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 JUNE 30, 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                      August 5, 2003
         ---------------------                      --------------
         $.01 par value                             2,518,131 shares

                                     INDEX

                         PART I - FINANCIAL INFORMATION

                                                                       Page
                                                                       ----

ITEM 1.  FINANCIAL STATEMENTS

     Unaudited Consolidated Balance Sheets as of
           June 30, 2003 and December 31, 2002                           4

     Unaudited Consolidated Statements of Income for the
           Three Months Ended June 30, 2003 and 2002                     5

     Unaudited Consolidated Statements of Income for the
           Six Months Ended June 30, 2003 and 2002                       6

     Unaudited Consolidated Statements of Stockholders'
           Equity for the Six Months Ended June 30, 2003 and 2002        7

     Unaudited Consolidated Statements of Cash Flows for the
           Six Months Ended June 30, 2003 and 2002                     8-9

     Notes to Unaudited Consolidated Financial Statements            10-14

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATION                        15-26

ITEM 3.  CONTROLS AND PROCEDURES                                        26

                          PART II - OTHER INFORMATION

ITEM 1      LEGAL PROCEEDINGS                                           27

ITEM 2      CHANGES IN SECURITIES                                       27

ITEM 3      DEFAULTS UPON SENIOR SECURITIES                             27

ITEM 4      SUBMISSION OF MATTERS TO A VOTE
              OF SECURITY HOLDERS                                       27

ITEM 5      OTHER INFORMATION                                           28

ITEM 6.  A) EXHIBITS                                                    28

         B) REPORTS ON FORM 8-K                                         28

SIGNATURES                                                              29

INDEX TO EXHIBITS                                                       30


                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                     UNAUDITED CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                                       JUNE 30,          DECEMBER 31,
                                                                                         2003                2002
                                                                                     ------------        ------------
<S>                                                                                      <C>                 <C>
ASSETS                                                                                    (Dollars in thousands)
------
Cash and due from banks                                                                $ 12,166            $ 12,572
Federal funds sold and securities purchased under agreements to resell                       --              13,120
Interest-bearing deposits in banks                                                        1,922               8,472
Available-for-sale securities                                                           102,013              83,897
Held to maturity securities, at amortized cost                                           19,399              23,002
Loans, less allowance for loan losses of $2,342 and $2,079
  at June 30, 2003 and December 31, 2002, respectively                                  183,539             186,300
Office buildings and equipment, net                                                       6,511               6,770
Intangible assets                                                                         4,388               4,598
Other assets                                                                             13,595              13,646
                                                                                       --------            --------
   Total Assets                                                                        $343,533            $352,377
                                                                                       --------            --------
                                                                                       --------            --------

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
   Noninterest-bearing                                                                 $ 33,120            $ 35,274
   Interest-bearing                                                                     215,772             227,811
                                                                                       --------            --------
   Total deposits                                                                       248,892             263,085
Short-term borrowings                                                                    11,990              13,454
Long-term borrowings                                                                     46,600              38,900
Company Obligated Mandatorily Redeemable Preferred Securities
  of subsidiary trust holding solely subordinated debentures                              7,000               7,000
Other liabilities                                                                         2,909               4,140
                                                                                       --------            --------
   Total Liabilities                                                                    317,391             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: 2,518,131 at June 30, 2003, 2,507,065
   at December 31, 2002                                                                      25                  25
Surplus                                                                                   8,773               8,698
Retained earnings                                                                        16,062              15,788
Accumulated other comprehensive income                                                    1,282               1,287
                                                                                       --------            --------
   Total Stockholders' Equity                                                            26,142              25,798
                                                                                       --------            --------
   Total Liabilities and Stockholders' Equity                                          $343,533            $352,377
                                                                                       --------            --------
                                                                                       --------            --------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                         THREE MONTHS ENDED JUNE 30,
                                                                          2003                2002
                                                                          ----                ----
<S>                                                                        <C>                 <C>
INTEREST INCOME:                                                           (Dollars in thousands,
                                                                           except per share data)
   Interest and fees on loans                                             $3,019              $3,673
   Interest and dividends on securities:
       Taxable                                                               929                 926
       Nontaxable                                                            282                 209
   Interest on fed funds sold and securities purchased under
      agreements to resell                                                     7                  17
   Interest on interest-bearing deposits in banks                              8                   7
                                                                          ------              ------
       Total Interest Income                                               4,245               4,832
                                                                          ------              ------

INTEREST EXPENSE:
   Interest on deposits                                                    1,230               1,547
   Interest on short-term borrowings                                          41                  49
   Interest on long-term borrowings                                          530                 555
   Interest on Company Obligated Mandatorily Redeemable
       Preferred Securities                                                   82                  --
                                                                          ------              ------
       Total Interest Expense                                              1,883               2,151
                                                                          ------              ------
   Net Interest Income                                                     2,362               2,681
   Provision for loan losses                                                 142                 122
                                                                          ------              ------
   Net Interest Income after Provision for Loan Losses                     2,220               2,559
                                                                          ------              ------

NONINTEREST INCOME:
   Service charges on deposit accounts                                       363                 396
   Gain on sale of loans                                                     141                  54
   Securities gains, net                                                      95                 225
   Other                                                                     281                 195
                                                                          ------              ------
       Total Noninterest Income                                              880                 870
                                                                          ------              ------
NONINTEREST EXPENSES:
   Salaries and employee benefits                                          1,360               1,338
   Occupancy                                                                 179                 261
   Equipment                                                                 231                 208
   Data processing services                                                  203                 188
   Advertising and marketing                                                 143                  91
   Amortization of intangibles                                                79                  78
   Professional fees                                                         116                 117
   Office supplies                                                            55                  69
   Telephone                                                                  79                  79
   Transportation and postage                                                112                  92
   Other                                                                     212                 318
                                                                          ------              ------
       Total Noninterest Expenses                                          2,769               2,839
                                                                          ------              ------
Income before Income Taxes                                                   331                 590
Income Taxes                                                                   1                 160
                                                                          ------              ------
Net Income                                                                $  330              $  430
                                                                          ------              ------
                                                                          ------              ------
Basic Earnings Per Share                                                  $ 0.13              $ 0.17
                                                                          ------              ------
                                                                          ------              ------

Diluted Earnings per Share                                                $ 0.13              $ 0.17
                                                                          ------              ------
                                                                          ------              ------
Dividends Per Share                                                       $ 0.09              $ 0.09
                                                                          ------              ------
                                                                          ------              ------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                          SIX MONTHS ENDED JUNE 30,
                                                                          2003                2002
                                                                          ----                ----
<S>                                                                        <C>                 <C>
INTEREST INCOME:                                                           (Dollars in thousands,
                                                                           except per share data)

   Interest and fees on loans                                             $6,267              $7,581
   Interest and dividends on securities:
       Taxable                                                             1,857               1,612
       Nontaxable                                                            535                 417
   Interest on fed funds sold and securities purchased under
      agreements to resell                                                    49                  50
   Interest on interest-bearing deposits in banks                             18                  34
                                                                          ------              ------
       Total Interest Income                                               8,726               9,694
                                                                          ------              ------

INTEREST EXPENSE:
   Interest on deposits                                                    2,496               3,108
   Interest on short-term borrowings                                          76                  95
   Interest on long-term borrowings                                        1,035               1,119
   Interest on Company Obligated Mandatorily Redeemable
       Preferred Securities                                                  163                  --
                                                                          ------              ------
       Total Interest Expense                                              3,770               4,322
                                                                          ------              ------
   Net Interest Income                                                     4,956               5,372
   Provision for loan losses                                                 365                 261
                                                                          ------              ------
   Net Interest Income after Provision for Loan Losses                     4,591               5,111
                                                                          ------              ------

NONINTEREST INCOME:
   Service charges on deposit accounts                                       700                 745
   Gain on sale of loans                                                     301                 127
   Securities gains, net                                                     424                 229
   Other                                                                     492                 411
                                                                          ------              ------
       Total Noninterest Income                                            1,917               1,512
                                                                          ------              ------
NONINTEREST EXPENSES:
   Salaries and employee benefits                                          2,818               2,731
   Occupancy                                                                 369                 449
   Equipment                                                                 461                 428
   Data processing services                                                  399                 387
   Advertising and marketing                                                 207                 163
   Amortization of intangibles                                               159                 154
   Professional fees                                                         302                 296
   Office supplies                                                           117                 125
   Telephone                                                                 153                 151
   Transportation and postage                                                212                 182
   Other                                                                     523                 554
                                                                          ------              ------
       Total Noninterest Expenses                                          5,720               5,620
                                                                          ------              ------
Income before Income Taxes                                                   788               1,003
Income Taxes                                                                  61                 256
                                                                          ------              ------
Net Income                                                                $  727              $  747
                                                                          ------              ------
                                                                          ------              ------
Basic Earnings Per Share                                                  $ 0.29              $ 0.31
                                                                          ------              ------
                                                                          ------              ------

Diluted Earnings per Share                                                $ 0.29              $ 0.31
                                                                          ------              ------
                                                                          ------              ------
Dividends Per Share                                                       $ 0.18              $ 0.18
                                                                          ------              ------
                                                                          ------              ------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                          SIX MONTHS ENDED JUNE 30,
                                                                          2003                2002
                                                                          ----                ----
<S>                                                                       <C>                 <C>
                                                                           (Dollars in thousands)
Common Stock:
   Balance at beginning of period                                        $    25             $    24
   Stock options exercised                                                    --                   1
                                                                         -------             -------
   Balance at end of period                                                   25                  25
                                                                         -------             -------

Surplus:
   Balance at beginning of period                                          8,698               7,555
   Stock options exercised                                                    75               1,117
   Sale of treasury stock                                                     --                  (4)
                                                                         -------             -------
   Balance at end of period                                                8,773               8,668
                                                                         -------             -------

Retained Earnings:
   Balance at beginning of period                                         15,788              15,447
   Net income                                                                727                 747
   Dividends declared on common stock                                       (453)               (444)
                                                                         -------             -------
   Balance at end of period                                               16,062              15,750
                                                                         -------             -------

Treasury Stock, at cost:
   Balance at beginning of period                                             --                 (58)
   Sale of treasury stock                                                     --                  32
                                                                         -------             -------
   Balance at end of period                                                   --                 (26)
                                                                         -------             -------

Accumulated other comprehensive income:
   Balance at beginning of period                                          1,287                 773
   Other comprehensive income (loss), net of taxes:
      Fair market value of available for sale securities                     (50)                214
      Fair value of interest rate SWAP contract                               45                  --
                                                                         -------             -------
   Balance at end of period                                                1,282                 987
                                                                         -------             -------

Total Stockholders' Equity                                               $26,142             $25,404
                                                                         -------             -------
                                                                         -------             -------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                            SIX MONTHS ENDED JUNE 30,
                                                                               2003           2002
                                                                               ----           ----
<S>                                                                            <C>            <C>
                                                                             (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                $    727       $    747
   Adjustments to reconcile net income to net cash
      provided by operating activities:
   Depreciation and amortization                                                  648            617
   Provision for loan losses                                                      365            261
   Gain on sale of loans                                                         (301)          (127)
   FHLB stock dividends                                                          (126)           (60)
   Amortization of premiums on securities, net                                    397             41
   Securities gains, net                                                         (424)          (229)
   Decrease (increase) in accrued interest receivable                             253            (74)
   Decrease in accrued interest payable                                           (55)          (184)
   Decrease (increase) in other assets                                           (213)           198
   Increase (decrease) in other liabilities                                    (1,127)             8
                                                                             --------       --------
  Net cash provided by operations before
   loan originations and sales                                                    144          1,198
   Origination of loans for sale                                              (15,050)        (9,971)
   Proceeds from sale of loans                                                 16,708         12,226
                                                                             --------       --------
   Net cash provided by operating activities                                    1,802          3,453
                                                                             --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net decrease in interest-bearing deposits in banks                           6,550          7,531
   Net decrease in federal funds sold and securities
      purchased under agreements to resell                                     13,120         10,986
   Proceeds from sales of available-for-sale securities                        23,957          8,523
   Proceeds from maturities and calls of available-for-sale securities         20,824          6,263
   Proceeds from maturities and calls of held-to-maturity securities            3,574          2,363
   Purchase of available-for-sale securities                                  (62,948)       (40,600)
   Purchase of held-to-maturity securities                                         --         (2,868)
   Net decrease in loans                                                          951         13,064
   Proceeds from the sale of office buildings, equipment, and
      other real estate owned                                                     317            376
   Purchase of office buildings and equipment, net                               (202)          (225)
                                                                             --------       --------
   Net cash provided by investing activities                                    6,143          5,413
                                                                             --------       --------
</TABLE>

           See Notes to Unaudited Consolidated Financial Statements.

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

<TABLE>
                                                                               SIX MONTHS ENDED JUNE 30,
                                                                               2003                2002
                                                                               ----                ----
<S>                                                                            <C>                 <C>
                                                                                (Dollars in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net decrease in deposits                                                  $(14,192)            $(9,845)
   Dividends paid                                                                (453)               (431)
   Proceeds from other borrowings                                               8,000                  --
   Payments on other borrowings                                                  (300)             (7,221)
   Net increase (decrease) in short-term borrowings                            (1,464)              8,321
   Proceeds from exercise of stock options                                         58               1,050
   Sale of treasury stock                                                          --                  28
                                                                             --------             -------
   Net cash used in financing activities                                       (8,351)             (8,098)
                                                                             --------             -------
   Net increase (decrease) in cash and due from banks                            (406)                768

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

   Ending                                                                    $ 12,166             $12,514
                                                                             --------             -------
                                                                             --------             -------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid (refunded) during the period for:
       Interest                                                              $  3,825             $ 4,506
       Income taxes                                                          $   (163)            $  (118)

SUPPLEMENTAL SCHEDULES OF NON-CASH INVESTING
   ACTIVITIES:
   Change in accumulated other comprehensive income
       unrealized gains (losses) on available-for-sale securities, net       $    (50)            $   214
   Other assets acquired in settlement of loans                              $     88             $   285
</TABLE>

           See Notes to Unaudited Consolidated Financial Statements.

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 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 six months ended June
       30, 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 June 30, 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.

(Dollars in thousands, except per share data)                Three Months Ended
                                                                   June 30,
                                                              2003        2002
                                                              ----        ----
Net income, as reported                                       $330        $430
Deduct total stock-based employee compensation expense
determined under  fair  value  based  method  for  all
awards, net of related tax effects                             (21)        (19)
                                                              ----        ----
PRO FORMA NET INCOME                                          $309        $411
                                                              ----        ----
                                                              ----        ----

Earnings per share:
   Basic:
     As reported                                             $0.13       $0.17
     Pro forma                                                0.12        0.17

   Diluted:
     As reported                                              0.13        0.17
     Pro forma                                                0.12        0.17

(Dollars in thousands, except per share data)                 Six Months Ended
                                                                   June 30,
                                                             2003         2002
                                                             ----         ----
Net income, as reported                                      $727         $747
Deduct total stock-based employee compensation expense
determined under  fair  value  based  method  for  all
awards, net of related tax effects                            (42)         (37)
                                                             ----         ----

PRO FORMA NET INCOME                                         $685         $710
                                                             ----         ----
                                                             ----         ----

Earnings per share:
   Basic:
     As reported                                            $0.29        $0.31
     Pro forma                                               0.27         0.29

   Diluted:
     As reported                                             0.29         0.31
     Pro forma                                               0.27         0.29

       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
                                                              JUNE 30,
                                                              --------
                                                       (Dollars in thousands)

                                                       2003              2002
                                                       ----              ----
       Balance at beginning of period                 $2,197            $2,517
       Provision charged to expense                      142               122
       Loans charged off                                  90               131
       Recoveries                                         93                11
                                                      ------            ------
       Balance at end of period                       $2,342            $2,519
                                                      ------            ------
                                                      ------            ------

                                                          Six Months Ended
                                                              June 30,
                                                              --------
                                                       (Dollars in thousands)

                                                       2003               2002
                                                       ----              ----
       Balance at beginning of period                 $2,079            $2,404
       Provision charged to expense                      365               261
       Loans charged off                                 247               182
       Recoveries                                        145                36
                                                      ------            ------
       Balance at end of period                       $2,342            $2,519
                                                      ------            ------
                                                      ------            ------

Note 3.Earnings per Share

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

<TABLE>
                                                               THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                    JUNE 30,                      JUNE 30,
                                                               2003           2002           2003           2002
                                                               ----           ----           ----           ----
<S>                                                            <C>            <C>            <C>            <C>
       Basic:
       Net income available to common stockholders          $  330,000     $  430,000     $  727,000     $  747,000
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
       Weighted average shares outstanding                   2,517,219      2,478,283      2,515,627      2,431,572
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
       Basic earnings per share                             $     0.13     $     0.17     $     0.29     $     0.31
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------

       Diluted:
       Net income available to common stockholders          $  330,000     $  430,000     $  727,000     $  747,000
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
       Weighted average shares outstanding                   2,517,219      2,478,283      2,515,627      2,431,572
       Effect of dilutive stock options outstanding             17,267          9,782         17,267          9,782
                                                            ----------     ----------     ----------     ----------
       Diluted weighted average shares outstanding           2,534,486      2,488,065      2,532,894      2,441,354
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
       Diluted earnings per share                           $     0.13     $     0.17     $     0.29     $     0.31
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
</TABLE>

Note 4.   Derivative Instrument

       As of June 30, 2003, the Company has entered into an interest rate swap
       transaction, which resulted in the Company converting its $7,000,000 of
       variable rate Company Obligated Mandatorily Redeemable Preferred
       Securities into fixed rate debt. This swap transaction requires the
       payment of interest by the Company at a fixed rate equal to 2.47% using
       an actual/360 day basis. In turn the Company receives a variable rate
       interest payment based on the 90 day LIBOR rate adjusted quarterly.

       Summary information about the interest rate swap at June 30 is as
       follows:

                                                         2003            2002
                                                         ----            ----
                                                        (Dollars in thousands)
       Notional amount                                 $7,000              --
       Weighted average fixed rate                      2.51%              --
       Weighted average variable rate                   1.02%              --
       Weighted average maturity                    4.5 years              --
       Fair value                                         $69              --

Note 5.   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.

       The Financial Accounting Standards Board has issued Statement 150,
       "Accounting for Certain Financial Instruments with Characteristics of
       both Liabilities and Equity".  This Statement establishes standards for
       how an issuer classifies and measures certain financial instruments with
       characteristics of both liabilities and equity and requires that certain
       freestanding financial instruments be reported as liabilities in the
       balance sheet.  Depending on the type of financial instrument, it is
       required to be accounted for at either fair value or the present value
       of future cash flows determined at each balance sheet date with the
       change in that value reported as interest expense in the income
       statement.  Prior to the application of Statement No. 150, either those
       financial instruments were not required to be recognized, or if
       recognized were reported in the balance sheet as equity and changes in
       the value of those instruments were normally not recognized in net
       income.  For the Company, the Statement is effective July 1, 2003 and
       implementation is not expected to have a material impact on the
       consolidated financial statements.

Note 6.   Recent Regulatory Developments

       On July  30, 2002, 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.

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  second
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 $330,000 for the three months ended June  30,
2003, a decrease of $100,000  or 23.3% from the  $430,000 reported for the  same
three month period in 2002.  Net income for the six month period ended June  30,
2003 was $727,000, a decrease of $20,000, or 2.7% from the $747,000 reported for
the same period in 2002.

Diluted earnings per share  were $0.13 and  $0.29 for the  three and six  months
ended June 30,  2003, respectively,  compared to $0.17  and $0.31  for the  same
periods in 2002.   This represents a decrease  of 23.5% and  6.5% for the  three
month and six month periods, respectively.

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 stockholders'
equity, interest income and expense on related items, and the company's  average
rate for the three and six month periods ended June 30, 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 June 30, 2003    Three Months ended June 30, 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                           $  1,409       $    8      2.28%     $  1,428      $    7      1.97%
  Federal funds sold &
      securities purchased under
      agreements to resell                  1,640            7      1.71%        3,885          17      1.76%
  Investment securities:
     Taxable investment securities         98,069          929      3.80%       72,345         926      5.13%
     Tax-exempt investment
       securities                          28,387          427      6.03%       19,598         317      6.49%
                                         --------       ------      -----     --------      ------      -----
           Total investment securities    126,456        1,356      4.30%       91,943       1,243      5.42%
  Loans                                   182,962        3,019      6.62%      196,087       3,674      7.52%
                                         --------       ------      -----     --------      ------      -----

TOTAL EARNING ASSETS                     $312,467       $4,390      5.64%     $293,343      $4,941      6.76%
                                                        ------      -----                   ------      -----

  Allowance for loan losses               (2,278)                              (2,518)
  Cash and due from banks                  11,263                               10,173
  Other assets                             21,351                               16,980
                                         --------                             --------

TOTAL ASSETS                             $342,803                             $317,978
                                         --------                             --------
                                         --------                             --------

INTEREST BEARING LIABILITIES:
  Interest bearing checking accounts     $ 39,047       $   75       .77%     $ 33,172      $   89      1.08%
  Savings deposits                         54,466          102       .75%       53,730         157      1.17%
  Time deposits                           124,229        1,053      3.40%      121,827       1,301      4.28%
                                         --------       ------      -----     --------      ------      -----
      Total interest bearing deposits     217,742        1,230      2.27%      208,729       1,547      2.97%
   Short-term borrowings                   13,463           41      1.22%       10,879          49      1.81%
   Long-term borrowings                    44,029          530      4.83%       41,306         555      5.39%
   Trust preferred securities               7,000           82      4.75%          -0-         -0-       -0-%
                                         --------       ------      -----     --------      ------      -----
TOTAL INTEREST-BEARING
  LIABILITIES                            $282,234       $1,883      2.68%     $260,914      $2,151      3.31%
                                                        ------      -----                   ------      -----

NET INTEREST SPREAD                                                 2.96%                               3.45%
                                                                    -----                               -----
                                                                    -----                               -----

  Noninterest bearing deposits             32,535                               30,274
  Other liabilities                         2,140                                2,011
                                         --------                             --------

  Total liabilities                       316,909                              293,199
  Stockholders' equity                     25,894                               24,779
                                         --------                             --------

TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                   $342,803                             $317,978
                                         --------                             --------
                                         --------                             --------

NET INTEREST MARGIN                                     $2,507      3.22%                   $2,790      3.81%
                                                        ------      -----                   ------      -----
                                                        ------      -----                   ------      -----
</TABLE>

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES

<TABLE>
(yields on a tax-equivalent basis)         Six Months ended June 30, 2003      Six Months ended June 30, 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                              $  1,774       $   18      2.05%    $  3,842       $   34       1.78%
  Federal funds sold &
    securities purchased under
    agreements to resell                     5,072           49      1.95%       6,154           50       1.64%
  Investment securities:
     Taxable investment securities          91,393        1,857      4.10%      61,424        1,613       5.30%
     Tax-exempt investment
       securities                           26,692          810      6.12%      19,453          631       6.54%
                                          --------       ------      -----    --------       ------       -----
           Total investment securities     118,085        2,667      4.55%      80,876        2,244       5.60%
  Loans                                    182,960        6,268      6.91%     199,942        7,583       7.65%
                                          --------       ------      -----    --------       ------       -----

TOTAL EARNING ASSETS                      $307,891       $9,002      5.90%    $290,815       $9,911       6.87%
                                                         ------      -----                   ------       -----

  Allowance for loan losses                (2,212)                             (2,518)
  Cash and due from banks                   10,860                               9,816
  Other assets                              21,514                              17,224
                                          --------                            --------

TOTAL ASSETS                              $338,053                            $315,336
                                          --------                            --------
                                          --------                            --------

INTEREST BEARING LIABILITIES:
  Interest bearing checking accounts      $ 38,513       $  162       .85%    $ 32,150       $  173       1.09%
  Savings deposits                          53,527          212       .80%      53,779          321       1.20%
  Time deposits                            123,518        2,122      3.46%     121,431        2,614       4.34%
                                          --------       ------      -----    --------       ------       -----
      Total interest bearing deposits      215,559        2,496      2.34%     207,360        3,108       3.02%
   Short-term borrowings                    12,958           76      1.18%      10,333           95       1.85%
   Long-term borrowings                     42,445        1,035      4.92%      41,844        1,119       5.39%
   Trust preferred securities                7,000          163      4.70%         -0-          -0-        -0-%
                                          --------       ------      -----    --------       ------       -----

TOTAL INTEREST-BEARING
  LIABILITIES                             $277,962       $3,770      2.74%    $259,537       $4,322       3.36%
                                                         ------      -----                   ------       -----

NET INTEREST SPREAD                                                  3.16%                                3.51%
                                                                     -----                                -----
                                                                     -----                                -----

  Noninterest bearing deposits              32,164                              29,260
  Other liabilities                          2,046                               2,134
                                          --------                            --------
  Total liabilities                        312,172                             290,931
  Stockholders' equity                      25,881                              24,405
                                          --------                            --------

TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                    $338,053                            $315,336
                                          --------                            --------
                                          --------                            --------

NET INTEREST MARGIN                                      $5,232      3.43%                   $5,589       3.88%
                                                         ------      -----                   ------       -----
                                                         ------      -----                   ------       -----
</TABLE>

Net interest  income decreased  by $283,000,  or 10.1%,  to $2,507,000  for  the
quarter ended June 30, 2003, compared to $2,790,000 for the comparable period in
2002.  On a  year to date basis  net interest income  decreased by $357,000,  or
6.4%, to $5,232,000  compared to $5,589,000  for the first  six months of  2002.
The net interest margin, which is the tax equivalent net interest income divided
by average interest earning  assets was 3.22%  and 3.43% for  the three and  six
month periods  ended June  30, 2003.   The  second quarter  net interest  margin
represents a 59  basis point decrease  compared to the  2002 second quarter  net
interest margin  of 3.81%.   The  year  to date  net  interest margin  of  3.43%
represents a 45 basis point increase  compared to the 3.88% net interest  margin
realized for the same period in 2002.

For the three  months ended June  30, 2003, total  interest income decreased  by
$551,000, or 11.2%, to $4,390,000 compared to $4,941,000 for the same period  in
2002.  The decrease in interest income is due  to a 112 basis point decrease  in
the yield on average  earning assets to  5.64% for the  second quarter of  2003,
compared to 6.76% for  the same period in  2002.  The decrease  in the yield  on
average earning assets  for the second  quarter of 2003  compared to the  second
quarter of 2002 is offset by  a $19,124,000 increase in average earning  assets.
For the  six months  ended June  30, 2003,  total interest  income decreased  by
$909,000, or 9.2%, to $9,002,000 compared  to $9,911,000 for the same period  in
2002.  The decrease in interest  income is due to a  97 basis point decrease  in
the yield on  average earning assets  to 5.90% compared  to 6.87%  for the  same
period in 2002 partially offset by a 5.9% increase in average earning assets.

The decrease in the yield on average earning assets reflects a shift in the
asset mix from loans to investment securities for the three and six month
periods ended June 30, 2003 compared to the same periods in 2002. The decrease
in the yield on average earning assets also reflects the difficulty of finding
attractive investments due to the lower interest rate environment during the
second quarter and first six months of 2003 compared to the same periods in
2002.  Managed and long-term interest rates are at historical lows.  If managed
rates continue to decrease or even remain at current levels, interest income and
the average rate on earning assets are expected to continue to decline as bank
assets reprice.

Interest and fees on  loans decreased 17.8% to  $3,019,000 for the three  months
ended June 30, 2003 compared to  $3,674,000 for the same  period of 2002.   This
decrease was  the result  of a  $13,125,000 or  6.7% decrease  in average  loans
outstanding and a 90  basis point decrease in  yield on the portfolio.  Interest
and fees on loans decreased  17.3% to $6,268,000 for  the six months ended  June
30, 2003 compared to $7,583,000  in same period of  2002. This decrease was  the
result of a $16,982,000 or 8.5% decrease  in average loans outstanding and a  74
basis point decrease in  yield on the portfolio.  The decrease in average  loans
outstanding for the three and six month periods ended June 30, 2003 compared  to
the same periods in 2002 is largely attributable to the refinancing activity  in
the residential real estate market, weak commercial and consumer loan demand and
competitive pricing pressure for  quality credits.  The  decrease in the  bank's
residential real estate portfolio accounted for $16,431,000 of the overall  year
to date  decrease  and  was  partially  offset  by  a  $10,655,000  increase  in
commercial real estate loans.  Year  to date average commercial loans  decreased
by $5,469,000 or 16.9%  to $26,901,000 and year  to date average consumer  loans
decreased by $6,179,000 or 23.5% to $20,101,000.

Interest income on taxable securities increased by $3,000 or 0.3% in the  second
quarter of 2003 to $929,000  compared to $926,000 for  the same period in  2002.
Average balances of taxable investment securities increased 35.6% to $98,069,000
for the quarter ended June 30, 2003 compared to $72,345,000 for the same  period
in the prior year. However, the  yield on average taxable investment  securities
decreased 133 basis points to 3.80% for  the second quarter of 2003 compared  to
5.13% for the  second quarter of  2002.  The  decrease in the  yield on  taxable
investments is  due  to  accelerated  pre-payment  speeds  on  mortgaged  backed
securities and collateralized mortgage obligations and management's decision  to
keep portfolio duration  short during  this historically  low rate  environment.
Tax exempt investment securities  increased $8,789,000, or  44.8% to an  average
balance of $28,387,000  for the  three months ended  June 30,  2003 compared  to
$19,598,000 for  the  same  period  in  2002.  Interest  income  on  tax  exempt
securities increased $110,000  or 34.7% to  $427,000 for the  second quarter  of
2003 compared to $317,000 for the second quarter of 2002.

Interest income on  taxable securities  increased by  $244,000 or  15.1% in  the
first six months of 2003  to $1,857,000 from $1,613,000  for the same period  in
2002.   Average balances  of taxable  investment securities  increased 48.8%  to
$91,393,000 for the six months ended  June 30, 2003 compared to $61,424,000  for
the same period in the prior year. The increase in average balances  outstanding
was offset by a decrease of 120 basis points  in average yield to 4.10% for  the
first six months of  2003 compared to 5.30%  for the first  six months of  2002.
The decrease in  the yield  on taxable investments  is due  to accelerated  pre-
payment speeds  on  mortgaged  backed  securities  and  collateralized  mortgage
obligations and management's  decision to keep  portfolio duration short  during
this historically low rate environment.  Average tax exempt securities increased
to $26,692,000 for the  six months ended June  30, 2003 compared to  $19,453,000
for the same  period in 2002  and their average  tax equivalent yield  decreased
from 6.54% for the six months ended June 30,  2002 to 6.12% for the same  period
in 2003.

Interest from fed funds sold and securities purchased under agreements to resell
decreased to $7,000 and $49,000 for the  three and six month periods ended  June
30, 2003, respectively, compared to $17,000 and $50,000 during the same  periods
in 2002. The quarterly and year to date decreases in interest on fed funds  sold
and securities purchased under  agreements to resell were  due to lower  average
balances.

Total interest expense decreased  by $268,000, or 12.4%,  to $1,883,000 for  the
three months ended June 30, 2003 compared  to $2,151,000 for the same period  in
2002.  For the six months ended  June 30, 2003 total interest expense  decreased
by $552,000, or 12.8%, to $3,770,000 compared to $4,322,000 for the same  period
in 2002.    The  decrease  in  total interest  expense  is  the  result  of  the
aforementioned lower interest rate environment.

While interest  paid on  deposits decreased  $317,000,  or 20.4%  to  $1,230,000
during the three months ended June 30, 2003 compared to $1,547,000 for the  same
period in 2002, average interest  bearing deposits increased $9,013,000  quarter
over quarter.   Year to date  interest paid on  deposits decreased $612,000,  or
19.7% to $2,496,000  compared to $3,108,000  for the same  period in 2002  while
average total interest bearing deposits increased by $8,199,000.

Interest on  short-term borrowings  decreased $8,000  to $41,000  for the  three
months ended June  30, 2003 compared  to $49,000 for  the same  period in  2002.
This decrease is the result  of an increase of  $3,943,000 in average fed  funds
purchased for the three months ended June  30, 2003 compared to the same  period
in 2002 offset by  lower rates due  to the decrease  in managed interest  rates.
For the  six  months ended  June  30,  2003 interest  on  short-term  borrowings
decreased $19,000 to $76,000  compared to $95,000 for  the same period in  2002.
This decrease is the  net result of  the decrease in  managed interest rates  as
mentioned earlier  and a  $2,625,000, or  25.4% increase  in average  short-term
borrowings to $12,958,000  for the six  months ended June  30, 2003 compared  to
$10,333,000 for the same period in 2002.

Interest expense  on  long-term  borrowings decreased  $25,000  and  $84,000  to
$530,000 and $1,035,000 for the three and six month periods ended June 30,  2003
compared to $555,000  for the second  quarter and $1,119,000  for the first  six
months of 2002.  The decrease is primarily the result of additional Federal Home
Loan Bank advances in 2003, at lower  market interest rates, and the pay-off  of
the bank debt of Blackhawk Bancorp, Inc. during December, 2002 co-incident  with
the issuance of the company's Trust Preferred Securities.

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 $142,000 in the second quarter of 2003, an increase of $20,000
or 16.4% from  the $122,000 in  the second quarter  of 2002. For  the first  six
months of 2003, the provision was $365,000 compared to $261,000 during the  same
time period a year ago.

Activity in the  allowance for  loan losses  is detailed  in footnote  2 to  the
unaudited consolidated financial statements. Charge-offs, net of recoveries  for
the second quarter  of 2003 decreased  by $123,000 to  net recoveries of  $3,000
compared to net charge-offs of $120,000 for the second quarter of 2002. Year  to
date net charge-offs decreased $44,000 or 30.1% to $102,000 compared to $146,000
for the first six months of 2002.

The year to date  increases in the provision  combined with reduced net  charge-
offs and a decrease in the  loan portfolio have resulted  in an increase in  the
ratio of the  allowance to total  loans to 1.26%  at June 30,  2003 compared  to
1.10% at December 31, 2002.

NONINTEREST INCOME

Total noninterest income increased $10,000, or  1.1%, to $880,000 for the  three
months ended June 30,  2003 compared to  $870,000 for the  same period in  2002.
Year  to  date  total  noninterest  income  increased  $405,000,  or  26.8%,  to
$1,917,000 compared to $1,512,000 for the same period in 2002.

Service charges on deposit accounts totaled $363,000 for the quarter ended  June
30, 2003 compared to $396,000 for the second  quarter of 2002.  The decrease  is
primarily due to lower  overdraft fees collected which  decreased by $46,000  or
18.0% to $210,000 for the quarter ended  June 30, 2003 compared to $256,000  for
the second quarter of 2002.  Year to date service charges on deposits  decreased
$45,000, or 6.0%, to $700,000 compared  to $745,000 in the prior year  primarily
due to lower levels of  overdraft fees collected for  the six months ended  June
30, 2003.

Gain on the sale of mortgage loans  increased $87,000 or 161.1% to $141,000  for
the second quarter of  2003 compared to the  $54,000 of gains recognized  during
the second quarter of 2002. The increase  was due to higher volumes and  margins
during the second quarter of 2003. In the second quarter of 2003, $7,719,000  of
loans were sold  to the  secondary market compared  to $3,917,000  for the  same
period in 2002. Year to date gain  on sale of mortgage loans increased  $174,000
or 137.0% to  $301,000 compared to  $127,000 for the  same period  in 2002.  The
increase is due to a higher volume of loans sold and better margins. The average
gain in 2003  was 1.80% on  $16,708,000 in loans  sold to  the secondary  market
compared to an average  gain of 1.04% on  the $12,226,000 of  loans sold in  the
same period in 2002. The lower volume in 2002 is the result of turn-over in  the
company's mortgage banking management and origination staff.

The Company recognized $95,000 in securities gains in the second quarter of 2003
compared to $225,000 in the second  quarter of 2002.   Year to date the  company
has realized $424,000 in securities gains, a $195,000 or 85.2% increase over the
$229,000 realized for the six months ended June 30, 2002.

Other noninterest income increased $86,000 or 44.1% to $281,000 for the  quarter
ended June 30, 2003  compared to $195,000  for the second  quarter of 2002.  The
increase is primarily due to additional income on the bank's investment in  bank
owned life  insurance.    The increase  in  the  cash surrender  value  of  life
insurance increased by  $67,000 in the  second quarter of  2003 compared to  the
second quarter  of  2002.   The  bank invested  $5,000,000  in bank  owned  life
insurance on  September  30,  2002.   Year  to  date  other  noninterest  income
increased by $81,000 or 19.7% to $492,000 for the six months ended June 30, 2003
from $411,000 for the six months ended June 30, 2002. The year to date  increase
is due to an increase in  cash surrender value of  bank owned life insurance  of
$135,000 offset by the unamortized portion of mortgage servicing rights  written
off on early payoffs of loans serviced for others.

NONINTEREST EXPENSES

Total operating expenses decreased $70,000, or 2.5%, to $2,769,000 for the three
months ended June 30, 2003 compared to  $2,839,000 for the same period in  2002.
The second quarter of 2002 included a $75,000 charge for closing the bank's Wal-
Mart facility and  a $50,000 employee  severance charge.   Excluding these  non-
recurring items, operating expenses increased by  $55,000 for the quarter.   The
increase in operating  expenses, net of  the non-recurring items,  is due to  an
increase in marketing and advertising expense.  For the first six months of 2002
total operating expenses increased $100,000, or 1.8%, to $5,720,000 compared  to
$5,620,000 for the same period in 2002.

Salaries and employee benefits increased $22,000  or 1.6% to $1,360,000 for  the
quarter ended June  30, 2003 compared  to $1,338,000 for  the second quarter  of
2002.   For the first  six months of 2002  total salaries and employee  benefits
increased $87,000 or  3.2% to  $2,818,000 compared  to $2,731,000  for the  same
period in 2002.

Occupancy expenses for 2002  included a $75,000 charge  related to the  Wal-Mart
branch consolidation.  Excluding  this one time  charge, occupancy expenses  for
the three months ended June 30, 2003 decreased to $179,000 from $186,000 for the
second quarter of 2002.   Occupancy expenses for the  six months ended June  30,
2003 decreased to $369,000 compared to $374,000 for the same period in 2002.

Furniture and equipment expenses increased $23,000 or 11.1% to $231,000 for  the
quarter ended June 30, 2003 compared to  $208,000 for the same quarter in  2002.
For the  first six  months of  2002 furniture  and equipment  expense  increased
$33,000, or 7.7%, to $461,000 compared to $428,000 for the same period in  2002.
The increase  relates primarily  to increased  depreciation and  maintenance  on
computer equipment purchased.

Data processing costs increased  $15,000, or 8.0%, to  $203,000 for the  quarter
ended June 30, 2003 and $12,000, or 3.1%,  to $399,000 for the six months  ended
June 30, 2003. These increases reflect  higher volumes of service utilized  from
our core processor.

Advertising and marketing costs increased $52,000, or 57.1% to $143,000 for  the
second quarter of 2003 compared to $91,000 for the same period in 2002. Year  to
date advertising and marketing costs increased $44,000, or 27.0% to 207,000 from
$163,000.  The increase is primarily due to  the timing of expenses as a  number
of major marketing campaigns occurred during the second quarter of 2003.

Transportation and postage increased $20,000 or 21.7% to $112,000 for the second
quarter of 2003 compared  to $92,000 for the  second quarter of  2002.  For  the
first six months of 2003 transportation  and postage increased $30,000 or  16.4%
to $212,000 compared to $182,000 for the same  period in 2002.  The increase  is
primarily due  to additional  costs  from an  expansion  of the  bank's  courier
program in 2003.

Other noninterest expenses decreased $106,000 or 33.3% to $212,000 for the three
months ended June 30, 2003 compared to $318,000 for the same period a year  ago.
For the first six months of 2003 other noninterest expenses decreased $31,000 or
5.6% to  $523,000 compared  to $554,000  for the  same period  in 2002.    Other
noninterest expenses in 2002  included $117,000 of  charges to accrue  severance
payments for executive officers that left  the company in 2002 partially  offset
by an $87,000 credit  from adjustment of stale  reconciling items.  The  company
also incurred lower net loan  expenses in 2003 compared  to the same periods  in
2002.

Income taxes decreased $159,000, or 99.4%, to $1,000 for the three months  ended
June 30, 2003  from $160,000 for  the same period  in 2002. For  the six  months
ended June 30, 2003 income taxes  decreased $195,000, or 76.2%, to $61,000  from
$256,000 for  the  same  period  in 2002.  The  decrease  reflects  greater  tax
efficiency brought  about  by  an increase  in  non-taxable  interest  from  the
municipal bond  portfolio and  the  purchase of  bank  owned life  insurance  on
September 30, 2002.

                             BALANCE SHEET ANALYSIS

OVERVIEW

Total assets decreased to $343,533,000 at June 30, 2003 compared to $352,377,000
at December 31, 2002, a  decrease of 2.5%. 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 2.9% from December 31, 2002  to
June 30, 2003.   While total assets excluding  the short-term year-end  deposits
increased by $9,756,000, there was a considerable shift in balances from  short-
term investments to investment securities. Securities increased by  $14,513,000,
while short investments decreased by $19,670,000.

LOANS

Gross loans decreased  $2,498,000, or  1.3%, to  $185,881,000 on  June 30,  2003
compared to $188,379,000 on December 31, 2002. The composition of loans is shown
in the following table:

<TABLE>
                                                                   As a % of Total Loans
                            June 30,   December 31,   Change in   June 30,   December 31,
                              2003          2002       Balance      2003         2002
                            --------   ------------   ---------   --------   ------------
                                   (Dollars in millions)
<S>                           <C>          <C>         <C>          <C>          <C>
Residential Real Estate      $77.0        $71.8        $5.2        41.4%        38.1%
Commercial Real Estate       $55.2        $59.0       ($3.8)       29.7%        31.4%
Construction and Land
   Development               $7.7          $6.4        $1.3         4.1%         3.4%
Commercial                   $26.4        $28.3       ($1.9)       14.2%        15.0%
Consumer                     $19.1        $22.3       ($3.2)       10.3%        11.8%
Other                        $0.5          $0.6       ($0.1)        0.3%         0.3%
</TABLE>

The  historically  low  interest  rate   environment  has  led  to   substantial
prepayments on the company's 1-4 family residential real estate loan  portfolio.
To offset this loan run-off, the bank has retained new adjustable and fixed rate
mortgages with lives  of 15 years  or less.   This has  lead to  an increase  of
$5,200,000 or 7.2%  in residential real  estate loans for  the six months  ended
June 30, 2003.   This increase has partially  offset decreases of $5,700,000  in
Commercial and Commercial  Real Estate loans  and $3,200,000  in Consumer  loans
over the same period.  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:

                                                    JUNE 30,       DECEMBER 31,
   (DOLLARS IN THOUSANDS)                             2003             2002
                                                    --------       ------------
   Non-accruing loans                                $3,233           $2,560
   Past due 90 days or more and still accruing           17               26
                                                     ------           ------
   Total non-performing loans                        $3,250           $2,586
                                                     ------           ------
                                                     ------           ------
   Restructured loans performing in accordance
   with modified terms                               $  393           $  418

ASSET QUALITY

The allowance for loan losses was $2,342,000 or 1.26% of total loans at June 30,
2003 compared to $2,079,000 or 1.10% of total loans at December 31, 2002. As  of
June 30,  2003,  non-performing  loans  and  restructured  loans  performing  in
accordance with  modified terms  totaled $3,643,000  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 debt or  in
its restoration to current status.

At June  30, 2003  the allowance  for loan  losses to  total non-performing  and
impaired loans equaled  64.3% compared  to 69.2% at  December 31,  2002.   Total
nonperforming and impaired loans increased by  $639,000 primarily as the  result
of two large loans.   One is a  commercial real estate loan  and the other is  a
single family residence. Both loans are in foreclosure.

SHORT-TERM INVESTMENTS

Fed funds sold  and securities purchased  under agreements  to resell  decreased
$13,120,000 to $0 at June 30, 2003 compared to $13,120,000 at December 31, 2002.
The  decrease  primarily  reflects   the  liquidation  of  short-term   year-end
investments on January 2,  2002 associated with the  December 31, 2002  year-end
deposits of $18,600,000.

INVESTMENT SECURITIES

Securities available for sale increased  $18,116,000, or 21.6%, to  $102,013,000
at June 30, 2003 compared to $83,897,000  at December 31, 2002. The increase  in
investments in securities available for sale  resulted from the redeployment  of
short-term investments and  cash flows  from held  to maturity  securities.   In
addition, proceeds  from  the  net  decrease in  loans  have  been  invested  in
available for sale securities.

DEPOSITS

Total deposits decreased $14,193,000 to $248,892,000  at June 30, 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 interest-bearing  deposits
of $18,600,000.   Excluding  the short-term  year-end deposits,  total  deposits
increased 1.8%  from  December  31,  2002.  Excluding  the  short-term  year-end
deposits, non-interest  bearing deposits  decreased by  $2,154,000 and  interest
bearing deposits increased by $6,561,000 at  June 30, 2003 compared to  December
31, 2002.

BORROWINGS

Short-term borrowings decreased $1,464,000 to $11,990,000 at June 30, 2003  from
$13,454,000 at year-end. The  decrease is due to  lower outstanding balances  of
repurchase agreements with  commercial customers,  offset by  $2,560,000 in  Fed
funds purchased at June 30, 2003.

Long-term borrowings consist of  term advances from the  Federal Home Loan  Bank
("FHLB") and  were $46,600,000  at  June 30,  2003  compared to  $38,900,000  at
December 31,  2002.   The increase  reflects an  additional $8,000,000  in  FHLB
advances net of a $300,000 repayment invested into securities during 2003.

STOCKHOLDERS' EQUITY

Total stockholders' equity increased  $344,000 to $26,142,000  at June 30,  2003
compared to $25,798,000 at December  31, 2002.  During  the first six months  of
2003 additional  paid  in  capital  increased  by  $75,000  from  stock  options
exercised. Accumulated  other comprehensive  income, which  is composed  of  the
adjustment of securities available for sale to market value, net of tax, and the
fair value of  Blackhawk Bancorp, Inc.'s  interest  rate  SWAP contract, net  of
tax, was $1,282,000  at June  30, 2003 compared  to $1,287,000  at December  31,
2002.  In  addition the company  declared two quarterly  dividends of $0.09  per
share on its common stock, which totaled $453,000.

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.


                                         June 30,   December 31,   Regulatory
                                           2003         2002      Requirements
                                           ----         ----      ------------

Total Capital (To Risk-Weighted Assets)    14.9%        13.9%         8.0%

Tier I Capital (To Risk-Weighted Assets)   13.7%        12.9%         4.0%

Tier I Capital (To Average Assets)          8.2%         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 monthly 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.

During June  2003, the  Company entered  into an  interest rate  SWAP  agreement
related to the  company obligated mandatorily  redeemable preferred  securities.
This SWAP  is  utilized  to  manage  variable  interest  rate  exposure  and  is
designated as a highly effective cash flow  hedge.  The differential to be  paid
or received on the  SWAP agreement is  accrued as interest  rates change and  is
recognized over  the  life of  the  agreement in  interest  expense.   The  SWAP
agreement expires in December 2007 and essentially fixes the rate to be paid  at
5.72%.  The  notional amount  is $7,000,000.   Included  in other  comprehensive
income is a gain of  $69,000, less $24,000 of  deferred income tax, relating  to
the fair  market  value of  the  SWAP agreement  as  of  June 30,  2003.    Risk
management results for the six months ended June 30, 2003 related to the balance
sheet  hedging  of  the  company  obligated  mandatorily  redeemable   preferred
securities indicate that  the hedge  was 100% effective  and that  there was  no
component of the derivative  instrument's gain or loss  which was excluded  from
the assessment of hedge effectiveness.

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 Stockholders,  payments of  principal and  interest  on borrowed  funds  and
subordinated debentures, 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  June  30,  2003  (in
thousands):

 Year Ended       Time          Long-term         Operating
  June 30,      Deposits       debt(1)<F1>          Leases         Total
                --------       -----------        ---------        -----
    2004       $ 71,589          $10,450             $ 50        $ 82,089
    2005         36,912           15,500               50          52,462
    2006          6,753            1,950               50           8,753
    2007          6,569            1,450               50           8,069
    2008          4,622            7,250               25          11,897
 Thereafter           0           17,000                0          17,000
               --------          -------             ----        --------
    Total      $126,445          $53,600             $225        $180,270
               --------          -------             ----        --------
               --------          -------             ----        --------

Commitments to extend credit                                 $ 36,684

(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
$36,684,000 as of June 30, 2003.  This compares to $30,939,000 at December 31,
2002.  The increase in commitments since December 31, 2002 is primarily due to
the volume of mortgage refinancings due to interest rates being at 45 year
historical lows. 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 a judge in the case denied Fiserv's motion for
reimbursement of legal fees. Fiserv has filed an appeal of the judge's decision.
The company plans to aggressively contest their appeal of the initial decision
and has not accrued the legal fee reimbursement claimed by Fiserv.

ITEM 3. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS  AND  PROCEDURES:     The  Company's  management,  with  the
participation of  the  Company's Chief  Executive  Officer and  Chief  Financial
Officer, has evaluated  the effectiveness of  the Company's disclosure  controls
and procedures (as such term is  defined in Rules 13a-15(e) and 15d-15(e)  under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of  the
end of  the period  covered by  this  report.   Based  on such  evaluation,  the
Company's Chief Executive  Officer and  Chief Financial  Officer have  concluded
that, as  of the  end of  such  period, the  Company's disclosure  controls  and
procedures are effective in recording, processing, summarizing and reporting, on
a timely  basis, information  required to  be disclosed  by the  Company in  the
reports that it files or submits under the Exchange Act.

INTERNAL CONTROL OVER FINANCIAL REPORTING:   There have not been any changes  in
the Company's internal control over financial reporting (as such term is defined
in Rules 13a-15(f)  and 15d-15(f)  under the  Exchange  Act) during  the  fiscal
quarter to  which this  report relates  that have  materially affected,  or  are
reasonably likely  to materially  affect, the  Company's internal  control  over
financial reporting.

                                    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

          On May 21, 2003, at the annual meeting of stockholders of the Company,
          the  stockholders  re-elected  Kenneth  A.  Hendricks  and  George  D.
          Merchant and elected Stephen R. Thomas and Stephen P. Carter to three-
          year terms expiring in 2006.   The vote, with respect to the  election
          of each director was as follows:

               Kenneth A. Hendricks
                    2,517,131 total votes eligible to be cast
                    2,033,870 votes were represented at the Annual Meeting
                    1,957,087 votes were cast "For" re-election
                    No votes were cast "Against" re-election
                    76,783 votes were withheld

              George D. Merchant
                    2,517,131 total votes eligible to be cast
                    2,033,870 votes were represented at the Annual Meeting
                    1,944,859 votes were cast "For" re-election
                    No votes were cast "Against" re-election
                    89,011 votes were withheld

               Stephen R. Thomas
                    2,517,131 total votes eligible to be cast
                    2,033,870 votes were represented at the Annual Meeting
                    1,934,054 votes were cast "For" election
                    No votes were cast "Against" election
                    99,816 votes were withheld

               Stephen P. Carter
                    2,517,131 total votes eligible to be cast
                    2,033,870 votes were represented at the Annual Meeting
                    1,933,554 votes were cast "For" election
                    No votes were cast "Against" election
                    100,316 votes were withheld

          In addition, as detailed in the Company's Proxy Statement dated  April
          11, 2003, the  stockholders ratified  the appointment  of McGladrey  &
          Pullen, LLP as the Company's independent accountants for fiscal  2003.
          The result of the vote is as follows:

                    2,517,131 total votes eligible to be cast
                    2,033,870 votes were represented at the Annual Meeting
                    1,961,235 votes were cast "For" the proposal
                    1,717 votes were cast "Against" the proposal
                    70,918 votes abstained

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 was one report  on Form 8-K filed  during the second quarter  of
          2003.   A report  dated  May 5,  2003  disclosed the  Company's  first
          quarter 2003 results under provisions of Regulation FD.

                                   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:  August 5, 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

                            BLACKHAWK BANCORP, INC.

                               INDEX TO EXHIBITS


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

31.1       Certification                                                 X

31.2       Certification                                                 X

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

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