FORM 10-QSB
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

                                       OR

            [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM ---- TO ----

                         COMMISSION FILE NUMBER 0-18599

                            BLACKHAWK BANCORP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           WISCONSIN                                          39-1659424
(STATE OR OTHER JURISDICTION OF                           (I. R. S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                           IDENTIFICATION NO.)

                                400 BROAD STREET
                            BELOIT, WISCONSIN  53511
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (608) 364-8911
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                 NOT APPLICABLE

(FORMER NAME,  FORMER ADDRESS  AND FORMER  FISCAL YEAR,  IF CHANGED  SINCE  LAST
REPORT)

Indicate by check mark whether the 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,  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.

                                                    OUTSTANDING AT
          CLASS OF COMMON STOCK                     MAY 12, 2003
          ---------------------                     --------------
          $.01 PAR VALUE                           2,517,131 SHARES

                                          INDEX

                              PART I - FINANCIAL INFORMATION

                                                                       Page
                                                                       ----

ITEM 1.  FINANCIAL STATEMENTS

     Unaudited Consolidated Balance Sheets as of
         March 31, 2003 and December 31, 2002                            4

     Unaudited Consolidated Statements of Income for the
         Three Months Ended March 31, 2003 and 2002                      5

     Unaudited Consolidated Statements of Stockholders'
         Equity for the Three Months Ended March 31, 2003 and 2002       6

     Unaudited Consolidated Statements of Cash Flows for the
         Three Months Ended March 31, 2003 and 2002                    7-8

     Notes to Unaudited Consolidated Financial Statements             9-11


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATION                     12-20


ITEM 3.  CONTROLS AND PROCEDURES                                        20


                          PART II - OTHER INFORMATION


ITEM 1   LEGAL PROCEEDINGS                                              21

ITEM 2   CHANGES IN SECURITIES                                          21

ITEM 3   DEFAULTS UPON SENIOR SECURITIES                                21

ITEM 4   SUBMISSION OF MATTERS TO A VOTE
           OF SECURITY HOLDERS                                          21

ITEM 5   OTHER INFORMATION                                              21

ITEM 6.  A) EXHIBITS                                                    21

         B) REPORTS ON FORM 8-K                                         21

SIGNATURES                                                              22

CERTIFICATIONS                                                       23-24

INDEX TO EXHIBITS                                                       25

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                      UNAUDITED CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                                 MARCH 31,          DECEMBER 31,
                                                                                   2003                 2002
                                                                                ----------           ----------
<S>                                                                                 <C>                 <C>
ASSETS                                                                               (Dollars in thousands)
Cash and due from banks                                                           $ 13,134            $ 12,572
Federal funds sold and securities purchased under agreements to resell               6,000              13,120
Interest-bearing deposits in banks                                                   1,227               8,472
Available-for-sale securities                                                      108,896              83,897
Held to maturity securities, at amortized cost                                      20,712              23,002
Loans, less allowance for loan losses of $2,197 and $2,079
  at March 31, 2003 and December 31, 2002, respectively                            177,478             186,300
Office buildings and equipment, net                                                  6,612               6,770
Intangible assets                                                                    4,489               4,598
Other assets                                                                        16,213              13,646
                                                                                  --------            --------
   Total Assets                                                                   $354,761            $352,377
                                                                                  --------            --------
                                                                                  --------            --------

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
   Noninterest-bearing                                                            $ 35,710            $ 35,274
   Interest-bearing                                                                215,679             227,811
                                                                                  --------            --------
       Total deposits                                                              251,389             263,085
Short-term borrowings                                                               22,997              13,454
Long-term borrowings                                                                43,900              38,900
Company Obligated Mandatorily Redeemable Preferred Securities
  of subsidiary trust holding solely subordinated debentures                         7,000               7,000
Other liabilities                                                                    3,729               4,140
                                                                                  --------            --------
       Total Liabilities                                                           329,015             326,579
                                                                                  --------            --------

STOCKHOLDERS' EQUITY:
Preferred stock
   1,000,000 shares, $.01 par value per share
   authorized, none issued or outstanding                                               --                  --
Common stock
   10,000,000 shares, $.01 par value per share authorized,
   shares issued and outstanding: 2,517,131 at March 31, 2003,
   2,507,065 at December 31, 2002                                                       25                  25
Surplus                                                                              8,763               8,698
Retained earnings                                                                   15,959              15,788
Accumulated other comprehensive income                                                 999               1,287
                                                                                  --------            --------
   Total Stockholders' Equity                                                       25,746              25,798
                                                                                  --------            --------
   Total Liabilities and Stockholders' Equity                                     $354,761            $352,377
                                                                                  --------            --------
                                                                                  --------            --------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                  UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
                                                                        THREE MONTHS ENDED MARCH 31,
                                                                          2003                2002
                                                                          ----                ----
<S>                                                                        <C>                 <C>
INTEREST INCOME:                                                           (Dollars in thousands,
                                                                            except per share data)
   Interest and fees on loans                                             $3,249              $3,908
   Interest and dividends on securities:
       Taxable                                                               927                 691
       Nontaxable                                                            253                 203
   Interest on fed funds sold and securities purchased under
      agreements to resell                                                    41                  33
   Interest on interest-bearing deposits in banks                             10                  27
                                                                          ------              ------
       Total Interest Income                                               4,480               4,862
                                                                          ------              ------
INTEREST EXPENSE:
   Interest on deposits                                                    1,266               1,561
   Interest on short-term borrowings                                          34                  46
   Interest on long-term borrowings                                          505                 564
   Interest on Company Obligated Mandatorily Redeemable
       Preferred Securities                                                   82                  --
                                                                          ------              ------
       Total Interest Expense                                              1,887               2,171
                                                                          ------              ------
   Net Interest Income                                                     2,593               2,691
   Provision for loan losses                                                 222                 139
                                                                          ------              ------
   Net Interest Income After Provision For Loan Losses                     2,371               2,552
                                                                          ------              ------
NONINTEREST INCOME:
   Service charges on deposit accounts                                       337                 349
   Gain on sale of loans                                                     158                  73
   Securities gains, net                                                     329                   4
   Other                                                                     213                 216
                                                                          ------              ------
       Total Noninterest Income                                            1,037                 642
                                                                          ------              ------
NONINTEREST EXPENSES:
   Salaries and employee benefits                                          1,458               1,393
   Occupancy                                                                 189                 188
   Equipment                                                                 230                 220
   Data processing services                                                  196                 199
   Advertising and marketing                                                  63                  72
   Amortization of intangibles                                                79                  76
   Professional fees                                                         185                 179
   Office supplies                                                            63                  56
   Telephone                                                                  75                  72
   Other                                                                     412                 326
                                                                          ------              ------
       Total Noninterest Expenses                                          2,950               2,781
                                                                          ------              ------
Income Before Income Taxes                                                   458                 413
Income Taxes                                                                  60                  96
                                                                          ------              ------
Net Income                                                                $  398              $  317
                                                                          ------              ------
                                                                          ------              ------
Basic Earnings Per Share                                                  $ 0.16              $ 0.13
                                                                          ------              ------
                                                                          ------              ------
Diluted Earnings Per Share                                                $ 0.16              $ 0.13
                                                                          ------              ------
                                                                          ------              ------
Dividends Per Share                                                       $ 0.09              $ 0.09
                                                                          ------              ------
                                                                          ------              ------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

                         BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                         THREE MONTHS ENDED
                                                             MARCH 31,
                                                        2003           2002
                                                      --------       --------
                                                       (Dollars in thousands)
Common Stock:
   Balance at beginning of period                     $    25        $    24
   Stock options exercised                                 --             --
                                                      -------        -------
   Balance at end of period                                25             24
                                                      -------        -------

Surplus:
   Balance at beginning of period                       8,698          7,555
   Stock options exercised                                 65            485
   Sale of treasury stock                                  --             (2)
                                                      -------        -------
   Balance at end of period                             8,763          8,038
                                                      -------        -------

Retained Earnings:
   Balance at beginning of period                      15,788         15,447
   Net income                                             398            317
   Dividends declared on common stock                    (227)          (219)
                                                      -------        -------
   Balance at end of period                            15,959         15,545
                                                      -------        -------

Treasury Stock, at cost:
   Balance at beginning of period                          --            (58)
   Sale of treasury stock                                  --             16
                                                      -------        -------
   Balance at end of period                                --            (42)
                                                      -------        -------

Accumulated other comprehensive income:
   Balance at beginning of period                       1,287            773
   Other comprehensive loss, net of taxes                (288)          (330)
                                                      -------        -------
   Balance at end of period                               999            443
                                                      -------        -------

Total Stockholders' Equity                            $25,746        $24,008
                                                      -------        -------
                                                      -------        -------

            See Notes to Unaudited Consolidated Financial Statements

                         BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                     UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
                                                                                       THREE MONTHS ENDED
                                                                                            MARCH 31,
                                                                                    2003                2002
                                                                                  --------            --------
<S>                                                                                  <C>                 <C>
                                                                                     (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                     $    398            $    317
   Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
   Depreciation and amortization                                                       328                 309
   Provision for loan losses                                                           222                 139
   Gain on sale of loans                                                              (158)                (73)
   FHLB stock dividends                                                                (53)                (30)
   Amortization of premiums on securities, net                                         152                  (5)
   Securities gains, net                                                              (329)                 (4)
   Decrease in accrued interest receivable                                             116                  17
   Decrease in accrued interest payable                                                 (3)               (115)
   Increase in other assets                                                         (2,701)                (20)
   Increase (decrease) in other liabilities                                           (221)                174
                                                                                   -------             -------
  Net cash provided by (used in) operations before
   loan originations and sales                                                      (2,249)                709
   Origination of loans for sale                                                    (6,883)             (5,839)
   Proceeds from sale of loans                                                       8,989               8,309
                                                                                   -------             -------
   Net cash provided by (used in) operating activities                                (143)              3,179
                                                                                   -------             -------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net (increase) decrease in interest-bearing deposits in banks                     7,245                (424)
   Net decrease in federal funds sold and securities
      purchased under agreements to resell                                           7,120              11,642
   Proceeds from sales of available-for-sale securities                             10,884                 507
   Proceeds from maturities and calls of available-for-sale securities               9,032               4,388
   Proceeds from maturities and calls of held-to-maturity securities                 2,274               1,627
   Purchase of available-for-sale securities                                       (45,155)            (17,257)
   Purchase of held-to-maturity securities                                              --              (1,621)
   Net decrease in loans                                                             6,587              10,569
   Proceeds from the sale of office buildings, equipment, and
     other real estate owned                                                           131                  55
   Purchase of office buildings and equipment, net                                     (83)               (120)
                                                                                   -------             -------
   Net cash provided by (used in) investing activities                              (1,965)              9,366
                                                                                   -------             -------
</TABLE>

           See Notes to Unaudited Consolidated Financial Statements.

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (CONTINUED)

<TABLE>
                                                                                      THREE MONTHS ENDED
                                                                                           MARCH 31,
                                                                                    2003               2002
                                                                                  --------           --------
<S>                                                                                 <C>                 <C>
                                                                                    (Dollars in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net decrease in deposits                                                       $(11,696)           $(11,345)
   Dividends paid                                                                     (226)               (213)
   Proceeds from other borrowings                                                    5,000                  --
   Payments on other borrowings                                                         --              (7,011)
   Net increase in short-term borrowings                                             9,543               4,769
   Proceeds from exercise of stock options                                              49                 431
   Sale of treasury stock                                                               --                  14
                                                                                  --------            --------
   Net cash provided by (used in) financing activities                               2,670             (13,355)
                                                                                  --------            --------
   Net increase (decrease) in cash and due from banks                                  562                (810)

CASH AND DUE FROM BANKS:
   Beginning                                                                        12,572              11,746
                                                                                  --------            --------

   Ending                                                                         $ 13,134            $ 10,936
                                                                                  --------            --------
                                                                                  --------            --------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for:
       Interest                                                                   $  1,890            $  2,287
       Income taxes                                                               $     --            $     --

SUPPLEMENTAL SCHEDULES OF NON-CASH INVESTING
   ACTIVITIES:
   Change in accumulated other comprehensive income
     unrealized gains (losses) on available-for-sale securities, net              $   (288)           $   (330)
   Other assets acquired in settlement of loans                                   $     64            $    238
</TABLE>

           See Notes to Unaudited Consolidated Financial Statements.

                         BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                      March 31, 2003

Note 1.   General:

          The unaudited consolidated financial statements include the accounts
          of Blackhawk Bancorp, Inc. and its subsidiaries.  In the opinion of
          management, all adjustments (consisting only of normal recurring
          adjustments) necessary for a fair presentation of the financial
          position, results of operation and cash flows for the interim periods
          have been made.  The results of operations for the three months ended
          March 31, 2003 are not necessarily indicative of the results to be
          expected for the entire fiscal year.

          The unaudited interim financial statements have been prepared in
          conformity with accounting principles generally accepted in the United
          States of America and industry practice.  Certain information in
          footnote disclosure normally included in financial statements prepared
          in accordance with accounting principles generally accepted in the
          United States of America and industry practice has been condensed or
          omitted pursuant to rules and regulations of the Securities and
          Exchange Commission. The more significant policies used by the Company
          in preparing and presenting its financial statements are stated in the
          Corporation's Form 10-KSB. These financial statements should be read
          in conjunction with the consolidated financial statements and notes
          thereto included in the Company's December 31, 2002 audited financial
          statements.

          The preparation of financial statements in conformity with  accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions which affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and liabilities as of the date of the financial statements, as well as
          the reported  amounts  of  income and  expenses  during  the  reported
          periods.  Actual results could differ from those estimates.

          Certain reclassifications  have  been  made  to  the  2002  historical
          financial statements to conform to the 2003 presentation.

          Stock-Based Compensation Plan:  At March 31, 2003, the Company had a
          ------------------------------
          stock-based director, key officer and employee compensation plan.  The
          Company accounts for this plan under the recognition and measurement
          principles of APB Opinion No. 25, Accounting for Stock Issued to
          Employees, and related interpretations.  No stock-based employee
          compensation cost is reflected in income, as all options granted under
          those plans had an exercise price equal to the market value of the
          underlying common stock on the date of grant.  The table on the
          following page illustrates the effect on net income and earnings per
          share if the Company had applied the fair value recognition provisions
          of Financial Accounting Standards Board (FASB) Statement No. 123,
          Accounting for Stock-Based Compensation, to stock-based employee
          compensation.


                                                   Three Months Ended March 31,
         (Dollars in thousands,
          except per share data)
                                                           2003          2002
                                                            ---           ---
         Net income, as reported                         $  398        $  317
         Deduct total stock-based employee compensation
          expense determined under fair value
          based method for all awards, net of
          related tax effects                               (21)          (18)
                                                         ------        ------


         PRO FORMA NET INCOME                            $  377        $  299
                                                         ------        ------
                                                         ------        ------
         Earnings per share:
           Basic:
             As reported                                 $ 0.16        $ 0.13
             Pro forma                                     0.15          0.13

           Diluted:
             As reported                                   0.16          0.13
             Pro forma                                     0.15          0.12


        In determining compensation cost using the fair value method prescribed
        in Statement No. 123, the value of each grant is estimated at the grant
        date with the following weighted-average assumptions used for grants:
        dividend yield of 4 percent; expected price volatility of 25 percent;
        risk-free interest rates of 4 percent; and expected lives of 10 years.

Note 2.   Allowance for Loan Losses

          A summary of transactions in the allowance for loan losses is as
          follows:

                                                         THREE MONTHS ENDED
                                                              MARCH 31,
                                                        (Dollars in thousands)
                                                        2003              2002
                                                        ----              ----
          Balance at beginning of period               $2,079           $2,404
          Provision charged to expense                    222              139
          Loans charged off                               157               51
          Recoveries                                       53               25
                                                       ------           ------
          Balance at end of period                     $2,197           $2,517
                                                       ------           ------
                                                       ------           ------

Note 3.   Earnings Per Share

          Presented below are  the calculations for  basic and diluted  earnings
          per share:


                                                         THREE MONTHS ENDED
                                                              MARCH 31,
                                                           2003        2002
                                                           ----        ----

          Basic:
          Net income available to common stockholders   $  398,000  $  317,000
                                                        ----------  ----------
                                                        ----------  ----------
          Weighted average shares outstanding            2,514,018   2,384,341
                                                        ----------  ----------
                                                        ----------  ----------
          Basic earnings per share                      $     0.16  $     0.13
                                                        ----------  ----------
                                                        ----------  ----------

          Diluted:
          Net income available to common stockholders   $  398,000  $  317,000
                                                        ----------  ----------
                                                        ----------  ----------
          Weighted average shares outstanding            2,514,018   2,384,341
          Effect of dilutive stock options outstanding       4,721       9,796
                                                        ----------  ----------
          Diluted weighted average shares outstanding    2,518,739   2,394,137
                                                        ----------  ----------
                                                        ----------  ----------
          Diluted earnings per share                    $     0.16  $     0.13
                                                        ----------  ----------
                                                        ----------  ----------

Note 4.   Recent Accounting Developments

          The Financial Accounting Standards Board has issued Statement 149,
          "Amendment of Statement 133 on Derivative Instruments and Hedging".
          This Statement amends and clarifies financial accounting and
          reporting for derivative instruments, including certain derivative
          instruments embedded in other contracts, and for hedging activities
          under Statement 133.  The Statement is effective for contracts entered
          into or modified after June 30, 2003 and for hedging relationships
          designated after June 30, 2003. Implementation of the Statement is not
          expected to have a material impact on the company's financial
          statements.

Note 5.   Recent Regulatory Developments

          On July 30, President Bush signed the Sarbanes-Oxley Act of 2002  (the
          "Act").  This  legislation  impacts  corporate  governance  of  public
          companies,  affecting  their  officers  and  directors,  their   audit
          committees, their relationships with  their accountants and the  audit
          function itself. Certain  provisions of  the Act  became effective  on
          July 30,  2002. Other  provisions will  become  effective as  the  SEC
          adopts appropriate rules.

          The  Act  implements  a  broad  range  of  corporate  governance   and
          accounting measures for public  companies designed to promote  honesty
          and transparency  in corporate  America and  better protect  investors
          from corporate  wrongdoing.  The  Act  includes  the  creation  of  an
          independent accounting oversight board to oversee the audit of  public
          companies  and  their   auditors,  provisions  restricting   non-audit
          services performed by independent accountants for public companies and
          additional corporate governance and responsibility provisions.

            ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATION

The purpose of Management's  discussion and analysis  is to provide  relevant
information regarding the Registrant's financial condition and its results of
operations.  The information  included herein should  be read in  conjunction
with the company's  consolidated financial statements  and footnotes  thereto
for the year ended December 31, 2002.

This report contains certain forward-looking statements within the meaning of
the Private Securities  Litigation Reform  Act of  1995 with  respect to  the
financial  condition,  results  of  operations,  plans,  objectives,   future
performance and business of Blackhawk Bancorp,  Inc. Statements that are  not
historical facts, including  statements about beliefs  and expectations,  are
forward-looking statements.  These  statements  are based  upon  beliefs  and
assumptions of Blackhawk's management and on information currently  available
to such management. The use of  the words "believe", "expect",  "anticipate",
"plan", "estimate", "may", "will" or similar expressions are  forward-looking
statements. Forward-looking statements  speak only as  of the  date they  are
made, and Blackhawk undertakes no obligation  to update publicly any of  them
in light of new information or future events.

Contemplated, projected,  forecasted or  estimated results  in such  forward-
looking statements involve certain inherent risks and uncertainties. A number
of factors - many of which are beyond  the ability of the company to  control
or predict  - could  cause actual  results to  differ materially  from  those
described in the forward-looking statements. Factors which could cause such a
variance to occur include,  but are not  limited to: heightened  competition;
adverse state  and  federal  regulation; failure  to  obtain  new  or  retain
existing  customers;  ability  to  attract  and  retain  key  executives  and
personnel; changes  in  interest  rates; unanticipated  changes  in  industry
trends; unanticipated changes in credit  quality and risk factors,  including
general economic  conditions; success  in gaining  regulatory approvals  when
required; changes in the Federal Reserve Board monetary policies;  unexpected
outcomes  of  new  and  existing  litigation   in  which  Blackhawk  or   its
subsidiaries,  officers,  directors   or  employees   is  named   defendants;
technological changes; changes in accounting principles generally accepted in
the United  States;  changes  in  assumptions  or  conditions  affecting  the
application of critical accounting policies; and the inability of third party
vendors to perform critical services for the company or its customers.

The Company does not undertake, and specifically declines any obligation,  to
publicly release  the results  of any  revisions  which may  be made  to  any
forward-looking statements to reflect events or circumstances after the  date
of  such  statements  or  to  reflect   the  occurrence  of  anticipated   or
unanticipated events.

                            RESULTS OF OPERATIONS

The company reported net income of $398,000 for the three months  ended March
31, 2003, an increase of $81,000 or 25.5% from the $317,000 reported  for the
same three month period  in 2002. Diluted earnings  per share were $0.16  for
the three months ended March 31,  2003 compared to $0.13 for the  same period
in 2002 and represents an increase of 23.1% year over year.

NET INTEREST INCOME

Net interest income, which is the sum of interest and certain  fees generated
by earning assets minus interest paid on deposits and other  funding sources,
is the primary source of the company's earnings.  All discussions of interest
income amounts and rates  are on a tax-equivalent  basis, which accounts  for
income earned on loans  and securities that are  not fully subject to  income
taxes as if they were fully subject to income taxes. The following table sets
forth the company's consolidated average balances of assets,  liabilities and
shareholders' equity, interest income and  expense on related items,  and the
company's average rate for the three  month periods ended March 31,  2003 and
2002. The tax-equivalent yield calculations assume a Federal Tax Rate of 34%:

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES

<TABLE>
(yields on a tax-equivalent basis)               Three Months ended March 31, 2003          Three Months ended March 31, 2002
                                                 ---------------------------------          ---------------------------------
                                                Average                      Average       Average                    Average
                                                Balance        Interest       Rate         Balance      Interest        Rate
                                                -------        --------      -------       -------      --------      -------
<S>                                               <C>            <C>           <C>           <C>          <C>           <C>
INTEREST EARNING ASSETS:
  Interest-bearing deposits in banks           $  2,144         $   10        1.89%       $  6,283       $   27         1.74%
  Federal funds sold & securities
    purchased under agreements to
    resell                                        8,543             41        1.95%          8,448           33         1.58%
  Investment securities:
     Taxable investment securities               84,642            927        4.44%         50,381          691         5.56%
     Tax-exempt investment securities            24,978            383        6.22%         19,306          308         6.47%
                                               --------         ------        -----       --------       ------         -----
           Total investment securities          109,620          1,310        4.85%         69,687          999         5.81%
  Loans                                         182,957          3,249        7.20%        203,840        3,909         7.78%
                                               --------         ------        -----       --------       ------         -----

TOTAL EARNING ASSETS                           $303,264         $4,610        6.16%       $288,258       $4,968         6.99%
                                                                ------        -----                      ------         -----
  Allowance for loan losses                     (2,146)                                    (2,519)
  Cash and due from banks                        10,453                                      9,455
  Other assets                                   21,606                                     17,471
                                               --------                                   --------

TOTAL ASSETS                                   $333,177                                   $312,665
                                               --------                                   --------
                                               --------                                   --------

INTEREST BEARING LIABILITIES:
  Interest bearing checking accounts          $  37,974     $       87         .93%      $  31,116   $       84         1.09%
  Savings deposits                               52,577            110         .85%         53,829          164         1.24%
  Time deposits                                 122,800          1,069        3.53%        121,030        1,313         4.40%
                                               --------         ------        -----       --------       ------         -----
      Total interest bearing deposits           213,351          1,266        2.41%        205,975        1,561         3.07%
   Short-term borrowings                         12,448             34        1.11%          9,781           46         1.91%
   Long-term borrowings                          40,844            505        5.01%         42,388          564         5.40%
   Trust Preferred Securities                     7,000             82        4.75%            -0-          -0-          -0-%
                                               --------         ------        -----       --------       ------         -----

TOTAL INTEREST-BEARING LIABILITIES             $273,643         $1,887        2.80%       $258,144       $2,171         3.41%
                                                                ------        -----                      ------         -----

NET INTEREST SPREAD                                                           3.37%                                     3.58%
                                                                              -----                                     -----
                                                                              -----                                     -----



  Noninterest bearing deposits                   31,789                                     28,235
  Other liabilities                               1,878                                      2,259
                                               --------                                   --------
  Total liabilities                             307,310                                    288,638
  Stockholders' equity                           25,867                                     24,027
                                               --------                                   --------

TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                         $333,177                                   $312,665
                                               --------                                   --------
                                               --------                                   --------

NET INTEREST MARGIN                                             $2,723        3.64%                      $2,797         3.94%
                                                                ------        -----                      ------         -----
                                                                ------        -----                      ------         -----
</TABLE>

Net interest income  decreased by  $74,000, or  2.6%, to  $2,723,000 for  the
quarter ended  March 31,  2003, compared  to  $2,797,000 for  the  comparable
period in 2002.  The net  interest margin, which  is the  tax equivalent  net
interest income divided by average interest earning assets was 3.64% for  the
three months ended March 31,  2003 compared to 3.94%  for the same period  in
2002. The 30 basis point decrease in net interest margin is primarily due  to
shifts in the Company's earning asset mix and the impact of the sustained low
interest rate environment.

For the three months  ended March 31, 2003,  total interest income decreased  by
$358,000, or 7.2%, to $4,610,000 compared  to $4,968,000 for the same period  in
2002.  The yield on  average earning assets decreased  83 basis points to  6.16%
for the first quarter of 2003,  compared to 6.99% for  the same period in  2002.
The decreases in interest income and the  yield on earning assets is the  result
the shift in the Bank's earning  assets from loans to investment securities  and
the sustained lower market interest rates,  which are at 40-year lows.   Average
loans decreased $20,883,000 or 10.2% to $182,957,000 for the quarter ended March
31, 2003  compared  to  $203,840,000  for  the  same  period  in  2002.  Average
investment securities increased  $39,933,000 or  57.3% to  $109,620,000 for  the
three months ended March 31, 2003 compared to $69,687,000 for the first  quarter
of 2002. The decrease in interest income due to shifts in the asset mix and  the
low interest rate  environment  were partially  offset  by a $15,006,000 or 5.2%
increase in average earning assets.

Interest and fees on  loans decreased 16.9% to  $3,249,000 for the three  months
ended March 31, 2003 compared to $3,909,000 for  the same period of 2002.   This
decrease was the  result of  a $20,833,000 or  10.2% decrease  in average  loans
outstanding and a 58  basis point decrease in  yield on the  portfolio.  Of  the
$20,833,000 decrease in average total loans,  $14,886,000 was in the 1-4  family
residential real estate  loans and  $5,249,000 was  in the  direct and  indirect
consumer loan categories.  These decreases reflect the refinancing activity  due
to interest  rates  reaching  40- year  lows,  as  consumers   re-finance  their
existing mortgages and use equity in their homes to consolidate other debt  into
secondary market loan products.  The lower yield on  average loans reflects  the
overall lower interest  rate environment  and competitive  pricing pressure  for
quality credit customers.

Interest income on  taxable securities  increased by  $236,000 or  34.2% in  the
first quarter of 2003  to $927,000 compared to  $691,000 for the same  period in
2002. Average  balances  of taxable  investment  securities increased  68.0%  to
$84,642,000 for the quarter ended March 31, 2003 compared to $50,381,000 for the
same period in the prior year. However, the yield on  average taxable investment
securities decreased 112  basis points to  4.44% for the  first quarter  of 2003
compared to  5.56%  for  the  first  quarter  of  2002.  Tax  exempt  investment
securities increased $5,672,000, or 29.4%  to an average balance  of $24,978,000
for the three months ended March  31, 2003 compared to $19,306,000 for  the same
period in 2002, while the yield decreased 25 basis points to 6.22%.

Interest from fed funds sold and securities purchased under agreements to resell
increased to $41,000 for the three  month period ended March 31, 2003,  compared
to $33,000 during the same periods  in 2002. The increase reflects an  increased
use  of  securities  purchased  under  agreements  to  resell  as  a  short-term
investment vehicle,  which achieves  a  higher yield  than  fed funds,  in  2003
compared to 2002.

Total interest expense decreased  by $284,000, or 13.1%,  to $1,887,000 for  the
three months ended March 31, 2003 compared to $2,171,000 for the same period  in
2002.  The decrease  in total interest  expense is primarily  the result of  the
aforementioned lower market interest  rate environment.   The decrease from  the
lower rate environment was partially offset  by a $15,499,000  or 6.0%  increase
in total interest-bearing liabilities.

Interest paid on deposits decreased $295,000, or 18.9% to $1,266,000 during  the
three months ended March 31, 2003 compared to $1,561,000 for the same period  in
2002.  The decrease in interest paid on  deposits, which was due to the  overall
lower interest rate environment,  was partially offset by  a $7,376,000 or  3.6%
increase in  total  interest-bearing deposits.  The  majority of  the  interest-
bearing  deposit  growth  was  in  interest-bearing  checking  accounts,   which
increased   $6,858,000   or   22.0%  for   the   first   quarter  of   2003   to
$37,974,000 compared to $31,116,000 for  the same period  in 2002.   The average
balance    of  noninterest-bearing   demand   deposits  increased  by  12.6%  or
$3,554,000   to $31,789,000 for the three  months ended March 31,  2003 compared
to  $28,235,000 for the first quarter of 2002.

Interest on short-term  borrowings decreased $12,000  to $34,000  for the  three
months ended March 31,  2003 compared to  $46,000 for the  same period in  2002.
This decrease is the result of lower market rates paid on short-term borrowings.
The decrease due  to lower rates  was partially offset  by a $2,667,000 or 27.3%
increase in the average balance of short-term borrowings.

Interest expense on long-term borrowings decreased  $59,000 to $505,000 for  the
three month period ended March 31, 2003 compared to $564,000 for the first three
months of 2002.  The decrease is the result of a 39 basis point decrease in  the
average rate to 5.01% for the  first quarter of 2003  compared to 5.40% for  the
first quarter of 2002 and a $1,544,000  or 3.6% decrease in the average  balance
comparing the same two periods.   The decrease in  the average balance of  long-
term borrowings is  due to  a reduced  usage of  bank debt  as a  result of  the
issuance of $7,000,000  in trust  preferred securities  in December  2002.   The
decrease in the usage of bank debt was partially offset by increases in  Federal
Home Loan Bank Advances.

Interest expense of trust preferred securities was $82,000 for the first quarter
of 2003 compared to  none in the first quarter  of 2002.  In   December  of 2002
the Company  issued   $7,000,000  of  trust  preferred   securities   through  a
special  purpose statutory  trust.  The proceeds from these securities were used
to reduce reliance on bank debt.

PROVISION FOR LOAN LOSSES

The provision for loan  losses (provision) is an  amount added to the  allowance
for loan losses  (allowance) to provide  for the known  and estimated amount  of
loans that  will  not be  collected.  Actual  loan losses  are  charged  against
(reduce) the allowance when management believes that the collection of principal
will not  occur. Subsequent  recoveries of  amounts  previously charged  to  the
allowance,  if  any,  are  credited  to  (increase)  the  allowance.  Management
determines the appropriate provision based upon a number of criteria,  including
a detailed  evaluation  of  certain credits,  historical  performance,  economic
conditions and overall quality of the loan portfolio.

The provision was $222,000 in the first quarter of 2003, an increase of  $83,000
or 59.7% from the $139,000 in the first quarter of 2002.

Activity   in   the   allowance  for  loan  losses  is detailed in note 2 to the
unaudited consolidated financial statements.  Charge-offs, net of recoveries for
the first quarter of 2003 increased by $78,000 or 300.0% to $104,000 compared to
$26,000 for the first quarter of 2002.

The increases in the provision and  a decrease in the loan portfolio,  partially
offset by higher net charge-offs  have resulted in an  increase in the ratio  of
the allowance to total  loans to 1.22% at  March 31, 2003  compared to 1.10%  at
December 31, 2002.

NONINTEREST INCOME

Total noninterest income  increased $395,000, or  61.5%, to  $1,037,000 for  the
three months ended March 31,  2003 compared to $642,000  for the same period  in
2002 primarily as the  result of increases in  security gains recognized and  an
increase in gains on the sale of mortgage loans sold to the secondary market.

Service charges on deposit  accounts were $337,000 for  the quarter ended  March
31, 2003  compared to  $349,000 for  the  first quarter  of 2002.  The  decrease
reflects a lower volume of overdraft fees assessed.

Gain on the sale of mortgage loans  increased $85,000 or 116.4% to $158,000  for
the first quarter of 2003 compared to the $73,000 of gains recognized during the
first quarter of  2002. In  the first quarter  of 2003,  $8,989,000 of  mortgage
loans were sold  to the  secondary market compared  to $8,309,000  for the  same
period in 2002. The average gain in 2003  was 1.76% compared to an average  gain
of .88% on  the loans  sold in the  first quarter  of 2002.  The higher  margins
realized on the sale of loans is due to a change in investors buying the  loans,
more  consistent  pricing  practices  and  closer  management  of  the  delivery
commitments.

The Company recognized $329,000 of securities gains in the first quarter of 2003
compared to $4,000 in the first quarter of 2002. Due to available liquidity from
increased  deposits  and  reductions  in  the  loan  portfolio,  $10,884,000  of
investment securities that would have matured or  been called in the next 12  to
18 months were sold and the proceeds invested in longer term securities.

Other noninterest income decreased $3,000 or 1.4% for the three months ended
March 31, 2003.  Increase in cash surrender value of life insurance increased by
$68,000 quarter over quarter, but was offset by decreases in foreign ATM fees
from the closure of the Wal-Mart branch in October 2002, higher mortgage
servicing rights amortization and a decrease in the volume of credit life and
A&H insurance sold.

NONINTEREST EXPENSES

Total noninterest expense  increased $169,000, or  6.1%, to  $2,950,000 for  the
three months ended March 31, 2003 compared to $2,781,000 for the same period  in
2002. The increase  includes a  $65,000 or 5%  increase in  salary and  employee
benefits to $1,458,000 for the first quarter of 2003 compared to $1,393,000  for
the first quarter of 2002.  This increase  is partially due to the expansion  of
health benefits to certain part-time employees.

Other expenses increased $86,000 or 26.4% to $412,000 for the three months ended
March 31, 2003 compared to $326,000 for the same period a year ago. This
increase includes $56,000 related to a sales and use tax audit covering the
period from 1998 through 2002 and higher costs related to the Company's courier
service and loan collection costs.

Income taxes decreased $36,000, or 37.5%, to $60,000 for the three months  ended
March 31,  2003  from $96,000  for  the same  period  in 2002.  The  decline  in
effective tax rate to 13.1% for the three month period ended March 31, 2003 from
23.2% for  the same  period of  2002  is reflective  of greater  tax  efficiency
brought about by  an increase in  non-taxable interest from  the municipal  bond
portfolio, an increase in non-taxable life insurance cash surrender value build-
up and security gains  recognized by the Bank's  investment subsidiary that  are
not taxable for state income tax purposes.

                             BALANCE SHEET ANALYSIS

OVERVIEW

Total  assets  increased  to  $354,761,000  at   March  31,  2003  compared   to
$352,377,000 at December 31, 2002,  an increase of .7%.   The December 31,  2002
balance sheet included short-term year-end  deposits of $18,600,000, which  were
invested in  federal  funds sold  and  interest  bearing deposits  in  banks  at
December 31, 2002.  Excluding these  deposits, total assets increased 6.3%  from
December 31, 2002 to March  31, 2003.  While  total assets excluding the  short-
term year-end deposits increased by $20,984,000, there was a considerable  shift
in balances from loans to investment  securities. Securities available for  sale
increased by  $24,999,000,  while  loans, net  of  allowance  for  loan  losses,
decreased by $8,822,000.

LOANS

Net loans  decreased $8,822,000,  or 4.7%,  to $177,478,000  on March  31,  2003
compared to $186,300,000 on December 31, 2002. The composition of loans is shown
in the following table:

<TABLE>
                                                                       As a % of Total Loans
                            March 31,   December 31,   Change in     March 31,   December 31,
                              2003           2002       Balance        2003          2002
                            ---------   ------------   ---------     ---------   ------------
<S>                            <C>          <C>           <C>           <C>          <C>
                                (Dollars in millions)
Residential Real Estate       $68.1         $71.8       ($3.7)         37.9%        38.1%
Commercial Real Estate        $33.8         $32.7        $1.1          18.8%        17.4%
Construction and Land
   Development                 $6.3          $6.4       ($0.1)          3.5%         3.4%
Commercial                    $50.0         $54.6       ($4.6)         27.8%        29.0%
Consumer                      $20.9         $22.3       ($1.4)         11.6%        11.8%
Other                          $0.6          $0.6        $0.0           0.4%         0.3%
</TABLE>

The  historically  low  interest  rate   environment  has  led  to   substantial
prepayments on the company's 1-4 family residential real estate portfolio. Also,
the economic conditions in the company's primary markets have adversely affected
loan demand leading to decreases in all categories of loans outstanding,  except
for commercial real  estate. In addition,  the company's  focus on  relationship
banking has resulted in the subsidiary bank not pursuing certain  "transactions"
that may have resulted in increased loan balances, but offered no opportunity to
form other relationships with the client.

NON-PERFORMING LOANS

Non-performing loans includes loans which have been categorized by management as
non-accruing because collection of interest is not assured, and loans which  are
past-due ninety days or more as to interest and/or principal payments.

The following summarizes information concerning non-performing loans:

                                                       MARCH 31,    DECEMBER 31,
          (Dollars in thousands)                         2003           2002
                                                       --------     ------------

          Non-accruing loans                            $ 3,028         $2,560
          Past due 90 days or more and still accruing        10             26
                                                         ------         ------
          Total non-performing loans                     $3,038         $2,586
                                                         ------         ------
                                                         ------         ------
          Restructured loans performing in accordance
          with modified terms                            $  400         $  418


ASSET QUALITY

The allowance for loan losses  was $2,197,000 or 1.22%  of total loans at  March
31, 2003 compared to $2,079,000 or 1.10% of total loans at December 31, 2002. As
of March 31,  2003, non-performing loans  and restructured  loans performing  in
accordance with modified terms (restructured loans) totaled $3,438,000  compared
to $3,004,000 at December 31, 2002. The allowance for loan losses is established
through a  provision for  loan  losses charged  to  expense. Loans  are  charged
against the  allowance  for  loan  losses  when  management  believes  that  the
collectibility of the principal  is unlikely. The allowance  for loan losses  is
adequate to cover  probable credit  losses relating  to specifically  identified
loans, as well as  probable credit losses  inherent in the  balance of the  loan
portfolio.   In accordance  with FASB  Statements 5  and 114,  the allowance  is
provided for losses that have been incurred as  of the balance sheet date.   The
allowance is based on past events and current economic conditions, and does  not
include the effects of expected losses on specific loans or groups of loans that
are related  to  future  events or  expected  changes  in  economic  conditions.
Management reviews a calculation of the allowance for loan losses on a quarterly
basis.   While  management uses  the  best  information available  to  make  its
evaluation, future adjustments to  the allowance may be  necessary if there  are
significant changes in economic conditions.

In addition, various regulatory agencies  periodically review the allowance  for
loan losses.   These agencies  may require  the bank  to make  additions to  the
allowance for loan losses  based on their judgments  of collectibility based  on
information available to them  at the time of  their examination. The policy  of
the Company is to place a loan on non-accrual status if: (a) payment in full  of
interest and principal is not expected, or (b) principal or interest has been in
default for a period of 90  days or more, unless the  obligation is both in  the
process of collection and  well secured. Well secured  is defined as  collateral
with sufficient market value to repay principal and all accrued interest. A debt
is in the process of collection if collection  of the debt is proceeding in  due
course either through legal action, including judgement enforcement  procedures,
or in appropriate circumstances, through collection efforts not involving  legal
action which are reasonably expected  to result in repayment  of the dept or  in
its restoration to current status.

At March 31,  2003 the  allowance for loan  losses to  total non-performing  and
restructured loans equaled 63.9% compared to 69.2% at December 31, 2002.   Total
nonperforming and  restructured loans  increased by  $434,000 primarily  due  to
increases in non-accrual single family first mortgage loans and consumer  loans.
Non-accrual first mortgage loans and consumer loans were $1,932,000 and $358,000
at March 31,  2003 compared  to $1,661,000 and  $206,000 at  December 31,  2002,
respectively.

SHORT-TERM INVESTMENTS

Fed funds sold  and securities purchased  under agreements  to resell  decreased
$7,120,000 to $6,000,000 at March 31,  2003 compared to $13,120,000 at  December
31,  2002.  The  decrease  reflects  the  liquidation  of  short-term   year-end
investments on January 2,  2003 associated with the  December 31, 2002  year-end
deposits of $18,600,000 referred to above.

Interest-bearing deposits in banks decreased  $7,245,000 to $1,227,000 at  March
31, 2003 compared to $8,472,000 at December 31, 2002.  The decrease reflects the
liquidation of $7,000,000 in short-term year-end investments at the Federal home
Loan Bank of Chicago on  January 2, 2003 associated  with the December 31,  2002
year-end deposits of $18,600,000 referred to above.

INVESTMENT SECURITIES

Securities available for sale increased  $24,999,000, or 29.8%, to  $108,896,000
at March 31, 2003 compared to $83,897,000 at December 31, 2002. The increase  in
investments in securities available for sale  resulted from the redeployment  of
cash flows  from the  decrease  in loans,  investment  of funds  from  increased
deposits, net  of  the  year  end  short-term  deposits,  and  the  purchase  of
$5,400,000 in securities during the first quarter of 2003 that were funded  with
Federal Home  Loan  Bank  advances.    Securities  held  to  maturity  decreased
$2,290,000 or  10.0%  to $20,712,000  at  March  31, 2003  from  $23,002,000  at
December 31, 2002 as a result of securities maturing.

DEPOSITS

Total deposits decreased $11,696,000 to $251,389,000 at March 31, 2003  compared
to $263,085,000 at December 31, 2002. As noted above, the Company's December 31,
2002 financial statements reflect  short-term year-end deposits of  $18,600,000.
Excluding the short-term year-end deposits,  total deposits increased 2.8%  from
December 31,  2002. Excluding  the  short-term year-end  deposits,  non-interest
bearing deposits increased by $436,000  and interest bearing deposits  increased
by $6,468,000 at March 31, 2003 compared to December 31, 2002.

BORROWINGS

Short-term borrowings increased $9,543,000 to $22,997,000 at March 31, 2003 from
$13,454,000 at year-end. The  increase is due to  purchasing $14,901,000 of  fed
funds at  March 31,  2003 offset  by lower  outstanding balances  of  repurchase
agreements with  commercial  customers,  which  decreased  by  $5,358,000  since
December 31,  2002.  Long-term borrowings  consist  of term  advances  from  the
Federal Home Loan Bank ("FHLB") and were $43,900,000 at March 31, 2003  compared
to $38,900,000  at  December  31, 2002.  The  increase  reflects  an  additional
$5,000,000 in FHLB  advances invested into  investment securities  in the  first
quarter of 2003.

SHAREHOLDERS' EQUITY

Total shareholders' equity decreased  $52,000 to $25,746,000  at March 31,  2003
compared to $25,798,000 at December 31, 2002.  During the first three months  of
2003 surplus increased by $65,000 from the sale of stock for options  exercised.
Accumulated other comprehensive  income which  is the  adjustment of  securities
available for sale to market value,  net of tax, decreased $288,000 to  $999,000
at March 31, 2003 from $1,287,000 at December 31, 2002.  The decrease reflects a
reduction for the securities gains of $329,000 realized in the first quarter  of
2003.  In addition the company declared a dividend of $0.09 per share on  common
stock, which totaled $227,000.

The Company is subject to certain regulatory capital requirements and  continues
to remain in  compliance with the  requirements. The following  table shows  the
company's capital ratios and regulatory requirements.

                                            MARCH 31, DECEMBER 31,   REGULATORY
                                              2003        2002      REQUIREMENTS
                                            --------  ------------ -------------
   Total Capital (To Risk-Weighted Assets)    14.4%       13.9%        8.0%

   Tier I Capital (To Risk-Weighted Assets)   13.3%       12.9%        4.0%

   Tier I Capital (To Average Assets)          8.4%        8.3%        4.0%

The Company's  subsidiary  bank  meets regulatory  capital  requirements  to  be
considered well capitalized.

ASSET/LIABILITY MANAGEMENT

Asset/liability management is the process of identifying, measuring and managing
the risk to the Company's earnings  and capital resulting from the movements  in
interest rates.  It is the  Company's objective to protect earnings and  capital
while achieving liquidity, profitability and strategic goals.

The Company focuses its measure of interest rate  risk on the effect a shift  in
interest rates would have on earnings rather than on the amount of assets and/or
liabilities subject to repricing in a given  time period.  Since not all  assets
or liabilities move at the same rate and at the same time, a determination  must
be made  as  to  how each  interest  earning  asset and  each  interest  bearing
liability adjusts with  each change  in the base  rate.   The Company  develops,
evaluates and  amends its  assumptions  on an  ongoing  basis and  analyzes  its
earnings exposure quarterly.

In addition to the  effect  on  earnings, a  quarterly  evaluation  is  made  to
determine the change in the economic value of the equity with various changes in
interest rates.   This determination indicates how much  the value of the assets
and  the  value  of  the  liabilities change with a specified change in interest
rates.   The  net  difference  between  the  economic  values  of the assets and
liabilities results in an economic value of equity.

LIQUIDITY

Liquidity, as it relates to the subsidiary bank, is a measure of its ability  to
fund loans and withdrawals of deposits  in a cost-effective manner.  The  Bank's
principal sources of funds are  deposits, scheduled amortization and  prepayment
of loan principal,  maturities of investment  securities, short-term  borrowings
and income from operations.   Additional sources  include purchasing fed  funds,
sale of securities, sale of loans, borrowing from both the Federal Reserve  Bank
and Federal  Home Loan  Bank, and  dividends paid  by Nevahawk,  a wholly  owned
subsidiary of the Bank.

The liquidity needs of the Company generally consist of payment of dividends  to
its shareholders, payments of  principal and interest on  borrowed funds, and  a
limited amount of expenses. The sources  of funds to provide this liquidity  are
issuance of  capital stock  and dividends  from its  subsidiary bank.    Certain
restrictions are imposed  upon the Bank,  which could limit  its ability to  pay
dividends if it did not have net earnings or adequate capital in the future. The
Company maintains adequate liquidity to pay its expenses.

The following table summarizes The Company's significant contractual obligations
and other potential funding needs at March 31, 2003 (in thousands):

                     Time         Long-term      Operating
                   Deposits        debt(1)<F1>     Leases        Total
                   ---------      ---------      ---------       -----
2004               $ 69,331  $      10,000           $ 50      $ 79,381
2005                 29,986         16,250             50        46,286
2006                 11,820          1,950             50        13,820
2007                  6,029          1,450             50         7,529
2008                  5,297          4,250             38         9,585
Thereafter                0         17,000              0        17,000
                   --------        -------           ----      --------
Total              $122,463        $50,900           $238      $173,601
                   --------        -------           ----      --------
                   --------        -------           ----      --------

Commitments to extend credit                                   $ 30,534

(1) <F1> Long-term debt includes company-obligated mandatorily redeemable
         preferred securities.

OFF BALANCE SHEET ITEMS AND CONTINGENCIES

Off-balance sheet  items consist  of commitments  to originate  mortgage  loans,
unused lines  of credit  and standby  letters of  credit totaling  approximately
$30,534,000 as of March 31, 2003.  This compares to $30,939,000 at December  31,
2002. The Company's commitments to originate mortgage loans are on a best effort
basis; therefore there are no contingent  liabilities associated with them.  The
Bank has  historically funded  off-balance sheet  commitments with  its  primary
sources of funds and management anticipates that this will continue.

On August 18, 2000, the Bank filed a lawsuit in Waukesha County, Wisconsin,
against Fiserv, Inc., a former data processing services provider, for breach of
contract.  The Bank was seeking to recover damages sustained due to a processing
error in which approximately $500,000 was improperly charged to the Bank's check
clearing account at the FHLB of Chicago.  On February 14, 2003, a jury delivered
a verdict that Fiserv, Inc. did not breach its contract with the Bank.  Fiserv,
Inc. has filed a counterclaim seeking approximately $380,000 in reimbursement of
legal fees. On May 12, 2003 the judge denied Fiserv's motion for reimbursement
of legal fees.

ITEM 3. CONTROLS AND PROCEDURES

We maintain a set of disclosure controls and procedures that are designed to
ensure that information required to be disclosed by us in the reports filed by
us under the Securities Exchange Act of 1934, as amended ("Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. Within the 90 days prior to the date of this
report, we carried out an evaluation, under the supervision and with the
participation of our management, including our President and Chief Executive
Officer, and Executive Vice President and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Exchange Act. Based on that
evaluation, our President and Chief Executive Officer, and Executive Vice
President and Chief Financial Officer concluded that our disclosure controls and
procedures are effective.

There have been no significant changes in our internal controls or other factors
that could significantly affect those controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

                                    PART II

                               OTHER INFORMATION

ITEM 1    LEGAL PROCEEDINGS

          None.

ITEM 2    CHANGES IN SECURITIES

          None.


ITEM 3    DEFAULTS UPON SENIOR SECURITIES

          None.


ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.


ITEM 5    OTHER INFORMATION

          None.

ITEM 6.   A) EXHIBITS

          See Exhibit Index following the signature  page in this report,  which
          is incorporated herein by this reference.

          B) REPORTS ON FORM 8-K

          There were two reports on Form  8-K filed during the first quarter  of
          2003.

          A report dated February 21 2003  announced 2002 earnings and  provided
          details of the outcome of the Bank's litigation against Fiserv, Inc.

          A report dated March 17, 2003  announced that the Company had  entered
          into an  Agreement  and Plan  of  Merger  with DunC  Corp.  and  First
          Bank,bc.

                                   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.

                           Blackhawk Bancorp, Inc.
                           ----------------------------------------------------
                           (Registrant)

Date:  May 12, 2003        /s/ R. Richard Bastian, III
                           ----------------------------------------------------
                           R. Richard Bastian, III
                           President and Chief Executive Officer

                           /s/ Todd J. James
                           ----------------------------------------------------
                           Todd J. James
                           Executive Vice President and Chief Financial Officer

                           /s/ Thomas L. Lepinski
                           ----------------------------------------------------
                           Thomas L. Lepinski, CPA
                           Principal Accounting Officer

                                SECTION 302 CERTIFICATION

I, R. Richard Bastian, III, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Blackhawk Bancorp,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly
         report is being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and

     c)  presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: May 12, 2003

                                                  /s/ R. Richard Bastian, III
                                                  ------------------------------
                                                  R. Richard Bastian, III
                                                  President and CEO

                             SECTION 302 CERTIFICATION

I, Todd J. James, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Blackhawk Bancorp,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: May 12, 2003

                                           /s/Todd J. James
                                           -------------------------------
                                           Todd J. James
                                           Executive Vice President and CFO

                        BLACKHAWK BANCORP, INC.

                           INDEX TO EXHIBITS

                                               Incorporated              Filed
Exhibit                                        Herein By                 Here-
Number       Description                       Reference To:             with
------       -----------                       ------------              ----

2.1          Agreement and Plan of Merger,
             dated as of March 17, 2003 by
             and among Blackhawk Bancorp,
             Inc., DUNC Merger Corporation,
             And DUNC Corp.                                                X

4.1          Amended and                       Exhibit 3.1 to
             restated Articles                 Amendment No. 1 to
             of Incorporation                  Registrant's
             of the Registrant                 Registration
                                               Statement on Form
                                               S-1 (Reg. No.
                                               33-32351)

4.2          By-laws of Regis-                 Exhibit 3.2 to
             trant as amended                  Amendment No. 1 to
                                               Registrant's
                                               Registration
                                               Statement on Form
                                               S-1 (Reg. No.
                                               33-32351)

99.1         Certification Pursuant to 18
             U. S. C. Section 1350, as
             Adopted Pursuant to Section
             906 of the Sarbanes-Oxley
             Act of 2002                                                   X

99.2         Certification Pursuant to 18
             U. S. C. Section 1350, as
             Adopted Pursuant to Section
             906 of the Sarbanes-Oxley
             Act of 2002                                                   X