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 SEPTEMBER 30, 2003

                                       OR

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

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

                         COMMISSION FILE NUMBER 0-18599

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

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

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

                                      (608) 364-8911
                   (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                      NOT APPLICABLE
(FORMER NAME,  FORMER ADDRESS  AND FORMER  FISCAL YEAR,  IF CHANGED  SINCE  LAST
REPORT)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months,  and (2) has been  subject to such filing  requirements
for the past 90 days.

                        YES    X                            NO
                              ---                               ---

Indicate the number  of shares outstanding  of each of  the issuer's classes  of
common stock, as of the latest practicable date.

                                                     OUTSTANDING AT
         CLASS OF COMMON STOCK                      NOVEMBER 7, 2003
         ---------------------                      ----------------
             $.01 PAR VALUE                         2,522,995 SHARES

                                     INDEX

                         PART I - FINANCIAL INFORMATION

                                                                       Page
                                                                       ----

ITEM 1.  FINANCIAL STATEMENTS

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

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

     Unaudited Consolidated Statements of Income for the
        Nine Months Ended September 30, 2003 and 2002                    6

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

     Unaudited Consolidated Statements of Cash Flows for the
        Nine Months Ended September 30, 2003 and 2002                 8-10

     Notes to Unaudited Consolidated Financial Statements            11-16

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATION                        17-29

ITEM 3.  CONTROLS AND PROCEDURES                                        29

                          PART II - OTHER INFORMATION

ITEM 1      LEGAL PROCEEDINGS                                           30

ITEM 2      CHANGES IN SECURITIES                                       30

ITEM 3      DEFAULTS UPON SENIOR SECURITIES                             30

ITEM 4      SUBMISSION OF MATTERS TO A VOTE
              OF SECURITY HOLDERS                                       30

ITEM 5      OTHER INFORMATION                                           30

ITEM 6   A) EXHIBITS                                                    30

         B) REPORTS ON FORM 8-K                                         30

SIGNATURES                                                              31

INDEX TO EXHIBITS                                                       32

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
                     UNAUDITED CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                               SEPTEMBER 30,        DECEMBER 31,
                                                                                   2003                 2002
                                                                               -------------        ------------
                                                                                    (Dollars in thousands)
<S>                                                                                <C>                  <C>
ASSETS
------
Cash and due from banks                                                           $ 17,252            $ 12,572
Federal funds sold and securities purchased under agreements to resell               9,572              13,120
Interest-bearing deposits in banks                                                   3,679               8,472
Available-for-sale securities                                                      108,917              83,897
Held to maturity securities, at amortized cost                                      18,691              23,002
Loans, less allowance for loan losses of $3,305 and $2,079
  at September 30, 2003 and December 31, 2002, respectively                        241,187             186,300
Office buildings and equipment, net                                                  9,769               6,770
Intangible assets                                                                    7,363               4,598
Other assets                                                                        15,390              13,646
                                                                                  --------            --------
   Total Assets                                                                   $431,820            $352,377
                                                                                  --------            --------
                                                                                  --------            --------

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
   Noninterest-bearing                                                            $ 48,423            $ 35,274
   Interest-bearing                                                                268,757             227,811
                                                                                  --------            --------
   Total deposits                                                                  317,180             263,085
Short-term borrowings                                                               18,485              13,454
Long-term borrowings                                                                58,596              38,900
Company Obligated Mandatorily Redeemable Preferred Securities
  of subsidiary trust holding solely subordinated debentures                         7,000               7,000
Other liabilities                                                                    4,723               4,140
                                                                                  --------            --------
   Total Liabilities                                                               405,984             326,579
                                                                                  --------            --------

STOCKHOLDERS' EQUITY:
Preferred stock
   1,000,000 shares, $.01 par value per share
   authorized, none issued or outstanding                                               --                  --
Common stock
   10,000,000 shares, $.01 par value per share authorized,
   shares issued and outstanding: 2,522,995 at September 30, 2003, 2,507,065
   at December 31, 2002                                                                 25                  25
Surplus                                                                              8,818               8,698
Retained earnings                                                                   16,073              15,788
Accumulated other comprehensive income                                                 920               1,287
                                                                                  --------            --------
   Total Stockholders' Equity                                                       25,836              25,798
                                                                                  --------            --------
   Total Liabilities and Stockholders' Equity                                     $431,820            $352,377
                                                                                  --------            --------
                                                                                  --------            --------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                            THREE MONTHS ENDED SEPTEMBER 30,
                                                                                2003                2002
                                                                                ----                ----
                                                                                 (Dollars in thousands,
                                                                                 except per share data)
<S>                                                                             <C>                 <C>
INTEREST INCOME:
   Interest and fees on loans                                                  $2,993              $3,608
   Interest and dividends on securities:
       Taxable                                                                    745                 946
       Nontaxable                                                                 286                 210
   Interest on fed funds sold and securities purchased under
          agreements to resell                                                      5                  59
   Interest on interest-bearing deposits in banks                                  14                   6
                                                                               ------              ------
       Total Interest Income                                                    4,043               4,829
                                                                               ------              ------

INTEREST EXPENSE:
   Interest on deposits                                                         1,180               1,459
   Interest on short-term borrowings                                               20                  89
   Interest on long-term borrowings                                               549                 533
   Interest on Company Obligated Mandatorily Redeemable
       Preferred Securities                                                       102                  --
                                                                               ------              ------
       Total Interest Expense                                                   1,851               2,081
                                                                               ------              ------
   Net Interest Income                                                          2,192               2,748
   Provision for loan losses                                                      142                 422
                                                                               ------              ------
   Net Interest Income after Provision for Loan Losses                          2,050               2,326
                                                                               ------              ------

NONINTEREST INCOME:
   Service charges on deposit accounts                                            372                 396
   Gain on sale of loans                                                          158                  95
   Securities gains, net                                                           50                  --
   Other                                                                          247                 210
                                                                               ------              ------
       Total Noninterest Income                                                   827                 701
                                                                               ------              ------

NONINTEREST EXPENSES:
   Salaries and employee benefits                                               1,322               1,233
   Occupancy                                                                      172                 193
   Equipment                                                                      202                 225
   Data processing services                                                       221                 184
   Advertising and marketing                                                       47                  93
   Amortization of intangibles                                                     79                  78
   Professional fees                                                               92                 116
   Office supplies                                                                 69                  63
   Telephone                                                                       79                  77
   Transportation and postage                                                     105                 101
   Other                                                                          281                 277
                                                                               ------              ------
       Total Noninterest Expenses                                               2,669               2,640
                                                                               ------              ------
Income before Income Taxes                                                        208                 387
Income Taxes (Benefit)                                                            (30)                 85
                                                                               ------              ------
Net Income                                                                     $  238              $  302
                                                                               ------              ------
                                                                               ------              ------
Basic Earnings Per Share                                                       $ 0.09              $ 0.12
                                                                               ------              ------
                                                                               ------              ------
Diluted Earnings per Share                                                     $ 0.09              $ 0.12
                                                                               ------              ------
                                                                               ------              ------
Dividends Per Share                                                            $ 0.09              $ 0.09
                                                                               ------              ------
                                                                               ------              ------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                                             2003                2002
                                                                             ----                ----
                                                                              (Dollars in thousands,
                                                                              except per share data)
<S>                                                                           <C>                 <C>
INTEREST INCOME:
   Interest and fees on loans                                               $ 9,261             $11,188
   Interest and dividends on securities:
       Taxable                                                                2,602               2,559
       Nontaxable                                                               821                 627
   Interest on fed funds sold and securities purchased under
          agreements to resell                                                   54                 109
   Interest on interest-bearing deposits in banks                                31                  40
                                                                            -------             -------
       Total Interest Income                                                 12,769              14,523
                                                                            -------             -------

INTEREST EXPENSE:
   Interest on deposits                                                       3,676               4,567
   Interest on short-term borrowings                                             96                 184
   Interest on long-term borrowings                                           1,584               1,652
   Interest on Company Obligated Mandatorily Redeemable
       Preferred Securities                                                     265                  --
                                                                            -------             -------
       Total Interest Expense                                                 5,621               6,403
                                                                            -------             -------
   Net Interest Income                                                        7,148               8,120
   Provision for loan losses                                                    508                 683
                                                                            -------             -------
   Net Interest Income after Provision for Loan Losses                        6,640               7,437
                                                                            -------             -------

NONINTEREST INCOME:
   Service charges on deposit accounts                                        1,072               1,142
   Gain on sale of loans                                                        459                 221
   Securities gains, net                                                        475                 229
   Other                                                                        739                 621
                                                                            -------             -------
       Total Noninterest Income                                               2,745               2,213
                                                                            -------             -------

NONINTEREST EXPENSES:
   Salaries and employee benefits                                             4,140               3,964
   Occupancy                                                                    541                 641
   Equipment                                                                    663                 654
   Data processing services                                                     619                 570
   Advertising and marketing                                                    254                 256
   Amortization of intangibles                                                  238                 232
   Professional fees                                                            393                 412
   Office supplies                                                              186                 188
   Telephone                                                                    232                 227
   Transportation and postage                                                   317                 282
   Other                                                                        805                 834
                                                                            -------             -------
       Total Noninterest Expenses                                             8,388               8,260
                                                                            -------             -------
Income before Income Taxes                                                      997               1,390
Income Taxes                                                                     31                 341
                                                                            -------             -------
Net Income                                                                  $   966             $ 1,049
                                                                            -------             -------
                                                                            -------             -------
Basic Earnings Per Share                                                    $  0.38             $  0.43
                                                                            -------             -------
                                                                            -------             -------
Diluted Earnings per Share                                                  $  0.38             $  0.43
                                                                            -------             -------
                                                                            -------             -------
Dividends Per Share                                                         $  0.27             $  0.27
                                                                            -------             -------
                                                                            -------             -------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

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

Surplus:
     Balance at beginning of period                                           8,698              7,555
     Stock options exercised                                                    120              1,152
     Sale of treasury stock                                                      --                 (7)
                                                                            -------            -------
     Balance at end of period                                                 8,818              8,700
                                                                            -------            -------

Retained Earnings:
     Balance at beginning of period                                          15,788             15,447
     Net income                                                                 966              1,049
     Dividends declared on common stock                                        (681)              (669)
                                                                            -------            -------
     Balance at end of period                                                16,073             15,827
                                                                            -------            -------

Treasury Stock, at cost:
     Balance at beginning of period                                              --                (58)
     Sale of treasury stock                                                      --                 48
                                                                            -------            -------
     Balance at end of period                                                    --                (10)
                                                                            -------            -------

Accumulated other comprehensive income:
    Balance at beginning of period                                            1,287                773
    Other comprehensive income (loss):
      Change in net unrealized gains on
        available-for-sale securities                                          (457)             1,079
      Change in net unrealized gains on
        interest rate SWAP contract                                             325                 --
      Reclassification adjustment for securities
        gains included in net income                                           (475)              (229)
      Income tax effects                                                        240               (321)
                                                                            -------            -------
    Balance at end of period                                                    920              1,302
                                                                            -------            -------

Total Stockholders' Equity                                                  $25,836            $25,844
                                                                            -------            -------
                                                                            -------            -------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                                             2003                2002
                                                                             ----                ----
                                                                               (Dollars in thousands)
<S>                                                                           <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                            $    966            $  1,049
     Adjustments to reconcile net income to net cash
          provided by operating activities:
     Depreciation and amortization                                              931                 939
     Provision for loan losses                                                  508                 683
     Gain on sale of loans                                                     (459)               (221)
     FHLB stock dividends                                                      (202)                (92)
     Amortization of premiums on securities, net                                744                 105
     Securities gains, net                                                     (475)               (229)
     Decrease (increase) in accrued interest receivable                         201                 (22)
     Decrease in accrued interest payable                                       (44)               (182)
     Decrease (increase) in other assets                                       (503)                549
     Decrease in other liabilities                                             (631)               (182)
                                                                           --------            --------
     Net cash provided by operations before
       loan originations and sales                                            1,036               2,397
     Origination of loans for sale                                          (24,385)            (18,094)
     Proceeds from sale of loans                                             26,550              18,468
                                                                           --------            --------
     Net cash provided by operating activities                                3,201               2,771
                                                                           --------            --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net decrease in interest-bearing deposits in banks                       6,184               7,521
     Net decrease in federal funds sold and securities
        purchased under agreements to resell                                 13,120              12,409
     Proceeds from sales of available-for-sale securities                    33,631               8,523
     Proceeds from maturities and calls of available-for-sale securities     34,096               7,886
     Proceeds from maturities and calls of held-to-maturity securities        4,553               2,914
     Purchase of available-for-sale securities                              (82,773)            (46,757)
     Purchase of held-to-maturity securities                                   (284)             (3,522)
     Net decrease (increase) in loans                                       (11,481)             16,547
     Purchase of bank owned life insurance                                       --              (5,000)
     Net cash used in acquisition                                            (4,533)                 --
     Proceeds from the sale of office buildings, equipment, and
          other real estate owned                                               369                 430
     Purchase of office buildings and equipment, net                           (910)               (669)
                                                                           --------            --------
     Net cash provided by (used in) investing activities                     (8,028)                282
                                                                           --------            --------
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

<TABLE>
                                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                                             2003                2002
                                                                             ----                ----
                                                                               (Dollars in thousands)
<S>                                                                           <C>                 <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net decrease in deposits                                              $(10,141)           $ (9,654)
     Dividends paid                                                            (679)               (657)
     Proceeds from other borrowings                                          15,500                  --
     Payments on other borrowings                                              (300)            (12,488)
     Net increase in short-term borrowings                                    5,030              18,281
     Proceeds from exercise of stock options                                     97               1,153
     Sale of treasury stock                                                      --                  41
                                                                           --------            --------
     Net cash provided by (used in) financing activities                      9,507              (3,324)
                                                                           --------            --------
     Net increase (decrease) in cash and due from banks                       4,680                (271)

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

     Ending                                                                $ 17,252            $ 11,475
                                                                           --------            --------
                                                                           --------            --------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid (refunded) during the period for:
          Interest                                                         $  5,688            $  6,586
          Income taxes                                                     $    (21)           $    (50)

SUPPLEMENTAL SCHEDULES OF NON-CASH INVESTING
     ACTIVITIES:
     Change in accumulated other comprehensive income:
          Unrealized gains (losses) on available-for-sale securities, net  $   (581)           $    529
          Unrealized gains (losses) on interest rate SWAP contract, net    $    214            $     --
     Other assets acquired in settlement of loans                          $    273            $    335
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

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

SUPPLEMENTAL SCHEDULES OF NON-CASH INVESTING ACTIVITIES
(CONTINUED):

Acquisition of DunC Corp.

Assets acquired:

Cash and due from banks                                                $ 2,686
Federal funds sold                                                       9,572
Interest-bearing deposits in banks                                       1,391
Available-for-sale securities                                           11,104
Loans                                                                   45,892
Office buildings and equipment, net                                      2,741
Intangible assets                                                        3,069
Other assets                                                             1,271
                                                                       -------

Total assets                                                           $77,726
                                                                       -------

Liabilities assumed:

Deposits                                                               $64,237
Borrowings                                                               3,631
Other liabilities                                                        1,401
                                                                       -------

Total liabilities                                                      $69,269
                                                                       -------

Net assets acquired                                                    $ 8,457
                                                                       -------
                                                                       -------

Cash paid                                                              $ 7,223
                                                                       -------
Cash acquired:
   DunC Corp.                                                                4
   First Banc bc                                                         2,686
                                                                       -------

Total cash received                                                    $ 2,690
                                                                       -------

Net cash used in acquisition                                           $ 4,533
                                                                       -------
                                                                       -------

            See Notes to Unaudited Consolidated Financial Statements

                    BLACKHAWK BANCORP, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 1. General:

        The unaudited consolidated financial statements include the accounts of
        Blackhawk Bancorp, Inc. and its subsidiaries.  Effective September 30,
        2003, Blackhawk Bancorp, Inc. acquired the assets of DunC Corp and its
        subsidiary, First Bank bc., in a transaction accounted for as a
        purchase.  The assets and liabilities of those acquired companies have
        been included in the September 30, 2003 Unaudited Consolidated Balance
        Sheet of Blackhawk Bancorp, Inc.

        In the opinion of management, all adjustments (consisting only of
        normal recurring adjustments) necessary for a fair presentation of the
        financial position, results of operation and cash flows for the interim
        periods have been made.  The results of operations for the nine months
        ended September 30, 2003 are not necessarily indicative of the results
        to be expected for the entire fiscal year.

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

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

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

        Stock-Based Compensation Plan:  At September 30, 2003, the Company had
        -----------------------------
        a stock-based director, key officer and employee compensation plan.
        The Company accounts for this plan under the recognition and
        measurement principles of APB Opinion No. 25, Accounting for Stock
        Issued to Employees, and related interpretations.  No stock-based
        employee compensation cost is reflected in income, as all options
        granted under those plans had an exercise price equal to the market
        value of the underlying common stock on the date of grant.  The table
        on the following page illustrates the effect on net income and earnings
        per share if the Company had applied the fair value recognition
        provisions of Financial Accounting Standards Board (FASB) Statement No.
        123, Accounting for Stock-Based Compensation, to stock-based employee
        compensation.

(Dollars in thousands, except per share data)                Three Months Ended
                                                                September 30,
                                                              2003         2002
                                                              ----         ----

Net income, as reported                                      $ 238        $ 302
Deduct total stock-based employee compensation expense
  determined under fair value based method for all
  awards, net of related tax effects                           (29)         (19)
                                                             -----        -----

PRO FORMA NET INCOME                                         $ 209        $ 283
                                                             -----        -----
                                                             -----        -----

Earnings per share:
   Basic:
     As reported                                             $0.09        $0.12
     Pro forma                                                0.08         0.11

   Diluted:
     As reported                                              0.09         0.12
     Pro forma                                                0.08         0.11


(Dollars in thousands, except per share data)                 Nine Months Ended
                                                                September 30,
                                                              2003         2002
                                                              ----         ----

Net income, as reported                                      $ 966       $1,049
Deduct total stock-based employee compensation expense
  determined under fair value based method for all
  awards, net of related tax effects                           (71)         (56)
                                                             -----       ------

PRO FORMA NET INCOME                                         $ 895       $  993
                                                             -----       ------
                                                             -----       ------

Earnings per share:
   Basic:
     As reported                                             $0.38       $ 0.43
     Pro forma                                                0.36         0.40

   Diluted:
     As reported                                              0.38         0.43
     Pro forma                                                0.35         0.40


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

Note 2. Allowance for Loan Losses

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

                                                        THREE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                        ------------------
                                                      (Dollars in thousands)
                                                       2003             2002
                                                       ----             ----

        Balance at beginning of period                $2,342           $2,519
        Reserve acquired in merger                       889               --
        Provision charged to expense                     142              422
        Loans charged off                                105              237
        Recoveries                                        37                2
                                                      ------           ------
        Balance at end of period                      $3,305           $2,706
                                                      ------           ------
                                                      ------           ------

                                                        NINE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                        -----------------
                                                      (Dollars in thousands)
                                                        2003             2002
                                                        ----             ----
        Balance at beginning of period                $2,079           $2,404
        Reserve acquired in merger                       889               --
        Provision charged to expense                     508              683
        Loans charged off                                353              419
        Recoveries                                       182               38
                                                      ------           ------
        Balance at end of period                      $3,305           $2,706
                                                      ------           ------
                                                      ------           ------

Note 3. Earnings per Share

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

<TABLE>
                                                               THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                 SEPTEMBER 30,
                                                               2003           2002           2003           2002
        Basic:                                                 ----           ----           ----           ----
<S>                                                            <C>            <C>            <C>            <C>
        Net income available to common stockholders         $  238,000     $  302,000     $  966,000     $1,049,000
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
        Weighted average shares outstanding                  2,520,443      2,503,832      2,517,250      2,455,923
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
        Basic earnings per share                            $     0.09     $     0.12     $     0.38     $     0.43
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------

        Diluted:
        Net income available to common stockholders         $  238,000     $  302,000     $  966,000     $1,049,000
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
        Weighted average shares outstanding                  2,520,443      2,503,832      2,517,250      2,455,923
        Effect of dilutive stock options outstanding            14,126          6,176         14,126          6,176
                                                            ----------     ----------     ----------     ----------
        Diluted weighted average shares outstanding          2,534,569      2,510,008      2,531,376      2,462,099
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
        Diluted earnings per share                          $     0.09     $     0.12     $     0.38     $     0.43
                                                            ----------     ----------     ----------     ----------
                                                            ----------     ----------     ----------     ----------
</TABLE>

Note 4. Derivative Instrument

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

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


                                                       2003               2002
                                                       ----               ----
                                                        (Dollars in thousands)
        Notional amount                              $7,000                 --
        Weighted average fixed rate                   2.51%                 --
        Weighted average variable rate                1.16%                 --
        Weighted average maturity                4.25 years                 --
        Fair value                                     $325                 --

Note 5. Acquisition of DunC Corp.

        As more fully described in Item 2 of this report under the caption
        "Acquisition or Disposition of Assets", Blackhawk Bancorp, Inc.
        acquired DunC Corp on September 30, 2003 in a transaction accounted for
        as a purchase. The assets and liabilities of DunC Corp., valued at fair
        market value, on the date of acquisition, September 30, 2003, were
        included in the unaudited consolidated balance sheet of Blackhawk
        Bancorp, Inc. and Subsidiaries at September 30, 2003. Since the
        transaction was accounted for as a purchased no amounts have been
        included in the unaudited consolidated statement of income for either
        of the periods presented.

Note 6. Recent Accounting Developments

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

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

        FIN No. 46 "Consolidation of Variable Interest Entities, an
        interpretation of Accounting Research Bulletin No. 51." establishes
        accounting guidance for consolidation of variable interest entities
        (VIE) that function to support the activities of the primary
        beneficiary. The primary beneficiary of a VIE entity is the entity that
        absorbs a majority of the VIE's expected losses, receives a majority of
        the VIE's expected residual returns, or both, as a result of ownership,
        controlling interest, contractual relationship or other business
        relationship with a VIE. Prior to the implementation of FIN 46, VIEs
        were generally consolidated by an enterprise when the enterprise had a
        controlling financial interest through ownership of a majority of
        voting interest in the entity. The provisions of FIN 46 were effective
        immediately for all arrangements entered into after January 31, 2003.
        If a VIE existed prior to February 1, 2003, FIN 46 was effective at the
        beginning of the first interim period beginning after June 15, 2003.
        However, on October 8, 2003, the Financial Accounting Standards Board
        (FASB) deferred the implementation date of FIN 46 until the first
        period ending after December 15, 2003.

        The interpretations of FIN 46 and its application to various
        transaction types and structures are evolving. Management continuously
        monitors emerging issues related to FIN 46, some of which could
        potentially impact the Corporation's financial statements. The
        Corporation currently consolidates its VIE, Blackhawk Statutory Trust
        I, in its unaudited consolidated financial statements and treats its
        Trust Preferred Securities as debt.

Note 7. Recent Regulatory Developments

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

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

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

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

This report contains certain forward-looking statements  within the meaning of
the Private  Securities Litigation  Reform Act  of  1995 with  respect  to the
financial  condition,  results   of  operations,  plans,   objectives,  future
performance and business  of Blackhawk Bancorp,  Inc. Statements that  are not
historical facts,  including statements  about beliefs  and  expectations, are
forward-looking statements.  These  statements  are  based  upon  beliefs  and
assumptions of Blackhawk's  management and on  information currently available
to such management.  The use of  the words "believe",  "expect", "anticipate",
"plan", "estimate", "may",  "will" or similar  expressions are forward-looking
statements.

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

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

                     ACQUISITION OR DISPOSITION OF ASSETS

On September 30, 2003 (the "Effective Date"), Blackhawk Bancorp, Inc., (the
"Corporation") consummated its acquisition of DunC Corp. ("DunC"), a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, and DunC's wholly owned subsidiary, First Bank, bc  ("First Bank"),
an Illinois state bank.

The Corporation acquired DunC and First Bank pursuant to an Agreement and Plan
of Merger dated as of March 17, 2003 (the "Merger Agreement"), between the
Corporation, DunC Merger Corporation ("Merger Corp"), a wholly owned
subsidiary of the Corporation, and DunC through a series of mergers.

Pursuant to the Merger Agreement, Merger Corp was merged with and into DunC at
the close of business on the Effective Date, and DunC became a wholly owned
subsidiary of the Corporation.  The merger consideration was cash in the
aggregate amount of $7,222,941, which was paid to former DunC shareholders.
The price paid by the Corporation for the DunC common stock was arrived at
through arms-length negotiations.

The terms of the merger of Merger Corp with and into DunC are described more
fully in the Merger Agreement filed as Exhibit 2.1 to the Corporation's Form
10-QSB for the quarterly period ended March 31, 2003, which is incorporated
herein by reference.  The description of the transaction set forth above is
qualified in its entirety by the terms set forth in the Merger Agreement.

Immediately following the merger of Merger Corp into DunC, DunC merged with
and into the Corporation, and First Bank merged with and into Blackhawk State
Bank, a wholly owned subsidiary of the Corporation.  As a result of these
mergers the Corporation and Blackhawk State Bank were the surviving entities,
and DunC and First Bank ceased to exist.

The merger consideration paid to the former shareholders of DunC was funded
through a term loan with U.S. Bank National Association, Milwaukee,
Wisconsin. The term loan for $7.5 million was entered into in the ordinary
course of business and on terms commensurate with prevailing market
conditions on September 26, 2003. The term loan matures on September 26,
2008. A copy of the term loan agreement was filed as an exhibit on the
Corporation's Current Report on Form 8-K dated September 30, 2003 and is
incorporated herein by reference.

The merger  was accounted  for as  a  purchase. The  assets  of the  acquired
companies (as detailed on page 10 of this report on Form 10-QSB) are included
in the September 30,  2003 Unaudited Consolidated Balance  Sheet. The results
of operations subsequent to the acquisition date will  be reflected in future
filings.

                            RESULTS OF OPERATIONS

The company  reported  net income  of  $238,000 for  the  three months  ended
September 30, 2003, a decrease of $64,000 or 21.2% from the $302,000 reported
for the same  three month  period in  2002.   Net income  for the  nine month
period ended September 30, 2003 was $966,000, a decrease  of $83,000, or 7.9%
from the $1,049,000 reported for the same period in 2002.

Diluted earnings per share were $0.09 and $0.38 for the three and nine months
ended September 30, 2003, respectively,  compared to $0.12 and  $0.43 for the
same periods in 2002.  This represents a decrease of 25.0%  and 11.6% for the
three month and nine month periods, respectively.

NET INTEREST INCOME

Net interest income, which is the sum of interest  and certain fees generated
by earning assets minus interest paid on deposits  and other funding sources,
is the primary source of the company's earnings.  All discussions of interest
income amounts and rates  are on a  tax-equivalent basis, which  accounts for
income earned on loans  and securities that are  not fully subject  to income
taxes as if they were fully subject to income taxes. The following table sets
forth the company's consolidated average balances  of assets, liabilities and
stockholders' equity, interest income  and expense on related  items, and the
company's average rate for the  three and nine month  periods ended September
30, 2003 and 2002. The tax-equivalent yield calculations assume a Federal Tax
Rate of 34%:

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES

<TABLE>

(yields on a tax-equivalent basis)                    Three Months ended                 Three Months ended
                                                      September 30, 2003                 September 30, 2002
                                                ------------------------------     ------------------------------
                                                Average                Average     Average                Average
                                                Balance     Interest     Rate      Balance    Interest      Rate
                                                -------     --------   -------     -------    --------    -------
<S>                                               <C>         <C>        <C>         <C>        <C>         <C>
INTEREST EARNING ASSETS:
  Interest-bearing deposits
    in banks                                   $  2,548      $   14      2.18%    $    987    $     6      2.41%
  Federal funds sold &
    securities purchased under
    agreements to resell                          2,047           5       .97%       9,687         59      2.42%
  Investment securities:
    Taxable investment securities                92,312         745      3.20%      77,182        946      4.86%
    Tax-exempt investment
      securities                                 29,560         433      5.81%      19,784        318      6.38%
                                               --------      ------      -----    --------     ------      -----
        Total investment securities             121,872       1,178      3.83%      96,966      1,264      5.17%
  Loans                                         192,758       2,994      6.16%     193,773      3,609      7.39%
                                               --------      ------      -----    --------     ------      -----

TOTAL EARNING ASSETS                           $319,225      $4,191      5.21%    $301,413     $4,938      6.50%
                                                             ------      -----                 ------      -----
  Allowance for loan losses                      (2,402)                            (2,491)
  Cash and due from banks                        11,287                             10,569
  Other assets                                   21,093                             17,013
                                               --------                           --------
TOTAL ASSETS                                   $349,203                           $326,504
                                               --------                           --------
                                               --------                           --------

INTEREST BEARING LIABILITIES:
  Interest bearing checking accounts           $ 36,396      $   62       .68%    $ 32,461     $   86      1.05%
  Savings deposits                               54,793          93       .67%      53,901        153      1.13%
  Time deposits                                 130,867       1,025      3.11%     123,716      1,220      3.91%
                                               --------      ------      -----    --------     ------      -----
    Total interest bearing deposits             222,056       1,180      2.11%     210,078      1,459      2.76%
  Short-term borrowings                          11,254          20       .71%      18,405         89      1.92%
  Long-term borrowings                           48,388         549      4.50%      39,442        533      5.36%
  Trust preferred securities                      7,000         102      5.78%         -0-        -0-       -0-%
                                               --------      ------      -----    --------     ------      -----
TOTAL INTEREST-BEARING LIABILITIES             $288,698      $1,851      2.54%    $267,925     $2,081      3.08%
                                                             ------      -----                 ------      -----


NET INTEREST SPREAD                                                      2.66%                             3.42%
                                                                         -----                             -----
                                                                         -----                             -----

  Noninterest bearing deposits                   32,998                             30,641
  Other liabilities                               1,809                              2,217
                                               --------                           --------
  Total liabilities                             323,505                            300,783
  Stockholders' equity                           25,698                             25,721
                                               --------                           --------
TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                         $349,203                           $326,504
                                               --------                           --------
                                               --------                           --------

NET INTEREST MARGIN                                          $2,340      2.91%                 $2,857      3.76%
                                                             ------      -----                 ------      -----
                                                             ------      -----                 ------      -----
</TABLE>

AVERAGE BALANCE SHEET WITH RESULTANT INTEREST AND RATES

<TABLE>

(yields on a tax-equivalent basis)                    Nine Months ended                  Nine Months ended
                                                      September 30, 2003                 September 30, 2002
                                                ------------------------------     ------------------------------
                                                Average                Average     Average                Average
                                                Balance     Interest     Rate      Balance    Interest      Rate
                                                -------     --------   -------     -------    --------    -------
<S>                                               <C>         <C>        <C>         <C>        <C>         <C>

INTEREST EARNING ASSETS:
  Interest-bearing deposits
      in banks                                 $  2,035     $    31     2.04%     $  2,880     $    40     1.86%
  Federal funds sold &
      securities purchased under
      agreements to resell                        4,053          54     1.78%        7,345         109     1.98%
  Investment securities:
     Taxable investment securities               91,702       2,602     3.79%       66,734       2,559     5.13%
     Tax-exempt investment securities
                                                 27,658       1,242     6.00%       19,564         949     6.49%
                                               --------     -------     -----     --------     -------     -----
        Total investment securities             119,360       3,844     4.31%       86,298       3,508     5.43%
  Loans                                         186,262       9,262     6.65%      197,863      11,192     7.56%
                                               --------     -------     -----     --------     -------     -----

TOTAL EARNING ASSETS                           $311,710     $13,191     5.66%     $294,386     $14,849     6.74%
                                                            -------     -----                  -------     -----
  Allowance for loan losses                      (2,276)                            (2,509)
  Cash and due from banks                        11,004                             10,070
  Other assets                                   21,372                             17,153
                                               --------                           --------
TOTAL ASSETS                                   $341,810                           $319,100
                                               --------                           --------
                                               --------                           --------

INTEREST BEARING LIABILITIES:
  Interest bearing checking accounts           $ 37,800     $   224      .79%     $ 32,255     $   259     1.07%
  Savings deposits                               53,953         305      .76%       53,820         474     1.18%
  Time deposits                                 125,995       3,147     3.34%      122,201       3,834     4.19%
                                               --------     -------     -----     --------     -------     -----
      Total interest bearing deposits           217,748       3,676     2.26%      208,276       4,567     2.93%
   Short-term borrowings                         12,384          96     1.04%       13,053         184     1.88%
   Long-term borrowings                          44,448       1,584     4.76%       41,035       1,652     5.38%
   Trust preferred securities                     7,000         265     5.06%          -0-         -0-      -0-%
                                               --------     -------     -----     --------     -------     -----
TOTAL INTEREST-BEARING
  LIABILITIES                                  $281,580     $ 5,621     2.67%     $262,364     $ 6,403     3.26%
                                                            -------     -----                  -------     -----

NET INTEREST SPREAD                                                     2.99%                              3.48%
                                                                        -----                              -----
                                                                        -----                              -----
  Noninterest bearing deposits                   32,445                             29,725
  Other liabilities                               1,966                              2,162
                                               --------                           --------
  Total liabilities                             315,991                            294,251
  Stockholders' equity                           25,819                             24,849
                                               --------                           --------

TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                         $341,810                           $319,100
                                               --------                           --------
                                               --------                           --------

NET INTEREST MARGIN                                         $ 7,570     3.25%                  $ 8,446     3.84%
                                                            -------     -----                  -------     -----
                                                            -------     -----                  -------     -----
</TABLE>

Net interest income decreased  by $517,000, or  18.1%, to $2,340,000  for the
quarter ended September 30,  2003, compared to $2,857,000  for the comparable
period in 2002.   On a year  to date basis  net interest income  decreased by
$876,000, or 10.4%, to $7,570,000  compared to $8,446,000 for  the first nine
months of 2002.  These decreases are primarily due to  decreases in yields on
interest earning assets, which  were only partially offset  with decreases in
costs of interest bearing liabilities.  The net interest margin, which is the
tax equivalent net interest income divided by average interest earning assets
was 2.91% and 3.25% for the three and nine month  periods ended September 30,
2003.  The  third quarter net  interest margin represents  an 85  basis point
decrease compared to  the 2002  third quarter net  interest margin  of 3.76%.
The year to  date net interest  margin of 3.25%  represents a 59  basis point
decrease compared  to the  3.84% net  interest margin  realized for  the same
period in 2002.

For the three months ended September 30, 2003, total interest income
decreased by $747,000, or 15.1%, to $4,191,000 compared to $4,938,000 for the
same period in 2002.  The decrease in interest income is due to a 129 basis
point decrease in the yield on average earning assets to 5.21% for the third
quarter of 2003, compared to 6.50% for the same period in 2002.  The decrease
in the yield on average earning assets for the third quarter of 2003 compared
to the third quarter of 2002 is offset by a $17,812,000 increase in average
earning assets. For the nine months ended September 30, 2003, total interest
income decreased by $1,658,000, or 11.2%, to $13,191,000 compared to
$14,849,000 for the same period in 2002. The decrease in interest income is
due to a 108 basis point decrease in the yield on average earning assets to
5.66% compared to 6.74% for the same period in 2002 partially offset by a
5.9% increase in average earning assets.  The decrease in yield on average
earning assets for the three months ended September 30, 2003 reflects the
investment of available liquidity into lower yielding investment securities
and the continued re-pricing of loans and investments in this historically
low interest rate environment.

Interest income on loans decreased 17.0% to $2,994,000  for the third quarter
of 2003 compared to  $3,609,000 for the same  period in 2002.   This decrease
primarily is due to lower rates  earned on the bank's loans  due to continued
repricing and the  sustained low  interest rate  environment.   Average loans
outstanding for  the three  months ended  September 30,  2003 decreased   .5%
compared to the same  period in 2002.   Interest and fees on  loans decreased
17.2% to $9,262,000 for the nine months ended September  30, 2003 compared to
$11,192,000 in  same period  of 2002.  This  decrease was  the  result of  an
$11,601,000 or  5.9% decrease  in average  loans outstanding  and a  91 basis
point decrease  in yield  on the  portfolio.  The decrease  in average  loans
outstanding for the nine  month period ended  September 30, 2003  compared to
the same period in 2002  is largely attributable to  the refinancing activity
in the  residential real  estate market,  weak commercial  and consumer  loan
demand and competitive pricing pressure for quality credits.

Interest income on taxable securities deincreased by $201,000 or 21.2% in the
third quarter of 2003 to $745,000 compared to $946,000 for the same period in
2002. The average balances  of taxable investment securities  increased 19.6%
to  $92,312,000  for  the  quarter  ended  September  30,  2003  compared  to
$77,182,000 for the  same period  in the  prior year.  However, the  yield on
average taxable investment securities decreased 166 basis points to 3.20% for
the third quarter of  2003 compared to 4.86%  for the third quarter  of 2002.
Interest income on taxable securities  increased by $43,000, or  1.7%, in the
first nine months of 2003 to  $2,602,000 from $2,559,000 for  the same period
in 2002.  Average  balances of taxable investment  securities increased 37.4%
to $91,702,000  for the  nine months  ended  September 30,  2003 compared  to
$66,734,000 for the same  period in the prior  year. The increase  in average
balances outstanding was offset by a decrease of 134  basis points in average
yield to 3.79% for  the first nine months  of 2003 compared to  5.13% for the
first nine months of 2002.  The decrease in the  yield on taxable investments
for the three and nine months  ended September 30, 2003 compared  to the same
periods a year ago  is primarily due to  the investment of proceeds  from the
maturity and sale of investments and additional liquidity into the investment
portfolio during the historically  low interest rate environment.   The yield
was further  impacted  by accelerated  amortization  of  purchase premium  on
mortgage-backed securities  and collateralized  mortgage  obligations due  to
increased prepayment speeds on the underlying collateral.

Tax exempt investment securities increased $9,776,000, or 49.4% to an average
balance of $29,560,000 for the three months ended September 30, 2003 compared
to $19,784,000 for the same period in 2002. Interest income on tax exempt
securities increased $115,000 or 36.2% to $433,000 for the third quarter of
2003 compared to $318,000 for the third quarter of 2002. Average tax exempt
securities increased to $27,658,000 for the nine months ended September 30,
2003 compared to $19,564,000 for the same period in 2002 and their average
tax equivalent yield decreased from 6.49% for the nine months ended September
30, 2002 to 6.00% for the same period in 2003.

Interest from fed  funds sold  and securities  purchased under  agreements to
resell decreased to $5,000 and $54,000  for the three and  nine month periods
ended September  30, 2003,  respectively, compared  to  $59,000 and  $109,000
during the same periods in 2002. The quarterly and year  to date decreases in
interest on  fed funds  sold  and securities  purchased  under agreements  to
resell were due to lower market rates and lower average balances outstanding.

Total interest expense decreased by $230,000, or 11.1%, to $1,851,000 for the
three months ended  September 30,  2003 compared to  $2,081,000 for  the same
period in 2002.  For the nine months ended September  30, 2003 total interest
expense decreased by $782,000, or 12.2%, to $5,621,000 compared to $6,403,000
for the same period in 2002.   The decrease in total interest  expense is the
result of the aforementioned lower interest rate environment offset by higher
average balances outstanding.

While interest paid  on deposits decreased  $279,000, or 19.1%  to $1,180,000
during the three months ended  September 30, 2003 compared  to $1,459,000 for
the  same  period  in  2002,  average  interest  bearing  deposits  increased
$11,978,000 quarter over  quarter.   Year to date  interest paid  on deposits
decreased $891,000, or  19.5% to  $3,676,000 compared  to $4,567,000  for the
same period in 2002  while average total interest  bearing deposits increased
by $9,472,000.

Interest on short-term borrowings decreased $69,000 to  $20,000 for the three
months ended September 30,  2003 compared to $89,000  for the same  period in
2002.  For the  nine months ended September  30, 2003 interest  on short-term
borrowings decreased $88,000  to $96,000  compared to  $184,000 for  the same
period in 2002.   Both  decreases are  the result  of lower  average balances
outstanding in 2003 coupled with the lower interest  rate environment in 2003
compared to 2002.  They also reflect the liquidation of the holding company's
bank line of credit during December 2002 coincident with  the issuance of the
company's Trust Preferred Securities.

Interest expense on  long-term borrowings increased  $16,000 to  $549,000 for
the three months ended September 30, 2003 compared to  $533,000 for the third
quarter of 2002.  The increase is primarily the  result of additional Federal
Home Loan Bank advances  in 2003, at lower  market interest rates,  offset by
the pay-off of the bank debt of Blackhawk Bancorp, Inc. during December, 2002
co-incident with the  issuance of the  company's Trust  Preferred Securities.
Interest expense on long-term borrowings decreased  $68,000 to $1,584,000 for
the nine months ended September 30, 2003 compared to $1,652,000 for the third
quarter of 2002 primarily from the liquidation of the holding company debt in
December 2002  offset  by  additional interest,  at  lower  market rates,  on
additional Federal Home Loan Bank advances outstanding in 2003.

PROVISION FOR LOAN LOSSES

The provision for loan losses (provision) is an amount added to the allowance
for loan losses (allowance) to provide for the known  and estimated amount of
loans that  will not  be collected.  Actual loan  losses are  charged against
(reduce) the  allowance  when  management  believes  that the  collection  of
principal will not occur. Subsequent recoveries of amounts previously charged
to  the  allowance,  if  any,  are  credited  to  (increase)  the  allowance.
Management determines  the  appropriate  provision  based  upon a  number  of
criteria, including  a  detailed evaluation  of  certain credits,  historical
performance, economic conditions and overall quality of the loan portfolio.
The provision  was $142,000  in the  third  quarter of  2003,  a decrease  of
$280,000 or 66.4% from  the $422,000 in the  third quarter of 2002.  The bank
provided an additional provision of $300,000 during the third quarter of 2002
to adequately value  its loan portfolio  for problem loans  identified during
the quarter.  For the first  nine months of 2003, the  provision was $508,000
compared to $683,000 during the same time period a year ago.

Activity in the allowance  for loan losses is  detailed in footnote 2  to the
unaudited consolidated financial  statements. Charge-offs, net  of recoveries
for the third  quarter of 2003  decreased by $167,000  to net  charge-offs of
$68,000 compared  to net  charge-offs of  $235,000 for  the third  quarter of
2002. Year to date  net charge-offs decreased  $210,000 or 55.1%  to $171,000
compared to $381,000 for the first nine months of 2002.

The ratio of  the allowance to  total loans was  1.35% at September  30, 2003
compared to 1.10% at December 31, 2002. The allowance for loan losses totaled
$3,305,000 at September 30, 2003 and included $889,000, which was acquired as
part of the DunC Corp. and First Bank, bc acquisition.

NONINTEREST INCOME

Total noninterest income  increased $126,000, or  18.0%, to $827,000  for the
three months  ended September  30, 2003  compared  to $701,000  for the  same
period in 2002. Year to date total noninterest  income increased $532,000, or
24.0%, to $2,745,000 compared to $2,213,000 for the same period in 2002.

Service charges on  deposit accounts totaled  $372,000 for the  quarter ended
September 30, 2003 compared to $396,000  for the third quarter of  2002.  The
decrease is primarily due  to lower overdraft fees  collected which decreased
by $22,000  or 8.6%  to $235,000  for the  quarter ended  September 30,  2003
compared to $257,000  for the third  quarter of 2002.   Year to  date service
charges on deposits  decreased $70,000,  or 6.1%,  to $1,072,000  compared to
$1,142,000 in the prior year primarily due to lower  levels of overdraft fees
collected for the nine months ended September 30, 2003.

Gain on the sale of mortgage loans increased $63,000 or 66.3% to $158,000 for
the third quarter of 2003 compared to the $95,000  of gains recognized during
the third quarter of 2002. The  increase was primarily due  to higher volumes
sold during  the  third  quarter of  2003.  In  the  third quarter  of  2003,
$9,842,000 of loans were sold to the secondary  market compared to $6,242,000
for the same  period in 2002.  Year to  date gain on  sale of  mortgage loans
increased $238,000 or 107.7%  to $459,000 compared  to $221,000 for  the same
period in 2002.  The increase is  due to  a higher volume  of loans  sold and
higher margins. The average  gain in 2003 was  1.73% on $26,550,000  in loans
sold to the  secondary market  compared to an  average gain  of 1.20%  on the
$18,468,000 of loans  sold in  the same period  in 2002.  The level  of gains
realized is dependent  on market  interest rates which  impacts the  level of
home loan  refinancings. Should  market interest  rates  increase from  their
current 45-year historical lows,  the amount of  loans sold to  the secondary
market and the level of gains realized is anticipated to decrease.

The Company recognized $50,000  in securities gains  in the third  quarter of
2003. No gains were  recognized in the third  quarter of 2002.   Year to date
the company has realized $475,000  in securities gains, a  $246,000 or 107.4%
increase over the $229,000 realized  for the nine months  ended September 30,
2002.

Other noninterest  income increased  $37,000  or 17.6%  to  $247,000 for  the
quarter ended September 30, 2003  compared to $210,000 for  the third quarter
of 2002. The  increase is primarily  due to additional  income on  the bank's
investment in bank owned life insurance.  The increase  in the cash surrender
value of life  insurance increased by  $68,000 in the  third quarter  of 2003
compared to the third quarter of 2002.  The bank  invested $5,000,000 in bank
owned life insurance on September 30,  2002.  Year to  date other noninterest
income increased by $118,000 or 19.0%  to $739,000 for the  nine months ended
September 30,  2003 from  $621,000 for  the nine  months ended  September 30,
2002. The year to date increase is due to an increase in cash surrender value
of bank  owned life  insurance of  $203,000  offset by  a  32.9% decrease  in
brokerage and annuity commissions realized  in 2003 from $130,000  in 2002 to
$87,000 in 2003.

NONINTEREST EXPENSES

Total operating expenses  increased $29,000, or  1.1%, to $2,669,000  for the
three months ended  September 30,  2003 compared to  $2,640,000 for  the same
period in 2002.  The third quarter of 2002 included a reversal of $157,000 in
accrued vacation as a  result of a change  in the company's  vacation policy.
Excluding this non-recurring item,  operating expenses decreased  by $128,000
for the  quarter.   The  decrease  in operating  expenses,  net  of the  non-
recurring item, reflects senior management's efforts to control discretionary
spending to offset lower net interest  margin.  For the first  nine months of
2002 total  operating expenses  increased $128,000,  or  1.5%, to  $8,388,000
compared to $8,260,000  for the same  period in 2002.  Adjusting for  the one
time year to date impact on  the 2002 change in vacation  policy of $145,000,
operating expenses decreased by $17,000 year over year.

Salaries and employee benefits for 2002 included the one time adjustment, due
to the change in the company's vacation policy, of  $157,000 and $145,000 for
the three  and  nine  months  ended  September  30,  2003.    Excluding  this
adjustment, salaries  and  employee benefits  decreased  $68,000  or 4.9%  to
$1,322,000 for the quarter  ended September 30, 2003,  compared to $1,390,000
for the third  quarter of 2002.    For  the first nine  months of  2002 total
salaries and  employee  benefits  increased  $31,000  or 0.8%  to  $4,140,000
compared to $4,109,000 for the same period in 2002.

Occupancy expenses for the three months ended September 30, 2003 decreased to
$172,000 from $193,000 for the third  quarter of 2002 primarily  due to lower
maintenance costs and the closure of the Wal-Mart branch.  Occupancy expenses
for the nine months ended  September 30, 2003 decreased  to $541,000 compared
to $641,000 for the same period in 2002 primarily as a result of the one time
charge in 2002 of $75,000 due to the closure of the company's Wal-Mart branch
and the reduction in rent expense for the closed branch.

Furniture and equipment expenses  decreased $23,000 or 10.2%  to $202,000 for
the quarter  ended  September 30,  2003  compared to  $225,000  for the  same
quarter in 2002  primarily due to  lower depreciation on  computer equipment.
For the first nine months  of 2002 furniture and  equipment expense increased
$9,000, or 1.4%,  to $663,000  compared to  $654,000 for  the same  period in
2002.

Data processing  costs  increased  $37,000, or  20.1%,  to  $221,000 for  the
quarter ended September 30,  2003 and $49,000, or  8.6%, to $663,000  for the
nine months ended  September 30, 2003.  These increases reflect  increases in
core processing costs and  the outsourcing of certain  network administration
and support functions midway through 2003.

Advertising and marketing  costs decreased $46,000,  or 49.5% to  $47,000 for
the third quarter of  2003 compared to $93,000  for the same period  in 2002.
Year to date  advertising and  marketing costs decreased  $2,000, or  0.8% to
254,000 from $256,000.   The third quarter decrease  is primarily due  to the
timing of expenses as a  number of major marketing  campaigns occurred during
the second quarter of 2003.

Transportation and postage increased $4,000 or 4.0% to $105,000 for the third
quarter of 2003 compared to $101,000 for the third quarter of  2002.  For the
first nine months  of 2003  transportation and  postage increased  $35,000 or
12.4% to $317,000  compared to  $282,000 for the  same period  in 2002.   The
increase is primarily due to additional costs from an expansion of the bank's
courier program in 2003 and increased  communication with customers regarding
the acquisition of DunC Corp. and First Bank, bc..

Other noninterest expenses increased $4,000 or 1.4% to $281,000 for the three
months ended September 30,  2003 compared to $277,000  for the same  period a
year ago.   For  the first  nine months  of 2003  other noninterest  expenses
decreased $29,000  or 3.5%  to $805,000  compared  to $834,000  for the  same
period in  2002.   Other noninterest  expenses in  2002 included  $117,000 of
charges to accrue  severance payments  for executive  officers that  left the
company in  2002 partially  offset by  an $87,000  credit from  adjustment of
stale reconciling items.

Income taxes decreased $115,000, or 135.3%,  to a tax benefit  of $30,000 for
the three months ended  September 30, 2003 from  income taxes of  $85,000 for
the same period in 2002. For the nine months ended  September 30, 2003 income
taxes decreased $310,000,  or 90.9%,  to $31,000 from  $341,000 for  the same
period in 2002. The decrease reflects greater tax efficiency brought about by
an increase in non-taxable interest from the municipal bond portfolio and the
purchase of bank  owned life insurance  on September 30,  2002 and  the lower
level of pre-tax income in 2003.

                             BALANCE SHEET ANALYSIS

OVERVIEW

Total assets  increased  to $431,820,000  at  September  30, 2003,  including
$77,726,000 in  assets  acquired  from  First  Bank, compared  to  assets  of
$352,377,000 at December  31, 2002,  an increase of  22.5%. The  December 31,
2002 balance  sheet  included short-term  year-end  deposits of  $18,600,000,
which were invested in  federal funds sold  and interest bearing  deposits in
banks at December 31, 2002.  Excluding these deposits, total assets increased
29.4% from December 31, 2002 to September 30, 2003.

LOANS

Gross loans increased $56,113,000, or 29.8%, to $244,492,000 on September 30,
2003, including  gross  loans  of  $46,781,000  received in  the  First  Bank
acquisition, compared to $188,379,000  on December 31, 2002.  The composition
of loans is shown in the following table:

<TABLE>
                                                                               As a % of Total Loans
                             September 30,    December 31,    Change in    September 30,    December 31,
                                 2003             2002         Balance         2003            2002
                             -------------    ------------    ---------    -------------    ------------
                                  (Dollars in millions)
<S>                              <C>              <C>            <C>           <C>             <C>

Residential Real Estate         $100.9           $71.8          $29.1          41.3%           38.1%
Commercial Real Estate          $ 70.5           $59.0          $11.5          28.8%           31.4%
Construction and Land
   Development                  $ 12.3           $ 6.4          $ 5.9           5.0%            3.4%
Commercial                      $ 37.5           $28.3          $ 9.2          15.3%           15.0%
Consumer                        $ 21.3           $22.3         ($ 1.0)          8.7%           11.8%
Other                           $  2.0           $ 0.6          $ 1.4           0.9%            0.3%
</TABLE>

The  historically  low  interest  rate  environment  has  led  to  substantial
prepayments  on  the  company's  1-4  family  residential  real   estate  loan
portfolio.  To offset this loan run-off, the bank has retained  new adjustable
and fixed rate mortgages with lives of 15 years or less.  This has  lead to an
increase of $15,900,000 or 22.1% in  residential real estate loans,  exclusive
of the First Bank acquisition, for  the nine months ended September 30,  2003.
This increase  has partially  offset decreases,  exclusive of  the First  Bank
acquisition, of $3,800,000 in Commercial and Commercial Real Estate  loans and
$4,800,000 in Consumer loans over the same period.  In addition, the company's
focus on relationship banking has resulted in the subsidiary bank not pursuing
certain "transactions" that may have resulted in increased loan  balances, but
offered no opportunity to form other relationships with the client.

NON-PERFORMING LOANS

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

The following summarizes information concerning non-performing loans:

                                                  SEPTEMBER 30,    DECEMBER 31,
     (Dollars in thousands)                           2003            2002
                                                  -------------    ------------
     Non-accruing loans                              $3,668          $2,560
     Past due 90 days or more and still accruing        154              26
                                                     ------          ------
     Total non-performing loans                      $3,822          $2,586
                                                     ------          ------
                                                     ------          ------
     Restructured loans performing in accordance
     with modified terms                             $  389          $  418

ASSET QUALITY

The allowance  for loan  losses was  $3,305,000 or  1.35% of  total loans  at
September 30, 2003 compared to $2,079,000 or 1.10% of total loans at December
31, 2002 and includes $889,000 acquired in the First  Bank acquisition. As of
September 30, 2003, non-performing loans and restructured loans performing in
accordance with modified terms  totaled $4,211,000 compared to  $3,004,000 at
December 31, 2002.  The allowance  for loan losses  is established  through a
provision for loan losses charged  to expense. Loans are  charged against the
allowance for loan losses when management believes that the collectibility of
the principal is unlikely. The allowance for loan losses is adequate to cover
probable credit losses relating to specifically identified  loans, as well as
probable credit losses  inherent in the  balance of the  loan portfolio.   In
accordance with  FASB Statements  5 and  114, the  allowance is  provided for
losses that have been incurred as  of the balance sheet date.   The allowance
is based on past events and current economic conditions, and does not include
the effects of expected losses on specific loans or groups  of loans that are
related  to  future  events  or  expected  changes  in  economic  conditions.
Management reviews  a  calculation of  the  allowance for  loan  losses on  a
quarterly basis. While management uses the best information available to make
its evaluation, future adjustments to the allowance may be necessary if there
are significant changes in economic conditions.

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

At September 30, 2003 the  allowance for loan losses  to total non-performing
and restructured loans equaled 78.5% compared to 69.2%  at December 31, 2002.
Total nonperforming and  restructured loans increased  by $1,207,000;$446,000
due to the First Bank acquisition and the balance as the  result of two large
loans.  One is a commercial real estate loan and the other is a single family
residence. Both loans are in foreclosure.

SHORT-TERM INVESTMENTS

Fed funds sold and securities purchased under  agreements to resell decreased
$3,548,000 to $9,572,000  at September  30, 2003  compared to  $13,120,000 at
December 31, 2002. The decrease reflects the  liquidation of short-term year-
end investments  on January  2, 2003  associated with  the December  31, 2002
year-end deposits  of $18,600,000  offset  by $9,572,000  of  fed funds  sold
acquired in the First Bank acquisition.

INVESTMENT SECURITIES

Securities  available   for  sale   increased  $25,020,000,   or  29.8%,   to
$108,917,000 at September  30, 2003 compared  to $83,897,000 at  December 31,
2002. $11,104,000 of the increase represents securities acquired in the First
Bank acquisition. The  balance of the  increase in investments  in securities
available for sale resulted  from the redeployment of  short-term investments
and cash flows from held to maturity securities.

DEPOSITS

Total deposits increased  $54,983,000 to $318,068,000  at September  30, 2003
compared to $263,085,000 at December 31, 2002. As  noted above, the Company's
December 31, 2002 financial statements reflect  short-term year-end interest-
bearing  deposits  of  $18,600,000.   The  Company  assumed   $13,899,000  of
noninterest-bearing deposits  and $50,338,000  of  interest bearing  deposits
from First Bank bc.  Excluding the short-term year-end  deposits and deposits
of  $64,237,000  assumed  in  the  First  Bank  acquisition,  total  deposits
increased 3.8%  from December  31, 2002.  Excluding  the First  Bank bc.  and
short-term year-end  deposits,  non-interest  bearing deposits  decreased  by
$749,000 and interest bearing deposits increased  by $10,095,000 at September
30, 2003 compared to December 31, 2002.

BORROWINGS

Short-term borrowings increased  $5,031,000 to  $18,485,000 at  September 30,
2003 from $13,454,000 at year-end. The  increase is due to  $9,594,000 of fed
funds purchased at September 30, 2003 offset by lower outstanding balances of
repurchase agreements with commercial customers.

Long-term borrowings at September 30, 2003 total $57,731,000 and consist of a
$7,500,000 commercial bank loan and term advances from  the Federal Home Loan
Bank ("FHLB").  The FHLB  advances  were $50,231,000  at  September 30,  2003
compared to  $38,900,000  at  December 31,  2002  and  include $3,631,000  of
borrowings assumed in the First  Bank acquisition.  The  increase reflects an
additional $8,000,000 in FHLB  advances net of a  $300,000 repayment invested
into securities during 2003 and the $7,500,000 term loan  used to finance the
First Bank acquisition.

STOCKHOLDERS' EQUITY

Total stockholders' equity increased $38,000 to  $25,836,000 at September 30,
2003 compared to  $25,798,000 at December  31, 2002.   During the  first nine
months of 2003 additional  paid in capital  increased by $120,000  from stock
options exercised. Accumulated other comprehensive income, which is comprised
of the adjustment of  securities available for sale  to market value,  net of
tax, and the  fair value  of Blackhawk  Bancorp, Inc.'  s interest  rate SWAP
contract, net  of  tax,  was  $920,000  at September  30,  2003  compared  to
$1,287,000 at  December 31,  2002.   In addition  the company  declared three
quarterly dividends of  $0.09 per  share on its  common stock,  which totaled
$681,000.

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

                                       September 30,  December 31,  Regulatory
                                           2003          2002      Requirements
                                       -------------  ------------ ------------
Total Capital (To Risk-Weighted Assets)    10.7%         13.9%         8.0%

Tier I Capital (To Risk-Weighted Assets)    9.5%         12.9%         4.0%

Tier I Capital (To Average Assets)          5.9%          8.3%         4.0%

The decreases in the capital ratios  at September 30, 2003 compared to  December
31, 2002 were due to the  First Bank acquisition, which increased average assets
and risk-weighted assets by $73,516,000 and $50,692,000 respectively.

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

ASSET/LIABILITY MANAGEMENT

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

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

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

During June 2003, the  Company entered into  an interest rate  SWAP agreement
related to the company obligated mandatorily redeemable preferred securities.
This SWAP  is  utilized to  manage  variable interest  rate  exposure and  is
designated as a  highly effective cash  flow hedge.   The differential  to be
paid or received on  the SWAP agreement is  accrued as interest  rates change
and is recognized over  the life of the  agreement in interest expense.   The
SWAP agreement expires in December 2007 and essentially fixes  the rate to be
paid at  5.72%.   The  notional  amount is  $7,000,000.    Included in  other
comprehensive income is a gain of $325,000, less  $111,000 of deferred income
tax, relating to the fair market value of the SWAP  agreement as of September
30, 2003.  Risk  management results for the  nine months ended  September 30,
2003  related  to  the  balance  sheet  hedging   of  the  company  obligated
mandatorily redeemable preferred securities indicate that  the hedge was 100%
effective and that there was no component of the derivative instrument's gain
or loss which was excluded from the assessment of hedge effectiveness.

LIQUIDITY

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

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

The  following  table  summarizes  The  Company's  significant  contractual
obligations and other  potential funding needs  at September  30, 2003  (in
thousands):

  Year Ended       Time       Long-term     Operating
September 30,    Deposits     debt(1)<F1>     Leases        Total
-------------    --------     -----------   ---------       -----
     2004        $ 87,731       $ 7,831       $  161      $ 95,723
     2005          42,214        18,250          161        60,625
     2006           9,430         3,200          161        12,791
     2007           9,270         1,700          161        11,131
     2008           1,486        16,750          124        18,360
  Thereafter            0        17,000          934        17,934
                 --------       -------       ------      --------
    Total        $150,131       $64,731       $1,702      $216,564
                 --------       -------       ------      --------
                 --------       -------       ------      --------

Commitments to extend credit                       $ 30,965

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

OFF BALANCE SHEET ITEMS AND CONTINGENCIES

Off-balance sheet items consist of commitments to originate mortgage loans,
unused lines of credit and standby letters of credit totaling approximately
$30,965,000 as of September 30, 2003.  This compares to $30,939,000 at
December 31, 2002. The Company's commitments to originate mortgage loans are
on a best effort basis; therefore there are no contingent liabilities
associated with them. The Bank has historically funded off-balance sheet
commitments with its primary sources of funds and management anticipates that
this will continue.

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

ITEM 3. CONTROLS AND PROCEDURES

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

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

                                    PART II

                               OTHER INFORMATION

ITEM 1    LEGAL PROCEEDINGS

          None.

ITEM 2    CHANGES IN SECURITIES

          The Credit Agreement with US Bank National Association dated September
          26, 2003 is  hereby incorporated  by reference  to Blackhawk  Bancorp,
          Inc. Current Report on Form 8-K dated September 30, 2003.

ITEM 3    DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

ITEM 5    OTHER INFORMATION

          None.

ITEM 6.   A) EXHIBITS

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

          B) REPORTS ON FORM 8-K

          There were two reports on Form  8-K filed during the third quarter  of
          2003.  A report  dated August 8, 2003  disclosed the Company's  second
          quarter 2003  results under  provisions of  Regulation FD.   A  report
          dated September 18, 2003 disclosed the  approval of the Agreement  and
          Plan of  Merger  by and  among  Blackhawk Bancorp,  Inc.  DunC  Merger
          corporation and  DunC  Corp.  dated  as of  March  17,  2003  by  DunC
          shareholders under provisions of Regulation FD.

          In addition, a report  on Form 8-K dated  September 30, 2003 was filed
          on October 14, 2003 and  provided details on the acquisition of assets
          from  DunC Corp.  This filing  also  included  a copy  of  the  Credit
          Agreement with US Bank National Association  dated September  26, 2003
          incorporated by reference into Part II, Item 2 of this report.


                                   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:  November 7, 2003                 /s/ R. Richard Bastian, III
                                        ----------------------------------------
                                        R. Richard Bastian, III
                                        President and Chief Executive Officer

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

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

                            BLACKHAWK BANCORP, INC.

                               INDEX TO EXHIBITS


                                             Incorporated                Filed
Exhibit                                      Herein By                   Here-
Number    Description                        Reference To:               with
-------   -----------                        -------------               -----
3.1       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)

3.2       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         Credit Agreement with US Bank      Form 8-K dated September
          National Association dated         30, 2003
          September 26, 2003

31.1      Certification of Chief Executive                                 X
          Officer Pursuant to Rule 13a-14(a)/
          15d-14(a)

31.2      Certification of Chief Financial                                 X
          Officer Pursuant to Rule 13a-14(a)/
          15d-14(a)

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

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