             |      |     
|                                                       |      |     

See accompanying notes
to consolidated financial statements.

F-3

---



MACATAWA BANK CORPORATION 
CONSOLIDATED STATEMENTS OF INCOME 
Years ended December 31, 2003, 2002 and 2001
(Dollars in thousands)

---

|                                                    | 2003 | 2002 | 2001
|--------------------------------------------------- | ---- | ---- | ----
|                                                    |      |      |     
|Interest income                                     |      |      |     
|Loans, including fees                               |      |      | $   
|Securities                                          |      |     
|Taxable                                             |      |      |     
|Tax-exempt                                          |      |      |     
|                                                    |      |      |     
|Total interest income                               |      |      |     
|Interest expense                                    |      |     
|Deposits                                            |      |      |     
|FHLB advances and other                             |      |      |     
|                                                    |      |      |     
|Total interest expense                              |      |      |     
|                                                    |      |      |     
|                                                    |      |     
|Net interest income                                 |      |      |     
|                                                    |      |     
|Provision for loan losses                           |      |      |     
|                                                    |      |      |     
|                                                    |      |     
|Net interest income after provision for loan losses |      |      |     
|                                                    |      |     
|Noninterest income                                  |      |     
|Service charges and fees                            |      |      |     
|Loan production revenue                             |      |      |     
|Trust fees                                          |      |      |     
|Other                                               |      |      |     
|                                                    |      |      |     
|Total noninterest income                            |      |      |     
|                                                    |      |     
|Noninterest expense                                 |      |     
|Salaries and benefits                               |      |      |     
|Occupancy expense of premises                       |      |      |     
|Furniture and equipment expense                     |      |      |     
|Legal and professional fees                         |      |      |     
|Advertising                                         |      |      |     
|Supplies                                            |      |      |     
|Data processing fees                                |      |      |     
|Other                                               |      |      |     
|                                                    |      |      |     
|Total noninterest expenses                          |      |      |     
|                                                    |      |      |     
|                                                    |      |     
|Income before income tax expense                    |      |      |     
|                                                    |      |     
|Income tax expense                                  |      |      |     
|                                                    |      |      |     
|                                                    |      |     
|Net income                                          |      |      | $   
|                                                    |      |      |     
|                                                    |      |     
|Basic earnings per share                            |      |      | $   
|                                                    |      |      |     
|                                                    |      |     
|Diluted earnings per share                          |      |      | $   
|                                                    |      |      |     

See
accompanying notes to consolidated financial statements.

F-4

---



MACATAWA BANK CORPORATION 
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 
Years ended December 31, 2003, 2002 and 2001
(Dollars in thousands)

---

|                                           | Common
Stock | Retained
Earnings
(Deficit) | Accumulated
Other
Comprehensive
Income
(Loss) | Total
Shareholders'
Equity
|------------------------------------------ | ------------ | --------------------------- | --------------------------------------------- | --------------------------
|                                           |              |                             |                                               |                           
|Balance, January 1, 2001                   |              |                             | $                                             | 36,890                    
|                                           |              |                            
|Net income                                 |              |                             |                                               |                           
|                                           |              |                            
|Other comprehensive income (loss):         |              |                            
|Net change in unrealized gain (loss)       |              |                            
|on securities available for sale, net      |              |                            
|of tax of $457                             |              |                             |                                               |                           
|                                           |              |                             |                                               |                           
|Comprehensive income                       |              |                             |                                               |                           
|                                          
|Proceeds from sale of 1,610,000 shares of  |              |                            
|common stock, net of offering costs        |              |                             |                                               | 23,677                    
|                                           |              |                            
|Issued 107,474 shares in payment of        |              |                            
|3% stock dividend                          |              |                             |                                               | 1,763                     
|                                           |              |                            
|Common stock issued upon exercise of       |              |                            
|stock options (412 shares)                 |              |                             |                                               | 4                         
|                                           |              |                            
|Cash dividends at $.26 per share           |              |                             |                                               | (1,307                    
|                                           |              |                             |                                               |                           
|                                           |              |                            
|Balance, December 31, 2001                 |              |                             |                                               | 62,334                    
|                                           |              |                            
|Net income                                 |              |                             |                                               |                           
|                                           |              |                            
|Other comprehensive income (loss):         |              |                            
|Net change in unrealized gain (loss)       |              |                            
|on derivative instruments, net             |              |                            
|of tax of $338                             |              |                             |                                               |                           
|                                           |              |                            
|Net change in unrealized gain (loss)       |              |                            
|on securities available for sale, net      |              |                            
|of tax of $617                             |              |                             |                                               |                           
|                                           |              |                             |                                               |                           
|Comprehensive income                       |              |                             |                                               |                           
|                                          
|Issued 2,472,015 shares for acquisition of |              |                            
|GBFC, adjusted for stock dividend          |              |                             |                                               | 39,817                    
|                                           |              |                            
|Conversion of GBFC stock options           |              |                             |                                               | 987                       
|                                           |              |                            
|Repurchase of 115,000 shares               |              |                             |                                               | (2,300                    
|                                           |              |                            
|Issued 212,355 shares in payment of        |              |                            
|4% stock dividend                          |              |                             |                                               | 4,270                     
|                                           |              |                            
|Common stock issued upon exercise of       |              |                            
|stock options (14,931 shares)              |              |                             |                                               | 93                        
|                                           |              |                            
|Cash dividends at $.32 per share           |              |                             |                                               |                           
|                                           |              |                             |                                               |                           
|                                           |              |                            
|                                           |              |                            
|Balance, December 31, 2002                 |              |                             |                                               | 105,201                   
|                                           |              |                            
|Net income                                 |              |                             |                                               |                           
|                                           |              |                            
|Other comprehensive income (loss):         |              |                            
|Net change in unrealized gain (loss)       |              |                            
|on derivative instruments, net             |              |                            
|of tax of $13                              |              |                             |                                               |                           
|                                           |              |                            
|Net change in unrealized gain (loss)       |              |                            
|on securities available for sale, net      |              |                            
|of tax of $423                             |              |                             |                                               |                           
|                                           |              |                             |                                               |                           
|Comprehensive income                       |              |                             |                                               |                           
|                                           |              |                            
|Issued 397,664 shares in payment of        |              |                            
|5% stock dividend                          |              |                             |                                               | 8,926                     
|Common stock issued upon exercise of       |              |                            
|stock options (80,907 shares)              |              |                             |                                               |                           
|                                           |              |                            
|Cash dividends at $.42 per share           |              |                             |                                               |                           
|                                           |              |                             |                                               |                           
|                                           |              |                            
|                                           |              |                            
|Balance, December 31, 2003                 |              |                             | $                                             | 114,568                   
|                                           |              |                             |                                               |                           

See accompanying
notes to consolidated financial statements.

F-5

---



MACATAWA BANK CORPORATION 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
Years ended December 2003, 2002 and 2001
(Dollars in thousands)

---

|                                                         | 2003 | 2002 | 2001
|-------------------------------------------------------- | ---- | ---- | ----
|                                                         |      |      |     
|Cash flows from operating activities                     |      |      |     
|Net income                                               |      |      | $   
|Adjustments to reconcile net income                      |      |     
|to net cash from operating activities                    |      |     
|Depreciation and amortization                            |      |      |     
|Provision for loan losses                                |      |      |     
|Origination of loans for sale                            |      |      |     
|Proceeds from sales of loans originated for sale         |      |      |     
|Gain on sales of loans                                   |      |      |     
|Net change in                                            |      |     
|Accrued interest receivable and other assets             |      |      |     
|Accrued expenses and other liabilities                   |      |      |     
|                                                         |      |      |     
|Net cash from operating activities                       |      |      |     
|                                                         |      |     
|Cash flows from investing activities                     |      |     
|Loan originations and payments, net                      |      |      |     
|Purchase of FHLB stock                                   |      |      |     
|Purchases of securities held to maturity                 |      |      |     
|Purchases of securities available for sale               |      |      |     
|Maturities and calls of securities available for sale    |      |      |     
|Principal paydowns on securities                         |      |      |     
|Cash received from acquisition of GBFC                   |      |      |     
|Additions to premises and equipment                      |      |      |     
|                                                         |      |      |     
|Net cash from investing activities                       |      |      |     
|                                                         |      |     
|Cash flows from financing activities                     |      |     
|                                                         |      |      |     
|Net increase in deposits                                 |      |      |     
|Net increase (decrease) in short-term borrowings         |      |      |     
|Proceeds from long-term debt and other borrowings        |      |      |     
|Repayments on other borrowings                           |      |      |     
|Proceeds from FHLB advances                              |      |      |     
|Repayments on FHLB advances                              |      |      |     
|Fractional shares purchased                              |      |      |     
|Cash dividends paid                                      |      |      |     
|Shares repurchased                                       |      |      |     
|Proceeds from sale of stock and exercises of options     |      |      |     
|                                                         |      |      |     
|                                                         |      |      |     
|Net cash from financing activities                       |      |      |     
|                                                         |      |     
|Net change in cash and cash equivalents                  |      |      |     
|Beginning cash and cash equivalents                      |      |      |     
|                                                         |      |      |     
|                                                         |      |     
|Ending cash and cash equivalents                         |      |      | $   
|                                                         |      |      |     
|                                                         |      |     
|Supplemental disclosures of cash flow information        |      |     
|Cash paid during the period for                          |      |     
|Interest                                                 |      |      | $   
|Income taxes                                             |      |      |     
|Noncash investing and financing activities:              |      |     
|GBFC acquistion:                                         |      |     
|Securities acquired (including FHLB stock)               |      |      |     
|Loans acquired                                           |      |      |     
|Premises and equipment acquired                          |      |      |     
|Acquisition intangibles recorded                         |      |      |     
|Other assets acquired                                    |      |      |     
|Deposits assumed                                         |      |      |     
|Borrowings assumed                                       |      |      |     
|Other liabilities assumed                                |      |      |     
|Value of common stock issued and converted stock options |      |      |     

See accompanying
notes to consolidated financial statements.

F-6

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Macatawa Bank, and its wholly-owned subsidiary, Macatawa Bank
Mortgage Company; Macatawa Statutory Trust I; and Macatawa Investment Services, Inc.,
after elimination of intercompany accounts and transactions.

Nature of Operations: Macatawa
Bank Corporation (the Company) became the bank holding company for Macatawa
Bank on February 23, 1998. Macatawa Bank commenced operations on November 25, 1997.
Upon the completion of the acquisition of Grand Bank Financial Corporation (GBFC), Grand
Bank became a wholly owned subsidiary effective April 1, 2002, and its results are
included in the consolidated statements of income since this effective date. Effective
January 1, 2003 Grand Bank was merged into Macatawa Bank with the combined bank named
Macatawa Bank.

Macatawa Bank is a Michigan chartered
bank with depository accounts insured by the Federal Deposit Insurance Corporation. The
bank operates twenty branch offices and one operational service facility, providing a full
range of commercial and consumer banking and trust services in Kent County, Ottawa County,
and northern Allegan County, Michigan. Macatawa Bank Mortgage Inc. originates and sells
residential mortgage loans into the secondary market on a servicing released basis.
Macatawa Investment Services was formed in October 2001 and gained approval in June 2002
from the NASD to commence operations as a broker/dealer. Macatawa Investment Services
provides various brokerage services including discount brokerage, personal financial
planning and consultation regarding individual stocks and mutual funds. Macatawa Statutory
Trust I is a grantor trust that was established on July 15, 2003 through which trust
preferred securities were issued.

The Company elected to become a
financial holding company pursuant to Title I of the Gramm-Leach-Bliley Act, effective
January 9, 2002. At the present time, the Company has no plans to engage in any of the
expanded activities permitted under the new regulations.

(Continued)

F-7

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates: To prepare
financial statements in conformity with accounting principles generally accepted in the
United States of America, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the financial
statements and the disclosures provided, and future results could differ. The allowance
for loan losses, the fair value of intangible assets, the status of contingencies and the
fair values of financial instruments are particularly subject to change.

Concentration of Credit Risk:
Loans are granted to, and deposits are obtained from, customers primarily in the western
Michigan area as described above. Substantially all loans are secured by specific items of
collateral, including residential real estate, commercial real estate, commercial assets
and consumer assets. Other financial instruments, which potentially subject the Company to
concentrations of credit risk, include deposit accounts in other financial institutions.

Cash Flow Reporting: Cash and
cash equivalents include cash on hand, demand deposits with other financial institutions
and short-term securities (securities with maturities of equal to or less than 90 days and
federal funds sold). Cash flows are reported net for customer loan and deposit
transactions, interest-bearing time deposits with other financial institutions and
short-term borrowings with maturities of 90 days or less.

Securities: Securities are
classified as held to maturity and carried at amortized cost when management has the
positive intent and ability to hold them to maturity. Securities available for sale
consist of those securities which might be sold prior to maturity due to changes in
interest rates, prepayment risks, yield and availability of alternative investments,
liquidity needs or other factors. Securities classified as available for sale are reported
at their fair value and the related unrealized holding gain or loss is reported in other
comprehensive income.

Interest income includes amortization
of purchase premium or discount. Gains and losses on sales are based on the amortized cost
of the security sold. Securities are written down to fair value when a decline in fair
value is not temporary.

Loans: Loans are reported at
the principal balance outstanding, net of the allowance for loan losses, and charge-offs.
Loans held for sale are reported at the lower of cost or market, on an aggregate basis.
Loans are sold servicing released, therefore no mortgage servicing right assets are
established.

(Continued)

F-8

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest income is reported on the
interest method and includes amortization of net deferred loan fees and costs over the
loan term. Interest income is not reported when full loan repayment is in doubt, typically
when the loan is impaired or payments are past due over 90 days (180 days for residential
mortgages). Payments received on such loans are reported as principal reductions.

All interest accrued but not received
for loans placed on nonaccrual is reversed against interest income. Interest received on
such loans is accounted for on the cash-basis or cost-recovery method, until qualifying
for return to accrual. Loans are returned to accrual status when all the principal and
interest amounts contractually due are brought current and future payments are reasonably
assured.

Allowance for Loan Losses: The
allowance for loan losses is a valuation allowance for probable incurred credit losses,
increased by the provision for loan losses and recoveries, and decreased by charge-offs,
less recoveries. Management estimates the allowance balance required based on known and
inherent risks in the portfolio, economic conditions and other factors. Allocations of the
allowance may be made for specific loans, but the entire allowance is available for any
loan that, in managements judgment, should be charged-off. Loan losses are charged
against the allowance when management believes the uncollectibility of a loan balance is
confirmed.

Loan impairment is reported when full
payment under the loan terms is not expected. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value of
estimated future cash flows using the loans existing rate or at the fair value of
collateral if repayment is expected solely from the collateral. Loans are evaluated for
impairment when payments are delayed, typically 90 days or more, or when the internal
grading system indicates a doubtful classification. Large groups of smaller balance
homogeneous loans, such as consumer and residential real estate loans, are collectively
evaluated for impairment, and accordingly, they are not separately identified for
impairment disclosures.

Foreclosed Assets: Assets
acquired through or instead of loan foreclosure are initially recorded at fair value when
acquired, establishing a new cost basis. If fair value declines, a valuation allowance is
recorded through expense. Costs after acquisition are expensed. The Company held $464,000
in foreclosed assets at December 31, 2003 and $388,000 in foreclosed assets at December
31, 2002.

Premises and Equipment: Land
is carried at cost. Premises and equipment are stated at cost less accumulated
depreciation. Buildings and related components are depreciated using the straight-line
method with useful lives ranging from 5 to 40 years.Furniture, fixtures and
equipment are depreciated using the straight-line method with useful lives ranging from 3
to 5 years. Maintenance, repairs and minor alterations are charged to current operations
as expenditures occur and major improvements are capitalized. These assets are reviewed
for impairment when events indicate the carrying amount may not be recoverable.

(Continued)

F-9

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes: Income tax
expense is the sum of the current year income tax due or refundable and the change in
deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected
future tax consequences of temporary differences between the carrying amounts and tax
bases of assets and liabilities, computed using enacted tax rates. A valuation allowance,
if needed, reduces deferred tax assets to the amount expected to be realized.

Fair Values of Financial
Instruments: Fair values of financial instruments are estimated using relevant market
information and other assumptions, as more fully disclosed separately. Fair value
estimates involve uncertainties and matters of significant judgment regarding interest
rates, credit risk, prepayments and other factors, especially in the absence of broad
markets for particular items. Changes in assumptions or in market conditions could
significantly affect the estimates. The fair value estimates of existing on-and
off-balance sheet financial instruments do not include the value of anticipated future
business or the values of assets and liabilities not considered financial instruments.

Earnings Per Share: Basic
earnings per share is net income divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per common share include the dilutive
effect of additional potential common shares issuable under stock options. Earnings and
dividends per share are restated for all stock splits and dividends through the date of
issue of the financial statements.

Stock Compensation: Employee
compensation expense under stock option plans is reported using the intrinsic value
method. No compensation cost related to stock options was recognized during 2003, 2002 or
2001, as all options granted had an exercise price equal to or greater than the market
price of the underlying common stock at date of grant. Had compensation cost for stock
options been measured using the fair value method, net income and basic and diluted
earnings per share would have been the pro forma amounts indicated below (dollars in
thousands except per share data). The pro forma effect may increase in the future if more
options are granted.

|                                         | 2003 | 2002 | 2001
|---------------------------------------- | ---- | ---- | ----
|                                         |      |      |     
|Net income as reported                   |      |      | $   
|                                         |      |     
|Deduct: Stock-based compensation expense |      |     
|using fair value method                  |      |      |     
|                                         |      |      |     
|                                         |      |      |     
|Pro forma net income                     |      |      | $   
|Basic earnings per share as reported     |      |      |     
|Proforma basic earnings per share        |      |      |     
|Diluted earnings per share               |      |     
|as reported                              |      |      |     
|Proforma diluted earnings                |      |     
|per share                                |      |      |     
|Weighted-average fair value of options   |      |     
|granted during the period                |      |      |     
|                                         |      |      |     

The pro forma effects are computed
using option pricing models, using the following weighted-average assumptions as of grant
date.

|                                | 2003    | 2002    | 2001   
|------------------------------- | ------- | ------- | -------
|                                |         |         |        
|Risk-free interest rate         | 4.16%   | 4.83%   | 4.78%  
|Expected option life            | 7 years | 7 years | 7 years
|Expected stock price volatility | 6.95%   | 7.29%   | 21.58% 
|Dividend yield                  | 1.83%   | 1.78%   | 1.79%  
|                                |         |         |        

Comprehensive Income:
Comprehensive income consists of net income and other comprehensive income. Other
comprehensive income includes unrealized gains and losses on securities available for sale
and unrealized gains and losses on cash flow hedges which are also recognized as separate
components of equity.

Segment Reporting: The
Company, through the branch network of the Bank, provides a broad range of financial
services to individuals and companies in western Michigan. These services include demand,
time and savings deposits; lending; ATM processing; cash management; and trust services.
While the Companys management team monitors the revenue streams of the various
Company products and services, operations are managed and financial performance is
evaluated on a Company-wide basis. Accordingly, all of the Companys banking
operations are considered by management to be aggregated in one reportable operating
segment.

Off Balance Sheet Financial
Instruments: Financial instruments include off-balance sheet credit instruments, such
as commitments to make loans and standby letters of credit, issued to meet customer
financing needs. The face amount for these items represents the exposure to loss, before
considering customer collateral or ability to repay. Such financial instruments are
recorded when they are funded. Instruments, such as standby letters of credit, that are
considered financial guarantees in accordance with FASB Interpretation No. 45 are recorded
at fair value.

Loss Contingencies: Loss
contingencies, including claims and legal actions arising in the ordinary course of
business, are recorded as liabilities when the likelihood of loss is probable and an
amount or range of loss can be reasonably estimated.

Derivative instruments and hedging
activities: All derivative instruments are recorded at their fair values. If
derivative instruments are designated as hedges of fair values, both the change in the
fair value of the hedge and the hedged item are included in current earnings. Fair value
adjustments related to cash flow hedges are recorded in other comprehensive income and
reclassified to earnings when the hedged transaction is reflected in earnings. Ineffective
portions of hedges are reflected in income currently.

Goodwill: Goodwill results
from prior business acquisitions and represents the excess of the purchase price over the
fair value of acquired tangible assets and liabilities and identifiable intangible assets.
Goodwill is assessed at least annually for impairment and any such impairment will be
recognized in the period identified.

Acquisition Intangibles:
Acquisition intangibles consist of core deposit and acquired customer relationship
intangible assets arising from acquisitions. They are initially measured at fair value and
then are amortized on an accelerated method with estimated useful lives of ten years.
These assets are reviewed for impairment when events indicate the carrying amount may not
be recoverable.

(Continued)

F-10

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Adoption of New Accounting
Standards: During 2003, the Company adopted FASB Statement 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities, FASB Statement 150,
Accounting for Certain Financial Instruments with Characteristics of both Liabilities
and Equities, FASB Statement 132 (revised 2003), Employers Disclosures about
Pensions and Other Postretirement Benefits, FASB Interpretation 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, and FASB
Interpretation 46, Consolidation of Variable Interest Entities. Adoption of the new
standards did not materially affect the Companys operating results or financial
condition.

Dividend Restriction: Banking
regulations require maintaining certain capital levels and may limit the dividends paid by
the Bank to the Company or by the Company to shareholders.

Reclassifications: Some items
in the prior year financial statements were reclassified to conform to the current
presentation.

# NOTE 2  ACQUISITION

On April 1, 2002, the Company
completed the acquisition of Grand Bank Financial Corporation (GBFC), a
commercial bank headquartered in Grand Rapids, Michigan. Under the terms of this
transaction, the Company acquired all of the outstanding stock of GBFC in exchange for
approximately 2.5 million common shares. The value of the common shares issued was
determined using the Companys quoted market price per share at the time the terms of
the acquisition agreement were agreed to and announced. Further, options to acquire GBFC
stock were converted to options to acquire Company stock. The value of these options for
purposes of determining the total cost to the Company for the acquisition was
approximately $1.0 million. Accordingly, the total cost of the transaction considering
common stock and converted options was approximately $40.8 million.

The acquisition was accounted for
using the purchase method of accounting, and, accordingly, the purchase price was
allocated to the assets purchased and the liabilities assumed based upon the estimated
fair values at the date of acquisition. The purchase accounting fair value adjustments are
being amortized under various methods and over the lives of the corresponding assets and
liabilities. Goodwill recorded for the acquisition was $23.9 million and is not being
amortized. Intangible assets recorded for the acquisition that are subject to amortization
were as follows in thousands of dollars as of December 31, 2003:

|                        | Gross Amount | Accumulated Amortization
|----------------------- | ------------ | ------------------------
|
|Core deposit intangible | $3,185       | $659                    
|Trust relationships     | 478          | 217                     

The amount of goodwill recorded in
this transaction relative to the smaller amounts of identified intangible assets reflects
that the value of GBFC related primarily to the foundation it provides to further build
our presence in the Grand Rapids market. The value of this foundation lies with the GBFC
workforce, their customer service orientation and their relationships within the
community. The amount of the core deposits intangible asset recorded was small relative to
the total purchase price and reflects that the GBFC deposit portfolio was weighted towards
higher interest rate account types.

(Continued)

F-11

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

Both the core deposits and trust
relationships intangibles are being amortized on an accelerated basis over a period of ten
years. Amortization expense for the years ended December 31, 2003 and 2002 was $484,000
and $392,000. Estimated amortization expense for the next five years is as follows in
thousands of dollars:

| |                          |                          | 
| | ------------------------ | ------------------------ | 
| | 2004
2005
2006
2007
2008 | $440
 406
 378
 340
 315 | 

In conjunction with the acquisition,
the fair values of significant assets and liabilities assumed were as follows as of April
1, 2002, stated in thousands of dollars:

| |                           |            | 
| | ------------------------- | ---------- | 
| | Cash and cash equivalents | $   21,390 | 
| | Securities                | 11,070     | 
| | Loans                     | 246,344    | 
| | Acquisition intangibles   | 27,578     | 
| | Deposits                  | (246,060)  | 
| | Other borrowings          | (20,170)   | 

The consolidated statements of income
reflect the operating results of GBFC since the effective date of the acquisition. The
following table presents pro forma information for year ended December 31 as if the
acquisition of GBFC had occurred at the beginning of both 2002 and 2001. The pro forma
information includes adjustments for the amortization of intangibles arising from the
transaction, the elimination of acquisition related expenses, and the related income tax
effects. The pro forma financial information is not necessarily indicative of the results
of operations as they would have been had the transactions been effected on the assumed
dates.

(Dollars in thousands, except per
share data)

|                                    | Year EndedDecember 31,2002 | Year EndedDecember 31,2001
|----------------------------------- | -------------------------- | --------------------------
|                                    |                            |                           
|Proforma                           
|Interest income                     |                            |                           
|Interest expense                    |                            |                           
|                                    |                            |                           
|Net interest income                 |                            |                           
|Provision for loan losses           |                            |                           
|                                    |                            |                           
|Net interest income after provision |                            |                           
|Noninterest income                  |                            |                           
|Noninterest expense                 |                            |                           
|                                    |                            |                           
|Income before federal income tax    |                            |                           
|Federal income tax expense          |                            |                           
|                                    |                            |                           
|Net income                          |                            |                           
|                                    |                            |                           
|                                    |                            |                           
|Basic earnings per share            |                            |                           
|Diluted earnings per share          |                            |                           

# NOTE 3  CASH AND DUE
FROM BANKS

The Company was required to have
$1,469,000 and $1,290,000 of cash on hand or on deposit with the Federal Reserve Bank to
meet regulatory reserve and clearing requirements at year-end 2003 and 2002. These
balances do not earn interest.

(Continued)

F-12

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 4  SECURITIES

The amortized cost and fair values of
securities at year-end were as follows (dollars in thousands):

|                               | Amortized
Cost | Gross
Unrealized
Gains | Gross
Unrealized
Losses | Fair
Values
|------------------------------ | -------------- | ---------------------- | ----------------------- | -----------
|
|Available for Sale 2003        |                |                        |                         |            
|U.S. Treasury securities and   |                |                       
|obligations of U.S. Government |                |                       
|agencies                       |                |                        | $                       | 74,804     
|State and municipal bonds      |                |                        |                         | 30,088     
|                               |                |                        |                         |            
|                               |                |                       
|                               |                |                        | $                       | 104,892    
|                               |                |                        |                         |            
|Held to Maturity 2003          |                |                       
|State and municipal bonds      |                |                        |                         | 2,624      
|                               |                |                        |                         |            
|                               |                |                       
|                               |                |                        | $                       | 2,624      
|                               |                |                        |                         |            
|                               |                |                       
|Available for Sale 2002        |                |                       
|U.S. Treasury securities and   |                |                       
|obligations of U.S. Government |                |                       
|agencies                       |                |                        | $                       | 67,747     
|State and municipal bonds      |                |                        |                         | 15,050     
|                               |                |                        |                         |            
|                               |                |                       
|                               |                |                        | $                       | 82,797     
|                               |                |                        |                         |            
|Held to Maturity 2002          |                |                       
|U.S. Treasury securities and   |                |                       
|obligations of U.S. Government |                |                       
|agencies                       |                |                        | $                       | 1,369      
|State and municipal bonds      |                |                        |                         | 2,692      
|                               |                |                        |                         |            
|                               |                |                       
|                               |                |                        | $                       | 4,061      
|                               |                |                        |                         |            

For unrealized losses on available
for sale securities, no loss has been recognized into income because management has the
intent and ability to hold these securities for the foreseeable future. The decline in
fair value is expected to recover as the bonds approach their maturity date.

(Continued)

F-13

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

Contractual maturities of debt
securities at December 31, 2003 were as follows (dollars in thousands):

|                           | Held-to-Maturity Securities | Available-for-Sale Securities
|-------------------------- | --------------------------- | -----------------------------
|
|
|Due in one year or less    |                             |                              
|Due from one to five years |                             |                              
|Due from five to ten years |                             |                              
|Due after ten years        |                             |                              
|                           |                             |                              
|                           |                             |                              
|                           |                             |                              

There were no sales of securities for
the years ended December 31, 2003, 2002 and 2001.

At December 31, 2003 and 2002,
securities with a carrying value of approximately $1,000,000 and $3,052,000 were pledged
as security for public deposits and for other purposes required or permitted by law. In
addition, securities totaling $73,804,000 and $70,768,000 at December 31, 2003 and 2002
were used as collateral for advances from the Federal Home Loan Bank.

# NOTE 5  LOANS

Year-end loans were as follows
(dollars in thousands):

|                     | 2003 | 2002
|-------------------- | ---- | ----
|
|Commercial           |      |     
|Commercial mortgage  |      |     
|Residential mortgage |      |     
|Consumer             |      |     
|                     |      |     
|                     |      |     
|                     |      |     
|                     |      |     

Activity in the allowance for loan
losses was as follows (dollars in thousands):

|                               | 2003 | 2002 | 2001
|------------------------------ | ---- | ---- | ----
|
|Beginning balance              |      |      | $   
|Balances from GBFC acquisition |      |      |     
|Provision for loan losses      |      |      |     
|Loans charged-off              |      |      |     
|Recoveries                     |      |      |     
|                               |      |      |     
|Ending balance                 |      |      | $   
|                               |      |      |     

Impaired loans were as follows
(dollars in thousands):

|                                   | 2003 | 2002
|---------------------------------- | ---- | ----
|
|Loans with no allocated allowance  |      |     
|for loan losses                    |      |     
|Loans with allocated allowance for |      |     
|loan losses                        |      |     
|                                   |      |     
|                                   |      |     
|                                   |      |     
|                                   |      |     
|                                   |      |     
|Amount of the allowance for loan   |      |     
|losses allocated                   |      |     
|                                   |      |     

|                                             | 2003 | 2002 | 2001
|-------------------------------------------- | ---- | ---- | ----
|
|Average of impaired loans during the period  |      |      | $   
|Interest income recognized during impairment |      |      |     
|Cash-basis interest income recognized        |      |      |     

Nonperforming loans were
as follows:

|                                             | 2003 | 2002
|-------------------------------------------- | ---- | ----
|
|Loans past due over 90 days still on accrual |      |     
|Nonaccrual loans                             |      |     
|                                             |      |     
|                                             |      |     
|                                             |      |     

Nonperforming loans includes both
smaller balance homogeneous loans that are collectively evaluated for impairment and
individually classified impaired loans.

(Continued)

F-14

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 6  PREMISES
AND EQUIPMENT  NET

Year-end premises and equipment were
as follows (dollars in thousands):

|                              | 2003 |  | 2002
|----------------------------- | ---- |  | ----
|
|Land                          |      |  | $   
|Building                      |      |  |     
|Leasehold improvements        |      |  |     
|Furniture and equipment       |      |  |     
|Construction in progress      |      |  |     
|                              |      | 
|                              |      |  |     
|                              |      |  |     
|Less accumulated depreciation |      |  |     
|                              |      |  |     
|                              |      |  | $   
|                              |      |  |     

Depreciation expense was $2,301,000,
$1,872,000 and $1,406,000 for each of the years ending December 31, 2003, 2002 and 2001.

The banks lease certain office and
branch premises and equipment under operating lease agreements. Total rental expense for
all operating leases aggregated $586,000, $648,000 and $311,000 for each of the years
ending December 31, 2003, 2002 and 2001. Future minimum rentals under noncancelable
operating leases as of December 31, 2003 are as follows (dollars in thousands):

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 

(Continued)

F-15

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 7  DEPOSITS

Deposits at year-end were as follows
(dollars in thousands):

|                           | 2003 | 2002
|-------------------------- | ---- | ----
|
|Noninterest-bearing demand |      |     
|Money market               |      |     
|NOW and Super NOW          |      |     
|Savings                    |      |     
|Certificates of deposit    |      |     
|                           |      |     
|                           |      |     
|                           |      |     

The following table depicts the
maturity distribution of certificates of deposits at December 31, 2003 (dollars in
thousands):

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 

The banks had approximately
$272,492,000 and $257,516,000 in time certificates of deposit, which were in denominations
of $100,000 or more at December 31, 2003 and 2002.

Brokered deposits totaled
approximately $112,624,000 and $107,083,000 at December 31, 2003 and 2002. At December 31,
2003 and 2002, brokered deposits had interest rates ranging from 1.35% to 5.25% and 2.10%
to 7.25%, respectively, and maturities ranging from one month to twenty-six months.

F-16

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 8  FEDERAL
HOME LOAN BANK ADVANCES

At year-end, advances from the
Federal Home Loan Bank were as follows (dollars in thousands):

|December 31, 2003                                                                                                                                                                                                                                                                                             |  |                                                                                       |  |                                                                                                                                                                                                                                             |  |                                                 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | 
|Principal Terms                                                                                                                                                                                                                                                                                               |  | Advance Amount                                                                        |  | Range of Maturities                                                                                                                                                                                                                         |  | Weighted Average
Interest Rate                  | 
|                                                                                                                                                                                                                                                                                                             
|Single maturity fixed rate advances
Putable advances                   
Short-term variable                
Amortizable mortgage advances      
 
December 31, 2002
Single maturity fixed rate advances
Putable advances                   
Short-term variable                
Amortizable mortgage advances |  | $ 67,173
  41,000
  25,000
  12,507$145,680$40,028
  41,000
  22,000
   3,869$106,897 |  | January 2004 to January 2006 
January 2005 to December 2010
May 2004 to July 2004        
February 2004 to July 2018   
March 2003 to November 2005  
January 2005 to December 2010
May 2003 to June 2003        
July 2003 to January 2009 |  | 2.85%
5.98%
1.11%
3.98%
4.36%
5.98%
1.56%
5.43% | 

Each advance is payable at its
maturity date and contains a prepayment penalty. These advances were collateralized by
securities totaling $74,789,000 and $70,768,000 at December 31, 2003 and December 31,
2002, residential real estate loans totaling $95,530,000 under a blanket lien arrangement
at December 31, 2002, and residential and commercial real estate loans totaling
$598,214,000 under a blanket lien arrangement at December 31, 2003.

Maturities as of December 31, 2003
were as follows (in thousands):

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 

(Continued)

F-17

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 9  OTHER
BORROWINGS

The Company has a $10,000,000 credit
facility to provide liquidity for the parent company and additional capital for the bank
as necessary. There were no advances outstanding on this credit facility as of December
31, 2003. As of December 31, 2002, $4.5 million in advances were outstanding.

# NOTE 10  LONG-TERM
DEBT

On July 15, 2003, $20.0 million of
pooled trust preferred securities (Preferred Securities)were issued through a
wholly-owned subsidiary grantor trust, Macatawa Statutory Trust I (the Trust).
The Preferred Securities accrue and pay distributions quarterly at a specified rate as
provided in the indenture, three-month LIBOR plus 3.05%. The Trust used the net proceeds
from the offering to purchase a like amount of Junior Subordinated Debentures (the
Debentures) of the Company. The Debentures are the sole assets of the Trust
and are eliminated, along with the related income statement effects, in the consolidated
financial statements. The Companys obligations under the Debentures and related
documents, taken together, constitute a full and unconditional guarantee by the Company of
the obligations of the Trust. The Preferred Securities are mandatorily redeemable upon the
maturity of the Debentures which is July 15, 2033, or upon earlier redemption as provided
in the indenture. The Company has the right to redeem the Debentures in whole or in part
on or after July 15, 2008, at a redemption price specified in the indenture plus any
accrued but unpaid interest to the redemption date. The initial interest rate on the
Preferred Securities was 4.16%. The entire $20.0 million issuance qualified as Tier 1
capital for regulatory capital purposes. At December 31, 2003 the carrying value of the
debentures was $19,655,000 net of unamortized debt issuance costs.

(Continued)

F-18

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 11  RELATED
PARTY TRANSACTIONS

Loans to principal officers,
directors, and their affiliates were as follows (dollars in thousands).

|                                     | 2003 |  | 2002 |       
|------------------------------------ | ---- |  | ---- | ------
|
|Beginning balance                    |      |  | $    | 20,659
|Balances from Grand Bank acquisition |      |  |      | 0     
|New loans and renewals               |      |  |      | 9,155 
|Repayments and renewals              |      |  |      | (8,996
|Effect of changes in related parties |      |  |      | (8,443
|                                     |      | 
|                                     |      |  |      |       
|Ending balance                       |      |  | $    | 12,375
|                                     |      |  |      |       

The primary cause for the change in
related parties during 2003 was the merger of Grand Bank into Macatawa Bank on January 1,
2003 and the corresponding elimination of its board of directors. Deposits from principal
officers, directors, and their affiliates at December 31, 2003 and 2002 were $5,451,239
and $5,758,107.

# NOTE 12  STOCK
OPTIONS

Options to buy stock are granted to
officers and employees under the Employee Stock Option Plan (the Employees Plan),
which provides for issue of up to 546,000 options. Options are also granted to directors
under the Directors Stock Option Plan (the Directors Plan), which provides for
issuance of up to 154,190 options. In conjunction with the acquisition of Grand Bank
Financial Corporation during the first quarter 2002, an additional 90,319 in options were
authorized to exchange existing GBFC options outstanding. The exercise price is the market
price at the date of grant for both plans. The maximum option term is ten years with
options vesting over a one-year period for both the Employees Plan and the
Directors Plan. The amount of options available for future grants is 255,781. A
summary of the activity in the plans is as follows.

(Continued)

F-19

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

|                             | OptionsOutstanding | Weighted Average Exercise Price
|---------------------------- | ------------------ | -------------------------------
|                             |                    |                                
|Balance at January 1, 2001   |                    |                                
|Granted                      |                    |                                
|Exercised                    |                    |                                
|Forfeited                    |                    |                                
|                             |                    |                                
|Balance at December 31, 2001 |                    |                                
|Granted                      |                    |                                
|GBFC Options exchanged       |                    |                                
|Exercised                    |                    |                                
|Forfeited                    |                    |                                
|                             |                    |                                
|Balance at December 31, 2002 |                    |                                
|Granted                      |                    |                                
|Exercised                    |                    |                                
|Forfeited                    |                    |                                
|                             |                    |                                
|Balance at December 31, 2003 |                    |                                
|                             |                    |                                

Options outstanding at year-end 2003
were as follows.

|                        | Outstanding | Exerciseable
|----------------------- | ----------- | ------------
|                        |             |             
|                        |             |             
|$2.50-$5.00             |             |             
|$5.01-$10.00            |             |             
|$10.01-$15.00           |             |             
|$15.01-$20.00           |             |             
|$20.01-$25.00           |             |             
|$25.01-$27.00           |             |             
|                        |             |             
|                        |             |             
|Outstanding at year end |             |             
|                        |             |             

(Continued)

F-20

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 13  EMPLOYEE
BENEFITS

The Company sponsors a 401(k) plan
which covers substantially all employees. Employees may elect to contribute to the plan
from 1% to 15% of their salary subject to statutory limitations. The Company makes
matching contributions equal to 100% of the first 3% of employee contributions. Effective
July 1, 2002 the plan was amended to establish additional Company matching contributions
equal to 50% of employee contributions in excess of 3% and up to 6%. The Companys
contribution for the years ended December 31, 2003 and 2002 were approximately $438,000
and $294,000.

The Company sponsors an employee
stock purchase plan which allows employees to defer after-tax payroll dollars and purchase
Company stock on a quarterly basis. The Company has reserved 25,000 shares of common stock
to be issued and purchased under the plan, however, the plan allows for shares to be
purchased directly from the Company or on the open market.

Grand Bank had a defined benefit
pension plan covering substantially all of its employees. This plan was curtailed in
conjunction with the acquisition of Grand Bank effective April 1, 2002. Financial
information regarding the plan was as follows subsequent to the acquisition and as of
December 31, 2003 and 2002.

|                                      |  | 
|------------------------------------- |  | 
|Benefit obligation at year-end        |  | 
|Fair value of plan assets at year-end |  | 
|                                      |  | 
|Funded status                         |  | 
|                                      |  | 
|Net benefit cost                      |  | 
|Employer contributions                |  | 
|Benefits paid                         |  | 

The weighted average discount rate
used in determining the actuarial present value of the benefit obligation was 6.0% for
2003 and 7.0% for 2002, and the weighted average expected return on plan assets was 6.0%
for 2003 and 8.0% for 2002.

# NOTE 14 EARNINGS
PER SHARE

A reconciliation of the numerators
and denominators of basic and diluted earnings per share are as follows (dollars in
thousands except per share data):

|                                  | 2003 | 2002 | 2001
|--------------------------------- | ---- | ---- | ----
|                                  |      |      |     
|Basic earnings per share          |      |      |     
|Net income                        |      |      | $   
|                                  |      |      |     
|Weighted average common shares    |      |     
|outstanding                       |      |      |     
|                                  |      |      |     
|                                  |      |     
|Basic earnings per share          |      |      | $   
|                                  |      |      |     
|                                  |      |     
|Diluted earnings per share        |      |     
|Net income                        |      |      | $   
|                                  |      |      |     
|Weighted average common shares    |      |     
|outstanding                       |      |      |     
|Add:  Dilutive effects of assumed |      |     
|exercises of stock options        |      |      |     
|                                  |      |      |     
|Weighted average common and       |      |     
|dilutive potential common         |      |     
|shares outstanding                |      |      |     
|                                  |      |      |     
|                                  |      |     
|Diluted earnings per share        |      |      | $   
|                                  |      |      |     

Stock options for 92,000, 40,950, and
25,389 shares of common stock were not considered in computing diluted earnings per share
for December 31, 2003, 2002 and 2001 because they were antidilutive.

(Continued)

F-21

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 15  FEDERAL
INCOME TAXES

The consolidated provision for income
taxes was as follows (dollars in thousands):

|                 | 2003 |  | 2002 |       | 2001
|---------------- | ---- |  | ---- | ----- | ----
|
|Current          |      |  | $    | 6,363 |     
|Deferred benefit |      |  |      | (575  | )   
|                 |      |  |      |       |     
|                 |      |  | $    | 5,788 |     
|                 |      |  |      |       |     

The difference between the financial
statement tax expense and amount computed by applying the statutory federal tax rate to
pretax income was reconciled as follows (dollars in thousands):

|                                              | 2003 |  | 2002 |       | 2001
|--------------------------------------------- | ---- |  | ---- | ----- | ----
|
|Statutory rate                                |      |  |      | 35    | %   
|Statutory rate applied to income before taxes |      |  | $    | 6,149 |     
|Add (deduct)                                  |      | 
|Tax-exempt interest income                    |      |  |      | (337  | )   
|Other                                         |      |  |      | (24   | )   
|                                              |      |  |      |       |     
|                                              |      |  | $    | 5,788 |     
|                                              |      |  |      |       |     

The net deferred tax asset recorded
included the following amounts of deferred tax assets and liabilities (dollars in
thousands):

|                                                 | 2003 |  | 2002
|------------------------------------------------ | ---- |  | ----
|                                                 |      |  |     
|Deferred tax asset                               |      |  |     
|Allowance for loan losses                        |      |  | $   
|Accrued expenses                                 |      |  |     
|Nonaccrual loan interest                         |      |  |     
|Other                                            |      |  |     
|                                                 |      |  |     
|                                                 |      |  |     
|Deferred tax liabilities                         |      | 
|Depreciation                                     |      |  |     
|Purchase accounting adjustments                  |      |  |     
|Unrealized gain on securities available for sale |      |  |     
|Unrealized gain on derivative instruments        |      |  |     
|FHLB dividends                                   |      |  |     
|Accretion                                        |      |  |     
|Other                                            |      |  |     
|                                                 |      |  |     
|                                                 |      |  |     
|                                                 |      |  |     
|Net deferred tax asset                           |      |  | $   
|                                                 |      |  |     

A valuation allowance related to
deferred tax assets is required when it is considered more likely than not that all or
part of the benefit related to such assets will not be realized. Based on the levels of
taxable income in the current and prior years which would be available to absorb the
benefit, management has determined that no valuation allowance was required at December
31, 2003 or 2002.

(Continued)

F-22

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 16 
COMMITMENTS AND OFF-BALANCE-SHEET RISK

Some financial instruments are used
to meet customer financing needs and to reduce exposure to interest rate changes. These
financial instruments include commitments to extend credit and standby letters of credit.
These involve, to varying degrees, credit and interest-rate risk in excess of the amount
reported in the financial statements.

Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any condition
established in the commitment, and generally have fixed expiration dates. Standby letters
of credit are conditional commitments to guarantee a customers performance to a
third party. Exposure to credit loss if the other party does not perform is represented by
the contractual amount for commitments to extend credit and standby letters of credit.
Collateral or other security is normally not obtained for these financial instruments
prior to their use, and many of the commitments are expected to expire without being used.

A summary of the notional or
contractual amounts of financial instruments with off-balance-sheet risk was as follows
(dollars in thousands):

|                                             | December 31,
|-------------------------------------------- | ------------
|
|
|Commitments to make loans                    |             
|Unused lines of credit and letters of credit |             

Approximately 35% of the Banks
commitments to make loans were at fixed rates, offered at current market rates. The
majority of the variable rate commitments noted above were tied to prime and expire within
30 days. The majority of the unused lines of credit were at variable rates tied to prime.

The Bank conducts substantially all
of its business operations in western Michigan.

# NOTE 17 
CONTINGENCIES

The Company and its subsidiaries
periodically become defendants in certain claims and legal actions arising in the ordinary
course of business.

On July 8, 2003 the Company filed a
Form 8-K (dated July 1, 2003) with the Securities and Exchange Commission reporting events
related to a former trust customer, Trade Partners, Inc. (Trade Partners), of
the former Grand Bank. Trade Partners was involved in purchasing and selling interests in
viaticals which are interests in life insurance policies of the terminally ill or elderly.
Beginning in 1996, Grand Bank served as a custodian and escrow agent with respect to
viaticals purchased by Trade Partners and sold to investors. Two lawsuits were filed, one
in December 2002 and another in March 2003, against Trade Partners, Grand Bank and the
Company alleging that Grand Bank breached certain escrow agreements related to viatical
settlement contracts. Both of these lawsuits have been dismissed although the plaintiffs
reserved the right to pursue the claims in the future. A third lawsuit was filed in April
2003 by two individual investors against Grand Bank, the Company, Trade Partners and
certain individuals and entities associated with Trade Partners. The complaint seeks
damages for the asserted breach of certain escrow agreements for which Grand Bank served
as custodian and escrow agent. In addition, in May 2003 a purported class action complaint
was filed against the Company alleging that Grand Bank breached escrow agreements and its
fiduciary duties with respect to the plaintiffs investments secured by viaticals.
The Company has answered the complaint denying the material allegations and raising
certain affirmative defenses. Management believes the Company has strong defenses and will
vigorously defend the cases.

(Continued)

F-23

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

Trade Partners is now in
receivership. The receiver has been authorized to borrow money from Macatawa Bank to pay
premiums, if needed. Macatawa Bank extended a $4 million line of credit to the receiver,
conditioned upon obtaining a security interest in the viaticals. As of December 31, 2003
no draws had yet been made on the line of credit.

It is possible that one or more
additional legal actions may be initiated involving the custodial and escrow agent
services provided by Grand Bank in connection with Trade Partners. If any such legal
actions are commenced, the Company intends to defend them vigorously. To the extent any
pending or future claims allege errors or omissions on the part of Grand Bank or Macatawa
Bank, Management believes that some or all liability, if any is proven or established,
will be covered by errors and omissions insurance maintained by Grand Bank and Macatawa
Bank.

The legal actions involving Trade
Partners are at an early stage and the outcome of such actions is uncertain. While we are
therefore unable to determine at this time whether or to what extent these actions may
impact the Company, the Company believes it has strong defenses and fully intends to
defend any and all such actions vigorously.

# NOTE 18  HEDGING
ACTIVITIES

The Company has asset/liability
management policies that include guidelines for measuring and monitoring interest rate
risk. Within these guidelines, parameters have been established for maximum fluctuations
in net interest income. Possible fluctuations are measured and monitored using simulation
modeling. The policies provide for the use of derivative instruments and hedging
activities to aid in managing interest rate risk to within the policy parameters.

The Companys assets are
comprised of a large portion of loans on which the interest rates are variable. As such,
the Company may periodically enter into derivative financial instruments to mitigate
exposure to fluctuations in cash flows resulting from changes in interest rates. Interest
rate swap arrangements may be utilized to hedge against these fluctuations in cash flows.

The Company has entered into interest
rate swap arrangements, all of which are classified as cash flow hedges, that convert the
variable rate cash inflows on certain of its loans to fixed rates of interest. These
interest rate swaps pay interest to the Company at a fixed rate and require interest
payments from the Company at a variable rate. All of these swaps were fully effective
during 2003 and 2002. It is anticipated that approximately $354,000 net of tax, of
unrealized gains on these cash flow hedges will be reclassified to earnings over the next
twelve months.

Summary information about interest
rate swaps at year-end follows (dollars in thousands).

|                                               | 2003 |  | 2002
|---------------------------------------------- | ---- |  | ----
|                                               |      |  |     
|Notional amounts                               |      |  | $   
|Weighted average pay rates                     |      |  |     
|Weighted average receive rates                 |      |  |     
|Weighted average maturity                      |      |  |     
|Unrealized gain related to interest rate swaps |      |  | $   

# NOTE 19 
REGULATORY MATTERS

The Company and the Bank are subject
to regulatory capital requirements administered by federal banking agencies. Capital
adequacy guidelines and prompt corrective action regulations involve quantitative measures
of assets, liabilities, and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators about components, risk weightings, and other factors, and the
regulators can lower classifications in certain cases. Failure to meet various capital
requirements can initiate regulatory action that could have a direct material effect on
the financial statements.

(Continued)

F-24

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

NOTE 19  REGULATORY
MATTERS (Continued)

The prompt corrective action regulations
provide five classifications, including well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically undercapitalized,
although these terms are not used to represent overall financial condition. If the Bank is
only adequately capitalized, regulatory approval is required to accept brokered deposits;
and if the Bank is undercapitalized, capital distributions are limited, as is asset growth
and expansion, and plans for capital restoration are required.

At December 31, 2003 and 2002, actual
capital levels (dollars in thousands) and minimum required levels were:

|                                         | Actual |  | Minimum Required
For Capital
Adequacy Purposes |         | To Be Well
Capitalized Under
Prompt Corrective
Action Regulations
|---------------------------------------- | ------ |  | ---------------------------------------------- | ------- | -----------------------------------------------------------------
|
|                                         |        |  |                                                |         |                                                                  
|December 31, 2003                        |        |  |                                                |         |                                                                  
|Total capital (to risk weighted assets)  |        | 
|Consolidated                             |        |  | $                                              | 128,900 |                                                                  
|Macatawa Bank                            |        |  |                                                | 118,301 |                                                                  
|Tier 1 capital (to risk weighted assets) |        | 
|Consolidated                             |        |  |                                                | 114,142 |                                                                  
|Macatawa Bank                            |        |  |                                                | 103,550 |                                                                  
|Tier 1 capital (to average assets)       |        | 
|Consolidated                             |        |  |                                                | 114,142 |                                                                  
|Macatawa Bank                            |        |  |                                                | 103,550 |                                                                  
|                                         |        | 
|December 31, 2002                        |        | 
|Total capital (to risk weighted assets)  |        | 
|                                         |        | 
|Consolidated                             |        |  | $                                              | 97,449  |                                                                  
|Macatawa Bank                            |        |  |                                                | 71,618  |                                                                  
|Grand Bank                               |        |  |                                                | 28,879  |                                                                  
|                                         |        | 
|Tier 1 capital (to risk weighted assets) |        | 
|                                         |        | 
|Consolidated                             |        |  |                                                | 85,127  |                                                                  
|Macatawa Bank                            |        |  |                                                | 62,681  |                                                                  
|Grand Bank                               |        |  |                                                | 21,000  |                                                                  
|                                         |        | 
|Tier 1 capital (to average assets)       |        | 
|                                         |        | 
|Consolidated                             |        |  |                                                | 85,127  |                                                                  
|Macatawa Bank                            |        |  |                                                | 62,681  |                                                                  
|Grand Bank                               |        |  |                                                | 21,000  |                                                                  
|                                         |        |  |                                                |         |                                                                  

The Company and Macatawa Bank were
categorized as well capitalized at December 31, 2003. Macatawa Bank and Grand Bank were
categorized as well capitalized at December 31, 2002.

Banking regulations limit capital
distributions. Generally, capital distributions are limited to undistributed net income
for the current and prior two years. At December 31, 2003 and 2002, approximately
$23,536,000 and $10,947,000 was available to pay dividends to the holding company.

(Continued)

F-25

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 20  FAIR
VALUES OF FINANCIAL INSTRUMENTS

Carrying amount and estimated fair
values of financial instruments were as follows at year-end (dollars in thousands).

|                              | 2003 |  | 2002
|----------------------------- | ---- |  | ----
|
|                              |      |  |     
|Financial assets              |      |  |     
|Cash and cash equivalents     |      |  | $   
|Securities available for sale |      |  |     
|Securities held to maturity   |      |  |     
|Federal Home Loan Bank stock  |      |  |     
|Loans held for sale           |      |  |     
|Loans, net                    |      |  |     
|Interest rate swaps           |      |  |     
|Accrued interest receivable   |      |  |     
|                              |      | 
|Financial liabilities         |      | 
|Deposits                      |      |  |     
|Other borrowings              |      |  |     
|Federal funds purchased       |      |  |     
|Federal Home Loan Bank        |      | 
|advances                      |      |  |     
|Accrued interest payable      |      |  |     

The methods and assumptions used to
estimate fair value are described as follows.

Carrying amount is the estimated fair
value for cash and cash equivalents, short-term borrowings, Federal Home Loan Bank stock,
accrued interest receivable and payable, demand deposits, short-term debt, and variable
rate loans or deposits that reprice frequently and fully. Security fair values are based
on market prices or dealer quotes, and if no such information is available, on the rate
and term of the security and information about the issuer. For fixed rate loans or
deposits and for variable rate loans or deposits with infrequent repricing or repricing
limits, fair value is based on discounted cash flows using current market rates applied to
the estimated life and credit risk. Fair values for impaired loans are estimated using
discounted cash flow analysis or underlying collateral values. Fair value of loans held
for sale is based on market quotes. Fair value of debt is based on current rates for
similar financing. The fair value of interest rate swaps is based on market prices or
dealer quotes.

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 21  CONDENSED
FINANCIAL STATEMENTS (PARENT COMPANY ONLY)

Following are condensed parent
company only financial statements (dollars in thousands):

CONDENSED BALANCE SHEETS

|                                           | 2003 |  | 2002
|------------------------------------------ | ---- |  | ----
|
|ASSETS                                     |      |  |     
|Cash and cash equivalents                  |      |  | $   
|Investment in subsidiaries                 |      |  |     
|Total loans                                |      |  |     
|Other assets                               |      |  |     
|                                           |      |  |     
|Total assets                               |      |  | $   
|                                           |      |  |     
|                                           |      | 
|LIABILITIES AND SHAREHOLDERS' EQUITY       |      | 
|Other borrowings                           |      |  | $   
|Long-term debt                             |      |  |     
|Other liabilities                          |      |  |     
|                                           |      |  |     
|Total liabilities                          |      |  |     
|                                           |      | 
|Shareholders' equity                       |      | 
|Common stock                               |      |  |     
|Retained earnings                          |      |  |     
|Accumulated other comprehensive income     |      |  |     
|                                           |      |  |     
|Total shareholders' equity                 |      |  |     
|                                           |      |  |     
|                                           |      | 
|Total liabilities and shareholders' equity |      |  | $   
|                                           |      |  |     

(Continued)

F-26

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 21  CONDENSED
FINANCIAL STATEMENTS (PARENT COMPANY ONLY)

(Continued)

CONDENSED STATEMENTS OF
INCOME

|                                              | 2003 | 2002 | 2001
|--------------------------------------------- | ---- | ---- | ----
|                                              |      |      |     
|Income                                        |      |      |     
|Interest income                               |      |      | $   
|Dividends from subsidiaries                   |      |      |     
|                                              |      |      |     
|Total income                                  |      |      |     
|                                              |      |      |     
|                                              |      |     
|Expense                                       |      |     
|Interest expense                              |      |      |     
|Other expense                                 |      |      |     
|                                              |      |      |     
|Total expense                                 |      |      |     
|                                              |      |     
|Income (loss) before income tax and equity in |      |     
|undistributed net income of subsidiaries      |      |      |     
|                                              |      |     
|Equity in undistributed net income            |      |     
|of subsidiaries                               |      |      |     
|                                              |      |      |     
|                                              |      |     
|Income before income tax                      |      |      |     
|                                              |      |     
|Federal income tax expense (benefit)          |      |      |     
|                                              |      |      |     
|                                              |      |     
|Net income                                    |      |      | $   
|                                              |      |      |     

(Continued)

F-27

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 21  CONDENSED
FINANCIAL STATEMENTS (PARENT COMPANY ONLY)

(Continued)

CONDENSED STATEMENTS OF
CASH FLOWS

|                                                 | 2003 | 2002 | 2001
|------------------------------------------------ | ---- | ---- | ----
|                                                 |      |      |     
|Cash flows from operating activities             |      |      |     
|Net income                                       |      |      | $   
|Adjustments to reconcile net income to net cash  |      |     
|provided by (used in) operating activities:      |      |     
|Equity in undistributed earnings of subsidiaries |      |      |     
|(Increase) decrease in other assets              |      |      |     
|Increase (decrease) in other liabilities         |      |      |     
|                                                 |      |      |     
|Net cash from operating activities               |      |      |     
|                                                 |      |     
|Cash flows from investing activities             |      |     
|Loan originations and payments                   |      |      |     
|Investment in subsidiaries                       |      |      |     
|                                                 |      |      |     
|Net cash from investing activities               |      |      |     
|                                                 |      |     
|Cash flows from financing activities             |      |     
|Other borrowings                                 |      |      |     
|Proceeds from issuance of long-term debt         |      |      |     
|Proceeds from issuance of common stock           |      |      |     
|Fractional shares purchased                      |      |      |     
|Shares repurchased                               |      |      |     
|Cash dividends paid                              |      |      |     
|                                                 |      |      |     
|Net cash from financing activities               |      |      |     
|                                                 |      |     
|Net change in cash and cash equivalents          |      |      |     
|                                                 |      |     
|Cash and cash equivalents at beginning of year   |      |      |     
|                                                 |      |      |     
|                                                 |      |     
|Cash and cash equivalents at end of year         |      |      | $   
|                                                 |      |      |     

(Continued)

F-28

---



MACATAWA BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002

---

# NOTE 22  QUARTERLY
FINANCIAL DATA

|               | Interest | Net Interest | Net | Earnings Per Share
|-------------- | -------- | ------------ | --- | ------------------
|
|
|2003           |          |              |     |                   
|First quarter  |          |              | $   | 15,408            
|Second quarter |          |              |     | 15,885            
|Third quarter  |          |              |     | 16,373            
|Fourth quarter |          |              |     | 16,768            
|               |          |             
|2002           |          |              |     |                   
|First quarter  |          |              | $   | 10,522            
|Second quarter |          |              |     | 15,000            
|Third quarter  |          |              |     | 15,810            
|Fourth quarter |          |              |     | 15,918            

F-29

---



# Quarterly Stock Price
Information

The Companys common stock is
quoted on the Nasdaq National Market under the symbol MCBC. High and low sales prices (as
reported on the Nasdaq National Market) for each quarter for the years ended December 31,
2003 and 2002, are set forth in the table below. This information has been restated for
the 5% stock dividend paid in May 2003 and the 4% stock dividend paid in May 2002.

|               | 2003 | 2002
|-------------- | ---- | ----
|
|
|
|First Quarter  |      |     
|Second Quarter |      |     
|Third Quarter  |      |     
|Fourth Quarter |      |     

On February 25, 2004 there were
approximately 814 owners of record and, in addition, approximately 5,367 beneficial owners
of the Companys common stock.

Quarterly cash dividends totaling
$.26 were paid during 2001, and a 3% stock dividend was declared during the second quarter
of 2001. Quarterly cash dividends totaling $.32 were paid during 2002, and a 4% stock
dividend was declared during the second quarter of 2002. Quarterly cash dividends totaling
$.42 were paid during 2003, and a 5% stock dividend was declared during the second quarter
of 2003.

|Shareholder Information
Administrative Offices                          
10753 Macatawa Drive                            
Holland, MI 49424                               
616-820-1444                                    
Annual Meeting                                  
Amway Grand Plaza Hotel
Grand Rapids, MI 49503                          
Date: April 21, 2004                            
Time: 10:00 a.m.
Investor Relations and Form 10-K                
Questions regarding corporate earnings releases,
Financial information, and other investor       
data should be addressed to:                    
Macatawa Bank                                   
10753 Macatawa Drive                            
Holland, MI 49424                               
616-820-1435                                    
Forms 10-K, 10-Q and others can be accessed     
 through our Website at www.macatawabank.com | Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
1.800.368.5948
E-mail Info@RTCo.com
Internet www.RTCO.com
General Counsel
Varnum, Riddering, Schmidt & Howlett LLP
Independent Auditor
Crowe Chizek and Company LLC
Online Information For the
most current News releases
and Macatawa Bank
Corporation financial
reports and product
information, visit our
Website at www.macatawabank.com
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



# Exhibit 21 
Subsidiaries of Registrant

Macatawa Bank  100% owned 
     Incorporated as a Michigan Banking Corporation 
     10753 Macatawa Drive
     Holland, Michigan 49424
     Macatawa Investment Services, Inc.  100% owned 
     Incorporated as a Michigan corporation
     10753 Macatawa Drive
     Holland, Michigan 49424
     Macatawa Statutory Trust I  100% owned 
     Statutory Trust under the laws of the State of Connecticut 
     10753 Macatawa Drive
     Holland, Michigan 49424 
     Macatawa Bank Mortgage Company 
     100% owned by Macatawa Bank 
     Incorporated as a Michigan corporation
     10753  Macatawa Drive 
     Holland, Michigan 49424



---



# EXHIBIT 23

# INDEPENDENT
AUDITORS CONSENT

We consent to the incorporation by
reference in the registration statements on Form S-8 (File No. 333-53593, File No.
333-53595, File No. 333-94207, File No. 333-85288, File No. 333-88572 and File No.
333-88574) of our report dated January 23, 2004, on our audit of the Macatawa Bank
Corporation consolidated financial statements as of December 31, 2003 and 2002, and for
the years ended December 31, 2003, 2002 and 2001, which report is included in this Annual
Report on Form 10-K.

| | /s/Crowe
Chizek and Company LLC Crowe Chizek and Company LLC
| | ------------------------------------------------------------

Grand Rapids, MichiganMarch
9, 2004



---



# EXHIBIT 31.1

# Certification Pursuant
to Section 302 of
the Sarbanes-Oxley Act of
2002

I,
Benj. A Smith, III, certify that:

| | 1. | I have reviewed this annual report on Form 10-K of Macatawa Bank Corporation;
| | -- | -----------------------------------------------------------------------------

| | 2. | Based on my knowledge, this annual report does not contain any untrue statement
               of material fact or omit to state a material fact necessary to make the
               statements made, in light of the circumstances under which such statements were
               made, not misleading with respect to the period covered by this report;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Based on my knowledge, the financial statements, and other financial information
               included in this annual report, fairly present in all material respects the
               financial condition, results of operations and cash flows of the registrant as
               of, and for, the periods presented in this annual report;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | The registrants other certifying officers and I are responsible for
               establishing and maintaining disclosure controls and procedures (as defined in
               Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and we have:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed to ensure that material information
               relating to the registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during the period in
               which this annual report is being prepared;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter that has materially affected, or is reasonably liked to
               materially affect, the registrants internal control over financial
               reporting.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The registrants other certifying officers and I have disclosed, based on
               our most recent evaluation of internal control over financial reporting, to the
               registrants auditors and the audit committee of registrants board of
               directors (or persons performing the equivalent functions):
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | 
|-------------------- | 
|Date: March 10, 2004 | 



---



# EXHIBIT 31.2

# Certification Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jon W. Swets, certify that:

| | 1. | I have reviewed this annual report on Form 10-K of Macatawa Bank Corporation;
| | -- | -----------------------------------------------------------------------------

| | 2. | Based on my knowledge, this annual report does not contain any untrue statement
               of material fact or omit to state a material fact necessary to make the
               statements made, in light of the circumstances under which such statements were
               made, not misleading with respect to the period covered by this report;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Based on my knowledge, the financial statements, and other financial information
               included in this annual report, fairly present in all material respects the
               financial condition, results of operations and cash flows of the registrant as
               of, and for, the periods presented in this annual report.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | The registrants other certifying officers and I are responsible for
               establishing and maintaining disclosure controls and procedures (as defined in
               Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this annual report is being prepared;
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter that has materially affected, or is reasonably liked to
               materially affect, the registrants internal control over financial
               reporting.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The registrants other certifying officers and I have disclosed, based on
               our most recent evaluation of internal control over financial reporting, to the
               registrants auditors and the audit committee of registrants board of
               directors (or persons performing the equivalent functions):
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | 
|-------------------- | 
|Date: March 10, 2004 | 



---



# EXHIBIT 32-1

Benj.    
          A. Smith III, Chief Executive Officer of Macatawa Bank Corporation, and Jon W.
          Swets, Senior Vice President and Chief Financial Officer of Macatawa Bank
          Corporation, each certify, pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

| | (1)       
               the Annual Report on Form 10-K for the year ended December 31, 2003 which this
               statement accompanies fully complies with the requirements of Section 13(a) or
               15(d) of the Securities Exchange Act of 1934, and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2)       
               the information contained in the Annual Report on Form 10-K for the year ended
               December 31, 2003 fairly presents, in all material respects, the financial
               condition and results of operations of Macatawa Bank Corporation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      | 
|--------------------- | 
|Dated: March 10, 2004 | 



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