<PAGE>   1

                                  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, 1997

                                       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                           53511
          BELOIT, WISCONSIN                        (ZIP CODE)
(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                   JUNE 30, 1997
            -----------------------             --------------------
               $.01 PAR VALUE                      2,291,264 SHARES

<PAGE>   2

                                     INDEX

                         PART I - FINANCIAL INFORMATION

                                                                   Page
                                                                  ------
ITEM 1.  FINANCIAL STATEMENTS

     Consolidated Condensed Balance Sheets as of
       June 30, 1997 and December 31, 1996                           3

     Consolidated Condensed Statements of Income for the
       three months ended June 30, 1997 and 1996                     4

     Consolidated Condensed Statements of Income for the
       six months ended June 30, 1997 and 1996                       5

     Consolidated Condensed Statements of Shareholders'
       Equity as of June 30, 1997 and December 31, 1996              6

     Consolidated Condensed Statements of Cash Flows for the
       six months ended June 30, 1997 and 1996                     7-8

     Notes to Consolidated Condensed Financial Statements         9-12


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                     13-18


                          PART II - OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS          19

ITEM 6.  A) EXHIBITS                                                19

         B) REPORTS ON FORM 8-K                                     19

SIGNATURES                                                          20

<PAGE>   3

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

<TABLE>
<CAPTION>

       ASSETS                                  JUNE 30,      DECEMBER 31,
      --------                                   1997           1996
                                           ---------------  --------------
<S>                                         <C>             <C>    
Cash and cash equivalents                    $ 11,435,909   $  7,966,929
Federal funds sold and other short-term
  investments                                   1,935,658      4,677,596
Securities available for sale                   8,413,014     10,701,911
Securities held to maturity                    29,081,903     24,864,640

Total loans                                   140,810,932     99,426,691
Allowance for loan losses (Note 3)              1,458,972      1,185,672
                                             ------------   ------------
Net loans                                     139,351,960     98,241,019

Bank premises and equipment, net                4,288,291      3,463,491
Accrued interest receivable                     1,106,759      1,041,756
Goodwill (Note 8)                                 816,532             --
Other assets                                    2,330,996        526,663
                                             ------------   ------------   
     Total Assets                            $198,761,022   $151,484,005
                                             ============   ============
     LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
  Deposits:
     Non-interest bearing                    $ 17,621,861   $ 23,193,906
     Interest bearing                         138,491,495     95,116,941
                                             ------------   ------------
           Total deposits                     156,113,356    118,310,847
  Borrowed Funds:
     Short-term borrowings (Note 4)            13,066,997      7,405,451
     Other borrowings (Note 5)                  3,950,000      2,275,456
  Accrued interest payable                        919,202        680,226
  Other liabilities                             2,141,685        782,827
                                             ------------   ------------
      Total Liabilities                       176,191,240    129,454,807
                                             ------------   ------------

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, 2,291,264 and
    2,285,864 shares issued and outstanding        22,913         22,859
  Additional paid-in capital                    6,983,267      6,960,550
  Employee stock options earned                   112,784         94,764
  Retained Earnings                            15,561,670     15,072,129
  Treasury Stock                                 (104,174)       (84,305)
  FASB 115 Adjustment                              (6,678)       (11,343)
                                             ------------   ------------     
                                               22,569,782     22,054,654
  Less: Deferred compensation related
        to employee stock ownership
        plan debt guarantee                            --        (25,456)
                                             ------------   ------------
     Total Shareholders' Equity                22,569,782     22,029,198
                                             ------------   ------------
    Total Liabilities and
Shareholders' Equity                         $198,761,022   $151,484,005
                                             ============   ============ 
</TABLE>

See Notes to Unaudited Consolidated Condensed Financial Statements

                                       3

<PAGE>   4

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

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED
                                                             JUNE 30,
                                                        1997           1996
                                                   -------------  -------------
<S>                                                <C>            <C>
INTEREST INCOME:
  Interest and fees on loans                         $ 2,971,088   $ 2,181,640
  Interest on deposits with other banks                   21,650           817
  Interest on investment securities:
  Taxable                                                614,864       540,434
  Exempt from federal income taxes                        33,478        66,420
  Interest on federal funds sold
  and other short-term investments                         9,698        50,200
                                                     -----------   -----------
  Total Interest Income                                3,650,778     2,839,511
                                                     -----------   -----------

INTEREST EXPENSE:
  Interest on deposits                                 1,481,572     1,142,011
  Interest on short-term borrowings                      189,296       186,602
  Interest on other borrowings                            67,144        46,395
                                                     -----------   -----------
  Total Interest Expense                               1,738,012     1,375,008
                                                     -----------   -----------

  Net Interest Income                                  1,912,766     1,464,503
    Provision for loan losses (Note 3)                    44,657        40,000
                                                     -----------   -----------
  Net Interest Income After
    Provision For Loan Losses                          1,868,109     1,424,503
                                                     -----------   -----------

OTHER OPERATING INCOME:
  Gain (loss) on sale of loans                            (8,025)       23,036
  Trust department income                                 58,803        39,915
  Service fees                                           250,467       137,430
  Other income                                           108,331        58,886
                                                     -----------   -----------
  Total Other Operating Income                           409,576       259,267
                                                     -----------   -----------

OTHER OPERATING EXPENSES:
  Salaries and employee benefits                         767,571       537,707
  Occupancy expense of bank premises, net                111,496        81,284
  Furniture and equipment                                 78,792        90,827
  Data processing                                        110,993        84,410
  Other operating expenses                               407,251       249,480
                                                     -----------   -----------  
  Total Other Operating Expenses                       1,476,103     1,043,708
                                                     -----------   -----------

  Income Before Income Taxes                             801,582       640,062

  Provision for Income Taxes                             286,306       209,365
                                                     -----------   -----------

  Net Income                                         $   515,276   $   430,697
                                                     ===========   ===========

  Earnings Per Share                                 $      0.22   $       .18
                                                     ===========   ===========

  Dividends Per Share                                $      0.11   $      0.10
                                                     ===========   ===========
</TABLE>

See Notes to Unaudited Consolidated Condensed Financial Statements



                                       4

<PAGE>   5

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


<TABLE>
                                                    SIX MONTHS ENDED
                                                         JUNE 30
                                                    1997           1996
                                                -----------    ------------
<S>                                            <C>            <C>

INTEREST INCOME:
     Interest and fees on loans                 $ 5,255,823    $  4,306,099
     Interest on deposits with other banks           21,926           1,234
     Interest on investment securities:
     Taxable                                      1,136,081       1,043,317
     Exempt from federal income taxes                71,904         117,471
     Interest on federal funds sold
     and other short-term investments                75,974         139,158
                                                  ---------       ---------
     Total Interest Income                        6,561,708       5,607,279
                                                  ---------       ---------

INTEREST EXPENSE:
     Interest on deposits                         2,620,212       2,280,977
     Interest on short-term borrowings              378,351         354,603
     Interest on other borrowings                   102,859         102,378
                                                  ---------       ---------
     Total Interest Expense                       3,101,422       2,737,958
                                                  ---------       ---------

     Net Interest Income                          3,460,286       2,869,321
       Provision for loan losses (Note 3)            74,657          85,000
                                                  ---------       ---------
     Net Interest Income After
     Provision For Loan Losses                    3,385,629       2,784,321
                                                  ---------       ---------

OTHER OPERATING INCOME:
     Investment securities gains (losses)                --              99
     Gain (loss) on sale of loans                       440          40,647
     Trust department income                         90,303          63,694
     Service fees                                   397,485         261,145
     Other income                                   165,579         128,242
                                                  ---------       ---------
     Total Other Operating Income                   653,807         493,827
                                                  ---------       ---------

OTHER OPERATING EXPENSES:
     Salaries and employee benefits               1,342,227       1,064,324
     Occupancy expense of bank premises, net        199,530         161,400
     Furniture and equipment                        160,873         180,843
     Data processing                                188,613         165,140
     Other operating expenses                       652,004         515,478
                                                  ---------       ---------
     Total Other Operating Expenses               2,543,247       2,087,185
                                                  ---------       ---------
     Income Before Income Taxes                   1,496,190       1,190,963

     Provision for Income Taxes                     528,789         388,619
                                                  =========      ==========
     Net Income                                   $ 967,401      $  802,344
                                                  =========      ==========

     Earnings Per Share                           $    0.41      $     0.34
                                                  =========      ==========

     Dividends Per Share                          $    0.21      $     0.18
                                                  =========      ==========

</TABLE>

See Notes to Unaudited Consolidated Condensed Financial Statements

                                      5
<PAGE>   6

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


<TABLE>
<CAPTION>
                                                 SIX MONTHS    TWELVE MONTHS
                                                    ENDED          ENDED
                                                   JUNE 30,     DECEMBER 31,
                                                     1997           1996
                                                 -----------   --------------
<S>                                               <C>            <C>
Common Stock:
     Balance at beginning of period               $  22,859       $  22,826
     Stock options exercised                             54              33
                                                -----------     -----------
     Balance at end of period                        22,913          22,859
                                                -----------     -----------
Additional Paid-in Capital:
     Balance at beginning of period               6,960,550       6,946,370
     Stock options exercised                         22,717          14,180
                                                -----------     -----------
     Balance at end of period                     6,983,267       6,960,550
                                                -----------     -----------

Employee Stock Options Earned:
     Balance at beginning of period                  94,764          52,165
     Stock options exercised                                            (55) 
     Unearned employee compensation                  18,020          42,654
                                                -----------     -----------
     Balance at end of period                       112,784          94,764
                                                -----------     -----------

Retained Earnings:
     Balance at beginning of period              15,072,129      14,210,036
     Net income                                     967,401       1,728,275
     Dividends declared on common stock            (477,860)       (866,182)
                                                -----------     -----------
     Balance at end of period                    15,561,670      15,072,129
                                                -----------     -----------

Treasury Stock, at cost:
     Balance at beginning of period                 (84,305)           --
     Purchase                                       (19,869)        (84,305)
                                                -----------     -----------
     Balance at end of period                      (104,174)        (84,305)
                                                -----------     -----------

FASB 115 Adjustment:
     Balance at beginning of period                 (11,343)         37,114
     Net adjustment during period                     4,665         (48,457)
                                                -----------     -----------
     Balance at end of period                        (6,678)        (11,343)
                                                -----------     -----------
Other:
Balance at beginning of period                      (25,456)        (79,027)
Principal payments on ESOP loan                      25,456          53,571
                                                -----------     -----------
Balance at end of period                                 --         (25,456)
                                                -----------     -----------

Total Shareholders' Equity                      $22,569,782     $22,029,198
                                                ===========     ===========
</TABLE>



See Notes to Unaudited Consolidated Condensed Financial Statements

                                       6
<PAGE>   7

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


<TABLE>
<CAPTION>
                                                       SIX MONTHS ENDED         
                                                            JUNE 30,            
                                                     1997             1996     
                                                  ----------       ----------- 
<S>                                              <C>              <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:                                          
  Net Income                                     $   967,401       $   802,344 
  Adjustments to reconcile net income                                          
    to net cash provided by operating                                          
    activities:                                                                
    Compensatory options recognized                   18,020                -- 
    Provision for loan losses                         74,657            85,000 
    Provision for depreciation and                                             
      amortization                                   202,974           168,960 
    Amortization of premiums (accretion of                                     
      discounts) on investment securities, net       (50,191)          (18,548)
      (Gains) losses on investment securities             --               (99)
      (Gain) on sale of loans                           (440)          (40,647)
      Loans originated for sale                   (3,114,125)       (3,232,399)
      Proceeds from sale of loans                  5,463,689         3,273,046 
      Change in assets and liabilities:                                        
        (Increase) decrease in accrued                                         
          interest receivable                        362,371           (45,797)
        (Increase) decrease in other assets         (509,079)           34,612 
        Increase (decrease) in accrued                                         
          interest payable                           128,590           (35,392)
        Increase (decrease) in other                                           
          liabilities                               (344,738)          (35,032)
                                                  ----------        ---------- 
            Net cash provided by operating                                     
              activities                           3,199,129           956,048 
                                                  ----------        ---------- 
                                                                               
CASH FLOWS FROM INVESTING ACTIVITIES:                                          
  Proceeds from maturity of available-                                         
    for-sale securities                            7,553,375         9,062,683 
  Purchase of available-for-sale securities       (4,320,568)      (13,172,673)
  Proceeds from maturity of investment                                         
    securities                                    10,414,826         3,684,942 
  Purchase of investment securities              (10,016,031)       (5,578,360)
  Net cash used in acquisition                      (198,587)               -- 
  Decrease in federal funds sold and                                           
    other short-term investments, net              2,741,938        11,485,855 
  Loans originated, net of                                                     
    principal collected                           (4,733,793)          402,367 
  Purchase of bank premises and equipment           (111,842)          (35,645)
                                                  ----------        ---------- 
            Net cash provided by (used in)                                     
              investing activities                 1,329,318         5,849,169 
                                                  ----------        ---------- 
</TABLE>  
  




     See Notes to Unaudited Consolidated Condensed Financial Statements.

                                       7
<PAGE>   8

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

<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED
                                                             JUNE 30,
                                                      1997             1996 
                                                  ------------     ------------ 
<S>                                               <C>              <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
     Stock options exercised                           22,771           12,054
     Purchase of Treasury Stock                       (19,869)         (84,305)
     Net (decrease) in deposits                    (6,189,639)     (11,616,491)
     Net increase (decrease) in  borrowings         5,605,130        2,954,445
     Cash dividends paid                             (477,860)        (411,285)
                                                  -----------      -----------
        Net cash (used in)
          financing activities                     (1,059,467)      (9,145,582)
                                                  -----------      -----------
     Net increase (decrease) in cash and
       cash equivalents                             3,468,980       (2,340,365)

CASH AND CASH EQUIVALENTS:
     Beginning of Period                            7,966,929        7,589,600
                                                  -----------      -----------
     End of Period                                $11,435,909      $ 5,249,235
                                                  ===========      ===========
SUPPLEMENTAL DISCLOSURES OF CASH 
 FLOW INFORMATION:
     Cash payments for:
       Interest                                   $ 2,752,060      $ 2,773,350
       Income taxes                               $   482,355      $   236,825

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
     ACTIVITIES:
     Other assets acquired in settlement of
      loans                                       $    73,188      $   152,191
     Principal payments on ESOP loan (Note 5)     $    25,456      $    26,785

</TABLE>




See Notes to Unaudited Consolidated Condensed Financial Statements.


                                      8
<PAGE>   9

                   BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 June 30, 1997

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, with the exception of FAS
          128, Earnings Per Share, which the Company adopted as of January 1,
          1997.

          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, 1997 and December 31,
          1996, the results of operations for the three and six months ended
          June 30, 1997 and 1996, and cash flows for the six months ended June
          30, 1997 and 1996.

          The results of operations for the three and six months ended June 30,
          1997 and 1996 are not necessarily indicative of the results to be
          expected for the full year.

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:


<TABLE>
<CAPTION>
                                             JUNE 30,        DECEMBER 31
                                     ---------------------   -----------
                                        1997        1996         1996
                                     ----------  ---------   -----------
<S>                                  <C>         <C>         <C>
          Impaired loans             $  632,000  $   --      $   445,000
          Non-accruing loans         $  334,000    719,000       443,000
          Past due 90 days or more
            and still accruing       $  472,000     73,000       252,000
                                     ----------  ---------   -----------
          Total non-performing loan  $1,438,000  $ 792,000   $ 1,140,000
                                     ==========  =========   ===========
</TABLE>


Note 3:  Allowance For Loan Losses

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


<TABLE>
<CAPTION>
                                         Three Months Ended
                                               June 30
                                       ------------------------
                                          1997          1996
                                       ----------    ----------
<S>                                    <C>           <C>
     Balance at beginning of
       period                          $1,208,782    $  938,961
     Allowance associated with
       acquisition                        345,096            --
     Provision charged to expense          44,657        40,000
     Loans charged off                   (153,389)      (14,905)
     Recoveries                            13,826        28,693
                                       ----------     ---------
     Balance at end of period          $1,458,972     $ 992,749
                                       ==========     =========
</TABLE>


                                      9
<PAGE>   10

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 1997


Note 3:  Allowance For Loan Losses (Continued)


<TABLE>
<CAPTION>
                                          SIX MONTHS ENDED
                                               JUNE 30
                                       -------------------------
                                          1997           1996
                                       ----------    -----------
<S>                                    <C>           <C>
     Balance at beginning of
       period                          $1,185,672    $  928,817
     Allowance associated with
       acquisition                        345,096            --
     Provision charged to expense          74,657        85,000
     Loans charged off                   (166,148)      (53,766)
     Recoveries                            19,695        32,698
                                       -----------   -----------
     Balance at end of period          $1,458,972    $  992,749
                                       ===========   ===========
</TABLE>


Note 4.  Short-Term Borrowings

     A summary of short-term borrowings is as follows:


<TABLE>
<CAPTION>
                                            JUNE 30,   DECEMBER 31,
                                              1997        1996
                                          -----------  ------------
<S>                                       <C>          <C>
     Securities sold under agreement to
       repurchase                         $12,216,997  $ 7,405,451
     Federal Funds Purchased                  850,000         --
                                          -----------  -----------
                                          $13,066,997  $ 7,405,451
                                          ===========  ===========
</TABLE>


Note 5.  Other Borrowings

<TABLE>
<CAPTION>
                                            JUNE 30,   DECEMBER 31,
                                             1997          1996
                                          -----------  ------------
<S>                                      <C>          <C>
     ESOP Debt Guarantee                  $        --  $    25,456
     FHLB Borrowings                        3,950,000    2,250,000
                                          -----------  -----------
                                          $ 3,950,000  $ 2,275,456
                                          ===========  ===========
</TABLE>

         The Company has an Employee Stock Ownership Plan for the benefit of
         the employees of the Company and Blackhawk State Bank.  The ESOP
         borrowed funds from a third party lender and purchased 112,101 shares
         of the Company's stock.  Accordingly, the debt has been recorded in
         the accompanying consolidated condensed balance sheets together with
         the related deferred compensation.  The debt and related deferred
         compensation are reduced as the ESOP makes principal payments.

         The bank has established a line of credit with the Federal Home Loan
         Bank ("FHLB").  Periodic draws are taken against this line to fund
         specific loans.  The total line of credit is $16,900,000, with an
         available balance of $12,950,000.

Note 6. Stock Option Plan

         Under the Company's 1994 Director's and Executive Stock Option
         Plans,options are granted at prices equal to the fair market value for
         directors and at prices from 90% to 100% of fair market value for key
         employees.  The options vest over three years and are exercisable to
         10 years from the date of grant.  Other pertinent information related
         to the plans is as follows:

                                      10
<PAGE>   11

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 June 30, 1997
                                  (CONTINUED)


Note 6.  Stock Option Plan (continued)


<TABLE>
<CAPTION>
                                                   JUNE 30     DECEMBER 31,
                                                    1997          1996
                                                  --------     ------------
<S>                                               <C>           <C>
Shares under option, beginning of year             275,776       262,235
     Granted during the year                        31,350        17,300
     Terminated and canceled during the year        (1,000)         (510)
     Exercised during the year                      (5,400)       (3,249)
                                                  --------      --------
Shares under option, end of period                 300,726       275,776
                                                  ========      ========
Options exercisable, end of period                 215,742       184,492
                                                  ========      ========
Available to grant, end of period                   83,000       114,300
                                                  ========      ========
Average prices: Granted during the period         $  11.40      $  11.20
     Exercised during the period                  $   4.22      $   5.25
     Under option                                 $   7.52      $   7.02

</TABLE>


Note 7. Commitments and Contingent Liabilities

         A summary of the amount of exposure to credit loss for loan
         commitments (unfunded loans and unused lines of credit) and standby
         letters of credit outstanding is as follows:

<TABLE>
<CAPTION>
                                           JUNE 30,       DECEMBER 31,
                                             1997            1996
                                          -----------      ----------
         <S>                              <C>              <C>
         Loan commitments                 $22,533,000      $9,328,000
         Standby letters of credit            447,000         356,000
                                          -----------      ----------
                                          $22,980,000      $9,684,000
                                          ===========      ==========
</TABLE>


Note 8. Acquisition of Rochelle Bancorp, Inc.

         On April 30, 1997 the company completed its acquisition of Rochelle
         Bancorp  Inc. (Rochelle).  Rochelle was the parent bank holding
         company of Rochelle Savings Bank, Rochelle, Illinois.  Cash of
         $4,173,000 was paid for the 554,875 outstnding shares of Rochelle.
         The acquisition was recorcded using purchase accounting.  Rochelle's
         consolidated financial condition has been included in the Company's
         consolidated balance sheet as of June 30, 1997, and Rochelle's
         consolidated results of operations have been reflected in the
         Company's consolidated statements of income beginning as of the
         acquisition date.

         On a pro forma basis, the pro forma total income, net income, and net
         income per share for the three and six months ended June 30, 1997 and
         1996 after giving effect to the Rochelle's acquisition as if it
         occurred on January 1, 1996 are as follows:


<TABLE>
<CAPTION>
                                 Three Months Ended       Six Month Ended
                                      June 30                  June 30
                                  1997        1996        1997        1996
                               ----------------------  ----------------------
<S>                           <C>         <C>         <C>         <C>
         Total Income          $4,449,417  $4,247,279  $8,747,685  $8,288,985
         Net Income            $  305,265  $  489,856  $  757,391  $  893,028
         Net Income per share  $      .13  $      .21  $      .31  $      .38

</TABLE>


                                      11
<PAGE>   12
                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 June 30, 1997
                                  (CONTINUED)

Note 9.  Mortgage Servicing Rights

         Mortgage loan servicing rights were acquired with the Company's
         purchase of Rochelle Bancorp, Inc.  (Note 8).

         Mortgage loans serviced for others are not included in the
         accompanying consolidated statements of financial condition.  The
         unpaid principal balances of mortgage loans serviced for others was
         $47,217,000 and $0 at June 30, 1997 and December 31, 1996,
         respectively.

         Mortgage servicing rights of $39,000 and $0 were capitalized in the
         six months ended June 30, 1997 and 1996, respectively.  Mortgage
         servicing rights have a fair value of $404,000 and $0 at June 30, 1997
         and December 31, 1996, respectively.  Amortization of mortgage
         servicing rights was $13,000 and $0 for the six months ended June 30,
         1997 and 1996, respectively.

Note 10. Earnings Per Share

         In February 1997, the Financial Accounting Standards Board issued
         Statement No. 128, Earnings per Share, ("Statement 128") which is
         required to be adopted on December 31, 1997.  Statement 128 may not be
         adopted early.  Upon adoption, the Company will be required to change
         the method currently used to compute earnings per share and to restate
         earnings per share for all prior periods according to the methodology
         detailed in Statement 128.

         Statement 128 will require a dual presentation of earnings per share
         regardless of the difference between earnings per common share and
         fully diluted earnings per share for companies having common stock
         equivalents such as stock options.  Additionally, Statement 128
         requires some modifications to the calculation of the dilutive effect
         of common stock equivalents.  The following table sets forth a pro
         forma calculation of the Company's basic and dilutive earnings per
         share as calculated pursuant to Statement 128 for the periods
         indicated.

<TABLE>
<CAPTION>
                                       Three Months Ended     Six Months Ended
                                             June 30               June 30
                                         1997       1996        1997      1996
                                       ------------------     ----------------
<S>                                    <C>        <C>         <C>       <C>
         Basic Earnings Per Share       $0.23      $0.19       $0.42     $0.35
         Diluted Earnings Per Share     $0.22      $0.18       $0.41     $0.34
</TABLE>
 
                                      12
<PAGE>   13

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 consolidated condensed balance sheets as of June 30, 1997 and December 31,
1996 and the consolidated condensed statements of income for the three months
and six months ended June 30, 1997 and 1996.  This information is not meant to
be a substitute for the balance sheets and income statements.

                             RESULTS OF OPERATIONS

On April 30, 1997, the Company completed the purchase of all of the outstanding
shares of Rochelle Bancorp, Inc. ("Rochelle") of Rochelle, Illinois, for
approximately $4,173,000 in cash.  Rochelle's wholly owned subsidiary, Rochelle
Savings Bank S.B., is an Illinois state chartered savings bank with offices in
Rochelle and Oregon, Illinois, and assets totaling approximately $51,000,000.
This acquisition was accounted for as a purchase and the cash consideration
paid for the outstanding shares approximates the fair market value of tangible
and intangible assets acquired less the liabilities assumed.

As a part of this purchase, the Company also acquired all of the outstanding
shares of Midland Acceptance Corporation ("MAC"), a financing subsidiary with
offices in Rochelle and Rockford, Illinois and assets  of approximately
$2,500,000.

Results of operations of Rochelle and MAC are incorporated in the Company's
statements from the acquisition date forward.  The impact on the Company's net
income for the balance of 1997 is expected to be positive.

                          THREE MONTHS ENDED JUNE 30

For the three months ended June 30, 1997, interest income was $3,651,000
compared to $2,840,000 for the same period in 1996.  This increase of $811,000,
nearly 29%, was the result of both increased rate and increased volume.
Earning assets averaged $171.0 million during the three months ended June 30,
1997 compared to $141.4 million for the same period in 1996.  Virtually all of
the increased volume is attributed to Rochelle.  The average yield on earning
assets increased to 8.54% for the period compared to 8.03% in 1996.  Both of
the main operating units, Blackhawk State Bank,("Blackhawk"), and Rochelle,
averaged approximately the same yield during the current period.

Interest and fees on loans increased to $2,971,000 in the current period
compared to $2,182,000 in the same period in 1996.  This increase of 36% was
due to increased volume.  Approximately 28% of the 36% volume increase is due
to Rochelle, and nearly all of their loans are secured by real estate.  The
average yield on loans was approximately the same for both periods.  Within the
various loan categories, the reduction of income in the real estate loans due
to rates was offset by an increase in the consumer loan area, of an equal
amount.  The comparisons of interest and fees on loans in the third and fourth
quarters of 1997 to the respective quarters in 1996 are expected to be very
favorable.

Investment income on taxable securities for the quarter ended June 30, 1997 was
$596,000 compared to $540,000 in 1996, an increase of 10%.  Income due to
volume decreased; however, this was more than offset by the increase due to
increased yields.  Income from tax-exempt securities declined nearly 50% in the
1997 period compared to 1996.  This was due almost entirely to reduced volumes.
Security volumes are further addressed in the discussion of the analysis of
financial condition.


                                      13
<PAGE>   14
In the second quarter of 1997 interest on fed funds and other short-term
investments decreased to $29,000 from $50,000 in the same period in 1996.  The
reduction in volume in this category will be explained in the analysis of
financial condition discussion.  Income from interest bearing deposits in banks
increased from less than $1,000 to nearly $22,000.  All of this increase is due
to increased volume which was obtained with the acquisition of Rochelle.

Interest paid on deposits in the three months ended June 30, 1997 was
$1,482,000 compared to $1,142,000 in the same period in 1996.  Of the $340,000
increase, $313,000 was due to increased volumes which were the result of the
Rochelle acquisition.  The average yield of the Rochelle deposits were slightly
lower than the average yield on the Blackhawk deposits.  This yield
relationship between Blackhawk and Rochelle is expected to continue.  Earlier
this year many were expecting interest rates to increase during 1997.  While
there has been some fluctuations in rates, they have been relatively minor.  If
interest rates increase in the coming months, an increase in the rates paid on
deposits can be expected. Significant growth in deposits is not expected in the
third quarter of 1997 from current levels.  However, comparisons to 1996 in the
future quarters will be very positive because of the Rochelle acquisition.

Interest on short-term borrowings was slightly higher in 1997 than in 1996,
$189,000 versus $186,000 respectively.  Short-term borrowings consist of fed
funds purchased and repurchase agreements.  The slightly higher average rate
for the quarter on these borrowings resulted in a larger cost that was nearly
offset by a lower volume. The interest cost on other borrowings which are
advances from the Federal Home Loan Bank, ("FHLB"), was $67,000 for the quarter
compared to $46,000 in 1996.  This increase was the result of increased volume.
The average rate on the borrowings was nearly the same for the second quarters
of 1997 and 1996.

The provision for loan loss was approximately $45,000 in the quarter ended June
30, 1997 as compared to $40,000 for the same period in 1996.   On a regular
basis, management determines the adequacy of the loan loss reserve and, if
necessary, adjusts the loan loss provision.

Total other operating income increased to $410,000 from $259,000 in the second
quarter of 1996. The largest single item in each period was service fees,
totaling $250,000 and $137,000 in 1997 and 1996, respectively.  Nearly $100,000
of this increase is attributed to Rochelle and includes the servicing income
from mortgages sold.  Continued increases in revenue from the servicing of sold
mortgages is anticipated.  Another area that experienced a significant increase
was trust fees, which totaled $59,000 as compared to $40,000 in the second
quarter of 1996.  It is anticipated that this area will also provide increased
revenue in the future.  Other income includes the revenue from the sale of
non-deposit investments and represents a significant amount of the increase to
$108,000 in 1997 from $59,000 in 1996.  A loss on the sale of loans of $8,000
was experienced in the second quarter of 1997 compared to income of $23,000 in  
the same quarter of 1996. Prior to the acquisition of Rochelle, Blackhawk's
loans were sold with servicing rights.  Since loans are now being sold with the
servicing rights retained by Rochelle, the proceeds from the sale are reduced. 
The increased income from servicing will offset the reduced income in this
area.

Total other operating expenses were $1,476,000 in the second quarter of 1997
compared to $1,044,000 in the same period in 1996.  The largest single item in
this category is salaries and benefits which were $768,000 in 1997 compared to
$538,000 in 1996.  Of this $230,000 increase, $164,000 is attributed to
Rochelle.  The amount relating to Blackhawk is the result of normal increases
and the addition of another in-store facility.  In preparation for the opening
of this facility in mid-July, new employees were hired for training during the
second quarter.  The relatively large increases in occupancy and data
processing are the result of the 


                                      14
<PAGE>   15

acquisition of Rochelle.  The increased costs in both of these areas are
expected to continue for the balance of 1997.

Income taxes increased to $286,000 from $209,000 for the three month period
ending June 30,1997.  The increase was due to higher income and also a higher
effective tax rate of 36% versus 33% for the comparable quarter of 1996.  The
higher effective tax rate resulted from a higher percentage of income subject
to state income taxes, Wisconsin and Illinois, and the reduction of income from
federally tax-exempt securities.

                            SIX MONTHS ENDED JUNE 30

Total interest income for the six months ended June 30, 1997, was $6,562,000
compared to $5,607,000 for the same period in 1996.  The largest area of
interest revenue, interest and fees on loans, also contributed the largest
dollar increase, $950,000.  As was discussed previously, volume was the primary
reason for the growth of revenue in this area.  The average yield in 1997 was
approximately the same as in 1996.  Future internal growth of loans could slow
during the second half of 1997 if the Federal Reserve Bank decides to increase
interest rates.  However, this does not seem to be likely, in the immediate
future.

Interest on taxable securities increased to $1,117,000 as compared to
$1,043,000 for the first half of 1996.  The increase in the average yield for
the period in 1997 was sufficient to offset the decrease in volume when
compared to 1996.  Interest income from tax-exempt securities was also effected
by reduced volume.  However, the average yield on the tax-exempt securities was
approximately the same for both periods, therefore income from these
investments decreased by $46,000 because of reduced volume.

Interest income from fed funds sold and short-term investments was $95,000 for
the first six months of 1997 as compared to $139,000 for the same period in
1996.  This $44,000 decrease was due entirely to reduced volume.  The average
yield on these investments was approximately 10 basis points higher in 1997
than in 1996.  Income from interest bearing bank deposits was due to increased
volume.  This increase was a direct result of the Rochelle acquisition.  Rather
than selling fed funds, Rochelle historically has invested in interest bearing
deposits of other banks for short-term investments.

Interest expense was $3,101,000 in the six months ended June 30, 1997 as
compared to $2,738,000 for the same period in 1996.  Interest on deposits was
$2,620,000 in 1997 as compared to $2,281,000 in 1996.  The average rate was the
nearly the same for both periods and nearly all of the increased cost was the
result of increased volume.  Most of the increased volume was attributable to
the Rochelle acquisition.

Interest on short-term borrowings was $378,000 in the first half of 1997 as
compared to $355,000 in the same period of 1996.  The volume in 1997 was
significantly higher and offset the effect of lower average interest rates
paid.

The provision for loan loss was approximately $75,000 for the period in 1997
compared to $85,000 in 1996.  Management believes that the provision was
appropriate based on their regular review of the adequacy of the overall
reserve.

Other operating income for the six months ended June 30, 1997 was $654,000
compared to $494,000 for the same period in 1996.  Service fees, the largest
item in this category, experienced the largest increase to $397,000 in 1997 as
compared to $261,000 in 1996.  The increase in this area was the result of
increased volume of accounts, increased fees and the additional 


                                      15
<PAGE>   16
revenues associated with the servicing of mortgages by Rochelle. Prior to the
acquisition of Rochelle, Blackhawk's loans were sold with servicing rights.
Loans are now being sold with the servicing rights retained by Rochelle,
therefore proceeds from these sales are reduced.  The increased income from
servicing will offset the reduced income in this area.  Trust department income
increased 42% in 1997, when compared to 1996, as result of additional business.
Continued improvement in this area is anticipated for the balance of 1997.
Other income increased $37,000 over 1996 levels, $165,000 compared to $128,000.
Income from the sale of non-deposit investments is included in this category.
It is anticipated that this activity will result in increased income in the
future.

For the six month period ending June 30, 1997, total other operating expenses
were $2,543,000 compared to $2,087,000 in 1996.  The area of largest increase
was salaries and benefits, which totaled $1,342,000 compared to $1,064,000 in
1996.  The acquisition of Rochelle, combined with normal salary and benefit
increases and additional staffing for the in-store branch opened in mid-July,
account for the increase.  Increases in the areas of occupancy and data
processing are primarily the result of the Rochelle acquisition.

As a result of higher income subject to state income taxes and reduced  
federally tax-exempt income, the effective tax rate increased to 35% in 1997,
from 33% in 1996.

                        ANALYSIS OF FINANCIAL CONDITION

This analysis of the Company's financial condition compares June 30, 1997 to
the Company's prior fiscal year end December 31, 1996.  Total assets were
$198.8 million as compared to $151.5 million as of  December 31, 1996.  This
represents an increase of approximately $47.3 million or 31%. The purchase of
Rochelle, which was completed on April 30, 1997, accounted for virtually all of
the overall increase.

Total investment securities, including securities held-to-maturity, securities
available-for-sale, fed funds sold and short-term investments, were $39.4
million as of June 30, 1997, as compared to $40.2 million as of December 31,
1996.  The reduction of Blackhawk's investments resulting from funding the
increase in loans and the purchase of Rochelle was partially offset by the
securities acquired with the Rochelle acquisition.

Loans totaled $140.8 million on June 30, 1997 as compared to $99.4 million on
December 31, l996, an increase of $41.4 million or 41.6%.  Approximately $36.9
million or 89%, of the increase is the result of the Rochelle acquisition and
of these, $28.8 million are real estate loans.  Diversification of Rochelle's
loan portfolio as to type of loans, will be an objective.  Loan demand
continues to be steady.  The strength of loan demand for the balance of 1997
will depend to some extent on what action the Federal Reserve Bank takes with
regard to interest rates.

Allowance for loan losses was $1.46 million as of June 30,1997 as compared to
$1.19 million as of December 31, 1996.  Footnote 3 to the financial statements
indicates the activity in the allowance for loan loss account for the six
months ended June 30, 1997 and 1996.  Non-performing loans (see Footnote 2)as
of June 30, 1997 were $1.44 million.  The potential loss resulting from these
loans has been provided for in management's determination of the adequacy of
the loan loss reserve.  Management believes that the allowance is adequate at
this time.

Bank premises and equipment increased 24% to $4.29 million as compared to $3.46
million at December 31, 1996.  This increase of $825,000 was primarily the
result of the Rochelle acquisition as there were no other significant purchases
in the first half of 1997.


                                      16
<PAGE>   17
Total deposits of $156.1 million increased $37.8 million as of June 30, 1997 as
compared to $118.3 million as of December 31, 1996.  Non-interest bearing
deposits decreased to $17.6 million from $23.2 million as of December 31, 1996.
Several commercial customers have historically increased their demand deposit
balances at year end.  As a result, subsequent interim reporting dates
typically have balances lower than the previous year-ends.  The non-interest
bearing deposits acquired with Rochelle was not sufficient to overcome this
reduction.  The 46% increase in interest-bearing deposits,$138.5 million
compared to $96.1 million, was primarily the result of Rochelle.  Excluding
Rochelle, the increase would have been approximately 1%.  Competition for
deposit dollars continues to be intense.  As a result, dramatic growth of
deposits is not anticipated during the balance of 1997.

The make-up of short-term borrowings and other borrowings is discussed in
footnotes 4 and 5 to the financial statements, respectively.  The increases in
these categories were used to fund the increase in the loan portfolio and other
liquidity needs of Blackhawk.  The use of borrowings, both short and long, will
be utilized as future need arise.

The company continues to maintain an excellent capital position regardless of
the measurement used.  The following table shows four different measurements as
of June 30, 1997 and December 31, 1996, and the regulatory requirement, if any.
Management does not anticipate the need for additional capital resources in
the near future.

<TABLE>
<CAPTION>
                            JUNE 30, DECEMBER 31,   REGULATORY
                              1997      1996       REQUIREMENTS
                            -------- ------------  ------------
<S>                         <C>       <C>           <C>

Leverage capital ratio       13.35%    15.08%          N/A

Core capital as a percent
  of assets                  11.21%    14.37%         5.50%

Core capital as a percent
  of risk-based assets       18.41%    22.88%          N/A

Total capital as a percent
  of risk-based assets       19.62%    23.47%         8.00%
</TABLE>


Liquidity as it relates to the subsidiary banks is a measure of their ability
to fund loans and withdrawals of deposits in a cost-effective manner.  Their
principal sources of funds are deposits, scheduled amortization and prepayment
of loan principal, maturities of investment securities, income from operations,
and short term borrowings.  Additional sources include purchasing fed funds,
sale of loans, borrowing from both the Federal Reserve Bank and Federal Home
Loan Bank, capital loans.  Also dividends paid by Nevahawk to Blackhawk provide
an additional source to Blackhawk.  Under present law, accumulated earnings
could be paid as dividends without incurring a tax liability.

The liquidity needs of the Company consist of payment of dividends to its
shareholders and a limited amount of expenses.  The sources of funds to provide
this liquidity are income from investments, maturities of investments, cash
balances, issuance of capital and dividends from its subsidiary banks.  Certain
restrictions are imposed upon the Banks which could limit their ability to pay
dividends if they did not have net earnings or adequate capital in the future.
The Company maintains adequate liquidity to pay its expenses.


                                      17
<PAGE>   18
Off-balance sheet items consist of credit card lines of credit, mortgage
commitments, letters of credit and other commitments totaling approximately
$23.0 million as of June 30, 1997.  This compares to $9.7 million at December
31, 1996.  The bank's have historically funded off-balance sheet commitments
with their primary sources of funds, and management anticipates that this will
continue.

When used in this report, the words "believes," "expects," and similar
expressions are intended to identify forward-looking statements.  The Company's
actual results may differ materially from those described in the
forward-looking statements.  Factors which could cause such a variance to occur
included, but are not limited to, changes in interest rates, levels of consumer
bankruptcies, customer loan and deposit preferences, and other general economic
conditions.


                                      18
<PAGE>   19
                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 June 30, 1997
                                  (CONTINUED)

                                    PART II

                               OTHER INFORMATION

ITEM 4.SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On May 14, 1997, at the annual meeting of shareholders of the Company, the
shareholders re-elected Jesse L. Calkins, Dennis M. Conerton, Kenneth A.
Hendricks and George D. Merchant to  three-year terms expiring in 2000.  The
vote, with respect to the re-election of each, was as follows:


         Jesse L. Calkins:
                 2,283,686 total votes eligible to be cast.
                 1,921,671 votes were represented at the Annual Meeting.
                 1,920,071 votes were case "For" re-election.
                        -0- votes were cast "Against" re-election.
                        1,600 votes abstained

         Dennis M. Conerton:
                 2,283,686 total votes eligible to be cast.
                 1,921,671 votes were represented at the Annual Meeting.
                 1,920,671 votes were cast "For" re-election.
                        -0- votes were cast "Against" re-election.
                        1,000 votes abstained.

         Kenneth A. Hendricks:
                 2,283,686 total votes eligible to be cast.
                 1,921,671 votes were represented at the Annual Meeting.
                 1,918,571 votes were cast "For" re-election.
                        -0- votes were cast "Against" re-election.
                        3,100 votes abstained.

         George D. Merchant:
                 2,283,686 total votes eligible to be cast.
                 1,921,671 votes were represented at the Annual Meeting.
                 1,918,871 votes were cast "For" re-election.
                        -0- votes were cast "Against" re-election.
                        2,800 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 no reports on Form 8-K filed during the second quarter of
            1997.


                                      19
<PAGE>   20

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 June 30, 1997
                                  (CONTINUED)



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 14, 1997                          /s/Dennis M. Conerton
                                            ------------------------------
                                                Dennis M. Conerton
                                                President and
                                                Chief Executive Officer




Date:  August 14, 1997                            /s/ Jesse L. Calkins
                                            ------------------------------
                                                Jesse L. Calkins
                                                Senior Vice President
                                                (Chief Financial and
                                                Accounting Officer)



                                      20
<PAGE>   21

                            BLACKHAWK BANCORP, INC.
                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
                                                      Incorporated    Filed
   Exhibit                       Herein By                Here-        Page
   Number    Description         Reference To:            with         No.
   -------------------------------------------------------------------------
   <S>     <C>                   <C>                     <C>         <C>
   2.1     Plan of Acquisition   Exhibit 99.1 to Form
                                 8-K/A filed April 25,
                                 1997.

   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)


   27      Financial Data                                               X
           Schedule


</TABLE>

                                      21