8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  November 25, 2008

SOUTHERN MICHIGAN BANCORP, INC.
(Exact Name of Registrant as
Specified in Charter)

Michigan
(State or Other Jurisdiction
of Incorporation) 000-49722
(Commission
File Number) 38-2407501
(IRS Employer
Identification No.)

51 West Pearl Street
Coldwater, Michigan
(Address of Principal Executive Offices)
49036
(Zip Code)

Registrant's telephone number,
including area code:  (517) 279-5500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

Item 7.01. Regulation FD Disclosure.

          On November 25, 2008, Southern Michigan Bancorp, Inc. mailed its quarterly report to shareholders, which included previously disclosed results of operations and a letter to shareholders from the Chairman of the Board and Chief Executive Officer. The letter is attached to this report as Exhibit 99.1. This Report and the Exhibit are furnished to, and not filed with, the Commission.

Forward-Looking Statements

          This report and the letter to shareholders contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and Southern Michigan Bancorp, Inc. Forward-looking statements are identifiable by words or phrases such as that an event or trend "will" occur, "continue" or is "likely" or that Southern Michigan Bancorp, Inc. or its management "expects", "believes", or are "confident" that a particular result or event will occur, or other words or phrases such as "going forward", "future", or "appears" and variations of such words and similar expressions. Accounting estimates, such as the provision and allowance for loan losses, are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. The future effect of changes in the financial and credit markets and the national and regional economy on the banking industry, generally, and Southern Michigan Bancorp, Inc., specifically, are also inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

          Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of Southern Michigan Bancorp, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2007; the timing and level of asset growth; changes in banking laws and regulations; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances and issues; governmental and regulatory policy changes; opportunities for acquisitions and the effective completion of acquisitions and integration of acquired entities; the possibility that anticipated cost savings and revenue enhancements from acquisitions, restructurings, reorganizations and bank consolidations may not be realized at amounts projected, at all or within expected time frames; the local and global effects of the ongoing war on terrorism and other military actions, including actions in Iraq; and current uncertainties and fluctuations in the financial markets and stocks of fi nancial services providers due to concerns about credit availability and concerns about the Michigan economy in particular. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

Item 9.01.	Financial Statements and Exhibits.
	(d)	Exhibits:
	99.1	Letter to Shareholders.

SIGNATURES

                    Pursuant to the requirements 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.

Date:  November 25, 2008	SOUTHERN MICHIGAN BANCORP, INC.
	By	/s/ Danice L. Chartrand
		Danice L. Chartrand Senior Vice President, Chief Financial Officer, Secretary, and Treasurer

EXHIBIT INDEX

Exhibit Number	Document
99.1	Letter to Shareholders.

EX-99.1

EXHIBIT 99.1

Dear Shareholders:

Recently many shareholders have asked me about news reports pertaining to the turmoil in the financial services industry. In a number of situations, the challenge for all of us has been to separate fact from speculation and then determine how it may affect our personal circumstances.

Let me offer some thoughts on what is occurring in the banking sector and how the current environment may affect Southern Michigan Bancorp, as well as other financial service companies.

• We are all familiar with the plight of Michigan's economy; our state and local economies will improve to the extent the automobile industry successfully completes its realignment. Southern's prudently conservative credit philosophy will enable us to withstand further economic shocks to our service area until a turnaround takes hold;

• The financial services industry is in the early stages of a massive restructuring that is transforming bank regulation, competition, and the manner by which we manage our business; our financial and managerial strengths will allow us to readily adapt to the new banking landscape more effectively than many of our competitors; and

• Southern ranks highly among its peers in terms of capital strength, core earnings, liquidity and overall financial performance; we expect to emerge from this volatile environment in a strong position to take advantage of the many opportunities that are likely to emerge over the next several years.

Although we are not immune to the negative impact of the current economic cycle, Southern earned $1,571,000, or $.69 per diluted share, for the first nine months ended September 30, 2008. Southern's net income for the three months ended September 30, 2008 was $21,000, or $0.01 per diluted share, compared with $1,082,000, or $0.61 per diluted share, for the same three-month period a year ago.

Our third quarter 2008 earnings were largely impacted by an increase in non-performing loans which rose by $1.1 million from the June 30, 2008 period. Total non-performing loans at September 30, 2008 were $10.4 million, or 3.1 percent of total loans. The allowance for loan losses for the period grew to $6.99 million, or 2.07% of total loans, from $5.61 million, or 1.66% of total loans at the prior quarter end. In the third quarter of 2008, provision for loan losses was $1.58 million compared with $800,000 last quarter. On a year-to-date basis, Southern's provision for loan losses totaled $2,730,000 versus $345,000 a year ago. Over half of the 2008 increase in the provision for loan losses relates to a single large commercial credit in the automotive industry.

Finalization of the integration process of back office systems and procedures between the banks occurred this quarter with the completion of the retail and mortgage lending software component. The process of streamlining operations corporate-wide began last December and has required a great deal of time and effort on the part of our staff. Much of the direct expense related to this initiative is non-recurring in nature and we remain confident that the banks will operate more efficiently going forward.

Southern's 4.43% net interest margin for the nine-month period ending September 30, 2008 remained strong when compared to peers and was relatively flat compared with the June 30, 2008 six-month period of 4.41%. Southern's net interest margin declined from the 4.87% reported for the nine month period ending September 30, 2007. The decline is attributable to the declining rate environment as well as the reversal of interest related to loans placed on non-accrual status.

Shareholders' equity as of September 30, 2008 totaled $44.9 million, compared with $44.2 million as of year-end 2007. Our capital ratios at the Company and for both subsidiary banks exceed the "well capitalized" levels under regulatory capital guidelines.

Although the future appears to be more unpredictable than in years past, the Southern management team and directors believe that substantial opportunities for success will emerge from a restructured financial services industry. We will continue to evaluate each one to determine how it may strengthen the Company and enable us to better serve our customers and communities.

Please feel free to contact me or members of Southern's management team or board of directors with your comments, suggestions and ideas. Your continued support is greatly appreciated.

Sincerely,

/s/ John H. Castle

John H. Castle,
Chairman and CEO