MACATAWA BANK CORPORATION

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

CHARTER

I.     PURPOSE

The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial reports and other financial information provided by the Corporation to any governmental body or the public; the Corporationís systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; and the Corporationís auditing, accounting and financial reporting processes generally. Consistent with this function, the Audit Committee should encourage continuous improvement of, and should foster adherence to, the corporationís policies, procedures and practices at all levels. The Audit Committeeís primary duties and responsibilities are to:

ē

 Serve as an independent and objective party to monitor the Corporationís financial reporting process and internal control system.



ē

 Review and appraise the audit efforts of the Corporationís independent accountants and internal audit function.



ē

 Provide an open avenue of communication among the independent accountants, financial and senior management, the internal audit function, and the Board of Directors.

The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.

II.     COMPOSITION

The Audit Committee shall be comprised of three or more directors of the Corporation or its subsidiaries as determined by the Board, each of whom shall be independent directors, and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. Independent directors shall be those who are not currently, nor in the last three years have been employed by the Corporation or its subsidiaries; receive no remuneration other than normal director fees; they shall have no immediate family members in Senior Management positions at the Corporation or its subsidiaries; and they or any company they control shall not receive more than 5% of their sales volume from business done with the Corporation or its subsidiaries. Each member of the Committee shall meet all applicable independence, financial literacy and other requirements of NASDAQ. If possible, at least one member of the Committee shall meet the applicable Securities and Exchange Commission definition of ďfinancial expertĒ or if no members satisfy such definition, the Committee shall promptly so inform the Board of Directors. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or an outside consultant.

The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

III.     MEETINGS

The Committee shall meet at least two times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee should meet at least annually with management, the internal audit coordinator and the independent accountants in separate sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. In addition, the Committee or at least its Chair should meet with the independent accountants and management quarterly to review the Corporations financials consistent with IV.4. below).

IV.     RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Audit Committee shall:

Documents/Reports Review

1.     Review and update this Charter periodically, at least annually, as conditions dictate.

2.     Review the organizationís annual financial statements, including any certification, report, opinion, or review rendered by the independent accountants.

3.     Review the regular internal reports to management prepared by the internal audit function and managementís response.

4.     Review with financial management and the independent accountants the 10-Q prior to its filing. The Chair of the Committee may represent the entire Committee for purposes of this review.

5.     Review and approve all transactions between the Company and parties who are related to the Company to the extent required under applicable laws and rules of NASDAQ.

Independent Accountants

6.     Recommend to the Board of Directors the appointment, retention, termination and oversight of the work of the independent auditor employed by the Company to perform audit services, considering independence and effectiveness. The Committee may consider input, if the Committee so desires, from the Companyís management. The independent auditors are ultimately accountable to the Committee.

7.     Approve the independent auditorís fee arrangements and other terms of service, and to preapprove any permitted non-audit services to be provided by the independent auditor. On an annual basis, the Committee should review and discuss with the accountants all significant relationships the accountants have with the Corporation to determine the accountantsí independence.

8.     Review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant.

9.     Periodically consult with the independent accountants out of the presence of management about internal controls and the fullness and accuracy of the organizationís financial statements.

Financial Reporting Processes

10.     In consultation with the independent accountants and the internal audit function, review the integrity of the organizationís financial reporting processes, both internal and external.

11.     Consider the independent accountantís judgments about the quality and appropriateness of the Corporationís accounting principles as applied in its financial reporting.

12.     Consider and approve, if appropriate, major changes to the Corporationís auditing and accounting principles and practices as suggested by the independent accountants, management, or the internal audit function.

Process Improvement

13.     Following completion of the annual audit, review separately with management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

14.     Review any significant disagreement among management and the independent accountants or the internal audit function in connection with the preparation of the financial statements.

15.     Review with the independent accountants, the internal audit function and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate point of time subsequent to implementation of changes or improvements, as decided by the Committee.)

Ethical and Legal Compliance

16.     Establish, review and update periodically the Senior Officer Code of Ethics and the Companyís Code of Ethical Conduct and ensure that management has established a system to enforce these Codes.

17.     Review managementís monitoring of the Companyís compliance with the organizationís Ethical Codes, and ensure that management has the proper review system to ensure that Corporationís financial statements, reports and other financial information disseminated to governmental organizations, and the public satisfy legal requirements.

18.     Oversee the monitoring of the Companyís compliance with the organizationís policy for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, misuse or inappropriate use of corporate assets or auditing matters or potential violations of law and for (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters or potential violations of law. The Companyís Problem Resolution Policy has been attached to this proxy as Appendix B.

19.     Review activities, organizational structure, and qualifications of the internal audit department/provider.

20.     Review with the organizationís counsel, any legal matter that could have a significant impact on the organizationís financial statement.

The foregoing list of duties is not exhaustive, and the Committee may, in addition, perform such other functions as may be necessary or appropriate for the performance of its oversight function consistent with this Charter, the Companyís By-laws and governing law. The Committee shall have the power to delegate its authority and duties to subcommittees or individual members of the Committee as it deems appropriate. In discharging its oversight role, the Committee shall have full access to all Company books, records, facilities and personnel. The Committee shall provide for appropriate funding as determined by the Committee, for the payment of any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company and to any other advisors employed by the Committee. In addition, the Company shall provide appropriate funding for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.