Southern Michigan Bancorp, Inc. (OTCBB: SOMC.OB) announced second quarter net income of $803,000, or $0.35 per diluted share, for the three months ended June 30, 2010. This compares to net income of $751,000, or $0.33 per diluted share, for the three months ended June 30, 2009. Southern’s net income for the six months ended June 30, 2010, was $1,505,000, or $0.65 per diluted share, compared to net income of $480,000, or $0.21 per diluted share, for the same six month period a year ago.

Southern provided $150,000 for loan losses during the second quarter of 2010 compared to a $500,000 provision for the second quarter of 2009. The decrease in the provision for loan losses resulted because many of the charged off loans had specific reserves previously assigned and from reduced charge offs. Net charge offs totaled $367,000 during the second quarter of 2010 compared to $766,000 in the second quarter of 2009. For the six month period ended June 30, 2010, net charge offs totaled $699,000 compared to $2,430,000 for the same six month period in 2009.

Southern’s allowance for loan losses totaled $5.7 million, or 1.77% of total loans, at June 30, 2010 compared to $6.1 million, or 1.82% of total loans, at December 31, 2009. Non-performing loans totaled $8,379,000, or 2.59% of gross loans, at June 30, 2010 compared to $7,599,000, or 2.28% of gross loans, at December 31, 2009, an increase of $780,000. Measurable progress has been achieved with numerous non-performing loan customers and the increase was primarily due to additional loans that are past due 90 days, but are currently fully secured and in the process of collection.

Southern’s net interest margin decreased slightly from 4.11% for the six month period ended June 30, 2009 to 4.02% for the same period of 2010. Reduced net interest income resulted from lower earning asset balances and rates which were partially offset by lower deposit rates.

John Castle, Chairman and CEO, stated, “The Federal Reserve has maintained an extremely low interest rate environment in an attempt to encourage economic activity. However, without employment growth, business conditions will in all likelihood remain subdued and interest rates will remain low well into 2011. Loan demand is weak as businesses are uncertain of the future. In addition, near term pressure on earnings from recent financial reform legislation will challenge the financial industry going forward,” Castle continued, “While we have more work to do in order to achieve the level of earnings we have historically delivered, we are pleased with our second quarter results and the progress we are making. A number of cost saving initiatives have been started that, when completed, should result in increased profitability in 2011.”

The annualized return on average assets for the six month periods ended June 30, 2010 and 2009 was 0.64% and 0.21%, respectively. The annualized return on average equity was 6.48% for the first six months of 2010 compared to 2.13% for the same period of 2009.

Southern Michigan Bancorp, Inc. is a bank holding company headquartered in Coldwater, Michigan with 18 branches within Branch, Calhoun, Cass, Hillsdale and St. Joseph Counties which provide a broad range of consumer, business and wealth management services throughout the region.