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, 2002

                                       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            July 23, 2002
          ---------------------            --------------
          $.01 par value                  2,501,321 shares

                                     INDEX

                         PART I - FINANCIAL INFORMATION

                                                                       Page
                                                                       ----

ITEM 1.  FINANCIAL STATEMENTS

     Consolidated Condensed Balance Sheets as of
           June 30, 2002 and December 31, 2001                           3

     Consolidated Condensed Statements of Income for the
           Three Months Ended June 30, 2002 and 2001                     4

     Consolidated Condensed Statements of Income for the
           Six Months Ended June 30, 2002 and 2001                       5

     Consolidated Condensed Statements of Shareholders'
           Equity for the Six Months Ended June 30, 2002 and 2001        6

     Consolidated Condensed Statements of Cash Flows for the
           Six Months Ended June 30, 2002 and 2001                     7-8

     Notes to Consolidated Condensed Financial Statements             9-11

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATION                        12-21

                          PART II - OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS              22

ITEM 6.  A) EXHIBITS                                                    23

         B) REPORTS ON FORM 8-K                                         23

SIGNATURES                                                              24

INDEX TO EXHIBITS                                                       25

                     BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                  (UNAUDITED)

                                                         JUNE 30,   DECEMBER 31,
                                                           2002         2001
                                                         --------   ------------
ASSETS                                                   (Dollars in thousands)
------

Cash and cash equivalents                                 $12,514      $11,746
Interest-bearing deposit accounts                             326        7,857
Federal funds sold and other short-term investments         5,431       16,417
Securities available for sale                              69,007       42,623
Securities held to maturity, fair value
  of $25,789 and $24,172                                   24,203       23,735
Federal Home Loan Bank of Chicago stock, at cost            2,449        2,385
Loans held for sale                                           624        2,752
Loans, net of allowance for loan losses
  of $2,519 and $2,404                                    192,773      206,383
Bank premises and equipment, net                            6,443        6,716
Accrued interest receivable                                 2,136        2,067
Intangible assets                                           4,845        5,040
Other assets                                                2,211        2,554
                                                         --------     --------
     Total Assets                                        $322,962     $330,275
                                                         --------     --------
                                                         --------     --------

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
     Non-interest bearing                                $ 31,399     $ 36,618
     Interest bearing                                     208,361      212,987
                                                         --------     --------
     Total deposits                                       239,760      249,605
                                                         --------     --------
Borrowed Funds:
     Short-term borrowings                                 14,408        6,087
     Other borrowings                                      41,167       48,388
                                                         --------     --------
     Total borrowed funds                                  55,575       54,475
                                                         --------     --------
Accrued interest payable                                      860        1,044
Other liabilities                                           1,363        1,410
                                                         --------     --------
     Total Liabilities                                    297,558      306,534
                                                         --------     --------

SHAREHOLDERS' 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,
     2,502,199 and 2,371,398 shares issued                     25           24
Additional paid-in capital                                  8,668        7,555
Retained earnings                                          15,750       15,447
Treasury stock, 2,260 and 4,980 shares, at cost               (26)         (58)
Accumulated other comprehensive income                        987          773
                                                         --------     --------
     Total Shareholders' Equity                            25,404       23,741
                                                         --------     --------
     Total Liabilities and Shareholders' Equity          $322,962     $330,275
                                                         --------     --------
                                                         --------     --------

       See Notes to Unaudited Consolidated Condensed Financial Statements

                     BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                  (UNAUDITED)

                                                    THREE MONTHS ENDED JUNE 30,
                                                           2002           2001
                                                           ----           ----
INTEREST INCOME:                                         (Dollars in thousands)
     Interest and fees on loans                            $3,673       $4,806
     Interest on securities:
          Taxable                                             926          741
          Exempt from federal income taxes                    209          192
     Interest on fed funds sold and
       other short-term investments                            19           20
     Interest on interest-bearing deposits                      5           13
                                                           ------       ------
          Total Interest Income                             4,832        5,772
                                                           ------       ------
INTEREST EXPENSE:
     Interest on deposits                                   1,547        2,374
     Interest on short-term borrowings                         49          294
     Interest on other borrowings                             555          531
                                                           ------       ------
          Total Interest Expense                            2,151        3,199
                                                           ------       ------
     Net Interest Income                                    2,681        2,573
     Provision for loan losses (Note 3)                       122          171
                                                           ------       ------
     Net Interest Income After Provision For Loan Losses    2,559        2,402
                                                           ------       ------
OTHER OPERATING INCOME:
     Service charges on deposit accounts                      396          381
     Gain on sale of mortgage loans                            54          142
     Gain on sale of securities                               225           94
     Brokerage and annuity commissions                         53           65
     Net loss on sale of other assets                         (17)         ---
     Other income                                             159          143
                                                           ------       ------
          Total Other Operating Income                        870          825
                                                           ------       ------
OTHER OPERATING EXPENSES:
     Salaries and employee benefits                         1,338        1,330
     Occupancy expense, net                                   261          182
     Furniture and equipment                                  208          200
     Data processing                                          188          172
     Amortization of intangible assets                         78          124
     Legal and professional fees                              117          117
     Office supplies                                           69           68
     Telephone and telecommunications                          79           71
     Other operating expenses                                 501          442
                                                           ------       ------
          Total Other Operating Expenses                    2,839        2,706
                                                           ------       ------
Income Before Income Taxes                                    590          521
Provision for Income Taxes                                    160          169
                                                           ------       ------
Net Income                                                 $  430       $  352
                                                           ------       ------
                                                           ------       ------
Basic Earnings Per Share                                   $ 0.17       $ 0.15
                                                           ------       ------
                                                           ------       ------
Diluted Earnings Per Share                                 $ 0.17       $ 0.15
                                                           ------       ------
                                                           ------       ------
Dividends Per Share                                        $ 0.09       $ 0.12
                                                           ------       ------
                                                           ------       ------

       See Notes to Unaudited Consolidated Condensed Financial Statements

                     BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                  (UNAUDITED)

                                                       SIX MONTHS ENDED JUNE 30,
                                                           2002          2001
                                                           ----          ----
INTEREST INCOME:                                        (Dollars in thousands)
     Interest and fees on loans                            $7,581       $9,534
     Interest on securities:
          Taxable                                           1,612        1,629
          Exempt from federal income taxes                    417          363
     Interest on fed funds sold and
       other short-term investments                            55           38
     Interest on interest-bearing deposits                     29           26
                                                           ------       ------
          Total Interest Income                             9,694       11,590
                                                           ------       ------
INTEREST EXPENSE:
     Interest on deposits                                   3,108        4,886
     Interest on short-term borrowings                         95          681
     Interest on other borrowings                           1,119        1,024
                                                           ------       ------
          Total Interest Expense                            4,322        6,591
                                                           ------       ------
     Net Interest Income                                    5,372        4,999
     Provision for loan losses (Note 3)                       261          275
                                                           ------       ------
     Net Interest Income After Provision For Loan Losses    5,111        4,724
                                                           ------       ------
OTHER OPERATING INCOME:
     Service charges on deposit accounts                      745          718
     Gain on sale of mortgage loans                           127          230
     Gain on sale of securities                               229           94
     Brokerage and annuity commissions                         82           83
     Net loss on sale of other assets                          (1)           5
     Other income                                             330          297
                                                           ------       ------
          Total Other Operating Income                      1,512        1,427
                                                           ------       ------
OTHER OPERATING EXPENSES:
     Salaries and employee benefits                         2,731        2,597
     Occupancy expense, net                                   449          388
     Furniture and equipment                                  428          399
     Data processing                                          387          320
     Amortization of intangible assets                        154          248
     Legal and professional fees                              296          211
     Office supplies                                          125          150
     Telephone and telecommunications                         151          147
     Other operating expenses                                 899          795
                                                           ------       ------
          Total Other Operating Expenses                    5,620        5,255
                                                           ------       ------
Income Before Income Taxes                                  1,003          896
Provision for Income Taxes                                    256          278
                                                           ------       ------
Net Income                                                 $  747       $  618
                                                           ------       ------
                                                           ------       ------
Basic Earnings Per Share                                   $ 0.31       $ 0.26
                                                           ------       ------
                                                           ------       ------
Diluted Earnings Per Share                                 $ 0.31       $ 0.26
                                                           ------       ------
                                                           ------       ------
Dividends Per Share                                        $ 0.18       $ 0.24
                                                           ------       ------
                                                           ------       ------

       See Notes to Unaudited Consolidated Condensed Financial Statements

                          BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
                                       (UNAUDITED)

                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                      2002              2001
                                                      ----              ----
                                                      (Dollars in thousands)
Common Stock:
     Balance at beginning of period                  $    24           $    23
     Stock options exercised                               1                 1
                                                     -------           -------
     Balance at end of period                             25                24
                                                     -------           -------

Additional Paid-in Capital:
     Balance at beginning of period                    7,555             7,417
     Stock options exercised                           1,117               118
     Sale of treasury stock                               (4)               --
                                                     -------           -------
     Balance at end of period                          8,668             7,535
                                                     -------           -------

Retained Earnings:
     Balance at beginning of period                   15,447            15,573
     Net income                                          747               618
     Dividends declared on common stock                 (444)             (565)
                                                     -------           -------
     Balance at end of period                         15,750            15,626
                                                     -------           -------

Treasury Stock, at cost:
     Balance at beginning of period                      (58)             (120)
     Sale of treasury stock                               32                18
                                                     -------           -------
     Balance at end of period                            (26)             (102)
                                                     -------           -------

Accumulated other comprehensive income:
     Balance at beginning of period                      773               102
     Other comprehensive income, net of taxes            214               421
                                                     -------           -------
     Balance at end of period                            987               523
                                                     -------           -------

Total Shareholders' Equity                           $25,404           $23,606
                                                     -------           -------
                                                     -------           -------

       See Notes to Unaudited Consolidated Condensed Financial Statements

                          BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                     CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                       (UNAUDITED)

                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                      2002              2001
                                                      ----              ----
                                                      (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                       $    747          $    618
   Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:
   Provision for loan losses                             261               275
   Provision for depreciation and amortization           617               698
   Amortization of premiums and (accretion of
          discounts) on Investment securities, net        41                29
   Gain on sale of loans held for sale                  (127)             (230)
   FHLB stock dividends                                  (60)              (75)
   (Gain) loss on sale of property,
     equipment and OREO                                   76                (5)
   Gain on sale of securities                           (229)              (94)
   Loans originated for sale                          (9,971)          (16,316)
   Proceeds from sale of loans held for sale          12,226            13,633
   Change in assets and liabilities:
   Decrease in other assets                              122               458
   (Increase) decrease in accrued interest receivable    (74)              223
   Decrease in accrued interest payable                 (184)             (497)
   Increase (decrease) in other liabilities                8              (183)
                                                    --------          --------
   Net cash provided by (used in)
     operating activities                              3,453            (1,466)
                                                    --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Decrease in federal funds sold,
     interest-bearing deposits and
     other short-term investments, net                18,517             2,451
   Proceeds from maturities and calls
     of securities available-for-sale                  6,263            23,608
   Purchase of securities available-for-sale         (40,600)          (13,952)
   Proceeds from maturities and calls
     of securities held-to-maturity                    2,363             1,629
   Purchase of securities held-to-maturity            (2,868)           (4,528)
   Proceeds from sale of securities
     available-for-sale                                8,523                96
   (Loans originated), net of principal collected     13,064            (1,265)
   Proceeds from the sale of property,
     equipment and OREO                                  376               641
   Purchase of bank premises and equipment              (225)             (661)
                                                    --------          --------
   Net cash provided by investing activities           5,413             8,019
                                                    --------          --------

      See Notes to Unaudited Consolidated Condensed Financial Statements.

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

                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                      2002              2001
                                                      ----              ----
                                                      (Dollars in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
   Stock options exercised                          $  1,050          $    119
   Sale of treasury stock                                 28                18
   Net decrease in deposits                           (9,845)          (24,665)
   Net increase in borrowings                          1,100            18,965
   Dividends paid                                       (431)             (565)
                                                    --------          --------
   Net cash used in financing activities              (8,098)           (6,128)
                                                    --------          --------
   Increase in cash and cash equivalents                 768               425

CASH AND CASH EQUIVALENTS:
   Beginning                                          11,746            13,336
                                                    --------          --------

   Ending                                            $12,514           $13,761
                                                    --------          --------
                                                    --------          --------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash payments for:
       Interest                                     $  4,506          $  7,088
       Income taxes                                 $   (118)         $    108

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
   ACTIVITIES:
   Other assets acquired in settlement of loans     $    285          $    741

      See Notes to Unaudited Consolidated Condensed Financial Statements.

                          BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                      June 30, 2002

Note 1.   General:

          The accompanying consolidated  condensed financial statements  conform
          to generally accepted accounting  principles and to general  practices
          within the banking industry.   The more  significant policies used  by
          the Company in preparing and  presenting its financial statements  are
          stated in the Corporation's Form 10-KSB.

          The effect of  timing differences in  the recognition  of revenue  and
          expense for tax  liability is  not determined  until the  end of  each
          fiscal year.

          In the opinion of Management, the accompanying unaudited  consolidated
          condensed financial statements contain all adjustments (consisting  of
          normal recurring accruals) necessary  to present fairly the  financial
          position of the Corporation  as of June 30,  2002, and the results  of
          operations for the three and six months ended June 30, 2002 and 2001.

          The results of operations for the three and six months ended June  30,
          2002 and 2001  are not  necessarily indicative  of the  results to  be
          expected for the full year.

          Certain reclassifications  have  been  made  to  the  2001  historical
          financial statements to conform to the 2002 presentation.

Note 2.   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)                         2002         2001
                                                         ----         ----
          Non-accruing loans                            $3,065       $2,808
          Past due 90 days or more and still accruing       56          356
                                                        ------       ------
          Total non-performing loans                    $3,121       $3,164
                                                        ------       ------
                                                        ------       ------

          Performing loans classified as impaired       $  638       $1,147


                     BLACKHAWK BANCORP, INC. AND SUBSIDIARY
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 June 30, 2002
                                  (CONTINUED)

Note 3.   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)                         2002         2001
                                                         ----         ----
          Balance at beginning of period                $2,517       $3,912
          Provision charged to expense                     122          171
          Loans charged off                                131        2,076
          Recoveries                                        11           50
                                                        ------       ------
          Balance at end of period                      $2,519       $2,057
                                                        ------       ------
                                                        ------       ------


                                                         SIX MONTHS ENDED
                                                              JUNE 30,
                                                              --------
          (Dollars in thousands)                         2002         2001
                                                         ----         ----
          Balance at beginning of period                $2,404       $3,894
          Provision charged to expense                     261          275
          Loans charged off                                182        2,168
          Recoveries                                        36           56
                                                        ------       ------
          Balance at end of period                      $2,519       $2,057
                                                        ------       ------
                                                        ------       ------

Note 4.   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,
                                                           2002           2001           2002          2001
                                                           ----           ----           ----          ----
<S>                                                        <C>            <C>            <C>            <C>
Basic:
Net income available to common stockholders            $  430,000     $  352,000     $  747,000     $  618,000
                                                       ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------
Weighted average shares outstanding                     2,478,283      2,348,125      2,431,572      2,343,687
                                                       ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------
Basic earnings per share                               $     0.17     $     0.15     $     0.31     $     0.26
                                                       ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------

Diluted:
Net income available to common stockholders            $  430,000     $  352,000     $  747,000     $  618,000
                                                       ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------
Weighted average shares outstanding                     2,478,283      2,348,125      2,431,572      2,343,687
Effect of dilutive stock options outstanding                9,782         42,685          9,782         42,685
                                                       ----------     ----------     ----------     ----------
Diluted weighted average shares outstanding             2,488,065      2,390,810      2,441,354      2,386,372
                                                       ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------
Diluted earnings per share                             $     0.17     $     0.15     $     0.31     $     0.26
                                                       ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------
</TABLE>

                     BLACKHAWK BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                      June 30, 2002
                                  (CONTINUED)

Note 5.   Recent Accounting Developments

          Business Combinations

          In September  2001, the  Financial Accounting  Standards Board  (FASB)
          issued Statement  of Financial  Accounting Standards  (SFAS) No.  141,
          "Business  Combinations",  and  SFAS  No.  142,  "Goodwill  and  Other
          Intangible Assets."  SFAS  No. 141  supersedes  Accounting  Principles
          Board (APB) Opinion No. 16, "Business Combinations", and SFAS No.  38,
          "Accounting   for    Preacquisition   Contingencies    of    Purchased
          Enterprises." SFAS No. 141 requires the use of the purchase method  of
          accounting for  business combinations  initiated after  September  30,
          2001.   SFAS  No.  142 supersedes  APB  Opinion  No.  17,  "Intangible
          Assets." SFAS No. 142 addresses how intangible assets acquired outside
          of a business combination should be accounted for upon acquisition and
          how goodwill and other intangible assets should be accounted for after
          they have  been initially  recognized.   SFAS No.  142 eliminates  the
          amortization for goodwill and other intangible assets with  indefinite
          lives.  Other intangible assets with  a finite life will be  amortized
          over their useful  life.  Goodwill  and other  intangible assets  with
          indefinite useful lives  shall be  tested for  impairment annually  or
          more frequently if  events or changes  in circumstances indicate  that
          the asset may be impaired.  SFAS No. 142 is effective for fiscal years
          beginning after December 15, 2001.

          The Company's  strategy  over  the past  several  years  has  included
          business combinations  accounted  for under  the  purchase  accounting
          method which created  goodwill upon the  transactions' closings.   The
          Company has goodwill of $3.1 million  on its balance sheet as of  June
          30, 2002.   It  was previously  being amortized  over 20  years.   The
          pronouncement eliminates  amortization of  this asset and subjects  it
          to periodic impairment analysis.

          The Company  adopted SFAS  No. 142  on January  1, 2002.  The  Company
          passed step one of the goodwill impairment test at January 1, 2002.


   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, 2001.

This quarterly Report  contains certain  "forward-looking statements"  within
the meaning of  the Private Securities  Litigation Reform Act  of 1995.  Such
statements are subject to certain  risks and uncertainties, including,  among
other things, changes in  economic conditions in  the Company's market  area,
changes in policies by regulatory  agencies, fluctuations in interest  rates,
demand for loans in  the Company's market areas  and competition, that  could
cause actual results to differ materially from historical earnings and  those
presently anticipated or projected. The Company wishes to caution readers not
to place undue reliance on any  such forward-looking statements, which  speak
only as of  the date  made. The  company wishes  to advise  readers that  the
factors listed above  could affect  the Company's  financial performance  and
could cause  the  Company's  actual results  for  future  periods  to  differ
materially from any opinions or statements  expressed with respect to  future
periods in any current statements.

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

                          SIX MONTHS ENDED JUNE 30

The company reported net income of $747,000 for the six months ended June 30,
2002, an increase  of $129,000 or  20.9% from the  $618,000 reported for  the
same six month period in 2001.  Net income for the six months ended June  30,
2002 includes  the  effect  of adopting  Statement  of  Financial  Accounting
Standards  (SFAS)   No.  142,   "Goodwill  and   Other  Intangible   Assets."
Accordingly, amortization  of intangible  assets with  indeterminable  useful
lives resulting  from prior  acquisitions accounted  for under  the  purchase
method of accounting was discontinued. The  adoption of SFAS No. 142 had  the
impact of increasing net income by $94,000 for the six months ended June  30,
2002 compared to the same period in 2001.  In the second quarter of 2002  the
company recorded an after tax charge of $45,000 to reflect the  consolidation
of it's  Wal-Mart  branch into  a  nearby  full service  branch.  The  charge
reflects the current write-off  of the net book  value of the branch's  fixed
assets and the  estimated cost to  return the leased  space to its  condition
prior to the company's use as a branch. The Company also recorded a  $117,000
charge for officer severance agreements. Diluted  earnings per share for  the
six months  ended June  30, 2002  were   $0.31,  a  $0.05 or  19.2%  increase
compared to the $0.26 per diluted share for the same period in 2001.

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.  Net  interest  income
increased by $373,000, or 7.5%, to  $5,372,000 for the six months ended  June
30, 2002, compared to $4,999,000 for the comparable period in 2001.  The  net
interest margin, which is the tax  equivalent net interest income divided  by
average interest earning assets  increased 35 basis points  to 3.87% for  the
six months ended June  30, 2002 compared  to 3.52% for  the six months  ended
June 30, 2001.

The following table sets forth  the company's consolidated average  balances of
assets, liabilities and  shareholders' equity  as well as  interest income  and
expense on related  items, and  the company's average  rate for  the six  month
periods ended June 30, 2002 and 2001:

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES

<TABLE>
(yields on a tax-equivalent basis)            Six months ended June 30, 2002            Six months ended June 30, 2001
                                           -----------------------------------       ------------------------------------

                                           Average                     Average       Average                      Average
                                           Balance       Interest        Rate        Balance       Interest        Rate
                                           -------       --------      -------       -------       --------       -------
<S>                                          <C>           <C>           <C>           <C>           <C>           <C>
INTEREST EARNING ASSETS:
  Interest-bearing deposit
      Accounts                            $   3,267       $   29         1.79%      $  1,004        $    26        5.22%
  Federal funds sold &
      short-term investments                  6,734           55         1.65%         1,574             38        4.87%
  Investment securities:
     Taxable investment securities           61,421        1,612         5.29%        52,517          1,629        6.26%
     Tax-exempt investment
       securities                            19,453          417         6.55%        17,115            363        6.48%
                                           --------       ------         -----      --------        -------        -----
           Total investment securities       80,874        2,029         5.60%        69,632          1,992        6.31%
  Loans                                     199,928        7,581         7.65%       224,643          9,534        8.56%

TOTAL EARNING ASSETS                       $290,803       $9,694         6.87%      $296,853        $11,590        8.00%
                                                          ------         -----                      -------        -----
  Allowance for loan losses                 (2,519)                                   (3,874)
  Cash and cash equivalents                   9,820                                   10,038
  Other assets                               17,203                                   18,477
                                           --------                                 --------
TOTAL ASSETS                               $315,307                                 $321,494
                                           --------                                 --------
                                           --------                                 --------

INTEREST BEARING LIABILITIES:
  Interest bearing demand deposits       $   32,148       $  172         1.08%      $ 26,755        $   340        2.56%
  Savings deposits                           53,778          321         1.20%        49,856            647        2.62%
  Time deposits                             121,435        2,615         4.34%       133,325          3,899        5.90%
                                           --------       ------         -----      --------        -------        -----
      Total interest bearing deposits       207,361        3,108         3.02%       209,936          4,886        4.69%
   Short-term borrowings                     10,338           95         1.85%        24,416            681        5.62%
   Other borrowings                          41,833        1,119         5.39%        35,665          1,024        5.79%

TOTAL INTEREST-BEARING
LIABILITIES                                $259,532       $4,322         3.36%      $270,017        $ 6,591        4.92%
                                                          ------         -----                      -------        -----

NET INTEREST SPREAD                                                      3.51%                                     3.08%
                                                                         -----                                     -----

  Demand deposits                            29,257                                   25,090
  Other liabilities                           2,113                                    2,574
                                           --------                                 --------
  Total liabilities                         290,902                                  297,681
  Shareholders' equity                       24,405                                   23,813
                                           --------                                 --------
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                     $315,307                                 $321,494
                                           --------                                 --------
                                           --------                                 --------

NET INTEREST MARGIN                                       $5,372         3.87%                      $ 4,999        3.52%
                                                          ------         -----                      -------        -----
                                                          ------         -----                      -------        -----
</TABLE>


For the  six months  ended June  30, 2002,  total interest  income decreased  by
$1,896,000, or 16.4%, to $9,694,000 compared to $11,590,000 for the same  period
in 2001.  The decrease in interest income is  due to a 2.0% decrease in  average
earning assets, and a 113 basis point  decrease in the yield on average  earning
assets to 6.87% for the first six months of 2002, compared to 8.00% for the same
period in 2001. The decrease in the  yield on average earning assets reflects  a
shift in  the asset  mix  from loans  to  investment securities  and  short-term
investments for the first six months of 2002 compared to 2001.  The decrease  in
the yield  on average  earning  assets also  reflects  the lower  interest  rate
environment during the first six months of  2002 compared to the same period  in
2001. Interest  and fees  on loans  decreased 20.5%  to $7,581,000  for the  six
months ended June 30, 2002 compared to  $9,534,000 in same period of 2001.  This
decrease was the result of  a $24.7 million or  11.0% decrease in average  loans
outstanding and a 91 basis point decrease  in yield on the portfolio. The  lower
overall portfolio yield reflects the Federal Reserve Bank's lowering of  managed
rates by 3.75% during 2001.

Interest income on taxable securities decreased by $17,000 or 1.0% in the  first
six months of 2002 to  $1,612,000 from $1,629,000 for  the same period in  2001.
Average balances  of  taxable investment  securities  increased 17.0%  to  $61.4
million for the six months ended June 30, 2002 compared to $52.5 million for the
same period in the prior year. The increase in average balances outstanding  was
offset by a decrease of 97 basis points in average yield to 5.29% for the  first
six months of 2002 compared to 6.26% for  the first six months of 2001.  Average
tax exempt securities increased to $19.5  million for the six months ended  June
30, 2002 compared to $17.1 for the same  period in 2001 while their average  tax
equivalent yield increased from 6.48% for the six months ended June 30, 2001  to
6.55% for the similar period in 2002.

Interest from fed funds sold and short-term investments increased to $55,000 for
the six months ended June 30, 2002 from  $38,000 during the same period in  2001
and reflect higher average invested balances kept in the first quarter of  2002.
Interest on interest-bearing deposit accounts increased to $29,000 for the first
six months of  2002 compared to  $26,000 for the  same period in  2001 and  also
reflects higher  average  balances  from  the  first  quarter  of  2002.  Excess
liquidity from  loan  and investment  scheduled  payments and  prepayments  were
invested short-term for much of the first three months of 2002 before being  re-
deployed into investment securities during the second quarter of 2002.

Total interest expense decreased by $2,269,000, or 34.4%, to $4,322,000 for  the
six months ended June  30, 2002 compared  to $6,591,000 for  the same period  in
2001.  This  decrease is the  result of the  aforementioned lower interest  rate
environment coupled with favorable  shifts in the  company's funding mix.  While
interest paid on deposits decreased $1,778,000,  or 36.4%. to $3,108,000  during
the six months ended June 30, 2002 compared to $4,886,000 for the same period in
2001, average interest bearing deposits decreased only $2.6 million or 1.2% year
over year.   The average balance  of time deposits  decreased $11.9 million,  or
8.9%, to $121.4  million for  the six  months ended  June 30,  2002 compared  to
$133.3 million for the same period in 2001. The decrease in the average  balance
of time deposits  was offset with  increases in the  average balances of  demand
deposits, interest-bearing demand deposits and savings accounts of $4.2 million,
$5.4 million and $3.9 million, respectively.

Interest on  short-term borrowings  decreased $586,000  to $95,000  for the  six
months ended June 30,  2002 compared to  $681,000 for the  same period in  2001.
This decrease  is  the result  of  the decrease  in  managed interest  rates  as
mentioned earlier and a $14.1 million,  or 57.7% decrease in average  short-term
borrowings to $10.3 million for the six  months ended June 30, 2002 compared  to
the same period in 2001.

Interest expense on other borrowings increased  $95,000, or 9.3%, to  $1,119,000
for the first six months of 2002 compared to $1,024,000 for the first six months
of 2001.  The increase is the result of a $6.2 million, or 17.3% increase in the
average balance of other  borrowings to $41.8 million  for the six months  ended
June 30, 2002 compared to $35.7 million for the  first six months of 2001.   The
increase in other borrowings is the result of refinancing FHLB daily advances to
term notes during 2001.

PROVISION FOR LOAN LOSSES

The provision for  loan losses  is an  amount added  to the  allowance for  loan
losses to provide for the known and estimated  amount of loans that will not  be
collected. Loan  losses  are  charged  against  the  allowance  when  management
believes the  uncollectability  of  a  loan  balance  is  confirmed.  Subsequent
recoveries, if any,  are credited to  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.   Activity  in the  allowance for  loan
losses account for the first six months of 2002  and 2001 is detailed in note  3
to the consolidated condensed financial statements.

The provision for  loan losses  recorded in  the first  six months  of 2002  was
$261,000 compared to $275,000 in 2001. At  June 30, 2002 the allowance for  loan
losses was equal to 1.29% of portfolio  loans compared to 1.15% at December  31,
2001.   It is  management's  opinion that  this  amount represents  an  adequate
allowance for loan losses.

OTHER OPERATING INCOME

Total other operating income increased $85,000,  or 6.0%, to $1,512,000 for  the
six months ended June  30, 2002 compared  to $1,427,000 for  the same period  in
2001. The  Company recognized  securities gains  of $229,000  in the  first  six
months of 2002 compared to $94,000 in the same  period of 2001. Gain on sale  of
mortgage loans decreased $103,000 or 44.8% to $127,000 for the six months  ended
June 30, 2002 compared to $230,000 for the same period in 2001. The decrease  is
due to lower volume and less favorable market pricing. The average gain in  2002
was 1.04% on the $12.2 million in loans sold to the secondary market compared to
an average gain of 1.72% on the $13.6 million  of loans sold in the same  period
in 2001. Service  charges on  deposit accounts  increased $27,000,  or 3.8%,  to
$745,000 for the first six months of 2002 compared to $718,000 the prior year.

OPERATING EXPENSES

Total operating expenses increased $365,000, or 6.9%, to $5,620,000 for the  six
months ended June 30, 2002 compared to  $5,255,000 for the same period in  2001.
This includes a  $134,000, or 5.2%  increase in compensation  and benefits.  The
increase reflects the addition of a  number of key management personnel as  part
of the company's restructuring efforts.  Occupancy expenses increased 15.7%,  or
$61,000, to $449,000 for the six months ended June 30, 2002 compared to $388,000
for the six months ended  June 30, 2001 and  include $75,000 in pre-tax  charges
related to  the  Wal-Mart  branch  consolidation  previously  discussed.    Data
processing costs increased  $67,000, or 20.9%,  to $387,000 for  the six  months
ended June 30, 2002.  This increase reflects the cost of the company's  internet
banking and platform systems, which were implemented  at the end of 2001, and  a
conversion  credit  that  was  received  in  the  first  six  months  of   2001.
Amortization of  intangible assets  decreased $94,000  to $154,000  for the  six
months ended June  30, 2002, which  reflects the adoption  of SFAS  No. 142,  as
discussed in Note 5 to the  consolidated condensed financial statements.   Legal
and professional fees  increased $85,000 to  $296,000 as a  result of  increased
legal fees  related to  the Company's  claim against  a former  data  processing
service provider and charges in the first quarter of 2002 for a bank  regulatory
exam. Office supplies decreased by $25,000 to $125,000 for the six months  ended
June 30,  2002  reflecting  company  efforts  to  control  supply  costs.  Other
operating expenses increased $104,000 to $899,000 for the six months ended  June
30, 2002  reflecting higher  costs for  marketing, postage  and loan  collection
expense.  Other operating  expense also includes $117,000  of charges to  accrue
severance payments for  executive officers that  left the company  in 2002.   In
addition, the  company  realized  an  $87,000  credit  against  other  operating
expenses due to an adjustment related to stale reconciling items.

Income taxes decreased $22,000,  or 7.9%, to $256,000  for the six months  ended
June 30,  2002  from $278,000  for  the same  period  in 2001.  The  decline  in
effective tax rate to 25.5% for the 2002 period from 31.0% in the same period of
2001 is reflective  of greater tax  efficiency brought about  by an increase  in
non-taxable  income  and  a  reduction  in  nondeductible  purchase   accounting
amortization.


                             BALANCE SHEET ANALYSIS

OVERVIEW

Total assets decreased  to $323.0 million  at June 30,  2002 compared to  $330.3
million at December 31, 2001, a decrease of 2.2%.  The December 31, 2001 balance
sheet included  short-term  year-end  deposits  of  $14.4  million,  which  were
invested in federal funds sold at December 31, 2001.  Excluding these  deposits,
total assets increased  2.2% from December  31, 2001 to  June 30,  2002.   While
total assets,  excluding the  short-term year-end  deposits, increased  by  $7.1
million, there was a  considerable shift in balances  from loans and  short-term
investments to investment securities. Securities available for sale increased by
$26.4 million, while loans, net of allowance for loan losses, decreased by $13.6
million and short-term  investments, excluding  the year-end  deposits of  $14.4
million, decreased by $4.1 million.

LOANS

Net portfolio loans decreased $13.6 million, or 6.6%, to $192.8 million on  June
30, 2002 compared to $206.4 million  on December 31, 2001. The bank  experienced
decreases in consumer, commercial and real estate loans outstanding at June  30,
2002 compared  to December  31, 2001.  The economic  conditions in  the  markets
served by the bank  adversely effected loan demand  leading to decreases in  all
categories of loans outstanding.

The allowance for loan losses  was $2.5 million or  1.29% of portfolio loans  at
June 30, 2002 compared to $2.4 million  or 1.15% of portfolio loans at  December
31, 2001.  The  increase  in  the  reserve  percentage  reflects  the  company's
commitment to provide an adequate reserve given the weak economy in our markets.
As of June 30, 2002, non-performing loans totaled $3.8 million compared to  $4.3
million at December 31, 2001. Management believes that the allowance is adequate
at this time.

SHORT-TERM INVESTMENTS

Fed funds sold and other short-term investments decreased $11.0 million to  $5.4
million at June 30,  2002 compared to  $16.4 million at  December 31, 2001.  The
decrease primarily reflects the  liquidation of short-term year-end  investments
on January 2, 2002  associated with the December  31, 2001 year-end deposits  of
$14.4 million.

INVESTMENT SECURITIES

Securities available  for  sale increased  $26.4  million, or  61.9%,  to  $69.0
million at June 30,  2002 compared to  $42.6 million at  December 31, 2001.  The
increase in  investments in  securities available  for  sale resulted  from  the
redeployment of cash flows from the decrease in loans and increase in  deposits.
Securities held to maturity  increased $.5 million or  2.0% to $24.2 million  at
June 30, 2002 from $23.7 million at December 31, 2001.

DEPOSITS

Total deposits  decreased  $9.8 million  to  $239.8  million at  June  30,  2002
compared to $249.6 million at December  31, 2001. As noted above, the  Company's
December 31, 2001 financial statements  reflect short-term year-end deposits  of
$14.4 million.    Excluding the  short-term  year-end deposits,  total  deposits
increased 1.9%  from  December  31,  2001.  Excluding  the  short-term  year-end
deposits of $5.9 million and $8.5  million included in non-interest bearing  and
interest bearing deposits, respectively, non-interest bearing deposits increased
by $0.7 million and interest bearing deposits increased by $3.9 million at  June
30, 2002 compared to December 31, 2001.

BORROWINGS

Short-term borrowings increased $8.3  million to $14.4 million at June 30,  2002
from  $6.1  million at  year-end.  The increase  is  due to  higher  outstanding
balances of  repurchase agreements with commercial customers. Other  borrowings,
consisting  of long-term  borrowings  incurred in  part  to complete  the  First
Financial  acquisition  and  term  advances from  the  Federal  Home  Loan  Bank
("FHLB"),  were $41.2 million  at June  30, 2002  compared to  $48.4 million  at
December  31,  2001. The  decrease  primarily  reflects the  repayment  of  $6.8
million in FHLB advances during January 2002.

SHAREHOLDERS' EQUITY

Total shareholders' equity increased  $1.7 million to $25.4 million at June  30,
2002  compared to $23.7  million at  December 31, 2001.   During  the first  six
months of 2002 additional  paid in capital increased by $1.1 million from  stock
options  exercised.  Accumulated  other  comprehensive  income,  which  is   the
adjustment  of  securities available  for  sale to  market  value, net  of  tax,
increased  $.2 million to  $1.0 million  at June 30,  2002 from  $.8 million  at
December 31, 2001.  In addition the company declared two dividends of $0.09  per
share on common stock, which totaled $444,000.

The Company is subject to certain regulatory capital requirements and  continues
to  remain  in  a  well-capitalized position.  The  following  table  shows  the
company's  capital  ratios  and regulatory  requirements  to  maintain  a  well-
capitalized rating.

                                           JUNE 30,   DECEMBER 31,  REGULATORY
                                             2002         2001     REQUIREMENTS
                                             ----         ----     ------------

Total Capital (To Risk-Weighted Assets)      11.0%        9.6%         8.0%

Tier I Capital (To Risk-Weighted Assets)      9.8%        8.5%         4.0%

Tier I Capital (To Average Assets)            6.3%        5.9%         4.0%

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

OFF BALANCE SHEET ITEMS AND CONTINGENCIES

Off-balance sheet  items  consist  of credit  card  lines  of  credit,  mortgage
commitments, letters  of credit  and  other commitments  totaling  approximately
$20.5 million as of June 30, 2002.   This compares to $25.8 million at  December
31, 2001.  The Bank has  historically funded off-balance sheet commitments  with
its primary sources of funds and management anticipates that this will continue.

At June 30, 2002 the Company continues to carry a $271,000 receivable related to
a $541,000 claim against  its former data  processor.  The  claim relates to  an
improper charge made by a former  data processing service provider  ("Provider")
to the Company's check  clearing account maintained with  the Federal Home  Loan
Bank of Chicago.  Trial  in this matter has  been rescheduled for October  2002.
The receivable will be adjusted  based on the results  of the upcoming trial  or
other developments as they occur. Legal  fees relating to this matter are  being
expensed as incurred.  Management intends to aggressively pursue recovery of the
entire $541,000, that was improperly charged, and related legal fees.

                             RESULTS OF OPERATIONS

                           THREE MONTHS ENDED JUNE 30

The company reported net income of $430,000 for the three months ended June  30,
2002, an increase of $78,000 or 22.2% from  the  $352,000 reported for the  same
three month period  in 2001.   Net income for  the quarter ended  June 30,  2002
includes the second quarter effect of adopting Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill  and Other Intangible Assets."  Accordingly,
amortization of  intangible assets  with indeterminable  useful lives  resulting
from prior acquisitions accounted  for under the  purchase method of  accounting
was discontinued.   The adoption  of SFAS No. 142  had the impact of  increasing
net income by $46,000 for the second quarter of 2002 compared to the same period
in 2001.     Diluted earnings  per share  for the  second quarter  of 2002  were
$0.17, a $0.02 or 13.3% increase compared to the $0.15 per diluted share for the
second quarter of 2001.

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.  Net  interest income  increased  by
$108,000, or 4.2%, to $2,681,000 for  the quarter ended June 30, 2002,  compared
to $2,573,000 for the comparable period in 2001.  The net interest margin, which
is the tax equivalent  net interest income divided  by average interest  earning
assets increased  19  basis points  to  3.81% for  the  second quarter  of  2002
compared to 3.62% the similar period in 2001.

The following table sets forth the company's consolidated average balances of
assets, liabilities and shareholders' equity as  well as interest income  and
expense on related items, and the company's average rate for the three  month
periods ended June 30, 2002 and 2001:

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES

<TABLE>
(yields on a tax-equivalent basis)           Three months ended June 30, 2002           Three months ended June 30, 2001
                                           ------------------------------------       ------------------------------------
                                           Average                      Average       Average                      Average
                                           Balance       Interest        Rate         Balance       Interest         Rate
                                           -------       --------       -------       -------       --------       -------
<S>                                          <C>            <C>           <C>           <C>            <C>            <C>
INTEREST EARNING ASSETS:
  Interest-bearing deposit
      accounts                            $    844        $    5         2.38%       $  1,078        $   13         4.84%
  Federal funds sold &
      short-term investments                 4,469            19         1.71%          1,702            20         4.71%
  Investment securities:
     Taxable investment securities          72,345           926         5.13%         48,405           741         6.14%
     Tax-exempt investment
       securities                           19,598           209         6.49%         18,188           192         6.42%
                                          --------        ------         -----       --------        ------         -----
           Total investment securities      91,943         1,135         5.42%         66,593           933         6.22%
  Loans                                    196,087         3,673         7.51%        226,898         4,806         8.50%

TOTAL EARNING ASSETS                      $293,343        $4,832         6.75%       $296,271        $5,772         7.95%
                                                          ------         -----                       ------         -----

  Allowance for loan losses                 (2,518)                                    (3,812)
  Cash and cash equivalents                 10,173                                     10,196
  Other assets                              16,980                                     18,072
                                          --------                                   --------

TOTAL ASSETS                              $317,978                                   $320,727
                                          --------                                   --------
                                          --------                                   --------

INTEREST BEARING LIABILITIES:
  Interest bearing demand deposits        $ 33,172        $   89         1.08%       $ 28,380        $  176         2.49%
  Savings deposits                          53,730           157         1.17%         49,776           306         2.47%
  Time deposits                            121,827         1,301         4.28%        131,013         1,892         5.79%
                                          --------        ------         -----       --------        ------         -----
      Total interest bearing deposits      208,729         1,547         2.97%        209,169         2,374         4.55%
   Short-term borrowings                    10,879            49         1.81%         21,997           294         5.36%
   Other borrowings                         41,306           555         5.39%         37,160           531         5.73%

TOTAL INTEREST-BEARING
LIABILITIES                               $260,914        $2,151         3.31%       $268,326        $3,199         4.78%
                                                          ------         -----                       ------         -----

NET INTEREST SPREAD                                                      3.45%                                      3.17%
                                                                         -----                                      -----
                                                                         -----                                      -----



  Demand deposits                           30,274                                     26,113
  Other liabilities                          2,011                                      2,785
                                          --------                                   --------
  Total liabilities                        293,199                                    297,224
  Shareholders' equity                      24,779                                     23,503
                                          --------                                   --------

TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                    $317,978                                   $320,727
                                          --------                                   --------
                                          --------                                   --------

NET INTEREST MARGIN                                       $2,681         3.81%                       $2,573         3.62%
                                                          ------         -----                       ------         -----
                                                          ------         -----                       ------         -----
</TABLE>

For the three  months ended June  30, 2002, total  interest income decreased  by
$940,000, or 16.3%, to $4,832,000 compared to $5,772,000 for the same period  in
2001.  The  decrease in interest  income is due  to a 1.0%  decrease in  average
earning assets, and a 120 basis point  decrease in the yield on average  earning
assets to 6.75% for the second three months  of 2002, compared to 7.95% for  the
same period  in  2001. The  decrease  in the  yield  on average  earning  assets
reflects a shift  in the  asset mix  from loans  to investments  for the  second
quarter of 2002 compared to 2001. The  decrease in the yield on average  earning
assets also reflects the lower interest rate environment during the second three
months of 2002 compared to the same period  in 2001. Interest and fees on  loans
decreased 23.6% to $3,673,000 for the three months ended June 30, 2002  compared
to $4,806,000 in same period of 2001.  This  decrease was the result of a  $30.8
million or 13.6%  decrease in  average loans outstanding  and a  99 basis  point
decrease in yield on the portfolio.  The lower overall portfolio yield  reflects
the Federal Reserve Bank's lowering of managed rates by 3.75% during 2001.

Interest income on  taxable securities  increased by  $185,000 or  25.0% in  the
second three months of  2002 to $926,000  from $741,000 for  the same period  in
2001. Average balances of taxable investment securities increased 49.4% to $72.3
million for the quarter ended  June 30, 2002 compared  to $48.4 million for  the
same period in the prior year. However, the yield on average taxable  investment
securities decreased 101 basis  points to 5.13% for  the second quarter of  2002
compared to 6.14%  for the second  quarter of 2001,  reflecting the decrease  in
managed rates which occurred throughout  2001. Tax exempt investment  securities
increased $1.4 million, or 7.8% to an  average balance of $19.6 million for  the
three months ended June 30, 2002 compared to $18.2 for the same period in 2001.

Interest from fed funds sold and short-term investments decreased to $19,000 for
the three months  ended June 30,  2002 from $20,000  during the  same period  in
2001.  Interest on interest-bearing deposit accounts decreased to $5,000 for the
second quarter of 2002 compared to $13,000 for the same period in 2001. This  is
the result of a $2.5 million increase in the average balance of interest-bearing
deposit accounts, fed funds sold and short-term investments to $5.3 million  for
the three months ended  June 30, 2002 compared  to $2.8 for  the same period  in
2001 and reflects the lower yields earned in 2002.

Total interest expense decreased by $1,048,000, or 32.8%, to $2,151,000 for  the
three months ended June 30, 2002 compared  to $3,199,000 for the same period  in
2001.  This  decrease is the  result of the  aforementioned lower interest  rate
environment coupled with favorable  shifts in the  company's funding mix.  While
interest paid on deposits decreased $827,000, or 34.8% to $1,547,000 during  the
three months ended June 30, 2002 compared  to $2,374,000 for the same period  in
2001, average total deposits increased $3.7  million quarter over quarter.   The
average balance of  time deposits  decreased $9.2  million, or  7.0%, to  $121.8
million for the three months ended June 30, 2002 compared to $131.0 million  for
the same period in 2001.  The decrease in the  average balance of time  deposits
was offset with increases in the average balances of demand deposits,  interest-
bearing demand deposits and savings accounts  of $4.2 million, $4.8 million  and
$4.0 million, respectively.

Interest on short-term borrowings  decreased $245,000 to  $49,000 for the  three
months ended June 30,  2002 compared to  $294,000 for the  same period in  2001.
This decrease  is  the result  of  the decrease  in  managed interest  rates  as
mentioned earlier and an $11.1 million, or 50.5% decrease in average  short-term
borrowings to $10.9 million for the three months ended June 30, 2002 compared to
$22.0 million in the same period in 2001. The decrease in short-term  borrowings
is also the result of refinancing FHLB daily advances to term notes during 2001.

Interest expense on other borrowings increased $24,000, or 4.5%, to $555,000 for
the second quarter of 2002 compared to $531,000 for the second quarter of  2001.
The decrease is the result of  a $4.1 million or  11.2% increase in the  average
balance of other borrowings to $41.3 million for the three months ended June 30,
2002 compared to $37.2 million for the second quarter of 2001.  The increase  in
other borrowings is the result of refinancing FHLB daily advances to term  notes
during 2001.

PROVISION FOR LOAN LOSSES

The provision for  loan losses  is an  amount added  to the  allowance for  loan
losses to provide for the known and estimated  amount of loans that will not  be
collected. Loan  losses  are  charged  against  the  allowance  when  management
believes the  uncollectability  of  a  loan  balance  is  confirmed.  Subsequent
recoveries, if any,  are credited to  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.  Activity in the allowance for loan  loss
account  is  detailed  in  note  3  to  the  consolidated  condensed   financial
statements.

The provision  for  loan losses  recorded  in the  second  quarter of  2002  was
$122,000 compared to $171,000 in 2001. At  June 30, 2002 the allowance for  loan
losses was equal to 1.29% of portfolio  loans compared to 1.15% at December  31,
2001.   It is  management's  opinion that  this  amount represents  an  adequate
allowance for loan losses.

OTHER OPERATING INCOME

Total other operating  income increased $45,000,  or 5.5%, to  $870,000 for  the
three months ended June  30, 2002 compared  to $825,000 for  the same period  in
2001.   Service charges  on  deposit accounts  increased  $15,000, or  3.9%,  to
$396,000 for  the second  quarter of  2002 compared  to $381,000  in the  second
quarter of the  prior year. The  Company recognized security  gains of  $225,000
during the second quarter of 2002 compared to the $94,000 that was recognized in
the second quarter of 2001. Gain on the sale of mortgage loans decreased $88,000
or 62.0% to $54,000 for the second quarter of 2002 compared to $142,000 of gains
recognized during the second quarter of 2001. In the second quarter of 2002 $3.9
million of loans were sold to the secondary market compared to $9.0 million  for
the same period in 2001.

OPERATING EXPENSES

Total operating  expenses increased  $133,000, or  4.9%, to  $2,839,000 for  the
three months ended June 30, 2002 compared  to $2,706,000 for the same period  in
2001. Occupancy  expenses  increased 43.4%,  or  $79,000, to  $261,000  for  the
quarter ended June 30,  2002 and include $75,000  in pre-tax charges related  to
the Wal-Mart branch  consolidation previously discussed.  Data processing  costs
increased $16,000, or  9.3%, to $188,000  for the quarter  ended June 30,  2002.
This increase reflects the cost of  the company's internet banking and  platform
systems, which  were  implemented in  2001.  Amortization of  intangible  assets
decreased $46,000 to  $78,000 for the  three months ended  June 30, 2002,  which
reflects the  adoption  of  SFAS  No.  142,  as  discussed  in  Note  5  to  the
consolidated condensed financial statements. Other operating expenses  increased
$59,000 to $501,000 for the three  months ended June 30, 2002 reflecting  higher
costs  for  marketing,  postage,  travel  reimbursements  and  loan   collection
expenses.  Other  operating expense  also includes  a $50,000  charge to  accrue
severance agreements.

Income taxes decreased $9,000, or 5.3%,  to $160,000 for the three months  ended
June 30,  2002  from $169,000  for  the same  period  in 2001.  The  decline  in
effective tax rate to 27.1% for the 2002 period from 32.4% in the same period of
2001 is reflective  of greater tax  efficiency brought about  by an increase  in
non-taxable  income  and  a  reduction  in  nondeductible  purchase   accounting
amortization.

                                    PART II

                               OTHER INFORMATION

ITEM 4.   SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On May 15,  2002, at  the annual  meeting of  shareholders of  the Company,  the
shareholders re-elected R. Richard Bastian, III, John B. Clark and Charles  Hart
and elected Roger G.  Bryden to three-year  terms expiring in  2004.  The  vote,
with respect to the election of each director was as follows:

     R. Richard Bastian, III
          2,430,838 total votes eligible to be cast
          2,072,698 votes were represented at the Annual Meeting
          2,026,674 votes were cast "For" re-election
          No votes were cast "Against" re-election
          46,024 votes abstained

    John B. Clark
          2,430,838 total votes eligible to be cast
          2,072,698 votes were represented at the Annual Meeting
          2,029,274 votes were cast "For" re-election
          No votes were cast "Against" re-election
          43,424 votes abstained

     Charles Hart
          2,430,838 total votes eligible to be cast
          2,072,698 votes were represented at the Annual Meeting
          2,007,609 votes were cast "For" re-election
          No votes were cast "Against" re-election
          65,089 votes abstained

     Roger G. Bryden
          2,430,838 total votes eligible to be cast
          2,072,698 votes were represented at the Annual Meeting
          2,030,574 votes were cast "For" re-election
          No votes were cast "Against" re-election
          42,124 votes abstained

ITEM 6.   A) EXHIBITS

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

          B) REPORTS ON FORM 8-K

          There were three reports on Form  8-K filed during the second  quarter
          of 2002.

          A report dated  April 5,  2002 announced  the appointment  of Todd  J.
          James as  Senior Vice  President and  Chief Financial  Officer of  the
          Company.

          A report dated April  24, 2002 announced the  resignation of David  A.
          Stearns, Executive Vice President effective May 1, 2002.

          A report dated May 15, 2002  announced the results of the election  of
          directors  at  the  Company's  annual  shareholders  meeting  and  the
          decision of  Mr.  Roger  K. Taylor  to  step  down as  a  director  of
          Blackhawk Bancorp, Inc.

                                   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:  July 23, 2002
                                          /s/R. Richard Bastian, III
                                          --------------------------------------
                                          R. Richard Bastian, III
                                          President and Chief Executive Officer

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

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

                                BLACKHAWK BANCORP, INC.

                                   INDEX TO EXHIBITS

                                 Incorporated              Filed
Exhibit                          Herein By                 Here-        Page
Number  Description              Reference To:             with          No.
------  -----------              -------------             ----         ---

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)

4.3     Plan of Conversion       Exhibit 1.2 to
        Beloit Savings           Amendment No. 1 to
        Bank as amended          Registrant's
                                 Registration
                                 Statement on Form
                                 S-1 (Reg. No.
                                 33-32351)

4.4     Severance Agreement      Exhibit A                  X           26
        with Dennis M. Conerton


4.5     Severance Agreement      Exhibit B                  X           27-30
        with David A. Stearns

4.6     Certification Pursuant   Exhibit C                  X           31
        to 18 U.S.C. Section
        1350, as Adopted
        Pursuant to Section
        906 of the Sarbanes-
        Oxley Act of 2002

4.7     Certification Pursuant   Exhibit D                  X           32
        to 18 U.S.C. Section
        1350, as Adopted
        Pursuant to Section
        906 of the Sarbanes-
        Oxley Act of 2002