# FORM 10-K SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549

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

For the fiscal year
ended December 31, 2005

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.  _________________

Indicate  by  check  mark
if the  registrant  is a  well-known  seasoned  issuer,  as  defined  in Rule  405 of the
Securities Act. Yes [   ]      No [X]

Indicate by check mark if
the  registrant  is not required to file reports  pursuant to Section 13 or Section 15(d)
of the Exchange Act.  Yes [   ]         No [X]

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.  Yes [X] 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 a large accelerated filer, an accelerated file, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. Large accelerated filer [   ] Accelerated filer [X] Non-accelerated
filer [   ]

1

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Indicate by check mark
whether the  registrant is a shell  company (as defined in Rule 12b-2 of the Exchange
 Act). Yes [   ]  No [X]

As of June 30, 2005, the aggregate
market value of the registrants common stock held by non-affiliates of the
registrant was $345,652,547 based on the closing sale price of $34.69 as reported on the
National Association of Securities Dealers Automated Quotation System. As of March 3,
2006, there were 10,271,465 outstanding 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 20, 2006 are incorporated by reference into Part II and Part
III of the Report.

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., Macatawa Statutory Trust I and Macatawa Statutory
Trust II. 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-three branch offices and a lending and
operational service facility offering commercial and personal banking services, including
checking and savings accounts (including certificates of deposit), cash management, 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. Other
service delivery channels we offer include ATMs, internet banking, telephone banking and
debit cards. 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
Statutory Trust II is a grantor trust that issued a pooled trust preferred security in
March, 2004. 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, 2005, we had total assets of $1.87 billion, total deposits of $1.51
billion, approximately 87,000 deposit accounts and shareholders equity of $141.7
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.

2

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# 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
savings 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
short-term borrowings, advances from Federal Home Loan Banks, certificates of deposit
purchased from brokers and the packaging of loans for securitization and sale.

Deposits
are gathered primarily from the communities we serve through our network of 23 branches.
We offer business and consumer checking accounts, regular and money market savings
accounts, and certificates of deposit having many options in their terms.

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 19% of total deposits at December 31, 2005 and
approximately 11% at December 31, 2004. We operate in a very competitive environment,
competing with other local banks similar in size and 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
|-------------------------- | --------------------
|                           |                     
|                           |                     
|                           |                     
|                           |                     
|                           |                     
|Noninterest bearing demand |                     
|Interest bearing demand    |                     
|Savings                    |                     
|Time                       |                     
|                           |                     
|Total deposits             |                     
|                           |                     

The
following table summarizes time deposits in amounts of $100,000 or more by time remaining
until maturity as of December 31, 2005:

|(Dollars in thousands) |  |  |  |  | 
|---------------------- |  |  |  |  | 

|                               | Amount
|------------------------------ | ------
|                               |       
|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.

|Year Ended December 31       
|-----------------------------
|                             
|                             
|                             
|                             
|                             
|Commercial real estate       
|Residential real estate      
|Other commercial             
|Consumer                     
|                             
|Total loans                  
|                             
|                             
|Less:                        
|                             
|Allowance for loan losses    
|                             
|Total  loans  receivable, net
|                             

4

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

|December 31                                        
|---------------------------------------------------
|                                                   
|(Dollars in thousands)                             
|                                                   
|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.

|December 31                                 
|--------------------------------------------
|                                            
|(Dollars in thousands)                      
|                                            
|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                     

5

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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.

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

Maturities
and Sensitivities of Loans to Changes in Interest Rates.The following
table shows the amount of total loans outstanding as of December 31, 2005 which, based on
remaining scheduled repayments of principal, are due in the periods indicated.

|Maturing                   
|---------------------------
|                           
|                           
|                           
|Commercial real estate     
|Residential real estate    
|Other commercial           
|Consumer                   
|                           
|Totals                     
|                           
|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, 2005.

|Fixed Rate                            | Variable Rate | Total
|------------------------------------- | ------------- | -----
|                                      |               |      
|Due within 3 months                   |               |      
|Due after 3 months, but within 1 year |               |      
|Due after one but within 5 years      |               |      
|Due after 5 years                     |               |      
|                                      |               |      
|Total                                 |               |      
|                                      |               |      
|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 that equal or exceed 90% at origination, 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 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 generally 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 90% of the appraised value of the property or 90% 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 prior to maturity due to changes in interest rates,
          prepayment risks, and availability of alternative investments, or 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
          the maximization of earnings, liquidity and to help decrease our overall
          exposure to changes in interest rates. The following table reflects the
          composition of our securities portfolio as of the dates indicated.

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

Excluding
our investment portfolio holdings 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 investment security maturities and their weighted average yield by
category at December 31, 2005.

|Due WithinOne Year      | One toFive Years | Five toTen Years | AfterTen Years | Investments with  No Contractual Maturity
|----------------------- | ---------------- | ---------------- | -------------- | -----------------------------------------
|                        |                  |                  |                |                                          
|                        |                  |                  |                |                                          
|                        |                  |                  |                |                                          
|U.S. Treasury and U.S.  |                  |                  |                |                                          
|Government Agencies     |                  |                  | $              | 2,059                                    
|Tax-exempt state and    |                  |                 
|municipal bonds (1)     |                  |                  |                | 715                                      
|                        |                  |                 
|Other equity securities |                  |                  |                | --                                       
|                        |                  |                  |                |                                          
|Total (1)               |                  |                  | $              | 2,774                                    
|                        |                  |                  |                |                                          
|                        |                  |                  |                |                                          

(1)    
          Yields on tax-exempt securities are computed on a fully taxable-equivalent
          basis.

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,
2005, the Trust Department had assets of approximately $915.2 million. Our types of
service include both personal trust and retirement plan services.

Our
personal trust services include financial planning, investment management services, trust
and estate administration and custodial services. As of December 31, 2005, our personal
trust assets totaled approximately $795.5 million.

Our
retirement plan services provide all types of qualified retirement plans including profit
sharing, 401(k)s and pension plans. As of December 31, 2005, our retirement plan assets
totaled approximately $119.7 million.

9

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# 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 is 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, health
services, pharmaceutical, transportation, equipment, food and construction supplies.
Companies operating in the market area include Steelcase, Herman Miller, Alticor, Gentex,
Spectrum Health, 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
generally below state levels but above national levels.

# Competition

Our
primary market area includes Ottawa County, Kent County and northern Allegan 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.

# 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, 2005, we had 323 full-time and 125 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.

10

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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.

11

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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 items, 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. The Sarbanes-Oxley Act of 2002
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.

12

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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.

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.

13

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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:

|                               | TotalRisk-BasedCapital Ratio | Tier 1Risk-BasedCapital 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, 2005, 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.

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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.

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.

# ITEM 1A: Risk Factors

You
should carefully consider the following risk factors, together with the other information
provided in this Annual Report on Form 10-K.

# Changes in economic
conditions or interest rates may negatively affect our earnings, capital and liquidity.

The
results of operations for financial institutions, including our bank, may be materially
and adversely affected by changes in prevailing local and national economic conditions,
including declines in real estate market values, rapid increases or decreases in interest
rates and changes in the monetary and fiscal policies of the federal government. Our
profitability is heavily influenced by the spread between the interest rates we earn on
investments and loans and the interest rates we pay on deposits and other interest-bearing
liabilities. Substantially all our loans are to businesses and individuals in western
Michigan and any decline in the economy of this area could adversely affect us. Like most
banking institutions, our net interest spread and margin will be affected by general
economic conditions and other factors that influence market interest rates and our ability
to respond to changes in such rates. At any given time, our assets and liabilities may be
such that they are affected differently by a given change in interest rates.

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# Our credit losses
could increase and our allowance for loan losses may not be adequate to cover actual loan losses.

The
risk of nonpayment of loans is inherent in all lending activities and nonpayment, if it
occurs, may have a material adverse affect on our earnings and overall financial condition
as well as the value of our common stock. We make various assumptions and judgments about
the collectibility of our loan portfolio and provide an allowance for potential losses
based on a number of factors. If our assumptions are wrong, our allowance for loan and
lease losses may not be sufficient to cover our losses, thereby having an adverse affect
on our operating results, and may cause us to increase the allowance in the future. The
actual amount of future provisions for loan losses cannot now be determined and may exceed
the amounts of past provisions. Additionally, federal banking regulators, as an integral
part of their supervisory function, periodically review our allowance for credit losses.
These regulatory agencies may require us to increase our provision for credit losses or to
recognize further loan or lease charge-offs based upon their judgments, which may be
different from ours. Any increase in the allowance for credit losses could have a negative
effect on our net income, financial condition and results of operations.

# Our business is
subject to various lending risks depending on the nature of the borrowers business,
its cashflow and our collateral.

Repayment
of our commercial loans is often dependent on cash flow of the borrower, which may be
unpredictable, and collateral securing these loans may fluctuate in value.Our
commercial loans are primarily made based on the cash flow of the borrower and secondarily
on the underlying collateral provided by the borrower. Most often, this collateral is
accounts receivable, inventory, equipment or real estate. In the case of loans secured by
accounts receivable, the availability of funds for the repayment of these loans may be
substantially dependent on the ability of the borrower to collect amounts due from its
customers. Other collateral securing loans may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business.

Our
commercial real estate loans involve higher principal amounts than other loans, and
repayment of these loans may be dependent on factors outside our control or the control of
our borrowers. Commercial real estate lending typically involves higher loan principal
amounts, and the repayment of these loans generally is dependent, in large part, on
sufficient income from the properties securing the loans to cover operating expenses and
debt service. Because payments on loans secured by commercial real estate often depend
upon the successful operating and management of the properties, repayment of such loans
may be affected by factors outside the borrowers control, such as adverse conditions
in the real estate market or the economy or changes in government regulation. If the cash
flow from the project is reduced, the borrowers ability to repay the loan and the
value of the security for the loan may be impaired.

Our
construction loans are based upon estimates of costs to construct and value associated
with the completed project.These estimates may be inaccurate. Because of the
uncertainties inherent in estimating construction costs, as well as the market value of
the completed project, it is relatively difficult to evaluate accurately the total funds
required to complete a project and the related loan-to-value ratio. As a result,
construction loans often involve the disbursement of substantial funds with repayment
dependent, in part, on the success of the ultimate project and the ability of the borrower
to sell or lease the property, rather than the ability of the borrower or guarantor to
repay principal and interest. Delays in completing the project may arise from labor
problems, material shortages and other unpredictable contingencies. If the estimate of the
cash of construction is inaccurate, we may be required to advance additional funds to
complete construction. If our appraisal of the value of the completed project proves to be
overstated, we may have inadequate security for the repayment of the loan upon completion
of the project.

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Our
consumer loans generally have a higher risk of default than our other loans. Consumer
loans entail greater risk than our other loans, particularly in the case of consumer loans
that are unsecured or secured by rapidly depreciating assets. 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 damage, loss or depreciation. The
remaining deficiency often does not warrant further substantial collection efforts against
the borrower beyond obtaining a deficiency judgment. In addition, consumer loan
collections are dependent on the borrowers continuing financial stability, and thus,
are more likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy, all of which increase when the economy is weak. Furthermore, the application
of various Federal and state laws, including Federal and state bankruptcy and insolvency
laws, may limit the amount that can be recovered on such loans.

# Litigation involving
Trade Partners may have a material adverse effect on our financial condition.

Item
3 of this Form 10-K includes information about the Trade Partners, Inc. receivership and
pending legal actions involving Trade Partners, Inc., the Macatawa Bank Corporation and
Macatawa Bank. If one or more of these legal actions is determined adversely to the
Macatawa Bank Corporation and Macatawa Bank, or if one or more of these legal actions
results in Macatawa Bank Corporation or Macatawa Bank paying a substantial settlement,
then such adverse determination or settlement may have a material adverse effect on our
financial condition.

# We may experience
difficulties in managing our growth.

To
sustain our continued growth, we require additional capital to fund our expanding lending
activities. As part of our strategy for continued growth, we intend to open additional
branches. New branches often experience a period of unprofitability due to the impact of
overhead expenses and the start-up phase of generating loans and deposits. To the extent
that we continue to open additional branches, we may experience the effects of higher
operating expenses relative to operating income from the new operations, which may have an
adverse affect on our levels of net income, return on average equity and return on average
assets.

In
addition, we may acquire banks and related businesses that we believe provide a strategic
fit with our business. To the extent that we grow through acquisitions, we cannot assure
you that we will be able to adequately or profitably manage such growth. Acquiring other
banks and businesses involves risks commonly associated with acquisitions.

# We rely heavily on
our management and other key personnel, and the loss of any of them may adversely effect
our operations.

We
are and will continue to be dependent upon the services of our management team, including
our Chairman and Chief Executive Officer, the President and Chief Executive Officer of
Macatawa Bank, and our other senior managers and commercial lenders. Losing one or more
key members of the management team could adversely affect our operations. We do not
maintain key man life insurance on any of our officers or directors.

# Our future success is
dependent on our ability to compete effectively in the highly competitive banking
industry.

We
face substantial competition in all phases of our operations from a variety of different
competitors. Our future growth and success will depend on our ability to compete
effectively in this highly competitive environment. We compete for deposits, loans and
other financial services with numerous Michigan-based and out-of-state banks, thrifts,
credit unions and other financial institutions as well as other entities which provide
financial services. Some of the financial institutions and financial services
organizations with which we compete are not subject to the same degree of regulation as we
are. Most of our competitors have been in business for many years, have established
customer bases, are larger, and have substantially higher lending limits than we do. The
primary competitors in our market area include Fifth Third Bancorp, Huntington Bancshares,
LaSalle Bank, and National City Corp. The financial services industry is also likely to
become more competitive as further technological advances enable more companies to provide
financial services. These technological advances may diminish the importance of depository
institutions and other financial intermediaries in the transfer of funds between parties.

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# We are subject to
significant government regulation, and any regulatory changes may adversely affect us.

The
banking industry is heavily regulated under both federal and state law. These regulations
are primarily intended to protect customers, not our creditors or shareholders. As a bank
holding company, we are also subject to extensive regulation by the Federal Reserve, in
addition to other regulatory and self-regulatory organizations. Our ability to establish
new facilities or make acquisitions is conditioned upon the receipt of the required
regulatory approvals from these organizations. Regulations affecting banks and financial
services companies undergo continuous change, and we cannot predict the ultimate effect of
such changes, which could have a material adverse effect on our profitability or financial
condition.

# We continually
encounter technological change, and we may have fewer resources than our competitors to
continueto invest in technological improvements.

The
banking industry is undergoing rapid technological changes with frequent introductions of
new technology-driven products and services. In addition to better serving customers, the
effective use of technology increases efficiency and enables financial institutions to
reduce costs. Our future success will depend, in part, on our ability to address the needs
of our customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in our
operations. Many of our competitors have substantially greater resources to invest in
technological improvements. There can be no assurance that we will be able to effectively
implement new technology-driven products and services or be successful in marketing such
products and services to our customers.

# Our articles of
incorporation and by-laws and Michigan laws contain certain provisions that could make a
takeovermore difficult.

Our
articles of incorporation and by-laws, and the laws of Michigan, include provisions which
are designed to provide our board of directors with time to consider whether a hostile
takeover offer is in our best interest and the best interests of our shareholders. These
provisions, however, could discourage potential acquisition proposals and could delay or
prevent a change in control. The provisions also could diminish the opportunities for a
holder of our common stock to participate in tender offers, including tender offers at a
price above the then-current price for our common stock. These provisions could also
prevent transactions in which our shareholders might otherwise receive a premium for their
shares over then current market prices, and may limit the ability of our shareholders to
approve transactions that they may deem to be in their best interests.

The
Michigan Business Corporation Act contains provisions intended to protect shareholders and
prohibit or discourage certain types of hostile takeover activities. In addition to these
provisions and the provisions of our articles of incorporation and by-laws, Federal law
requires the Federal Reserve Boards approval prior to acquisition of
control of a bank holding company. All of these provisions may have the effect
of delaying or preventing a change in control at the company level without action by our
shareholders, and therefore, could adversely affect the price of our common stock.

# Our ability to pay
dividends is limited by law and contract.

We
are a holding company and substantially all of our assets are held by our bank. Our
ability to continue to make dividend payments to our shareholders will depend primarily on
available cash resources at the holding company and dividends from our bank. Dividend
payments or extensions of credit from our bank are subject to regulatory limitations,
generally based on capital levels and current and retained earnings, imposed by regulatory
agencies with authority over our bank. The ability of our bank to pay dividends is also
subject to its profitability, financial condition, capital expenditures and other cash
flow requirements. We also are prohibited from paying dividends on our common stock if the
required payments on our subordinated debentures have not been made. We cannot assure you
that our bank will be able to pay dividends to us in the future.

18

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# The market price for
our common stock fluctuates.

The market price for our common stock
has fluctuated, ranging between $26.48 and $40.00 for 2005. The overall market and the
price of our common stock may continue to fluctuate. There may be a significant impact on
the market price for our common stock due to, among other things:

| |  | Variations
in our anticipated or actual operating results or the results of our competitors;
| | - | --------------------------------------------------------------------------------------------

| |  | Changes
in investors' or analysts' perceptions of the risks and conditions of our business;
| | - | -------------------------------------------------------------------------------------------

| |  | The
size of the public float of our common stock;
| | - | -------------------------------------------------

| |  | Regulatory
developments;
| | - | ------------------------

| |  | Market
conditions; and
| | - | ----------------------

| |  | General
economic conditions.
| | - | ----------------------------

Additionally, the average daily
trading volume for our common stock as reported on the Nasdaq National Market was 22,404
shares during 2005, with daily volume ranging from a low of 4,200 shares to a high of
98,000 shares. There can be no assurance that a more active or consistent trading market
in our common stock will develop. As a result, relatively small trades could have a
significant impact on the price of our common stock.

19

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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
deposit operations.

Our
facilities as of February 24, 2006, were as follows:

| | Location of Facility                  
10753 Macatawa Drive, Holland                
815 E. Main Street, Zeeland                  
125 Ottawa Avenue N.W., Grand Rapids*        
126 Ottawa Avenue N.W., Grand Rapids*        
124 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        
15135 Whittaker Way, Grand Haven             
12415 Riley Street, Holland                  
2750 Walker N.W., Walker                     
1575 - 68th Street S.W., Grand Rapids        
2820 - 10 Mile Road, Rockford                
*   Leased facility | UseMain Branch, Administrative, and Loan Processing
Offices
Branch Office
Trust and Mortgage Offices
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office
Branch Office and Loan Center
Branch Office
Branch Office and Loan Center
Branch Office and Loan Center
Branch Office
Branch Office
Branch Office
Branch Office
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

20

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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.
The trial court had entered an order in February 2005 staying this case, but the stay
order was reversed on appeal in May 2005. A trial date of May 1, 2006 has been set.

In May 2003, a purported class action
complaint was filed by Forrest W. Jenkins and Russell S. Vail against the Company 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 had stayed this action to avoid
interference with the process of the receivership proceedings, but the stay was lifted in
July 2005. 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.

In late July 2005 counsel to the
Trade Partners Receiver filed another purported class action on behalf of Kelly Priest and
certain trusts controlled by Gary Towle and his wife, making substantially the same
allegations as in the Jenkins complaint but on behalf of a class which is asserted to
comprise all investors who are holders of allowed claims in the Trade Partners
receivership, described below. 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 these 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
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 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. As of
January 15, 2006, the Receiver reported that he had received since the inception of the
receivership cash payments for death benefit claims aggregating about $28.3 million. He
reported at the same time that all premium payments were current. As of January 15, 2006
the receiver reported cash on hand of approximately $10.2 million. As additional
viaticated policies mature, death benefits from those policies could provide a source of
funding for continued premium payments, though the receivers ability to so use such
benefits may be limited or eliminated by the terms of the sale of the portfolio to
Universal Settlements International, Inc., described below.

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 agreed to extend a $4
million line of credit to the receiver, conditioned upon obtaining a security interest in
the viaticals. No draws were made against the line, and the line expired during the fourth
quarter of 2004.

21

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The receiver in June 2004 proposed a
plan of distribution of the assets of Trade Partners. No hearing has yet been set on the
plan. The receiver in July 2005 received authorization from the Court to sell the entire
portfolio with a face value of approximately $170 million to Universal Settlements
International, Inc., a Canadian company, for an amount equal to 26.58% of face value or
approximately $43 million. Under the terms of the sale, payments are to be made by
Universal Settlements to the receivership as policy transfers are processed by the issuing
insurance companies. The receiver has reported that as of January 15, 2006 payments
aggregating approximately $8.2 million had been received on policies transferred pursuant
to the sale agreement. The receiver had previously indicated that, depending on the
outcome of the motion to sell the portfolio, he might propose a new plan of distribution,
but to date no such plan has been proposed. The receiver reported as of January 15, 2006
that claims against the receivership estate totaling $143,089,859.75 have been allowed,
and reported total active claims of $185,095,837.42.

The Company has no information on 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. The Company has reported the Trade Partners matter to its two insurance carriers.
One carrier has assumed the Companys defense and has advanced a portion of its
defense costs pursuant to a reservation of rights letter asserting certain coverage
defenses, and an Interim Funding Agreement. The other carrier has taken the position that
the duty of defense rests solely with the first carrier, and reserves its rights with
respect to indemnity pursuant to a reservation letter asserting certain coverage defenses.

As of 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 2005 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 |                                                           |                                 |               
|                    | and Chief Executive Officer of Macatawa Bank Corporation. |                                 |               
|                    |                                                           |                                
|Philip J. Koning    |                                                           |                                 |               
|                    |                                                           |                                
|Ronald L. Haan      |                                                           |                                 |               
|                    |                                                           |                                
|Jon W. Swets        |                                                           |                                 |               
|                    |                                                           |                                
|Ray D. Tooker       |                                                           |                                 |               

22

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# PART II

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

Our
common stock is quoted on the Nasdaq National Market. 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.

|               | 2005 | 2004
|-------------- | ---- | ----
|               |      |     
|               |      |     
|               |      |     
|First Quarter  |      |     
|               |      |     
|Second Quarter |      |     
|               |      |     
|Third Quarter  |      |     
|               |      |     
|Fourth Quarter |      |     

On
February 23, 2006, there were approximately 785 owners of record and, in addition,
approximately 7,116 beneficial owners of our common stock.

The
Company declared its first cash dividend, amounting to $.05 per share, during the fourth
quarter of 2000. Quarterly cash dividends totaling $.22 were paid during 2001, and a 3%
stock dividend was declared during the second quarter of 2001. Quarterly cash dividends
totaling $.27 were paid during 2002, and a 4% stock dividend was declared during the
second quarter of 2002. Quarterly cash dividends totaling $.35 were paid during 2003, and
a 5% stock dividend was declared during the second quarter of 2003. Quarterly cash
dividends totaling $.43 were paid during 2004, and a 5% stock dividend was declared during
the second quarter of 2004. Quarterly cash dividends totaling $.61 were paid during 2005,
and a 15% stock dividend was declared during the second quarter of 2005. 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 further stock dividends. We expect to obtain the funds for the payment of future
cash dividends from cash currently held and 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, 2005, is incorporated
by reference and is filed as part of Exhibit 13 to this form 10-K Annual Report.

23

---



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

The
information set forth under the caption Managements Discussion and Analysis of
Results of Operations and Financial Condition, in our Annual Report to Shareholders
for the year ended December 31, 2005, 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 Results of Operations and Financial Condition  Sensitivity to Market Risk
in our Annual Report to Shareholders for the year ended December 31, 2005, 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 Registered Public Accounting Firm on Financial
Statements, Consolidated Balance Sheets, Consolidated Statements
of Income, Consolidated Statements of Changes in Shareholders
Equity, Consolidated Statements of Cash Flows, and Notes to
Consolidated Financial Statements in our Annual Report to Shareholders for the year
ended December 31, 2005, 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) | Managements
Report on Internal Control over Financial Reporting.
| | --- | -----------------------------------------------------------------

The
management of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting. The Companys internal control system was
designed to provide reasonable assurance to the Companys management and board of
directors regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation.

Company
management assessed the effectiveness of the Companys internal control over
financial reporting as of December 31, 2005. In making this assessment, it used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based on our assessment we believe that,
as of December 31, 2005, the Companys internal control over financial reporting is
effective based on those criteria.

Managements
assessment of the effectiveness of internal control over financial reporting as of
December 31, 2005, has been audited by Crowe Chizek and Company LLC, an independent
registered certified public accounting firm, as stated in their report included in Exhibit
13 to this Annual Report on Form 10-K which is incorporated herein by reference.

24

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| | (c) | Changes
in Internal Controls.
| | --- | -----------------------------

There
were no significant changes in the Companys internal controls over financial
reporting during the fourth quarter ended December 31, 2005, that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.

# ITEM 9B: Other
Information.

| | None.
| | -----

# PART III

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

The
information set forth on pages 3-4, under the caption Information About
Directors and on page 19 under the caption Section 16(a) Beneficial Ownership
Reporting Compliance in our definitive Proxy Statement dated March 6, 2006,
relating to our 2006 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 Compensation of Directors and Executive Compensation, in
our definitive Proxy Statement dated March 6, 2006, relating to our 2006 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 10 under the caption Security Ownership of Management in our
definitive Proxy Statement dated March 6, 2006, relating to our 2006 Annual Meeting of
Shareholders and the information within that section is incorporated by reference.

The
Equity Compensation Plan Information table on page 11 in our definitive Proxy Statement
dated March 6, 2006, relating to our 2006 Annual Meeting of Shareholders is incorporated
by reference.

25

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# ITEM 13: Certain
Relationships and Related Transactions.

Information
relating to certain relationships and related transactions is contained on page 17, under
the caption Transactions Involving Management in our definitive Proxy
Statement dated March 6, 2006, relating to our 2006 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 20, under the
caption Principal Accounting Firm Fees in our definitive Proxy Statement dated
March 6, 2005, relating to our 2006 Annual Meeting of Shareholders and the information
within that section is incorporated by reference.

26

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# PART IV

# ITEM 15:   Exhibits,
Financial Statement Schedules.

|(a) | Financial
Statements.
|--- | ---------------------

| | 1. | The
following documents are filed as part of Item 8 of this report:
| | -- | -------------------------------------------------------------------

| | Report
of Independent Registered Public Accounting Firm on Financial Statements Consolidated
Balance Sheets as of December 31, 2005 and 2004 Consolidated Statements of Income for the
years ended December 31, 2005, 2004 and 2003 Consolidated Statements of Changes in
Shareholders Equity for the years ended December 31, 2005, 2004 and 2003
Consolidated
Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

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# 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 February 24, 2006.

| |  | MACATAWA BANK CORPORATION/s/ Benj. A. Smith, III
Benj. A. Smith, IIIChairman and Chief Executive Officer(Principal Executive Officer)/s/ Jon W. Swets
Jon W. SwetsSenior Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below on February 24, 2006 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 | February 24, 2006
|--------------------------------------------------------------------------------------- | -----------------

|/s/ G. Thomas Boylan
G. Thomas Boylan, Director | February 24, 2006
|------------------------------------------------------------- | -----------------

|/s/ Robert E. DenHerder
Robert E. DenHerder, Director | February 24, 2006
|------------------------------------------------------------------- | -----------------

|/s/ John F. Koetje
John F. Koetje, Director | February 24, 2006
|--------------------------------------------------------- | -----------------

|/s/ Philip J. Koning
Philip J. Koning, Director and President | February 24, 2006
|--------------------------------------------------------------------------- | -----------------

|/s/ Arend D. Lubbers
Arend D. Lubbers, Director | February 24, 2006
|------------------------------------------------------------- | -----------------

28

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EXHIBIT INDEX

# Exhibit Number and
Description

|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 August 25, 2004,
incorporated by reference to Exhibit 10.1 to the Macatawa Bank Corporation Report on Form
8-K dated August 26, 2004.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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, incorporated by reference to Exhibit 10.5 to
the Macatawa Bank Corporation Annual Report on Form 10-K for the year ended December 31,
2003.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Form
of Stock Option Agreement, incorporated by reference to Exhibit 10.6 to the Macatawa Bank
Corporation Annual Report on Form 10-K for the year ended December 31, 2004.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

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|13 | Annual
Report to Shareholders for the year ended December 31, 2005. 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.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|23 | Consent
 of  Crowe  Chizek  and  Company  LLC,  independent  registered  public
                  accounting firm
|-- | -----------------------------------------------------------------------------------------------------------------

|24 | Power
of  Attorney  (included  on the  signature  page on page 28 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.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30

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