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 12, 2010

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 12, 2010, Southern Michigan Bancorp, Inc. mailed to its shareholders the letter furnished with this report as Exhibit 99.1, which is here incorporated by reference. This Report and the Exhibit are furnished to, and not filed with, the Commission.

Forward-Looking Statements

          The letter contains 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 "continues", "believe", "momentum", "project", "likely", "will", "until", "trend", "position", "future", "until" and variations of such words and similar expressions. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to the future effects of expense control initiatives, future costs associated with our business, future economic disruptions, future growth and other expansion opportunities, and the effects of newly enacted laws. All statements with references to future time periods are forward-looking. Management's determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including goodwill, mortgage servicing rights and deferred tax assets) and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involves judgments that are inherently forward-looking. All of the information concerning interest rate sensitivity is forward-looking. Management's assumptions regarding pension and other post retirement plans involve judgments that are inherently forward-looking. Our ability to successfully implement new programs and initiatives, increase efficiencies, and improve profitability is not entirely within our control and is not assured. The future effect of changes in the real estate, financial and credit markets and the national and regional economy on the banking industr y, 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. Actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. We undertake no obligation to update or revise our forward-looking statements to reflect developments that occur or information obtained after the date of this report.

          Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009 and in "Part II, Item 1A - Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010. 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 mailed November 12, 2010.

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 12, 2010	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 mailed November 12, 2010.

EX-99.1

EXHIBIT 99.1

To Our Shareholders:

I am pleased to announce that Southern Michigan Bancorp, Inc. continued its momentum by earning net income of $870,000, or $0.38 per fully diluted common share, during the third quarter of 2010. This represents a thirteen percent increase over last year's third quarter net income of $771,000. Through the first nine months of 2010, net income totaled $2.375 million, or $1.03 per share, representing a ninety percent increase over net income of $1.251 million for the same period last year. Through the nine months ended September 30, 2010, Southern's return on average assets rose to 0.67 percent and return on average equity totaled 6.76%.

Southern's total deposits grew by $21 million to $402 million through the first nine months of 2010. Over the same period, the loan portfolio declined by $13 million to $320 million. The migration in our balance sheet to lower yielding, temporary investments resulted in further reduction of our net interest margin to 4.02 percent. Despite historically low interest rates and weak loan demand affecting most banks, Southern's net interest margin continues to rank highly among its Michigan community bank peers.

Asset quality, as measured by non-accrual loans, continued to show improvement. For the twelve month period ended September 30, 2010, non-accrual commercial loans declined twenty percent from $5.61 million to $4.47 million, non-accrual mortgage loans declined from $2.45 million to $2.28 million, or seven percent, and total non-performing assets declined from $9.67 million to $7.93 million, or eighteen percent. Our provision for loan losses for the third quarter of 2010 totaled $425,000, nearly matching our charge-offs of $423,251 for the quarter. Our allowance for loan losses at September 30, 2010 amounted to $5.7 million, or 1.79% of loans.

The current economic environment has required us to sharpen our focus on ways to improve operating efficiencies. Our management team's expense control initiatives resulted in a reduction of non interest expenses for the third quarter of 2010 totaling $133,000 compared with the third quarter of 2009. Through the first nine months of 2010 compared with the same period last year, non-interest expenses were reduced by $507,000, or four percent. We continue to carefully evaluate how to effectively and efficiently meet our customers' banking needs. Use of electronic banking delivery alternatives continues to become more popular, as internet banking continues to expand. Recently, we announced the closure of our North Adams branch, which will become effective December 3, 2010. We believe this action, although difficult, will enable us to cushion the impact of additional regulatory compliance costs and other operating expenses projected to increase through the remainder of this year and into 2011.

Throughout these challenging economic times, there have been many changes occurring within the banking industry. New banking laws, improper mortgage foreclosures, and small business stimulus programs, among others, have been major topics of discussion in the media. Several observations are worth noting:

Ø	The recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act will likely drive up the cost of doing business for all banks, including Southern, while making traditional banking services more costly for both borrowers and deposit customers;
Ø	Mortgage foreclosure problems appear to be confined to large, nationally-based mortgage providers; we have not identified any improperly documented mortgage foreclosures; and
Ø	Southern continues to actively pursue credit-worthy borrowers and make new loans every day. Stronger loan demand, despite the federal government's best efforts, is unlikely to emerge until job creation and business expansion trends reverse themselves.

Our cautious and prudent approach to managing the bank has enabled Southern to remain categorized as "well-capitalized" and we believe sufficiently strong to withstand future economic disruptions. As of September 30, 2010, total shareholders' equity amounted to $47.75 million. Our Tier 1 Leverage Ratio of 8.5 percent and Total Risk-Based Capital Ratio of 13.07 percent enabled Southern to exceed regulatory minimums for "well-capitalized" financial institutions. In addition, we believe Southern's management team and directors have positioned the bank to take advantage of growth and other expansion opportunities that may be presented to us in the future as a result of the current economic cycle.

Your continued support is appreciated.

Sincerely,

/s/ John H. Castle

John H. Castle
Chairman & Chief Executive Officer