<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended June 30, 1999    Commission file number 2-78178
                      -------------                           -------

                         Southern Michigan Bancorp, Inc.
             (Exact name of registrant as specified in its charter)

         Michigan                                            38-2407501
         --------                                            ----------
(State or other jurisdiction of                  (I.R.S. Employer Identification
  incorporation or organization)                  Number)


51 West Pearl Street, Coldwater, Michigan                   49036
-----------------------------------------                   -----
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code -- (517) 279-5500
                                                       -------------
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

Common Stock, $2.50 Par Value - 1,845,461 shares at July 31, 1999 (including
shares held by ESOP)



<PAGE>   2


CONDENSED CONSOLIDATED BALANCE SHEETS

SOUTHERN MICHIGAN BANCORP, INC  AND SUBSIDIARY

<TABLE>
<CAPTION>


                                                                                        June 30         December 31
                                                                                         1999               1998
                                                                                       ----------------------------
                                                                                             (Unaudited) (A)
                                                                                              (In thousands)

<S>                                                                                  <C>                <C>
     ASSETS
     Cash and due from banks                                                           $   9,625          $  16,228
     Federal funds sold                                                                                       4,000
     Investment securities available-for-sale                                             33,239             36,138
     Investment securities held to maturity (market value of $20,338 in 1999
           and $28,793 in 1998)                                                           19,786             31,756
     Loans, net                                                                          180,865            161,277
     Premises and equipment                                                                6,879              7,036
     Other assets                                                                         10,936             10,416
                                                                                       ----------------------------
                                    TOTAL ASSETS                                       $ 261,330          $ 266,851
                                                                                       ============================

LIABILITIES AND SHAREHOLDERS' EQUITY
     Deposits:
          Non-interest bearing                                                         $  33,158          $  34,751
          Interest bearing                                                               186,645            198,610
                                                                                       ----------------------------
                                                                                         219,803            233,361
     Federal funds purchased                                                               8,000
     Accounts payable and other liabilities                                                2,824              2,528
    Other long-term borrowings                                                             5,000              5,000
                                                                                       ----------------------------
                                 TOTAL LIABILITIES                                       235,627            240,889
    Common stock subject to repurchase obligation in ESOP                                  3,232              6,029
     Shareholders' equity:
          Preferred stock, 100,000 shares authorized
          Common stock, $2.50 par value:
                 Authorized--4,000,000 shares
                 Issued--1,847,961 shares (1998-1,872,677)
                 Outstanding--1,742,441 shares (1998-1,721,950)                            4,356              4,305
          Capital surplus                                                                  5,777              3,863
          Retained earnings                                                               12,570             11,505
          Net unrealized appreciation (depreciation) on available-for-sale
                securities net of tax of $123 (1998--$95)                                   (232)               260
                                                                                       ----------------------------
                                 TOTAL SHAREHOLDERS' EQUITY                               22,471             19,933
                                                                                       ----------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                             $ 261,330          $ 266,851
                                                                                       ============================

</TABLE>

(A)  The balance sheet at December 31, 1998 has been derived from the audited
     consolidated financial statements at that date.

See notes to condensed consolidated financial statements.

                                      -2-


<PAGE>   3


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>

                                                                            Three Months Ended                 Six Months Ended
                                                                                June 30                            June 30
                                                                            1999         1998                 1999          1998
                                                                    ----------------------------------------------------------------
                                                                                    (In thousands, except per share amounts)

<S>                                                                        <C>            <C>            <C>             <C>
Interest income:
     Loans, including fees                                                   $ 3,961         $ 3,964        $ 7,726         $ 7,805
     Investment securities:
         Taxable                                                                 557             537          1,190           1,074
         Tax exempt                                                              287             254            623             497
     Other                                                                        16              83             41             119
                                                                    ----------------------------------------------------------------
                  Total interest income                                        4,821           4,838          9,580           9,495
Interest expense:
     Deposits                                                                  1,875           1,862          3,794           3,682
     Other                                                                       140              78            258             163
                                                                    ----------------------------------------------------------------
                  Total interest expense                                       2,015           1,940          4,052           3,845
                                                                    ----------------------------------------------------------------
                                 NET INTEREST INCOME                           2,806           2,898          5,528           5,650
Provision for loan losses                                                        186             150            336             300
                                                                    ----------------------------------------------------------------
                  NET INTEREST INCOME AFTER
                  PROVISION FOR LOAN LOSSES                                    2,620           2,748          5,192           5,350
Non-interest income:
     Service charges on deposit accounts                                         263             247            508             461
     Trust department                                                            225             126            340             245
     Secondary market gains                                                      233             306            375             528
     Earnings on life insurance policies                                          62              46            101              84
     Other                                                                       135             139            258             208
                                                                    ----------------------------------------------------------------
                                                                                 918             864          1,582           1,526
                                                                    ----------------------------------------------------------------
                                                                               3,538           3,612          6,774           6,876
Non-interest expenses:
     Salaries and benefits                                                     1,079           1,129          2,165           2,265
     Occupancy                                                                   194             173            407             354
     Equipment                                                                   241             188            467             375
     Other                                                                       763             793          1,482           1,528
                                                                    ----------------------------------------------------------------
                                                                               2,277           2,283          4,521           4,522
                                                                    ----------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                                     1,261           1,329          2,253           2,354
Federal income taxes                                                             292             338            503             606
                                                                    ----------------------------------------------------------------
NET INCOME                                                                       969             991          1,750           1,748
Other comprehensive income, net of tax:
    Change in unrealized gains on securities                                    (299)              8           (492)             (8)
                                                                    ----------------------------------------------------------------
COMPREHENSIVE INCOME                                                         $   670         $   999        $ 1,258         $ 1,740
                                                                    ================================================================

Basic and Diluted Earnings Per Share                                         $  0.52         $  0.52        $  0.94         $  0.91
                                                                    ================================================================
Dividends Declared Per Share                                                 $  0.19         $  0.15        $  0.37         $  0.30
                                                                    ================================================================
</TABLE>


See notes to condensed consolidated financial statements.

                                      -3-

<PAGE>   4




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)

SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>

                                                                                          Six Months Ended
                                                                                               June 30
                                                                                        1999               1998
                                                                                   --------------------------------
                                                                                               (In thousands)

<S>                                                                                 <C>                 <C>
OPERATING ACTIVITIES

     Net income                                                                        $  1,750            $  1,748
     Adjustments to reconcile net income to net
           cash provided by operating activities:
                  Provision for loan losses                                                 336                 300
                  Provision for depreciation                                                323                 235
                  Increase  in other assets                                                (263)               (432)
                  Increases (decrease) in accounts payable
                  and other liabilities                                                     338                (156)
                                                                                   --------------------------------
                  Net cash provided by operating activities                               2,484               1,695


INVESTING ACTIVITIES

     Proceeds from maturity of investment securities                                     23,183               6,971
     Purchases of investment securities                                                  (9,063)            (16,685)
     Decrease in federal funds sold                                                       4,000               1,000
     Net increase in loans                                                              (19,924)             (3,347)
     Net increase in premises and equipment                                                (166)               (834)
                                                                                   --------------------------------
                  Net cash used in investing activities                                  (1,970)            (12,895)


FINANCING ACTIVITIES

     Net increase (decrease) in deposits                                                (13,558)             12,336
     Increase in federal funds purchased                                                  8,000                   0
     Increase in other borrowings                                                             0               2,000
     Common stock issued                                                                      0                 251
     Common stock repurchased and retired                                                  (832)             (2,299)
     Cash dividends                                                                        (727)               (671)
                                                                                   --------------------------------
                  Net cash provided by (used in) financing activities                    (7,117)             11,617
                                                                                   --------------------------------
Increase (decrease) in cash and cash equivalents                                         (6,603)                417
Cash and cash equivalents at beginning of period                                         16,228              16,848
                                                                                   --------------------------------

                  CASH AND CASH EQUIVALENTS AT END OF PERIOD                           $  9,625            $ 17,265
                                                                                   ================================
</TABLE>


See notes to condensed consolidated financial statements.

                                       -4-






<PAGE>   5


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARY

June 30, 1999



NOTE A -- BASIS OF PRESENTATION

The accompanying year-end balance sheet data was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1998.

Basic earnings per common share is net income divided by the weighted average
number of common shares outstanding during the period. ESOP shares are
considered outstanding for this calculation unless unearned. Diluted earnings
per common share includes the dilutive effect of additional potential common
shares issuable under stock options. Earnings and dividends per share are
restated for all stock splits and dividends through the date of issue of the
financial statements. The weighted average common shares outstanding for the six
months ended June 30, 1999 and 1998 were 1,859,862 and 1,914,410, respectively.


                                      -5-



<PAGE>   6




ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

FINANCIAL CONDITION

Total deposits have declined by 5.8% during the first six months of 1999. This
decline is due to schools and other governmental entities using funds on deposit
until their revenues are received.

Net loans have increased by 12.1% in the first six months of 1999. The loan
growth has occurred in the commercial and real estate mortgage portfolios. The
commercial growth is due to borrowers' seasonal demands and continued economic
growth. The real estate mortgage increase is the result of additional
construction loans and the offering of a competitive in-house fixed rate
product. There were no loans held for sale as of June 30, 1999.

Investment securities decreased by 21.9% during the first six months of 1999.
Funds received from maturing securities were used to support the increase in
loans.

There were no significant fixed asset commitments as of June 30, 1999.

CAPITAL RESOURCES

The Federal Reserve Board (FRB) has adopted risk-based capital guidelines
applicable to the Company. These guidelines require that bank holding companies
maintain capital commensurate with both on and off balance sheet credit risks of
their operations. Under the guidelines, a bank holding company must have a
minimum ratio of total capital to risk-weighted assets of 8.0 percent. In
addition, a bank holding company must maintain a minimum ratio of Tier 1 capital
equal to 4.0 percent of risk-weighted assets. Tier 1 capital includes common
shareholders' equity, qualifying perpetual preferred stock and minority interest
in equity accounts of consolidated subsidiaries less goodwill.

As a supplement to the risk-based capital requirements, the FRB has also adopted
leverage capital ratio requirements. The leverage ratio requirements establish a
minimum ratio of Tier 1 capital to total assets less goodwill of 3 percent for
the most highly rated bank holding companies. All other bank holding companies
are required to maintain additional Tier 1 capital yielding a leverage ratio of
4 percent to 5 percent, depending on the particular circumstances and risk
profile of the institution. The following table summarizes the Company's capital
ratios as of June 30, 1999:

                  Tier 1 risk-based capital ratio             12.30%
                  Total risk-based capital ratio              13.35
                  Leverage ratio                               9.45

                                      -6-

<PAGE>   7

The above table indicates that the Company's capital ratios are above the
regulatory minimum requirements.

The Company repurchased and retired 9,169 shares of outstanding common stock
during the second quarter of 1999.

RESULTS OF OPERATIONS

Net Interest Income


Net interest income decreased by $92,000 and $122,000 for the three and six
month periods ended June 30, 1999 compared to the same periods in 1998. This
decrease is due to competitive pressures to lower loan rates and increase
deposit rates, as well as the need for more expensive funding due to the decline
in deposits.

Provision for Loan Losses


The provision for loan losses is based on an analysis of outstanding loans. In
assessing the adequacy of the allowance, management reviews the characteristics
of the loan portfolio in order to determine the overall quality and risk
profile. Some factors considered by management in determining the level at which
the allowance is maintained include a continuing evaluation of those loans
identified as being subject to possible problems in collection, results of
examinations by regulatory agencies, current economic conditions and historical
loan loss experience.

The provision for loan losses increased by $36,000 the three and six month
periods ended June 30,1999 compared to the same periods in 1998. This increase
occurred to provide for loan growth and increased charge-offs and delinquencies,
primarily as a result of increased customer bankruptcies. A large commercial
borrower discontinued business operations during the second quarter of 1999. As
a result, approximately $170,000 in loans to this borrower were charged-off
during the second quarter. Management is liquidating the collateral and has
placed approximately $819,000 in loans to the borrower on nonaccrual. The
provision for loan losses will continue to be recorded at a higher level than in
1998 to provide for additional potential losses from this borrower and the
significant loan growth experienced to date in 1999. The allowance for loan
losses is being maintained at a level, which in management's opinion, is
adequate to absorb possible loan losses in the loan portfolio as of June 30,
1999.

Non-interest Income


Non-interest income, which includes service charges on deposit accounts, trust
fee income, security gains and losses and other miscellaneous charges and fees,
increased by $54,000 and $56,000 for the three and six month periods ended June
30, 1999 compared to the same periods in 1998. This increase is due primarily to


                                      -7-

<PAGE>   8

increased service charges on deposit accounts and an increase in collected trust
fees. These increases were partially offset by a decline in gains recognized on
the sale of real estate mortgage loans to the secondary market.

Non-interest Expense


Non-interest expenses have remained fairly consistent in the first six months of
1999 compared to the same period in 1998. Salaries and benefits and marketing
expenditures have declined from 1998 levels and offset increases in occupancy
and equipment costs. The Company has also seen a decline in income taxes as its
nontaxable income has increased.

Year 2000


The Company has developed a plan to assess Year 2000 issues. The concern is
whether or not computers, elevators, telephone systems and other electronic
items will recognize the Year 2000 as a valid date. For banks, this is a concern
not only for the bank's operations, but for those of their customers and
vendors. As part of the Year 2000 plan, the Company has identified all critical
business processes and established a priority schedule for assessment of each
process.

The Company has completed the testing of critical hardware systems (mainframe
computer and personal computers) and critical software (mainframe operating
software, trust systems, Microsoft operating systems and systems providing
connectivity of network hardware). As part of its Year 2000 plan, the Company
has initiated formal communications with its critical service providers to
determine the extent to which the Company is vulnerable to any failure of those
third parties to remedy their own Year 2000 issues. Critical service providers
include phone companies and energy providers. There can be no assurance that the
systems of other companies on which the Company's systems rely will be remedied
in a timely manner or that there will be no adverse effect on the Company's
systems. Therefore, the Company could be negatively impacted to the extent that
other entities not affiliated with the Company are unsuccessful in properly
addressing Year 2000 issues.

A key step in the Company's Year 2000 plan is the development of a Remediation
Contingency Plan to mitigate risks associated with a failure to successfully
complete renovation, validation and implementation of the Company's Year 2000
plan. As a part of the Remediation Contingency Plan, the Company has provided
for alternate software vendors for those that are not Year 2000 compliant. The
Remediation Contingency Plan also provides for alternate service providers for
those that are not Year 2000 compliant as of June 30, 1999. The Company also has
in place an expanded Business Resumption Plan. This Plan is an addition to the
Company's current Business Resumption Plan and specifically addresses Year 2000
issues and the interruption of the Company's business operations by such things
as a power outage. The Business Resumption Plan includes the identification of
the Company's

                                      -8-

<PAGE>   9

core business processes and a specific recovery plan for the possible failure of
each core business process. A sustained power outage or similar disruption will
have an adverse effect on the Company's operations; however, management is not
aware of any facts which would indicate that such disruptions are likely.

The Company has identified all significant customers whose own Year 2000
compliance status may pose a risk to the Company and determined the actions
these customers are taking to avoid significant disruptions that could result
from the Year 2000 date change.

The Company's Board of Directors reviews the status of the Year 2000 issues on a
monthly basis. The Company will continue to incur remediation and testing costs
relating to Year 2000 issues through the Year 2000, but does not anticipate that
any material incremental costs will be incurred in any single period. The costs
of the project and the date on which the Company plans to complete Year 2000
modifications are based upon management's best estimates.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary market risk exposure is interest rate risk and to a lesser
extent liquidity risk. Interest rate risk arises when the maturity or repricing
characteristics of assets differ significantly from the maturity or the
repricing characteristics of liabilities. Accepting this risk can be an
important source of profitability and shareholder value, however, excessive
levels of interest rate risk could pose a significant threat to the Company's
earnings and capital base. Accordingly, effective risk management that maintains
interest rate risk at prudent levels is essential to the Company's safety and
soundness.

The Company measures the impact of changes in interest rates on net interest
income through a comprehensive analysis of the Bank's interest rate sensitive
assets and liabilities. Interest rate sensitivity varies with different types of
interest-earning assets and interest-bearing liabilities. Overnight federal
funds and mutual funds on which rates change daily and loans which are tied to
the prime rate or a comparable index differ considerably from long-term
investment securities and fixed-rate loans. Similarly, certificates of deposit
and money market investment accounts are much more interest sensitive than
passbook savings accounts. The shorter term interest rate sensitivities are key
to measuring the interest sensitivity gap, or excess interest-earning assets
over interest-bearing liabilities. In addition to reviewing the interest
sensitivity gap, the Company also analyzes projected changes in market interest
rates and the resulting effect on net interest income.

Liquidity management involves the ability to meet the cash flow requirements of
customers who may be either depositors wanting withdraw funds or borrowers
needing

                                      -9-

<PAGE>   10

assurance that sufficient funds will be available to meet their credit
needs. Certain portions of the Bank's liabilities may be short-term or due on
demand, while most of its assets may be invested in long-term loans or
investments. Accordingly, the Company seeks to have in place sources of cash to
meet short-term demands. These funds can be obtained by increasing deposits,
borrowing or selling assets. Also, Federal Home Loan Bank advances and
short-term borrowings provide additional sources of liquidity for the Company.

The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates as of June 30, 1999.
The Company had no derivative financial instruments, or trading portfolio, as of
that date. The expected maturity date values for loans receivable were
calculated without adjusting the instrument's contractual maturity date for
expectations of prepayments. Investment securities are reported at the earlier
of maturity date or anticipated call date. Expected maturity date values for
interest-bearing core deposits were not based upon estimates of the period over
which the deposits would be outstanding, but rather the opportunity for
repricing. Similarly, with respect to its variable rate instruments, the Company
believes that repricing dates, as opposed to expected maturity dates, may be
more relevant in analyzing the value of such instruments and are reported as
such in the following table. Company borrowings are also reported based on
conversion or repricing dates.

                                      -10-


<PAGE>   11

<TABLE>
<CAPTION>


                                                                                        Principal Amount Maturing in:
                                                                 -------------------------------------------------------------------
                                                                  06/30/00        06/30/01     06/30/02       06/30/03     06/30/04
                                                                 -------------------------------------------------------------------
<S>                                                            <C>              <C>         <C>           <C>            <C>
Rate sensitive assets:
  Fixed interest rate loans                                       $14,768          $5,206       $10,944       $9,347        $15,648
                  Average interest rate                             9.93%          10.16%        10.00%       10.26%          9.50%
  Variable interest rate loans                                     82,110           8,373         1,715        2,522         15,920
                  Average interest rate                             8.37%           8.89%         9.09%        8.93%          8.36%
  Fixed interest rate securities                                   16,064          13,632         9,870        6,323          2,402
                  Average interest rate                             6.42%           6.12%         5.52%        5.78%          6.09%

Rate sensitive liabilities:
  Interest bearing demand deposits                                $68,850
                  Average interest rate                             3.28%
  Savings deposits                                                 45,889
                  Average interest rate                             3.29%
  Time deposits                                                    56,906           9,403         4,633          964
                  Average interest rate                             4.87%           5.52%         5.37%        5.29%
  Fixed interest rate borrowings                                    8,000                                      5,000
                  Average interest rate                             5.20%                                      5.71%








<CAPTION>
                                                                                                             Fair
                                                                            Principal Amount Maturing in:   Value
                                                                 -------------------------------------------------------------------
                                                                           Thereafter         Total         06/30/99
                                                                 -------------------------------------------------------------------
<S>                                                                        <C>            <C>              <C>
Rate sensitive assets:
  Fixed interest rate loans                                                   $15,185         $71,098         $71,899
                  Average interest rate                                         7.06%           9.48%
  Variable interest rate loans                                                  1,239         111,879         111,879
                  Average interest rate                                         8.17%           8.70%
  Fixed interest rate securities                                                4,734          53,025          53,577
                  Average interest rate                                         5.97%           5.77%

Rate sensitive liabilities:
  Interest bearing demand deposits                                                            $68,850         $68,850
                  Average interest rate                                                         3.28%
  Savings deposits                                                                             45,889          45,889
                  Average interest rate                                                         3.29%
  Time deposits                                                                                71,906          72,176
                  Average interest rate                                                         5.26%
  Fixed interest rate borrowings                                                               13,000          13,000
                  Average interest rate                                                         5.39%


</TABLE>



                                      -11-





<PAGE>   12





PART II - OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of Southern Michigan Bancorp, Inc. was held
on April 19, 1999 at Southern Michigan Bank & Trust. The following items were
approved by the shareholders at the Annual Meeting:

a.  Election of James P. Briskey, Nolan E. Hooker, Jane L. Randall as directors.

b. Ratification of the selection of Crowe, Chizek and Company LLP as Independent
Auditors for 1999.

ITEM 6.  Exhibits and Reports on Form 8-K

a.  Listing of Exhibits:  Financial Data Schedule

b.  Form 8-K was filed in the second quarter of 1999 announcing the Registrant's
    adoption of a Stock Repurchase Program.


                                   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.

                                                 Southern Michigan Bancorp, Inc.
                                                 ------------------------------
                                                     (Registrant)

AUGUST 11, 1999                                  /s/  JAMES T. GROHALSKI
---------------                                  ------------------------------
Date                                             James T. Grohalski,  President
                                                 and Chief Executive Officer
                                                 (Principal Financial and
                                                 Accounting Officer)



                                      -12-
<PAGE>   13



                                 Exhibit Index
<TABLE>
<CAPTION>
<S>                      <C>
Exhibit No.              Description
-----------              -----------
   27                    Financial Data Schedule
</TABLE>