U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 2002
                                       OR
             [ ] TRANSITION REPORT UNDER 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.
                 (Name of small business issuer in its charter)
                 WISCONSIN                          39-1659424
            (State of Incorporation)           (IRS Employer ID No.)

                   400 Broad Street, Beloit, Wisconsin 53511
                    (Address of principal executive offices)
                    Issuer's Telephone Number (608) 364-8911

         Securities Registered Under Section 12(b) of the Exchange Act:
                                      NONE

         Securities Registered Under Section 12(g) of the Exchange Act:
                         COMMON STOCK, $ .01 PAR VALUE

 Check whether the issuer (1) filed all reports required to be filed by Section
 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
  subject to such filing requirements for the past 90 days.  Yes  X    No    .

Check if there is no disclosure of delinquent filers in response to Item 405 of
    Regulation S-B is not contained in this form, and no disclosure will be
    contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
                  or any amendment to this Form 10-KSB. [ X ]

        State issuer's revenues for its most recent fiscal year. $22,194,763

As of March 14, 2003, 2,517,131 shares of common stock were outstanding and the
aggregate market value (based on the bid price at March 14, 2003) of the shares
   held by non-affiliates (excludes shares reported or beneficially owned by
 directors and officers - does not constitute an admission to affiliate status)
                         was approximately $17,126,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of Blackhawk Bancorp, Inc.' s definitive proxy statement for its Annual
    Meeting of Stockholders, to be held on May 21, 2003, are incorporated by
                        reference into Part III hereof.

 Transitional Small Business Disclosure Format (check one): Yes [   ]  No [ X ]

                         Index of Exhibits on Page 36.

                            BLACKHAWK BANCORP, INC.

                        FORM 10-KSB - TABLE OF CONTENTS

PART I                                                                     PAGE

Item  1.   Description of Business                                            3

Item  2.   Description of Property                                            8

Item  3.   Legal Proceedings                                                  9

Item  4.   Submission of Matters to a Vote of Security Holders                9

PART II

Item  5.   Market for Common Equity and Related Stockholder Matters           9

Item  6.   Management's Discussion and Analysis or Plan of Operation         10

Item  7.   Financial Statements                                              20

Item  8.   Changes In and Disagreements with Accountants on
           Accounting and Financial Disclosure.                              30

PART III

Item  9.   Directors, Executive Officers, Promoters and Control Persons;
           Compliance With Section 16(a) of the Exchange Act                 31

Item 10.   Executive Compensation                                            31

Item 11.   Security Ownership Of Certain Beneficial Owners
           and Management and Related Stockholder Matters                    31

Item 12.   Certain Relationships and Related Transactions                    32

Item 13.   Exhibits and Reports on Form 8-K                                  32

Item 14.   Controls and Procedures                                           32

Signatures                                                                   33

Certifications                                                               34

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL.  Blackhawk  Bancorp, Inc. (the  "Company") was  incorporated under  the
laws of the state of Wisconsin in November 1989.  The Company owns and  operates
a subsidiary financial institution, Blackhawk State Bank ("Bank")  headquartered
in Beloit,  Wisconsin  and owns  100%  of  the common  securities  of  Blackhawk
Statutory Trust I, which was formed in December 2002 for the purpose of  issuing
Trust Preferred Securities.

The Bank is a Wisconsin-chartered  commercial bank operating nine  free-standing
branches, three of which are in Beloit, Wisconsin  and   six are located in  the
following cities in Illinois: Belvidere (2), Oregon (1), Rochelle (1),  Rockford
(1) and Roscoe  (1).   The Bank  has three  wholly-owned subsidiaries:  Nevahawk
Investment, Inc. ("Nevahawk"),  an investment subsidiary  located in Las  Vegas,
Nevada;  RSL, Inc.  ("RSL"), which in turn  owns Midland Acceptance  Corporation
("MAC"), both  of  which  are  substantially  inactive;  and    First  Financial
Services, Inc.  ("FFSI"), whose  primary activity  is ownership  of one  of  the
bank's facilities.

Through its nine locations the Bank provides various consumer banking,  business
banking  and  related  financial  services.     Consumer  banking  services   to
individuals include  demand,  savings  and  time  deposits.    Consumer  lending
services  include  installment  loans,  mortgage  loans,  overdraft  protection,
personal lines of  credit and  credit cards. The  bank also  provides trust  and
investment services through a separate department of the bank and also through a
third party marketing agreement with a full service brokerage company.

Business banking services, which are provided to small business, commercial  and
governmental  organizations  include  commercial  and  commercial  real   estate
lending, deposits, cash management and letters of credit.

The bank's primary source of revenue is  net interest income and fees earned  on
its loans, and investments.  Other non-interest income consists of fees from the
sale and  servicing  of  mortgage loans,  service  charges  on  deposits,  trust
services fees and income from retail non-deposit investment sales.

RECENT DEVELOPMENTS.  On  March 17, 2003 Blackhawk  Bancorp, Inc. announced  the
signing of a  definitive agreement  to acquire  DunC Corp.  and its  subsidiary,
First Bank, bc, for  $7.2 million, or  $1,518 per share  in a cash  transaction.
The agreement provides for limited adjustments in price based on the performance
of DunC Corp.  The acquisition is expected  to be complete in the third  quarter
of 2003 and is subject to  shareholder and regulatory approval. First Bank,  bc,
with assets of approximately $75 million and over 40 employees, is headquartered
in Capron, Illinois.  It has  four full service locations in Illinois  including
Capron, Belvidere, Rockford and  Machesney Park.  First  Bank, bc offers a  full
range of retail, commercial and real estate banking services.  After  completion
of this  merger, Blackhawk  will rank  second in  deposit balances  in the  fast
growing Boone County of Illinois.  It  also picks up a full-service facility  in
the rapidly developing Rte. 173 and Forest Hills Rd. area of Machesney Park, IL.
Proxy statements will  be sent to  DunC Corp. shareholders  for approval of  the
proposed transaction.   Shareholders  of Blackhawk  Bancorp,  Inc. will  not  be
required to vote on the transaction.

LENDING ACTIVITIES.   A  significant amount  of  the loans  in the  Bank's  loan
portfolio are secured by residential or  commercial real estate.   Substantially
all of the  real estate  securing the mortgage  loans is  located within  thirty
minutes driving distance  of the  Bank's offices   Commercial  loans are  either
collateralized by assets  other than  real estate  or are  unsecured.   Interest
rates on commercial loans are generally tied to an index adjustable monthly  and
therefore are more rate-sensitive than mortgage loans.  Consumer and installment
loans are  generally secured  by automobiles,  boats, or  second liens  on  real
estate.  A substantial percentage of automobile and boat loans in the  portfolio
were purchased from  area dealers. The  Bank also offers  credit cards and  home
equity lines of credit.  The Analysis of  Loan Portfolio, located in Table 2  of
Item 7, shows the changes in the types of loans from 2000 through 2002.

INVESTMENT  ACTIVITIES.    The  Bank  and  its  subsidiary,  Nevahawk,  maintain
investment portfolios, which  are managed to  provide liquidity  for lending  or
deposit withdrawals, control interest rate risk and enhance the earnings of  the
company.  The  investments held by  the Bank and  Nevahawk consist primarily  of
U.S. government and agency securities, mutual funds, corporate bonds,  mortgage-
backed securities, collateralized  mortgage obligations and  municipal bonds  or
repurchase agreements backed by similar securities.

DEPOSIT ACTIVITIES.   Deposits  are divided  between interest  bearing and  non-
interest bearing.  Non-interest bearing deposits consist of checking accounts of
individuals, businesses and  governmental organizations.   The  interest-bearing
deposits include savings accounts,  money market deposit accounts,  certificates
of deposit,  individual retirement  accounts and  NOW accounts.   The  aggregate
balance of  time deposits  with balances  in excess  of $0.1  million was  $28.9
million  at  December  31,  2002.    The  Bank  attracts  deposits  by  offering
competitive rates and fees and providing high quality customer service.

WEALTH MANAGEMENT  SERVICES    The Bank  provides  wealth  management  services,
including acting as trustee for living and testamentary trusts, and as an agent,
custodian, guardian, conservator, personal  representative or administrator  for
individuals or their  estates.  The  Bank also  provides full-service  brokerage
services through  a  relationship with  a  third-party provider,  Raymond  James
Securities, Inc.

COMPETITION.  Active competition exists for all services offered by the  Company
with other  state  banks, national  banks,  credit unions,  savings  and  loans,
finance companies, personal loan companies, brokerage and mutual fund companies,
mortgage bankers, insurance  agencies, and other  financial institutions in  the
Company's markets.    The  principal competitive  factors  in  the  banking  and
financial services industry are quality of services to customers, ease of access
to services, and pricing of services, including interest rates paid on deposits,
interest rates  charged on  loans,  and fees  charged  for fiduciary  and  other
services.  To compete in this environment, the Company offers competitive  rates
and fees, convenient hours and locations,  and high quality services,  including
internet banking and a unique courier service.

EMPLOYMENT.   As  of  December 31,  2002,  the  Company and  the  Bank  had  154
employees, of  which  125 were  employed  on a  full-time  basis.   The  Company
provides  a  variety  of  benefit  plans  to  its  employees,  including  health
insurance, long-term disability insurance,  group term life insurance,  flexible
spending  accounts,  profit  sharing,  401k,  and  stock  options.    Management
considers its relations with employees to be good.

REGULATORY FILINGS  WITH SECURITIES  AND EXCHANGE  COMMISSION.   Copies  of  our
Annual Reports on Form 10-KSB, Quarterly reports on Form 10-QSB, Current Reports
on Form 8-K, and amendments to those reports are available free of charge at the
SEC's website at http://www.sec.gov and/or from the company.

SUPERVISION AND REGULATION.  The Company and the Bank are extensively  regulated
under federal  and state  law.   Any descriptions  of statutory  and  regulatory
provisions contained in the following discussion are qualified in their entirety
by reference to the particular statutory and regulatory provisions.  Any  change
in applicable law or regulations may have a material effect on the Company.

THE COMPANY.

On March 27, 1990, the Company received approval from the Federal Reserve  Board
(the "FRB") under the  Bank Holding Company  Act of 1956,  as amended (the  "BHC
Act"), to  become a  registered bank  holding company  by acquiring  all of  the
capital stock of the Bank.  As a result, since consummation of the bank  holding
company reorganization  on May  16, 1990,  the  Company's activities  have  been
subject to limitations  imposed under  the BHC  Act.   Transactions between  the
Company  and  the  Bank  and  their  affiliates  are  also  subject  to  certain
restrictions.  As a registered bank  holding company, the Company is subject  to
various filing requirements of the FRB and is also subject to examination by the
FRB.

FRB approval must  be obtained  before a bank  holding company  acquires all  or
substantially all of the assets  of a bank or  savings association or merges  or
consolidates with  another bank  holding company  or  savings and  loan  holding
company.   Wisconsin  has also  adopted  legislation that  allows  bank  holding
companies from other states to acquire banks in Wisconsin, and allows  Wisconsin
bank holding companies to acquire banks in other states.

GRAMM-LEACH-BLILEY ACT.   The  laws  and regulations  to  which the  Company  is
subject are constantly under review by  Congress, regulatory agencies and  state
legislatures.  On  November 12, 1999,  then President  Clinton signed  important
legislation passed  by  Congress  to  overturn  Depression-era  restrictions  on
affiliations by banking organizations.  This comprehensive legislation, referred
to as the Gramm-Leach-Bliley Act (the "Act"), eliminates certain barriers to and
restrictions on  affiliations  between  banks and  securities  firms,  insurance
companies and other financial service organizations.  The Act provides for a new
type of "financial  holding company" structure,  under which affiliations  among
these entities may occur, subject to the regulation of the Federal Reserve Board
and regulation  of  affiliates  by  the  functional  regulators,  including  the
Securities and Exchange Commission and state insurance regulators.  In addition,
the Act permits certain non-banking financial and financially related activities
to be conducted by operating subsidiaries of a national bank.  Under the Act,  a
bank holding company  may become  certified as  a financial  holding company  by
filing a notice with  the Federal Reserve Board,  together with a  certification
that the  bank  holding  company  meets  certain  criteria,  including  capital,
management and  Community Reinvestment  Act requirements.   The  Act contains  a
number of provisions allocating regulatory  authority among the Federal  Reserve
Board, other  banking regulators,  the Securities  and Exchange  Commission  and
state insurance regulators.  In addition,  the Act imposes strict new limits  on
the  transfer  and  use  by   financial  institutions  of  nonpublic,   personal
information about their customers.

Other important  provisions  of  the Act  permit  merchant  banking  activities,
venture capital activities,  and insurance underwriting,  to be  conducted by  a
subsidiary of a financial holding company.  It also allows municipal  securities
underwriting activities to be  conducted directly by a  national bank or by  its
subsidiary.  Under the Act,  a financial holding company  may engage in a  broad
list of "financial activities," and any non-financial activity that the  Federal
Reserve Board determines is "complementary" to a financial activity and poses no
substantial risk to the  safety and soundness of  the depository institution  or
the financial system. The Company has not elected to become a financial  holding
company.

On June 1, 2000, the federal  bank regulatory agencies issued final  regulations
implementing the Act's consumer  privacy protections.   Among other things,  the
new privacy regulations give  customers the right to  "opt out" of having  their
nonpublic,  personal  information  shared   by  a  financial  institution   with
nonaffiliated  third  parties,  bars  financial  institutions  from   disclosing
customer account  numbers or  other such  access  codes to  nonaffiliated  third
parties  for  direct  marketing  purposes  and  requires  annual  disclosure  by
financial  institutions  of  their   policies  and  procedures  for   protecting
customers' nonpublic,  personal  information.   Full  compliance  with  the  new
privacy regulations was mandatory as of July 1, 2001.

USA PATRIOT ACT OF 2001.   On October 26, 2001,  President Bush signed into  law
the USA Patriot Act of 2001.  The requirements  of the Act were scheduled to  go
into effect  on  October  26, 2002,  pending  issuance  of final  rules.    This
comprehensive  legislation  provides  that  U.S.  depository  institutions   are
prohibited from providing correspondent banking services to foreign shell banks.
It also requires that upon request of the appropriate federal banking agency the
Bank must produce records  relating to its  anti-money laundering compliance  or
its customers within 120 hours of the request. The Act allows the Bank to  share
information relating  to  money  laundering or  suspected  terrorists  with  the
Financial Crimes Enforcement Network (FinCEN) and other financial  institutions.
In addition, the Act requires the institution to establish anti-money laundering
programs  and  perform  due  diligence  on  private  banking  and  correspondent
accounts.  The Act allows the  Treasury to issue regulations on the  maintenance
of "concentration  accounts" and  to prohibit  an institution's  customers  from
anonymously directing funds into or through  such accounts. The Federal  Reserve
Board and other regulators are required to consider the effectiveness of a  bank
holding company or its financial institution in combating money laundering  when
ruling on applications.

Section 326 of  the USA  Patriot Act of  2001 requires  the Bank  to develop  an
extensive Customer Identification Program  and obtain certain information  prior
to opening or adding a signatory to  an account. The Bank must adopt  risk-based
procedures for verifying the elements of  customer information and must  develop
procedures for determining whether the customer appears on any list of known  or
suspected terrorists or terrorist organizations  provided to the institution  by
any federal government agency. The Bank  must provide the customer prior  notice
of the requirements of the Act, and must  retain all records used to verify  the
customer's identity for a period of five years after the account is closed.

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

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

The Act requires  audit committees to  have in place  procedures to receive  and
address complaints regarding  accounting, internal control  and auditing  issues
and provides protection for corporate whistleblowers.  The Company has adopted a
policy providing employees with the  opportunity to confidentially report  their
concerns directly  to  members of  the  Bank's  Audit Committee  or  the  Bank's
Internal Auditor and has communicated its policy to all employees.

CAPITAL ADEQUACY. The  FRB has  adopted capital  guidelines as  to both  minimum
levels of  core  capital  and  risk-based  capital.  The  minimum  core  capital
requirement ranges from 3% to 5% of total assets depending upon the  regulator's
determination of the  holding company's strength.   The  guidelines assign  risk
weightings to assets and  off-balance sheet items,  and have minimum  risk-based
capital ratios.    All  bank  holding  companies  are  required  to  have  total
consolidated capital  of 8%  of risk-weighted  assets.   Core  capital  consists
principally of  shareholders' equity  less intangibles,  while qualifying  total
capital consists of core capital plus certain debt instruments and a portion  of
the allowance for  loan losses.   Table 12 of  Item 7 of  this report,  reflects
various regulatory measures of capital as  of December 31, 2002.  The  Company's
core and risk-based capital  ratios, as shown  in the table  are well above  the
minimum levels.

Under Wisconsin law,  a bank  holding company  is deemed  to be  engaged in  the
banking business and is subject to supervision and examination by the  Wisconsin
Department of Financial Institutions (the "WDFI").   The WDFI is also  empowered
to issue orders to  a bank holding  company to remedy  any condition or  policy,
which, in the  opinion of  the WDFI,  endangers the  safety of  deposits of  any
subsidiary state bank  or trust company.   In the  event of non-compliance  with
such an order, the WDFI has the power to direct the operations of the state bank
or trust company and to restrict dividends paid to the bank holding company.

THE BANK.

Wisconsin-chartered banks, including the Bank,  are regulated and supervised  by
the WDFI.  Each Wisconsin chartered bank is periodically examined by the WDFI or
its primary  federal  regulator.   The  approval  of  the WDFI  is  required  to
establish or close  branches, merge with  other banks and  undertake many  other
activities.

Any Wisconsin bank  that does not  operate in accordance  with the  regulations,
policies  and  directives  of  the  WDFI   may  be  subject  to  sanctions   for
noncompliance.  The  WDFI may, under  certain circumstances,  suspend or  remove
directors, officers or employees who have violated the law, conducted the Bank's
business in a  manner which is  unsafe, unsound or  contrary to the  depositors'
interests or been negligent in the performance of their duties.

Wisconsin state  banks  are authorized  to  accept deposits  (including  demand,
savings and time deposits  and certificates of deposit).  Banks may make a  wide
variety of  loans (including  mortgage loans,  loans to  corporations and  other
commercial loans and other  personal consumer loans).   Other federal and  state
regulations with respect to banks include  required reserves, limitations as  to
the nature and amount, by type and borrower, of lending, regulatory approval  of
mergers and  consolidations,  issuance and  retirement  by  a bank  of  its  own
securities, and other aspects of banking operations.

PAYMENT OF DIVIDENDS.  A  Wisconsin bank may only  pay dividends on its  capital
stock if such  payment would  not impair the  bank's capital  stock and  surplus
account (as defined under  Wisconsin law). Federal  and state regulations  limit
dividends paid by the Bank to  the Company to net income  of the Bank. The  Bank
paid dividends to the Company of $1.5 million, $1.5 million and $1.3 million for
the years ended December 31, 2002, 2001 and 2000, respectively. During 2001  the
Bank received a  waiver from state  banking regulators to  pay dividends to  the
Company in excess of current net income.

FEDERAL DEPOSIT INSURANCE CORPORATION.  The Bank's deposit accounts are  insured
by the FDIC.   FDIC insurance, at the  present time, generally  insures up to  a
maximum of $0.1 million for each insured depositor.  The FDIC imposes an  annual
assessment on deposits.  Effective January 1, 1993, premiums are assessed on the
basis of a risk rating assigned by the FDIC.  Since that time the Bank's premium
has  been  at  the  lowest  available  rate.    Beginning  in  1997,   financial
institutions insured by the  FDIC were required to  contribute to the  Financing
Corporation bond refinancing.  This is expected to occur through the year  2003.
Beginning January 1,  2000, the Bank's  Bank Insurance Fund  ("BIF") and  Saving
Association Insurance Fund ("SAIF") deposits were assessed at the same rate.

The FDIC issues regulations, conducts periodic examinations, requires the filing
of reports and generally  supervises the operations of  its insured banks.   The
approval of the FDIC is  required prior to any  merger or consolidation, or  the
establishment or  relocation  of  any  branch  office.    This  supervision  and
regulation is intended primarily for the protection of depositors.

As a  FDIC-insured  bank, the  Bank  is  subject to  certain  FDIC  requirements
designed to  maintain the  safety  and soundness  of  individual banks  and  the
banking system.    The FDIC,  based  upon appraisals  during  examinations,  may
revalue assets of an insured institution  and require establishment of  specific
reserves in amounts  equal to the  difference between such  revaluation and  the
book value  of  the assets.    In addition,  the  FDIC has  adopted  regulations
regarding capital adequacy requirements similar to those of the FRB.

OTHER ASPECTS OF FEDERAL AND STATE LAW.  The Bank is also subject to federal and
state statutory and regulatory provisions covering, among other things, security
procedures, currency  reporting,  insider  and  affiliated  party  transactions,
management  interlocks,  community  reinvestment,  truth-in-lending,  electronic
funds transfers, truth-in-savings, privacy, and equal credit opportunity.

Proposals for new legislation  or rule making  affecting the financial  services
industry are continuously being advanced and considered at both the national and
state  levels.    Proposals  are   primarily  focused  upon  restructuring   and
strengthening regulation and supervision to reduce the risks to which assets  of
banks and savings institutions are exposed.

Although further changes in  the regulatory framework  may be enacted,  specific
provisions and  their ultimate  effect upon  the business  of the  Bank and  the
Company cannot be reliably anticipated.

GOVERNMENTAL MONETARY POLICIES  AND ECONOMIC CONDITIONS.   The  earnings of  the
Bank and the Company  are affected not only  by general economic conditions  but
also by  the  policies  of various  governmental  regulatory  authorities.    In
particular, the FRB  influences general economic  conditions and interest  rates
through the regulation  of money and  credit conditions.   It does so  primarily
through open-market  operations  in  U.S.  Government  Securities,  varying  the
discount rate  on member  and nonmember  bank  borrowings, and  setting  reserve
requirements  against  bank  deposits.    FRB  monetary  policies  have  had   a
significant effect on the operating results of banks in the past and are  likely
to continue to have such an effect in the  future.  The general effect, if  any,
of such policies upon  the future business  and earnings of  the Bank cannot  be
accurately predicted.  In  addition, losses sustained  by the federal  insurance
funds and regulatory costs incurred in connection with failed or failing insured
depository institutions continue to  be assessed to  those within the  industry.
As such, future earnings  will be adversely affected  by regulations enacted  to
cover these losses and costs.

EXECUTIVE OFFICERS

          NAME AND AGE                             PRINCIPAL OCCUPATION
          ------------                             --------------------

R. Richard Bastian, III, 56    President  and Chief  Executive  Officer  of  the
                               Company  since February  2002  and  of  the  Bank
                               since  May 2001.  Previously,  President  of  the
                               Bank of  Kenosha  from January  1999  to  January
                               2001 and  Executive Vice  President and  Director
                               of the Clean  Air Action Corporation from  August
                               1994 to January 2001.

Todd J. James, 39              Executive  Vice  President  and  Chief  Financial
                               Officer  of  the  Company  and  the  Bank   since
                               February 2003.  Senior Vice  President and  Chief
                               Financial Officer from February 2002 to  February
                               2003. Previously  Senior Vice  President,  Amcore
                               Investment  Group  N.A.  from  October  1999   to
                               February   2002   and   Vice   President   Amcore
                               Financial,  Inc. from  October  1998  to  October
                               1999.   Previously, Vice  President, Amcore  Bank
                               N.A.

Judith A. Gard, 62             Senior Vice President,  Manager Consumer  Banking
                               for  the Bank  since  October  2001.  Previously,
                               Vice  President,  Private  Banking  Manager   for
                               Firstar Bank from  February 1999 to October  2001
                               and  Senior  Vice  President,  Home  Equity  Unit
                               Manager for Bank One from 1996 to 1998.

Todd L. Larson, 43             Senior Vice President,  Business Banking for  the
                               Bank   since  January   2003.   Previously   Vice
                               President, Business  Banking  for the  Bank  from
                               November  1999   to   January  2003,   and   Vice
                               President  of   Stillman  BancCorp,   N.A.   from
                               November 1998 to  November 1999. Previously  Vice
                               President, Commercial Lending, Belvidere Bank.

Terri Burdick, 39              Senior Vice  President,  Human Resources  of  the
                               Bank since February 2003.  Vice President,  Human
                               Resources  of  the  Bank  from  October  2001  to
                               February 2003.    Employee Benefits  Manager  for
                               The Swiss  Colony, Inc.  from September  1999  to
                               October  2001.  Previously,  Corporate   Benefits
                               Manager for Regal Beloit Corporation.

James A. Sylvester, 56         Vice President,  Senior  Mortgage Lender  of  the
                               Bank  since  August  2001.  Previously   Business
                               Development  Director  for  RSM  McGladrey,  Inc.
                               from    January    through    June    2001    and
                               owner/operator  of Jimmy's  Frozen  Custard  from
                               1996 through 2000.

Peggy Holt, 45                 Vice  President,   Quality  Control   &   Process
                               Improvement  of  the  Bank  since  January  2003.
                               Previously      Organizational      Effectiveness
                               Consultant of the  Bank from  January 2002  until
                               December 2002. Prior thereto, Senior  Consultant,
                               Leadership   Development    and    Senior    Vice
                               President, Organizational  Development  Bank  One
                               Corporation.

Victoria A. Damron, 53         Vice President of  Marketing for  the Bank  since
                               August    2002.    Previously    owner     Damron
                               Communications.

ITEM 2.  DESCRIPTION OF PROPERTY

On December 31, 2002, the Company  had nine locations, of  which one was
leased.  All of  these offices are considered  by management to  be well
maintained and adequate for the purpose intended. See the  Note 5 to the
Consolidated Financial Statements and Table 14 included  under Item 7 of
this document for further information on properties.

ITEM 3.  LEGAL PROCEEDINGS

Management believes that no litigation is threatened or pending in which
the Company  faces  potential loss  or  exposure  which will  materially
affect the Company's financial  position or results of  operation, other
than noted  below.   Since the  Company's banking  subsidiary acts  as a
depository of funds, trustee or  escrow agent, it is  named as defendant
in lawsuits involving  claims to  the ownership  of funds  in particular
accounts.   This and  other litigation  is incidental  to the  Company's
business.

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 $0.5  million was
improperly charged to the  Bank's check clearing account  at the Federal
Home Loan Bank  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  a   $0.4  million
reimbursement of legal fees.  The  court has not made a  final ruling on
the case or any counter claims that have been or may be filed by Fiserv,
Inc.  Although the ultimate disposition of any  counterclaims can not be
predicted with any  certainty, the Company  believes that the  case will
not have  a  material  adverse  effect  on  the  Company's  consolidated
financial position, though  it could have  a material adverse  effect on
the Company's consolidated results of operations in a given year.

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

     No matters were submitted to a vote of  security holders during the
fourth quarter of 2002.

                                   PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

At December 31, 2002 the company has approximately 900 holders of record
of its common stock.  The Company's stock is publicly traded on the Over
the Counter  Market under  the symbol  BKHB.   The following  table sets
forth the stock price  and dividend information for  each quarter during
the years ended  December 31,  2002 and 2001.   Stock  price information
represents high and low bid quotations and  as such reflect inter-dealer
prices, without  retail mark-up,  mark-down or  commission  and may  not
represent actual transactions.

<TABLE>
                                         For the Quarter Ended
             12/31/02  09/30/02  06/30/02  03/31/02  12/31/01  09/30/01  06/30/01  03/31/01
             --------  --------  --------  --------  --------  --------  --------  --------
<S>            <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Stock Price
    High     $  9.50   $  9.50   $  9.70   $  9.65   $  9.50   $ 10.62   $ 10.30   $ 10.38
    Low         8.25      8.55      9.35      9.10      8.50      8.80      8.38      8.00
Dividends       0.09      0.09      0.09      0.09      0.09      0.09      0.12      0.12
</TABLE>

For disclosures required under  the company's equity  compensation plans
see Notes 1  and 10 to  the Company's Consolidated  Financial Statements
attached as Exhibit 99 of this Form 10-KSB.

A Wisconsin bank  may only pay  dividends on its  capital stock  if such
payment would not  impair the bank's  capital stock and  surplus account
(as defined under  Wisconsin law). Federal  and state  regulations limit
dividends paid by  the Bank to  the Company to  net income of  the Bank.
Thus, the ability of  the Company to pay  dividends will be  impacted by
the profitability of the Bank. The Bank paid dividends to the Company of
$1.5 million, $1.5 million and $1.3 million for the years ended December
31, 2002, 2001 and 2000,  respectively. During 2001 the  Bank received a
waiver from state banking regulators to pay dividends  to the Company in
excess of current net income.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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.  This  discussion focuses on  the significant factors  which
affected the Company's earnings in 2002, with comparisons to 2001 and 2000,
where applicable.

FACTORS INFLUENCING FORWARD-LOOKING STATEMENTS

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

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

                       CRITICAL ACCOUNTING POLICIES

The financial condition  and results of  operations for Blackhawk  Bancorp,
Inc. presented in the Consolidated Financial Statements, accompanying notes
to the Consolidated Financial Statements, selected financial data appearing
elsewhere within this report, and management's discussion and analysis are,
to a large extent,  dependent upon the  Company's accounting policies.  The
selection and application of these accounting policies involve  judgements,
estimates and uncertainties that are susceptible to change.

Presented  below  are  discussions   of  those  accounting  policies   that
management believes are the  most important (Critical Accounting  Policies)
to the portrayal and understanding of the Company's financial condition and
results  of  operations.   These  Critical   Accounting  Policies   require
management's  most  difficult,  subjective  and  complex  judgements  about
matters  that  are  inherently  uncertain.  In  the  event  that  different
assumptions or conditions were to prevail, and depending upon the  severity
of  such  changes,  the  possibility  of  materially  different   financial
condition or results  of operations is  a reasonable  likelihood. See  also
Note 1 of the Notes to Consolidated Financial Statements.

LOANS

Loans are the Company's  largest income earning  asset category. Loans  are
recorded at the amount advanced to the borrower plus certain costs incurred
by the Bank to originate the  loan, less certain origination fees that  are
collected from the  borrower. The carrying  amount of loans  is reduced  as
principal payments are made.  Payments made by  the borrower are  allocated
between interest income  and principal payment  based upon the  outstanding
principal amount, the  contractual rate of  interest and other  contractual
terms. The carrying amount is further  adjusted to reflect amortization  of
the origination costs net  of origination fees.  These items are  amortized
over the expected life of the loan.

The accrual  of  interest  income is  generally  discontinued  (Non-Accrual
Status) when  management  believes  that  collection  of  principal  and/or
interest is doubtful or  when payment becomes 90  days past due.   Payments
received from the borrower after a loan is placed on Non-Accrual Status are
applied to reduce the  principal balance of the  loan until such time  that
collectibility of remaining principal and  interest is no longer  doubtful.
Unpaid interest that  has previously been  recorded as  income is  reversed
against interest income when  a loan is placed  on Non-Accrual Status.  The
outstanding loan  balance is  written-off against  the allowance  for  loan
losses  when  management  determines  that  probability  of  collection  of
principal will not  occur. See also  the discussion of  Allowance for  Loan
Losses that follows.

Those judgements and assumptions that are most critical to the  application
of this accounting policy are the initial and on-going credit-worthiness of
the borrower, the amount and timing of  future cash flows  of the  borrower
that are available for repayment of the loan, the sufficiency of underlying
collateral  and  the  enforceability   of  third-party  guarantees.   These
judgements and assumptions  are dependent upon  or can be  influenced by  a
variety of factors including the breadth and depth of experience of lending
officers, credit  administration and  loan review  staff that  periodically
review the status of the loan,  changing economic and industry  conditions,
changes in the financial condition of the borrower and changes in the value
and availability of the underlying collateral and guarantees.

If different  assumptions or  conditions were  to prevail,  the amount  and
timing of interest income and loan losses, due to the inability to  collect
all of the remaining principal balance  that is due from a borrower,  could
be materially different. These factors are most pronounced during  economic
downturns. See  also  Table 2  and  Note 4  of  the Notes  to  Consolidated
Financial Statements.

ALLOWANCE FOR LOAN LOSSES

Management periodically reviews the loan portfolio in order to establish an
estimated allowance for loan losses (Allowance) that are probable as of the
respective reporting date. Additions to  the Allowance are charged  against
earnings for the period as a provision for loan losses (Provision).  Actual
loan losses  are charged  against (reduce)  the Allowance  when  management
believes that the collection of principal  will not occur. Unpaid  interest
for loans that  are placed on  Non-Accrual Status is  reversed against  the
interest income  previously recognized.  Subsequent recoveries  of  amounts
previously charged to the Allowance, if any, are credited to (increase) the
Allowance.

The Allowance is regularly reviewed by  management to determine whether  or
not the amount is considered adequate to absorb probable losses. If not, an
additional Provision is  made to  increase the  Allowance. This  evaluation
includes specific loss  estimates on certain  individually reviewed  loans,
statistical loss  estimates for  loan groups  or pools  that are  based  on
historical loss experience and general loss  estimates that are based  upon
the size, quality,  and concentration characteristics  of the various  loan
portfolios, adverse  situations that  may affect  a borrower's  ability  to
repay, and current economic and industry conditions.

In addition  to  the judgements  and  assumptions noted  in  the  preceding
discussion of  Loans,  those  most critical  to  the  application  of  this
accounting policy are the  frequency and subjectivity  of loan reviews  and
risk gradings, emerging or changing trends that might not be fully captured
in the historical loss  experience, and charges  against the Allowance  for
actual losses that are greater than previously estimated. While the Company
strives to reflect all known risk factors in its evaluation of the adequacy
of the Allowance, estimation or judgement errors may occur.

If different assumptions or conditions were  to prevail, the Allowance  may
not be adequate to absorb  the new estimate of  probable losses. If so,  an
additional Provision may be necessary and the amount could be material. See
also Table 2 and Note 4 of the Notes to Consolidated Financial Statements.

                           RESULTS OF OPERATIONS

OVERVIEW

The Company reported net income of $1.2 million for the year ended December
31, 2002.  This compares to $0.9 million for the year ended 2001 and a  net
loss of $0.3 million in 2000.  This represents an increase of $0.4  million
or 43.06% when comparing 2002 to 2001, and an increase of $1.1 million when
comparing 2001 to 2000.

Diluted earnings per share  for 2002 were $0.50  compared to $0.36 in  2001
and ($0.12) in 2000.   This represents  an increase of  $0.14 per share  or
38.89% when comparing 2002 to 2001, and an increase of $0.48 per share when
comparing 2001 to 2000.   The percentage increase  in diluted earnings  per
share is less than  the percentage increase  in net income  due to a  4.86%
increase in the weighted average common shares outstanding, resulting  from
the issuance of shares for stock options exercised.

The company's return on average equity  for 2002 was 4.92% versus 3.65%  in
2001 and (1.19%) in 2000.  The company's return on average assets for  2002
was 0.38% compared to 0.27% in 2001 and (0.09%) in 2000.

Both the  Company and  the  Bank continue  to  exceed the  minimum  capital
requirements  established  by  regulators   for  banks  and  bank   holding
companies.  In  addition, the Bank  continues to be  "well capitalized"  as
defined by  regulatory  guidelines.    See  Note  15  to  the  Consolidated
Financial Statements attached as Exhibit 99 of this form 10-KSB.

The 2002 results include the write-off of a $0.3 million receivable related
to a claim against a former data  processing provider.  On August 18,  2000
the bank filed a  breach of contract lawsuit  to recover $0.5 million  that
was charged to its check clearing account in error.  In the fourth  quarter
of 2000,  $0.3  million of  the  original claim  was  written off  and  the
remaining amount  was  written off  in  the fourth  quarter  of 2002.    On
February 14, 2003  a Waukesha County,  Wisconsin jury  delivered a  verdict
that the data processor  did not breach  its contract with  the bank.   The
after tax charge to income in the fourth quarter of 2002 was $0.2 million.

During the third  quarter of  2002 the bank  closed its  Wal Mart  in-store
branch.  The 2002 results include an after tax charge of $40.0 thousand due
to the abandonment of leasehold improvements.

In 2002 the bank  changed its vacation policy  to eliminate the vesting  of
vacation on December 31 for the following year.  Instead, vacation will  be
earned and used in the same calendar  year. This change resulted in a  $0.1
million decrease in salary and benefits expense.

Pursuant to SFAS No. 142, an accounting standard effective January 1, 2002,
amortization  of  goodwill,   which  resulted   from  purchase   accounting
adjustments  from  previous  acquisitions,  was  discontinued.     Goodwill
amortization for 2001 and  2000 was $0.2  million or $0.08  per share.   No
transition or impairment charge was required for 2002.

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. As shown  in Item 7,  Table 1 of  this report,  net interest  income
increased by $0.4 million,  or 3.96%, to $11.2  million for the year  ended
December 31, 2002, compared to $10.8  million for the comparable period  in
2001.  The net  interest margin, which is  the tax equivalent net  interest
income divided by average interest earning assets was 3.77% in 2002,  3.66%
in 2001 and 3.48% in 2000. The increase in Net Interest Margin between 2002
and 2001 is  primarily due  to the  impact of  lower market  rates paid  on
deposit accounts not being  fully offset as  earning assets re-priced  more
slowly in 2002.  If this trend continues into 2003 the Bank may see a lower
Net Interest Margin as assets re-price  with less incremental benefit  from
lower interest costs on deposit accounts.  Net interest income and the  net
interest margin are expected to continue to be pressured from the shifts in
the asset mix  from loans  to investment  securities. The  increase in  Net
Interest Margin between 2001  and 2000 is primarily  due to Bank growth,  a
mix shift in deposit accounts to more transaction accounts and the  effects
of the lower interest rate environment on time deposits.

For the year ended December 31, 2002, total tax equivalent interest  income
decreased by $3.2  million or 13.96%,  to $19.6 million  compared to  $22.8
million for the  year ended  December 31,  2001. The  decrease in  interest
income is due to a 115 basis point decrease in the yield on average earning
assets to 6.58% for 2002,  compared to 7.73% for  the same period in  2001.
The decrease in the  yield on average earning  assets for 2002 compared  to
2001 is partially  offset by  a $2.8  million increase  in average  earning
assets. For the year ended December 31, 2001, total tax equivalent interest
income increased by $0.5  million, or 2.34%, to  $22.8 million compared  to
$22.3 million for the same period in 2000.  The increase in interest income
was due to bank growth offset by the impact of lower interest rates as  the
yield on earning assets decreased from 7.96% for 2000 to 7.73% in 2001.

The decrease in the yield on average earning assets reflects a shift in the
asset mix from  loans to investment  securities and short-term  investments
for the  year ended December  31, 2002 compared to the same period in 2001.
The decrease in the yield on average earning assets also reflects the lower
interest rate environment during 2002 compared to 2001, which resulted from
the Federal Reserve Bank's  lowering of managed rates  by 375 basis  points
during 2001 and another 50  basis points in November  of 2002.  If  managed
rates continue  to decrease  or even  remain  at current  levels,  interest
income and the average rate on  earning assets are expected to continue  to
decline as more assets re-price.

Interest and fees on loans decreased  20.61% to $14.7 million for the  year
ended December 31, 2002  compared to $18.5 million  for the same period  of
2001.  This decrease was the result  of a $25.3 million or 11.38%  decrease
in average loans outstanding and an 87 basis point decrease in yield on the
portfolio. The decrease  in average loans  outstanding for  the year  ended
December 31, 2002 is  largely attributable to  the refinancing activity  in
the residential real estate market. The remaining decrease is the result of
economic conditions and lower loan demand in the company's primary markets.
The lower overall  portfolio yield on  average loans  reflects the  overall
lower interest  rate  environment  and  competitive  pricing  pressure  for
quality credit customers and the Federal Reserve Bank's lowering of managed
rates by  375 basis  points during  2001  and another  50 basis  points  in
November of  2002. Interest  and fees  on loans  increased 5.03%  to  $18.5
million for the year ended December  31, 2001 compared to $17.6 million  in
2000. This increase was the result of an $18.2 million or 8.90% increase in
average loans outstanding offset by a  31 basis point decrease in yield  on
the portfolio.

Interest income on taxable securities increased  by $0.4 million or  13.76%
in 2002 to $3.5 million compared to $3.1 million for 2001. Average balances
of taxable investment securities increased 39.59% to $71.9 million for 2002
compared to $51.5 million for the  same period in the prior year.  However,
the yield  on average  taxable investment  securities decreased  110  basis
points to 4.86% for 2002 compared to 5.96% for 2001. Interest income on tax
exempt securities increased $0.1 million or 11.86% to $1.3 million compared
to $1.2 million in 2001.  This is the result of a $2.1 million increase  in
the average balance of  tax exempt investment  securities to $20.1  million
for 2002 compared to $18.0  for 2001.  The  yield on tax exempt  securities
was 6.43% in 2002 and 6.42% in 2001.

Interest income on taxable securities decreased  by $0.7 million or  17.48%
in 2001 to $3.1  million compared to  $3.7 million for  the same period  in
2000. Average balances of taxable investment securities decreased 11.79% to
$51.5 million for 2001 compared to $58.4 million for the same period in the
prior year.  Also, the  average  yield decreased  .42%  to 5.96%  for  2001
compared to  6.38% for  2000. Average  tax exempt  securities increased  to
$18.0 million in 2001 compared to $15.1 for the same period in 2000,  while
their average tax equivalent yield increased  from 5.33% for 2000 to  6.42%
for 2001.

Interest from fed funds  sold and repurchase  agreements increased to  $0.1
million for the year  ended December 31, 2002,  compared to $49.0  thousand
during the same period in 2001. The increase in interest on fed funds  sold
and repurchase agreements is due to increased average balances. Funds  from
the reduction in  the loan portfolio  were held  in short-term  investments
before being  used  to purchase  longer-term  investment securities.    The
Company invested a portion of these funds in short-term reverse  repurchase
agreements backed by U.S. Government guaranteed securities.

Total interest  expense  decreased by  $3.6  million, or  30.12%,  to  $8.4
million for 2002  compared to $12.0  million for the  same period in  2001.
For 2001 total  interest expense decreased  by $0.5 million,  or 4.36%,  to
$12.0 million compared to  $12.5 million for the  same period in 2000.  The
decrease in  total interest  expense is  the result  of the  aforementioned
lower interest  rate  environment  coupled with  favorable  shifts  in  the
company's funding mix.

While interest paid on deposits decreased  $2.9 million, or 32.51% to  $5.9
million during 2002 compared to $8.8  million for the same period in  2001,
average total interest  bearing deposits  increased $0.9  million over  the
year.   Year to  date interest  paid  on deposits  in 2001  decreased  $0.6
million, or 5.92%  to $8.8 million  compared to $9.3  million for the  same
period in 2000 while average total  interest bearing deposits increased  by
$5.2 million.  In addition to the impact of the overall lower interest rate
environment the company's funding cost was reduced due to favorable  shifts
in the  funding  mix.   For  2002  the  average balance  of  time  deposits
decreased $6.0  million, or  4.65%, to  $122.6 million  compared to  $128.6
million for the same period in 2001. The decrease in the average balance of
time deposits was offset with increases in the average balances of checking
accounts, interest-bearing checking accounts  and savings accounts of  $4.0
million, $4.3 million and $2.6 million, respectively.

Interest on short-term borrowings decreased $0.2 million to $0.3 million in
2002 compared to $0.5 million in 2001.  This decrease is the result of  the
lower managed interest rate environment in 2002 previously discussed  which
offset the 33.97% increase in average balances outstanding.

Interest on short-term borrowings decreased $1.5 million to $0.5 million in
2001 compared to $1.9 million for the  same period in 2000.  This  decrease
is the net result of the decreasing interest rate environment as  mentioned
earlier, and the refinancing of short-term FHLBC advances to long-term.

Interest expense on other borrowings decreased $0.6 million to $2.2 million
compared to $2.8 million in 2001.  The decrease is primarily the result  of
the maturity of  $6.8 million of  Federal Home Loan  Bank term advances  in
January 2002.

PROVISIONS 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 for loan  losses of $1.0 million  for 2002 represents a  $0.2
million or 17.84% decrease compared to $1.2 million for 2001.  In 2002, the
provision  includes  $0.5  million  to  cover  a  loss  on  one  commercial
relationship that was also charged off against the allowance in 2002.   The
provision of $1.2  million in 2001  includes an increased  amount based  on
management's assessment of  the portfolio  and economic  conditions in  the
bank's primary markets, even though it represents a $1.0 million or  45.93%
decrease compared to  2000.   The decrease  from 2000  is due  to the  2000
provision including  $1.9 million  related to  one commercial  real  estate
loan.  This loan was subsequently  charged off in 2001. In 2002,  Blackhawk
had net charge-offs of $1.3 million (total charge-offs of $1.4 million less
recoveries of $0.1 million). In 2001, the Bank had net charge-offs of  $2.7
million  (total  charge-offs  of  $2.8  million  less  recoveries  of  $0.1
million), compared to  2000, when it  had net charge-offs  of $0.4  million
(total charge-offs of $0.4  million less recoveries  of $0.0 million).  Net
charge-offs to average loans were 0.67% in 2002, 1.22% in 2001 and 0.18% in
2000. The allowance  for loan losses  as a percent  of loans  was 1.10%  at
December 31, 2002 compared to  1.14% at December 31,  2001 and to 1.76%  at
December 31, 2000.

NONINTEREST INCOME

Noninterest income  increased  6.37% to  $3.0  million in  2002  from  $2.8
million in 2001.  The majority of this increase was from net security gains
as they increased $0.2 million or 143.18% to $0.3 million for 2002 compared
to $0.1 million  in 2001.   Service charges on  deposit accounts  increased
$0.1 million or 4.77% to $1.6 million and primarily reflect higher  volumes
of demand deposits  in 2002.   The  gain on  sale of  loans decreased  $0.1
million and is the  result of turn-over in  the company's mortgage  banking
management and origination staff. Management believes that these changes in
staff have resulted in  better quality control and  risk management in  the
company's mortgage banking activities.  In 2002, $33.8 million of mortgages
were sold to the secondary market at  an average gain of 1.34% compared  to
an average gain of 1.75% on the $32.2 million of mortgage loans sold to the
secondary market in 2001.  Approximately 75% of the loan volume sold to the
secondary market was from refinance activity.  The level of market interest
rates and the volume  of higher rate mortgage  loans that are eligible  for
refinancing will  impact  the Bank's  level  of gains  reported  in  future
periods.  Brokerage  and annuity  commissions increased  $33.0 thousand  or
26.83% to  $0.2  million.   On  September  30, 2002  Blackhawk  State  Bank
purchased $5.0  million in  Bank Owned  Life Insurance  (BOLI) assets.  The
BOLI, which  insures the  lives of  key employees,  was purchased  to  help
offset the cost  of increasing employee  benefits. Thus the  cash value  of
life insurance  increase is  $0.1 million  or 181.78%  for the  year  ended
December 31, 2002.   These increases were offset  by a $63.0 thousand  loss
from abandonment of leasehold  improvements related to  the closing of  the
Bank's Wal-Mart in-store branch in October 2002 and the $0.1 million  write
down of an  OREO property  based on a  change in  the estimate  of its  net
realizable value.

Noninterest income  for 2001  increased $0.4  million,  or 18.49%  to  $2.8
million compared  to $2.4  million in  2000. The  increase included  a  net
increase of $0.2 million, or 93.23% in revenues from the sale and servicing
of mortgage  loans and  an increase  of $0.1  million in  gain on  sale  of
securities. The  increase  in  revenues from  the  sale  and  servicing  of
mortgage loans was driven  by the high level  of refinancing activity  that
occurred  in  2001  compared  to  2000  due  to  the  lower  interest  rate
environment in 2001. The interest rate environment and economic uncertainty
had the opposite effect on brokerage  and annuity commission income,  which
decreased 46.05% from $0.2 million in 2000 to $0.1 million in 2001. Deposit
service charges increased $0.2 million, or 17.04% from $1.3 million in 2000
to $1.5  million in  2001.  The increase  in  deposit service  charges  was
achieved as a result of increased  focus on gathering transaction  accounts
and a restructuring of account fees.

NONINTEREST EXPENSE

Noninterest  expense increased  3.69% to $11.3 million  in 2002 from  $10.9
million in 2001, including a $0.3  million charge to write off the  balance
of a receivable related  to the Bank's breach  of contract claim against  a
former data processor.  On February  14, 2003 a Waukesha County,  Wisconsin
jury delivered  a  verdict that  the  data  processor did  not  breach  its
contract.

Total salary and benefits increased $0.2 million or 3.72% in 2002  compared
to 2001.   Salaries and  employee benefits for  2002 were  reduced by  $0.1
million as  a result  of the  Company's  change in  vacation policy.    The
Company changed its vacation policy to eliminate the vesting of vacation on
December 31 for the  following year.  Instead  vacation will be earned  and
used in the same year.  Excluding  the favorable impact from the change  in
vacation policy,  salary  and  benefits increased  6.51%.    This  increase
reflects the costs associated  with attracting several  key members of  the
management team that  have joined the  organization in the  second half  of
2001 and throughout 2002.  These key managers  include the chief  executive
officer R. Richard Bastian, III, chief financial officer Todd J. James  and
other officers listed in Part I Item 1 of this filing.

Equipment expense increased $0.1 million or 17.34% to $0.9 million in  2002
from $0.8  million  in  2001.  The increase  is  primarily  due  to  higher
depreciation  expense   on  computer   equipment  and   systems  in   2002.
Professional fees, while down $0.1 million  or 11.16% compared to 2001  are
still higher than normal,  primarily due to  the on-going lawsuit,  against
Fiserv, Inc.  Amortization  of intangibles decreased by  $0.2 million as  a
result of FASB 142 which was adopted by the Company on January 1, 2002  and
eliminated the amortization of  goodwill resulting from prior  acquisitions
accounted for under the purchase method of accounting.  Goodwill is subject
to an annual impairment  test.  No impairment  charge was required for  the
year.  Other expense includes $0.1  million of charges to accrue  severance
payments for former executives.  In  addition, the company realized a  $0.1
million credit against other expenses due to an adjustment related to stale
reconciling items.

Noninterest expense increased  5.98% to $10.9  million for  the year  ended
December 31, 2001 from $10.3 million for the year ended December 31,  2000.
Salary and benefits increased $0.3 million  or 6.94% from $4.9 million  for
the year  ended  December 31,  2000  to $5.2  million  for the  year  ended
December 31, 2001. The Bank also incurred a significant level of legal fees
related to its lawsuit  against a former check  processor to recover  funds
improperly charged to  the Bank's correspondent  bank account during  1998.
Total professional fees increased $0.3 million or 73.30% to $0.6 million in
2001 from $0.4  million in 2000.  Loan expenses increased  193.02% or  $0.2
million from $0.1 million in 2000 to  $0.3 million in 2001 and reflect  the
increased costs of  working through a  higher level of  problem credits  in
2001.

Management monitors  two  ratios  related to  other  operating  income  and
expense: (1) Net other operating expense as a percentage of average assets,
and (2) Standard efficiency ratio.  Net other operating expense to  average
assets increased slightly to 2.56% in  2002 from 2.52% in 2001 compared  to
2.57% in  2000.  The increase  from  2001 to  2002  reflected  management's
commitment to  invest  resources  to create  long-term  shareholder  value,
including the recruitment of a number of key managers and upgrading desktop
computers and  operating  systems.  The  standard  efficiency  ratio  (non-
interest expense divided  by net  interest income  plus other  non-interest
income) decreased to 81.61% in 2002, compared to 82.04% in 2001 and  86.23%
in 2000.  For  2002, the standard efficiency  ratio reflects the  Company's
ability to grow net interest income and other operating income in excess of
the growth in operating expenses.

INCOME TAXES

The effective  income tax  rate for  the Company  in 2002  was 19.53%.  The
effective income tax  rate was  25.32% in 2001  and (54.50%)  in 2000.  The
resulting effective  rate for  2000 was  not  reflective of  the  Company's
effective tax rate under  normal operating results,  but was reflective  of
the pre-tax loss for the year and the net effect of non-deductible and non-
taxable income and expenses upon that relatively smaller taxable base. Thus
we are comparing effective income tax rates from 2002 and 2001. The primary
reasons for the decline in the effective income tax rate from 2001 to  2002
were  the  increased  holdings  of  tax-exempt  municipal  securities,  the
decrease in  non-deductible  amortization  of intangibles  and  the  Bank's
purchase of $5.0  million of BOLI,  on which the  earnings are tax  exempt.
Income generated at  Nevahawk is not  subject to state  income taxes  while
certain U.S. government agency investments qualify for state tax  exemption
for the Bank within Illinois.

                          BALANCE SHEET ANALYSIS

OVERVIEW

Total assets as of  December 31, 2002 increased  $22.1 million or 6.69%  to
$352.4 million compared to $330.3 million  as of December 31, 2001.   Total
average assets  for the  year increased  $3.2 million  or 1.00%  to  $322.4
million compared  to  $319.2 million  in  2001. December  31  total  assets
included short-term year-end deposits from one commercial customer of $18.6
million in 2002 and $14.4 million in 2001.  Excluding those deposits  total
assets increased 5.67% year over year.

SECURITIES

Available-for-sale securities increased $41.3 million, to $83.9 million, as
of December 31, 2002 from  $42.6 million as of  December 31, 2001.   During
2002 the Bank experienced loan run-off of $23.2 million and deposit  growth
of $9.3  million,  excluding the  short-term  year end  deposits  of  $18.6
million and $14.4 million at December 31, 2002 and 2001, respectively.  The
funds provided  from  loans and  deposits  as  well as  the  Bank's  excess
liquidity at December 31, 2001 were invested in investment securities.

FEDERAL HOME LOAN BANK OF CHICAGO STOCK

The Bank's investment  in stock of  the Federal Home  Loan Bank of  Chicago
increased from  $2.4  million at  December  31,  2001 to  $4.5  million  at
December 31, 2002. The increase is due  to the purchase of $2.0 million  in
additional stock and stock  dividends received.   The additional stock  was
purchased as the returns on the FHLB stock  are expected to be at least  as
high as debt  securities allowed by  the bank's  investment policy  without
price risk.

LOANS

Net loans decreased 10.92%  during 2002 to $186.3  million at December  31,
2002 from  $209.1 million  at December  31, 2001.  The composition  of  and
changes to the Bank's loan portfolio are detailed  in Table 2 of Item 7  of
this report.  The decrease  occurred across  all  categories of  loans  and
reflects low loan  demand due to  economic weakness in  the bank's  primary
markets.  In addition, the historically  low interest rate environment  has
created a significant amount of refinancing  of loans in the bank's one  to
four family  mortgage  portfolio.   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.
Management expects continued weak loan  demand and competition for  quality
credits.

NON-PERFORMING LOANS

Non-performing loans include  loans that  have been  placed in  non-accrual
status, are determined by management to be impaired because full collection
of principal and interest is doubtful, and loans which are past-due  ninety
days or more  as to  interest and/or  principal payments.   For  additional
discussion of the Bank's non-performing loans see table 2 of Part I Item  7
of this filing and footnote 4 to the Consolidated Financial Statements.

ASSET QUALITY

The allowance for loan losses was $2.1  million or 1.10% of total loans  at
December 31,  2002 compared  to $2.4  million or  1.14% of  total loans  at
December 31,  2001.  As of  December  31, 2002,  non-performing  loans  and
performing loans classified  as impaired totaled  $3.0 million compared  to
$4.3 million  at  December 31,  2001.  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.  Table 2 of item 7 of this filing  contains
an allocation of the  allowance for loan losses  by category.  At  December
31, 2002, $1.4  million or  67.91% of the  allowance is  allocated to  real
estate mortgage loans. Approximately $0.9 million of this allocation is due
to historic loss  experience and the  remaining amount is  due to  economic
factors and an increase in the number of commercial real estate loans added
to the  bank's internal  watch list.   The  decrease in  the allocation  to
consumer loans  is the  result of  a change  in the  handling of  loans  to
customers in bankruptcy.  During the  fourth quarter of 2002  approximately
$0.1 million of consumer loans were  charged off, despite the existence  of
collateral.   Future  payments on  these  loans  will be  credited  to  the
allowance account as recoveries.

POTENTIAL PROBLEM LOANS

The bank  uses  an internal  asset  classification  system as  a  means  of
identifying and  reporting  problem  and  potential  problem  loans.    All
commercial and commercial real loans are graded on a scale of 1 to 7,  with
1 being the best credit grade.  Loans graded  5, 6, or 7 are classified  as
"watch",  "substandard"  and  "doubtful",   respectively.    An  asset   is
classified as substandard if  it is inadequately  protected by the  current
net worth and paying capacity of the obligor, or the collateral pledged, if
any.   Substandard  assets  include those  characterized  by  the  distinct
possibility that the company will sustain some loss if the deficiencies are
not corrected.  Assets  classified as doubtful have  all of the  weaknesses
inherent in those classified as  substandard with the added  characteristic
that the weaknesses present make collection or liquidation in full, on  the
basis  of  currently   existing  facts,  conditions   and  values,   highly
questionable and improbable.  Once an asset is considered uncollectible and
viewed as non-bankable it  is charged off as  a loss against the  allowance
account.  Assets  that do not  currently expose the  company to  sufficient
risk to warrant classification in one of the aforementioned categories, but
possess weakness that may or may not be within the control of the  customer
are deemed to be watch loans.  The classified loans are reviewed monthly by
the directors'  loan  committee,  which  must  approve  all  additions  and
deletions from the classified list.

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 December 31, 2002 the allowance for loan losses to total  non-performing
and impaired loans equaled 69.21% compared to 55.76% at December 31,  2001.
While the total nonperforming and impaired loans decreased by $1.3  million
there was a considerable shift in the make-up of non-performing loans.   As
a result  of increased  collection efforts  total residential  real  estate
loans either on  non-accrual or  past due 90  days and  still accruing  was
reduced by  $0.8  million to  $1.8  million  compared to  $2.5  million  at
December 31, 2001.  The reduction in non-performing residential real estate
loans was offset by an increase in nonperforming commercial and  industrial
loans of $0.3 million to $0.5 million at December 31, 2002 compared to $0.2
million at December 31, 2001.

DEPOSITS

Total deposits at  December 31,  2002 were  $263.1 million  as compared  to
$249.6 million  at December  31, 2001.   Excluding  short-term deposits  of
$18.6 million and $14.4 million made on the final business day of 2002  and
2001, respectively,  deposits  increased  3.95%.   During  2002,  the  Bank
generated more transaction accounts.  The average balance of  non-interest-
bearing checking accounts increased $4.0 million or 15.18% to $30.3 million
for the  year ended  December 31,  2002, the  average balance  of  interest
bearing checking accounts increased $4.3 million or 15.09% to $32.7 million
and the average balance of savings deposits increased $2.6 million or 5.10%
to $53.7  million.   These favorable  mix  shifts to  lower cost  of  funds
deposits offset  a  decrease of  $6.0  million  or 4.65%  in  average  time
deposits from $128.6 million for the year ended December 31, 2001 to $122.6
million in the current year.

SHORT-TERM BORROWINGS

Total short  term borrowings  increased $7.4  million or  121.03% to  $13.5
million compared to $6.1  million at December 31,  2001.  This increase  is
primarily due to  an increase in  repurchase agreements  with business  and
governmental organizations.  The bank's customers use repurchase agreements
to invest excess  liquidity on a  daily basis.   During 2002 the  Company's
$5.7 million term loan was refinanced as  a line of credit.  However,  upon
issuance of the  trust preferred securities  described below,  the line  of
credit was reduced to $0.1 million.

LONG-TERM BORROWINGS

Long-term borrowings decreased  $9.5 million to  $38.9 million at  December
31, 2002  compared to  $48.4 million  at  December 31,  2001.   The  bank's
primary source  for  long-term borrowings  has  been, and  is  expected  to
continue to be, the Federal Home Loan  Bank of Chicago ("FHLB").  Early  in
2002, the Bank  paid off  $6.8 million  in FHLB  advances.   In the  fourth
quarter of 2002, $3.0 million was borrowed from the FHLB to fund investment
purchases.  As mentioned  above the Company's $5.7  million term bank  loan
was refinanced as a line of credit.

COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY
TRUST HOLDING SOLELY SUBORDINATED DEBENTURES

In December of 2002 the Company capitalized Blackhawk Statutory Trust I for
the purpose of issuing $7.0 million in trust preferred capital  securities.
The  Company  capitalized  the  trust  and  then  issued  $7.2  million  of
subordinated debentures to the trust, which in turn issued $7.0 million  of
capital securities to an outside investor.   Management believes that  this
is an advantageous method of funding the Company's growth strategies.   The
subordinated debentures do not contain restrictions or covenants  typically
found in bank financing arrangements.   Also, while it qualifies as tier  I
capital, with certain limitations, it does not dilute the ownership of  the
existing shareholders.  The capital provided  was initially used to  reduce
outstanding bank debt, however, bank debt financing will likely increase to
prior levels upon the closing of the pending acquisition of DunC Corp.  See
footnote 9 to the Consolidated  Financial Statements for further discussion
of  Company  Obligated  Mandatorily  Redeemable  Preferred  Securities   of
Subsidiary Trust Holding Solely Subordinated Debentures.

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 re-pricing  in a  given time  period.
Since not all assets or liabilities move at  the same rate and at the  same
time, a determination must  be made as to  how each interest earning  asset
and each interest bearing  liability adjusts with each  change in the  base
rate.  The  Company develops, evaluates  and amends its  assumptions on  an
ongoing basis and analyzes its earnings exposure quarterly.

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

LIQUIDITY

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

The liquidity  needs  of  the  Company  generally  consist  of  payment  of
dividends to  its  shareholders,  payments of  principal  and  interest  on
borrowed funds  and  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 December 31, 2002 ( in
thousands):

                 Time         Long-term      Operating
               Deposits      debt(1)<F1>       Leases          Total
               --------      -----------     ---------         -----
2003           $ 66,224        $ 6,600          $ 50         $ 72,874
2004             28,359         10,400            50           38,809
2005             17,661          7,450            50           25,161
2006              5,395            450            50            5,895
2007              5,602              0            50            5,652
Thereafter            0         21,000             0           21,000
               --------        -------          ----         --------
Total          $123,241        $45,900          $250         $169,391
               --------        -------          ----         --------
               --------        -------          ----         --------

Commitments to extend credit                                 $ 25,596

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

CAPITAL

Total shareholders  equity  as  of December  31,  2002  was  $25.8  million
compared to $23.7 million as of  December 31, 2001.  The increase  resulted
from the  sale  of 135,667  shares  of  company stock  under  employee  and
director option plans  and the favorable  impact of  interest rate  changes
during 2002 on the Bank's available-for-sale security portfolio carried  in
shareholders' equity as accumulated other comprehensive income. The capital
ratios of the Company are in excess of the regulatory requirements.   Under
guidelines issued by the Federal Reserve Bank, the $7.0 million of  company
obligated mandatorily redeemable preferred  securities of subsidiary  trust
holding solely subordinated debentures issued in December 2002 are included
in Tier 1  and total  capital of the  Company at  December 31,  2002.   The
issuance of these securities is the  primary driver behind the increase  in
the Company's capital ratios year over year. Tier I capital as a percent of
risk based assets for 2002 is 12.94% compared to a December 31, 2001  ratio
of 8.49% and a regulatory requirement of 4.0%.  Total capital as a  percent
of risk based assets  for 2002 is  13.94% compared to  a December 31,  2001
ratio of 9.61% and a regulatory requirement of 8.0%. The leverage ratio for
the Company for  2002 is 8.29%  compared to a  December 31,  2001 ratio  of
5.87% and a 4.0% regulatory requirement.

IMPACT OF INFLATION AND CHANGING PRICES

Unlike most industrial companies, most of the assets and liabilities of the
Bank are monetary  in nature.   Consequently,  interest rates  have a  more
significant impact on the Company's  performance and results of  operations
than the effect  of general  levels of inflation.   Interest  rates do  not
necessarily move in  the same  direction or in  the same  magnitude as  the
prices of goods and services as measured  by the Consumer Price Index.   As
discussed previously under Asset/Liability Management, the Bank's  interest
rate exposure in conjunction with the direction of the movement in interest
rates, is an important factor in the Company's results of operations.   The
Company's financial statements  are prepared in  accordance with  generally
accepted accounting principles, which require the measurement of  financial
position and results of operations in terms of historical dollars,  without
giving consideration to changes in the  relative purchasing power of  money
over time due to inflation.

ITEM 7. FINANCIAL STATEMENTS

The required financial statements are attached to Form 10-KSB as Exhibit 99
and herein incorporated by reference.

Following are supplemental data tables of the Company:

TABLE 1
RATE/VOLUME ANALYSIS

The following rate/volume analysis is  prepared with non-accruing loans  treated
on a cash basis in accordance with the Company's practices as described in  Note
4 to  the  Consolidated  Financial  Statements  attached  to  this  report.  Tax
equivalency is calculated based on an effective combined income tax rate of 34%.

<TABLE>
       Average Balance                Average Rate                                                        Interest Earned or Paid
  2002       2001      2000       2002    2001    2000        (Dollars in thousands)                      2002      2001      2000
  ----       ----      ----       ----    ----    ----                                                    ----      ----      ----
<S>          <C>       <C>        <C>     <C>     <C>                                                     <C>       <C>       <C>
                                                       Interest Earning Assets:
$ 71,938   $ 51,536  $ 58,424    4.86%   5.96%   6.38%   Taxable investment securitie                   $ 3,497   $ 3,074   $ 3,725
  20,088     17,992    15,095    6.43%   6.42%   5.33%   Tax-exempt investment securities (1)<F2>         1,292     1,155       805
  92,026     69,528    73,519    5.20%   6.08%   6.16%         Total investments                          4,789     4,229     4,530
 196,903    222,176   204,021    7.44%   8.31%   8.62%   Loans                                           14,659    18,465    17,580
   6,635      1,679       705    2.00%   2.92%   3.83%   Federal funds sold & repurchase agreements         133        49        27
   2,510      1,889     1,962    1.83%   3.65%   7.85%   Interest bearing deposits in banks                  46        69       154

 298,074    295,272   280,207    6.58%   7.73%   7.96% TOTAL EARNING ASSETS                             $19,627   $22,812   $22,291
  -2,529     -3,065    -1,966                            Allowance for loan losses
  10,114     10,017    11,106                            Cash & cash equivalents
  16,780     17,012    17,175                            Other assets

$322,439   $319,236  $306,522                          TOTAL ASSETS

                                                       Interest Bearing Liabilities:
$ 32,736   $ 28,443  $ 18,499    1.04%   2.13%   1.71%   Interest bearing checking accounts             $   342   $   607   $   316
  53,672     51,068    56,749    1.13%   2.20%   1.88%   Savings and money market deposits                  604     1,123     1,066
 122,616    128,596   127,702    4.06%   5.48%   6.23%   Time deposits                                    4,980     7,051     7,952
 209,024    208,107   202,950    2.84%   4.22%   4.60%      Total interest bearing deposits               5,926     8,781     9,334
                                                         Company obligated mandatorily redeemable
     249        -0-       -0-    5.22%                     preferred securities of subsidiary trust          13       -0-       -0-
  15,325     11,439    30,394    1.91%   4.04%   6.38%   Short-term borrowings                              292       462     1,941
  40,327     47,157    20,039    5.34%   5.84%   6.33%   Other borrowings                                 2,152     2,753     1,268

 264,925    266,703   253,383    3.16%   4.50%   4.95% TOTAL INTEREST BEARING LIABILITIES               $ 8,383   $11,996   $12,543

                                 3.42%   3.23%   3.01% INTEREST RATE SPREAD

  30,309     26,315    26,651                            Checking accounts
   2,075      2,531     2,651                            Other liabilities
 297,309    295,549   282,685                          TOTAL LIABILITIES
  25,130     23,687    23,837                          Shareholders' equity

                                                       TOTAL LIABILITIES AND
$322,439   $319,236  $306,522                            SHAREHOLDERS EQUITY

                                 3.77%   3.66%   3.48% NET INTEREST MARGIN/INCOME                       $11,244   $10,816   $ 9,748
</TABLE>

TABLE 1
RATE/VOLUME ANALYSIS (CONTINUED)

<TABLE>
                                                      2002 Compared to 2001                      2001 Compared to 2000
                                                    Increase (Decrease) due to                Increase (Decrease) due to
                                                           Rate/Volume                                Rate/Volume

                                                                  Rate/                                       Rate/
                                             Rate     Volume      Volume      Net       Rate       Volume     Volume      Net
                                             ----     ------      ------      ---       ----       ------     ------      ---
<S>                                          <C>       <C>         <C>        <C>       <C>         <C>        <C>        <C>
Interest Earning Assets:
   Taxable investment securities              ($ 569)   $ 1,217   ($ 225)    $ 423     ($ 77)    ($ 586)    $   12     ($ 651)
   Tax-exempt investment securities (1)<F2>        2        135        0       137       164        154         32        350

      Total investments                         (567)     1,351     (225)      560        87       (432)        44       (301)


   Loans                                      (1,924)    (2,100)     219    (3,806)     (624)     1,564        (55)       885
   Federal funds sold & repurchase
     agreements                                  (15)       145      (45)       84        (4)        58         (9)        45
   Interest bearing deposits in banks            (34)        23      (11)      (23)      (87)       (48)        27       (108)

   TOTAL EARNING ASSETS                       (2,541)      (582)     (63)   (3,185)     (628)     1,142          7        521


Interest Bearing Liabilities:
   Interest bearing checking accounts           (310)        92      (47)     (265)       79        170         42        291
   Savings and money market deposits            (548)        57      (28)     (519)      182       (107)       (18)        57
   Time deposits                              (1,828)      (328)      85    (2,071)     (951)        56         (6)      (901)

      Total interest bearing deposits         (2,686)      (179)      10    (2,855)     (690)       119         18       (553)

   Company obligated mandatorily redeemable
      preferred securities of subsidiary trust     0          0       13        13
   Short-term borrowings                        (244)       157      (83)     (170)     (711)    (1,210)       442     (1,479)
   Other borrowings                             (237)      (399)      34      (601)      (98)     1,716       (133)     1,485

TOTAL INTEREST BEARING
  LIABILITIES                                 (3,167)      (421)     (25)   (3,613)   (1,499)       625        327       (547)

NET INTEREST MARGIN                            $ 626     ($ 161)  ($  37)    $ 428     $ 871      $ 517     ($ 320)    $1,068
</TABLE>

(1)<F2>Tax exempt investment securities are presented on a tax-equivalent basis.

TABLE 2

<TABLE>
   ANALYSIS OF LOAN PORTFOLIO
                                                                2002                       2001                      2000
(Dollars in thousands)                                                % of                       % of                      % of
                                                       Amount         Total        Amount        Total        Amount       Total
                                                       ------         -----        ------        -----        ------       -----
<S>                                                     <C>            <C>          <C>           <C>          <C>          <C>
Real estate-mortgage                                  $127,295        68.33%     $136,625        65.33%      $153,033      70.30%
Real estate-construction                                 8,916         4.79%        9,806         4.69%         4,551       2.09%
Real estate-held-for-sale                                2,315         1.24%        2,752         1.31%           739       0.34%
Consumer                                                21,598        11.59%       27,851        13.32%        32,139      14.77%
Commercial                                              28,255        15.17%       34,505        16.50%        31,097      14.29%

Gross loans                                            188,379       101.12%      211,539       101.15%       221,559     101.79%

Allowance for loan loss                                (2,079)        -1.12%       (2,404)       -1.15%        (3,894)     -1.79%

Net loans                                            $186,300        100.00%     $209,135       100.00%      $217,665     100.00%
</TABLE>

<TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSS BY CATEGORY
                                                                2002                       2001                      2000
                                                                  Percent of                 Percent of                  Percent of
                                                                 Gross Loans                Gross Loans                 Gross Loans
(Dollars in thousands)                                Amount     By Category       Amount   By Category       Amount    By Category
                                                      ------     -----------       ------   -----------       ------    -----------
<S>                                                     <C>          <C>            <C>         <C>            <C>          <C>
Real estate-mortgage                                 $ 1,412          67.91%     $    939        39.06%      $  2,717      69.77%
Real estate-construction                                   0           0.00%            0         0.00%             0       0.00%
Consumer                                                 244          11.74%          809        33.65%           568      14.59%
Commercial                                               364          17.51%          656        27.29%           609      15.64%
Unallocated                                               59           2.84%
Total                                                $ 2,079         100.00%     $  2,404       100.00%      $  3,894     100.00%
</TABLE>

<TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
                                                                                   December 31,
(Dollars in thousands)                                 2002            2001          2000         1999          1998
                                                       ----            ----          ----         ----          ----
<S>                                                    <C>             <C>           <C>          <C>           <C>
Allowance for loan losses, beginning                 $ 2,404         $ 3,894      $ 1,996       $ 1,915       $ 1,523
Amounts associated with acquisition                        0               0            0             0           452
Amounts associated with sale                               0               0            0            24             0
Amounts charged-off:
   Real estate-mortgage                                   78           2,445          196            94             1
   Consumer                                              542             340          170           314           180
   Commercial                                            769               0           28             0           214
      Total Charge-offs                                1,389           2,785          394           408           395
</TABLE>

TABLE 2 (CONTINUED)

<TABLE>
                                                                                   December 31,
                                                       2002           2001          2000          1999         1998
                                                       ----            ----          ----         ----          ----
<S>                                                    <C>             <C>           <C>          <C>           <C>
Recoveries on amounts previously charged-off:
   Real estate-mortgage                              $     2         $    30      $     1       $     5       $     0
   Consumer                                               56              43           31            44            13
   Commercial                                              2               0            0             0             7
      Total recoveries                                    60              73           32            49            20
      Net charge-offs                                  1,329           2,712          362           359           375
Provision charged to expense                           1,004           1,222        2,260           464           315
Allowance for loan losses, ending                    $ 2,079         $ 2,404      $ 3,894       $ 1,996       $ 1,915

NON-PERFORMING LOANS AT PERIOD END
Restructured/Impaired loans                          $   418         $ 1,147      $ 2,063       $ 1,984       $ 2,389
Non-accrual                                            2,560           2,808        1,819           565           857
Past due 90 days or more and still accruing               26             356          280           529           240
   Total problem loans                               $ 3,004         $ 4,311      $ 4,162       $ 3,078       $ 3,486

RATIOS
Allowance for loan loss to period-end loans            1.10%           1.14%        1.76%         1.04%         1.08%
Net charge-offs to average loans                       0.67%           1.22%        0.18%         0.20%         0.24%
Recoveries to charge -offs                             4.32%           2.62%        8.12%        12.01%         5.06%
Problem loans to gross loans                           1.59%           2.04%        1.88%         1.60%         1.41%

EFFECT ON INTEREST INCOME OF
NON-ACCRUAL LOANS
Income recognized                                    $    12         $   177       $   74       $    35       $    33
Income that would have been recognized
in accordance with the original loan terms               156             185          178            73            76
</TABLE>

TABLE 3

<TABLE>
NON-INTEREST INCOME AND EXPENSE
                                         2002                      2001                           2000
(Dollars in thousands)                         % of                        % of                             % of
                                              Average                     Average                          Average
                                  Amount      Assets       Amount         Assets         Amount            Assets
                                  ------      ------       ------         ------         ------            ------
<S>                                <C>         <C>          <C>            <C>            <C>               <C>
Non-interest expense             $11,271       3.49%       $10,870         3.41%         $10,257            3.35%
Non-interest income                3,006       0.93%         2,826         0.89%           2,385            0.78%

Net non-interest expense         $ 8,265       2.56%       $ 8,044         2.52%         $ 7,872            2.57%
</TABLE>

TABLE 4

<TABLE>
THREE-YEAR COMPARISON OF AVERAGE BALANCE SHEETS

                                                                    Years Ended December 31,
                                                      2002                    2001                       2000
                                                          Percent of              Percent of                   Percent of
(Dollars in thousands)                         Amount       Total      Amount       Total       Amount           Total
                                               ------       -----      ------       -----       ------           -----
<S>                                             <C>          <C>        <C>          <C>         <C>              <C>
ASSETS:
   Federal funds sold
      and repurchase agreements               $  6,635       2.06%   $  1,679        0.53%     $    705           0.23%
   Interest bearing deposits
        in banks                                 2,510       0.78%      1,889        0.59%        1,962           0.64%
   Taxable investment
       Securities                               71,938      22.31%     51,537       16.14%       58,424          19.07%
   Tax-exempt investment
       Securities                               20,088       6.23%     17,992        5.64%       15,095           4.92%
   Loans, net of unearned
       Income                                  196,903      61.06%    222,176       69.60%      204,021          66.56%

     Total earning assets                      298,074      92.44%    295,273       92.50%      280,207          91.42%

   Cash and due from banks                      10,114       3.14%     10,016        3.14%       11,106           3.62%
   Office buildings and equipment                6,659       2.07%      6,838        2.14%        6,802           2.22%
   Other non-earning assets                      7,592       2.35%      7,108        2.22%        8,407           2.74%

     Total non-earning assets                   24,365       7.56%     23,962        7.50%       26,315           8.58%

TOTAL ASSETS                                  $322,439     100.00%   $319,235      100.00%     $306,522         100.00%
</TABLE>

TABLE 4  (CONTINUED)

<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY/CAPITAL
LIABILITIES:                                                    Years Ended December 31,
                                                      2002                    2001                       2000
                                                            % of                     % of                        % of
                                                           Average                  Average                     Average
                                               Amount      Assets      Amount       Assets      Amount          Assets
                                               ------      ------      ------       ------      ------          ------
<S>                                             <C>          <C>        <C>          <C>         <C>              <C>
   Interest bearing checking accounts         $ 32,736      10.15%   $ 28,443        8.91%     $ 18,499           6.04%
   Savings deposits                             53,672      16.65%     51,068       16.00%       56,749          18.51%
   Time deposits                               122,616      38.03%    128,596       40.28%      127,702          41.66%

    Total interest bearing deposits            209,024      64.83%    208,107       65.19%      202,950          66.21%

   Company obligated mandatorily
     redeemable preferred securities
     of subsidiary trust                           249       0.08%        -0-        0.00%          -0-           0.00%
   Short-term borrowings                        15,325       4.75%     11,439        3.58%       30,394           9.90%
   Other borrowings                             40,327      12.51%     47,157       14.78%       20,039           6.54%

    Total interest-bearing liabilities         264,925      82.17%    266,703       83.55%      253,383          82.67%

   Checking accounts                            30,309       9.40%     26,315        8.24%       26,651           8.69%
   Other liabilities                             2,075       0.64%      2,530        0.79%        2,651           0.86%

    Total liabilities                          297,309      92.21%    295,548       92.58%      282,685          92.22%

  Stockholders' Equity/Capital                  25,130       7.79%     23,687        7.42%       23,837           7.78%

TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY/CAPITAL                                $322,439     100.00%   $319,235      100.00%     $306,522         100.00%
</TABLE>

TABLE 5

INVESTMENT SECURITIES
                                                          December 31,
(Dollars in thousands)                          2002        2001         2000
                                                ----        ----         ----
Available-for-Sale
US Treasury                                   $      0    $      0     $      0
US Government Agency                            36,766      37,459       49,142
Tax-exempt obligations                           3,951         233          556
Other securities                                43,180       4,903        4,370
Total market value of available for sale        83,897      42,595       54,068
securities

Held-to-Maturity
US Treasury                                          0           0            0
US Government Agency                             3,305       4,768        4,253
Tax-exempt obligations                          19,697      18,967       14,277
Total book value of held-to-maturity
securities                                      23,002      23,735       18,530

Total market value of held-to-maturity
securities                                      24,016      24,172       18,530
Total book value of securities                $106,899    $ 66,330     $ 72,598

TABLE 6

<TABLE>
MATURITY OF INVESTMENT SECURITIES
                                      Within               After One but          After Five but
                                     One Year            Within Five Years       Within Ten Years        After Ten Years
(Dollars in thousands)         Amount         Yield     Amount       Yield     Amount         Yield    Amount       Yield
                               ------         -----     ------       -----     ------         -----    ------       -----
<S>                             <C>            <C>       <C>          <C>        <C>           <C>      <C>          <C>
Available-for-Sale
US Government Agency           $ 5,558        4.24%     $27,635      5.02%     $ 5,265        5.63%    $24,250      5.25%
Tax-exempt obligations               0        0.00%         685      2.59%       3,265        3.46%          0      0.00%
Other securities                 6,933        3.23%       3,861      5.69%       6,445        5.33%          0      0.00%

Total                           12,491        3.68%      32,181      5.05%      14,975        5.03%     24,250      5.25%

Held-to-Maturity
US Government Agency                 0        0.00%           0      0.00%       3,061        5.62%        244      6.49%
Tax-exempt obligations           3,143        4.12%      11,993      4.27%       4,561        4.25%          0      0.00%

Total                            3,143        4.12%      11,993      4.27%       7,622        4.80%        244      6.49%

Grand Total                    $15,634        3.77%     $44,174      4.84%     $22,597        4.95%    $24,494      5.26%
</TABLE>

TABLE 7

<TABLE>
MATURITY AND INTEREST SENSITIVITY OF LOANS
December 31, 2002
                                                                                               Greater Than
(Dollars in thousands)                 Time Remaining to Maturity                                One Year
                                                After One                                   Fixed       Floating
                                Due Within      But Within     After Five                 Interest      Interest
                                 One Year       Five Years       Years        Total         Rate          Rate
                                 --------       ----------       -----        -----         ----          ----
<S>                                <C>             <C>            <C>          <C>          <C>           <C>
Real estate-mortgage              $ 4,648         $ 7,501       $38,061     $ 50,210       $10,128       $35,434
Real estate-construction            3,963           4,829            93        8,885           -0-         4,922
Real estate-held for sale           2,315             -0-           -0-        2,315           -0-           -0-
Consumer                            4,067          28,393         1,637       34,097        22,217         7,813
Commercial                         34,459          56,384         2,029       92,872        50,071         8,342

Gross Loans                       $49,452         $97,107       $41,820     $188,379       $82,416       $56,511
</TABLE>

TABLE 8

<TABLE>
COMPOSITION OF DEPOSITS AND INTEREST RATES PAID
                                                       Years Ended December 31,
                                                 2002                             2001                            2000
                                  Average     Percent of   Average  Average     Percent of  Average   Average   Percent of  Average
(Dollars in thousands)            Balance       Total       Rate    Balance       Total      Rate     Balance      Total      Rate
                                  -------       -----       ----    -------       -----      ----     -------      -----      ----
<S>                                 <C>          <C>        <C>       <C>          <C>       <C>        <C>         <C>       <C>
Non-interest bearing demand
   deposits                       $ 30,309      12.66%         --   $ 26,315      11.23%        --   $ 26,651      11.61%       --
Interest bearing demand deposits    32,736      13.68%      1.04%     28,443      12.13%     2.13%     18,499       8.05%    1.71%
Savings deposits                    53,672      22.43%      1.13%     51,068      21.78%     2.20%     56,749      24.72%    1.88%
Time deposits                      122,616      51.23%      4.06%    128,596      54.86%     5.48%    127,702      55.62%    6.23%

Total                             $239,333     100.00%      2.84%   $234,422     100.00%     4.22%   $229,601     100.00%    4.98%
</TABLE>

TABLE 9

<TABLE>
INTEREST RATE RISK ANALYSIS
                                                      Time Remaining to Maturity

December 31, 2002             Due Within     Four to      Seven to         After
(Dollars in thousands)         3 months     6 months      12 months      12 months        Total
                               --------     --------      ---------      ---------        -----
<S>                              <C>          <C>            <C>           <C>             <C>
Certificates of Deposit
   Less than $100,000           $12,410      $ 9,572       $24,704        $47,683       $ 94,369
   More than $100,000             5,069        7,042         7,427          9,334         28,872

Total                           $17,479      $16,614       $32,131        $57,017       $123,241
</TABLE>

TABLE 10

SHORT-TERM BORROWINGS
(Dollars in thousands)
Balance outstanding December 31,             2002          2001         2000
                                             ----          ----         ----
Repurchase agreements                       $13,399       $5,037       $9,323
Fed funds purchased                               0            0            0
FHLB Open line of credit                          0            0            0
Line of Credit                                   55        1,050          550
                                            -------       ------       ------
                                            $13,454       $6,087       $9,873
                                            -------       ------       ------
                                            -------       ------       ------
Weighted rate December 31,
Repurchase agreements                         0.95%        1.25%        4.34%
Fed funds purchased                              --           --           --
FHLB Open line of credit                         --           --           --
Line of Credit                                3.38%        3.93%        7.91%
                                            -------       ------       ------
                                              0.96%        1.71%        4.53%
                                            -------       ------       ------
                                            -------       ------       ------

TABLE 10 (CONTINUED)

(Dollars in thousands)                        2002        2001           2000
                                              ----        ----           ----
Maximum month-end outstanding balance
Repurchase agreement                        $18,131     $12,599        $15,132
Fed funds purchased                           6,395       6,865         10,200
FHLB Open line of credit                          0           0         25,500
Line of Credit                                6,056       1,050            550

(Dollars in thousands)                        2002        2001           2000
                                              ----        ----           ----
Year-to-date average amount outstanding
Repurchase agreements                       $11,924      $8,071        $10,651
Fed funds purchased                             921       1,004          3,793
FHLB Open line of credit                        -0-         697         15,770
Line of Credit                                2,480       1,010            180
                                            -------      ------         ------
                                            $15,325     $10,782        $30,394
                                            -------      ------         ------
                                            -------      ------         ------



Year-to-date average weighted rate            2002        2001           2000
                                              ----        ----           ----
Repurchase agreements                         1.49%       3.92%          5.77%
Fed funds purchased                           1.93%       5.14%          6.74%
FHLB Open line of credit                      0.00%       6.43%          6.69%
Line of Credit                                3.86%       4.94%          7.98%
                                            -------      ------         ------
                                              1.90%       4.29%          6.38%
                                            -------      ------         ------
                                            -------      ------         ------


TABLE 11

<TABLE>
INTEREST RATE RISK ANALYSIS
                                                                Two-      Four-       Seven-      Ten-         Over
December 31, 2002                                     One      three       six         nine      twelve        One
(Dollars in thousands)                               Month     months     months      months     months        year        Total
                                                     ----      ------     ------      ------     ------        ----        -----
<S>                                                  <C>        <C>        <C>         <C>        <C>          <C>          <C>
Federal funds sold and short-term investments       $13,120   $     0     $     0     $    0     $     0      $     0     $13,120
Interest bearing deposits                             8,472         0           0          0           0            0       8,472
Taxable investment securities                         9,077     1,514       3,098      1,614       2,625       65,324      83,252
Tax-exempt investment securities                          0     1,803         815        350         925       19,754      23,647
Federal Home Loan Bank of Chicago stock                   0     4,511           0          0           0            0       4,511
Loans                                                48,887     3,295       6,497      7,890       8,464      113,346     188,379

Total interest-earning assets                       $79,159   $11,123     $10,410     $9,854     $12,014     $198,821    $321,381
</TABLE>

TABLE 12

SELECTED EQUITY RATIOS                              2002    2001    Regulatory
                                                    Ratio   Ratio   Requirement
                                                    -----   -----   -----------
Equity as a percent of assets                       7.37%   7.19%        N/A
Core capital as a percent of risk based assets     12.94%   8.49%      4.00%
Total capital as a percent of risk based assets    13.94%   9.61%      8.00%
Leverage ratio                                      8.29%   5.87%      4.00%

TABLE 13

<TABLE>
SELECTED FINANCIAL RATIOS
                                                               2002        2001        2000          1999         1998
                                                               ----        ----        ----          ----         ----
<S>                                                            <C>         <C>         <C>           <C>          <C>
Return on average assets                                      0.38%       0.27%       (0.09)%        0.39%        0.87%
Return on average equity                                      4.92%       3.65%       (1.19)%        4.64%        8.33%
Average equity to average assets                              7.79%       7.42%        7.78%         7.43%       10.22%
Dividend payout ratio                                        72.41%     114.58%         n/m        100.18%       53.41%
Interest rate spread                                          3.42%       3.23%        3.01%         3.15%        3.59%
Net interest margin                                           3.77%       3.66%        3.48%         3.64%        4.24%
Net non-interest expense to assets                            2.56%       2.52%        2.57%         2.54%        2.29%
Efficiency ratio                                             81.61%      82.04%       86.23%        81.66%       68.06%
Allowance for loan losses to total loans at end of period     1.10%       1.14%        1.79%         1.04%        1.08%
</TABLE>

TABLE 14

<TABLE>
LOCATIONS                                         Owned or                                Owned or
Address                                           Leased       Address                    Leased
-------                                           ------       -------                    ------
<S>                                                <C>          <C>                        <C>
400 Broad St., Beloit, WI 53511                   Owned        1021 N. State St.,         Owned
                                                               Belvidere, IL 61008
2200 Cranston Rd., Beloit, WI 53511               Owned        121 E. Locust Ave.,        Owned
                                                               Belvidere, IL 61008
1795 Madison Rd., Beloit, WI 53511                Owned        422 Cherry Ave.,           Owned
                                                               Rochelle, IL 61068
5206 Elevator Rd., Roscoe, IL 61073               Leased       307 N. Franklin Dr.,       Owned
                                                               Oregon, IL 61061
2475 N. Perryville Road, Rockford, IL 61107       Owned
</TABLE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On August  27, 2002,  the Audit  Committee  of the  Board of  Directors  of
Blackhawk Bancorp, Inc. ("the Company") approved a change in auditors.  The
Board of Directors ratified the Audit Committee's engagement of McGladrey &
Pullen, LLP to serve  as the Company's  independent public accountants  and
replacement of  Wipfli Ullrich  Bertelson LLP  (Wipfli") as  the  Company's
independent public accountants, effective August 28, 2002.

Wipfli performed audits  of the consolidated  financial statements for  the
two years ended December 31, 2001  and 2000. Their reports did not  contain
an adverse opinion  or a disclaimer  of opinion and  were not qualified  or
modified as to uncertainty, audit scope, or accounting principles.

During the two years  ended December 31, 2001,  and from December 31,  2001
through the effective date  of the Wipfli termination,  there have been  no
disagreements between the Registrant and Wipfli on any matter of accounting
principles or practice, financial  statement disclosure, or auditing  scope
or  procedure,  which  disagreements  would  have  caused  Wipfli  to  make
reference to the subject  matter of such  disagreements in connection  with
this report.

During the two years  ended December 31, 2001,  and from December 31,  2001
until the effective date of the dismissal of Wipfli, Wipfli did not  advise
the Registrant of any of the following matters:

1. That  the internal  controls  necessary for  the Registrant  to  develop
   reliable financial statements did not exist;

2. That information had  come to Wipfli's attention that had lead it to  no
   longer  be able  to rely on  management's representations,  or that  had
   made  it  unwilling  to be  associated  with  the  financial  statements
   prepared by management;

3. That there was a need to expand significantly the scope of the audit  of
   the Registrant, or that information had come to Wipfli's attention  that
   if  further investigated:  (i)  may materially  impact the  fairness  or
   reliability  of either a  previously-issued audit  report or  underlying
   financial  statements,  or the  financial  statements issued  or  to  be
   issued covering  the fiscal periods subsequent to  the date of the  most
   recent  financial  statements  covered by  an  audit  report  (including
   information  that may  prevent it  from rendering  an unqualified  audit
   report  on  those financial  statements)  or (ii)  may  cause it  to  be
   unwilling to rely  on management's representation or be associated  with
   the  Registrant's financial statements and  that, due to its  dismissal,
   Wipfli did not so expand the scope of its audit or conduct such  further
   investigation;

4. That information  had come to Wipfli's  attention that it had  concluded
   materially  impacted  the  fairness or  reliability  of  either:  (i)  a
   previously-issued  audit report or  the underlying financial  statements
   or  (ii) the financial statements  issued or to  be issued covering  the
   fiscal  period subsequent  to  the date  of  the most  recent  financial
   statements  covered  by an  audit  report (including  information  that,
   unless resolved to the accountant's satisfaction, would prevent it  from
   rendering  an unqualified audit report  on those financial  statements),
   or that, due  to its dismissal, there were no such unresolved issues  as
   of the date of its dismissal.

Wipfli has furnished  a letter to  the SEC dated  August 29, 2002,  stating
that it agrees with the above statements, and is attached hereto as Exhibit
16.1.

During the two years  ended December 31, 2001,  and from December 31,  2001
through  engagement  of  McGladrey  &  Pullen,  LLP  as  the   Registrant's
independent accountant, neither the Registrant nor anyone on its behalf had
consulted McGladrey  &  Pullen,  LLP with  respect  to  any  accounting  or
auditing issues  involving  the Registrant.  In  particular, there  was  no
discussion with  the Registrant  regarding  the application  of  accounting
principles to a specified transaction, the type of audit opinion that might
be rendered on the financial statements, or any related item.

                                 PART III

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS, PROMOTERS  AND  CONTROL  PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

a) Directors  of the registrant.   The information  that will appear  under
   "Election  of  Directors"  in  the  definitive  Proxy  Statement  to  be
   prepared and filed  for the Company's Annual Meeting of Stockholders  to
   be held on May 21, 2003 is incorporated herein by this reference.

b) Executive  officers  of  the Registrant.   The information presented  in
   Item I of this report is incorporated herein by this reference.

c) Section   16(a)   Beneficial   Ownership   Reporting   Compliance.   The
   information that  will appear under "Section 16(a) Beneficial  Ownership
   Reporting Compliance" in  the definitive proxy statement to be  prepared
   and filed  for the Company's Annual Meeting  of stockholders to be  held
   on May 21, 2003 is incorporated herein by this reference.

ITEM 10.  EXECUTIVE COMPENSATION

The  information   that  will   appear   under  "Director   and   Executive
Compensation" in the definitive  Proxy Statement to  be prepared and  filed
for the Company's Annual Meeting of Stockholders to be held on May 21, 2003
is incorporated herein by this reference.

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL OWNERS AND  MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

The information that will appear under "Beneficial Ownership of Securities"
in the  definitive  Proxy  Statement  to be  prepared  and  filed  for  the
Company's Annual Meeting  of Stockholders  to be held  on May  21, 2003  is
incorporated herein by this reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  that  will   appear  under  "Certain  Transactions   with
Management and Others" in the definitive Proxy Statement to be prepared and
filed for the Company's  Annual Meeting of Stockholders  to be held on  May
21, 2003 is incorporated herein by this reference.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

a) Documents Filed:

1. and 2.   Financial Statements.   See the  following "Index to  Financial
Statements and Financial Statement Schedules" which is incorporated  herein
by this reference.

3.          Exhibits.  See "Exhibit Index" which is incorporated herein  by
this reference.

b) Reports On Form 8-K:
      During the fourth  quarter of 2002  the Company filed  one report  on
      Form 8-K. An 8-K filed on December 26, 2002 announced the sale of  $7
      million in  floating-rate  trust-preferred securities  in  a  private
      placement.

ITEM 14.  CONTROLS AND PROCEDURES

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

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

SIGNATURES

Pursuant to the requirements of Section  13 or 15(d) 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 on March 25, 2003.

                                        Blackhawk Bancorp, Inc.

                                        By /s/ Todd J. James
                                           ------------------------------------

                                        Todd J. James
                                        Executive Vice President and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by  the following persons on  behalf of the registrant  in
the capacities indicated on March 25, 2003.

Principal Executive Officer and Director:
  Director, President and               /s/ R. Richard Bastian, III
  Chief Executive Officer               ----------------------------------------
                                        R. Richard Bastian, III, President and
                                        Chief Executive Officer

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


Principal Accounting Officer            /s/ Thomas L. Lepinski
                                        ----------------------------------------
                                        Thomas L. Lepinski, C.P.A.,
                                        Principal Accounting Officer

Directors:

                                        /s/ Merritt J. Mott
-----------------------------           ------------------------------
    John B. Clark                           Merritt J. Mott

/s/ Roger G. Bryden                     /s/ Sunil Puri
-----------------------------           ------------------------------
    Roger G. Bryden                         Sunil Puri

                                        /s/ George D. Merchant
-----------------------------           ------------------------------
    Charles Hart                            George D. Merchant

/s/ Kenneth A Hendricks                 /s/Prudence A. Harker
-----------------------------           ------------------------------
    Kenneth A. Hendricks                    Prudence A. Harker


-----------------------------           ------------------------------
    Charles J. Howard                       Dennis M. Conerton

                                 CERTIFICATIONS

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

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

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

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

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

   a)  designed such disclosure controls and procedures to ensure that material
       information relating to the registrant, including its consolidated
       subsidiaries, is made known to us by others within those entities,
       particularly during the period in which this annual report is being
       prepared;
   b)  evaluated the effectiveness of the registrant's disclosure controls and
       procedures as of a date within 90 days prior to the filing date of this
       annual report (the "Evaluation Date"); and

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

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

   a)  all significant deficiencies in the design or operation of internal
       controls which could adversely affect the registrant's ability to
       record, process, summarize and report financial data and have identified
       for the registrant's auditors any material weaknesses in internal
       controls; and
   b)  any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       controls; and

6. The registrant's other certifying officer and I have indicated in this
   annual report whether there were significant changes in internal controls or
   in other factors that could significantly affect internal controls
   subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.

Date: March 25, 2003
                                                     /s/ R. Richard Bastian, III
                                                     ---------------------------
                                                         R. Richard Bastian, III
                                                               President and CEO

I, Todd J. James, certify that:

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

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

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

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

   a)  designed such disclosure controls and procedures to ensure that material
       information relating to the registrant, including its consolidated
       subsidiaries, is made known to us by others within those entities,
       particularly during the period in which this annual report is being
       prepared;
   b)  evaluated the effectiveness of the registrant's disclosure controls and
       procedures as of a date within 90 days prior to the filing date of this
       annual report (the "Evaluation Date"); and
   c)  presented in this annual report our conclusions about the effectiveness
       of the disclosure controls and procedures based on our evaluation as of
       the Evaluation Date;

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

   a)  all significant deficiencies in the design or operation of internal
       controls which could adversely affect the registrant's ability to
       record, process, summarize and report financial data and have identified
       for the registrant's auditors any material weaknesses in internal
       controls; and
   b)  any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       controls; and

6. The registrant's other certifying officer and I have indicated in this
   annual report whether there were significant changes in internal controls or
   in other factors that could significantly affect internal controls
   subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.

Date: March 25, 2003
                                                                /s/Todd J. James
                                                                ----------------
                                                                   Todd J. James
                                                Executive Vice President and CFO

                            Blackhawk Bancorp, Inc.
                                Exhibit Index To
                       2002 Annual Report on Form 10-KSB


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

3.1     Amended and Restated         Exhibit 3.1 to
        Articles of Incorporation    Amendment No. 1 to
        of Blackhawk Bancorp,        Registration   Statement
        Inc.                         on Form S-1(Reg. No.
                                     33.32351)

3.2     By-Laws of Blackhawk         Exhibit 3.2 to
        Bancorp, Inc., as            Amendment No. 1 to
        amended.                     Registration Statement
                                     on Form S-1

3.3     Amendments to By-Laws        Exhibit 3.3 to 1994 Form
        of Blackhawk Bancorp,        10-KSB dated March 29,
        Inc., as amended.            1995

3.4     Amendments to By-Laws of     Exhibit 3.4 to 1994 Form
        Blackhawk Bancorp, Inc.,     10-KSB dated March 29,
        as amended.                  1995.

4.1     Sections 15 and 19 of        Exhibit 1.2 to Amendment
        Plan of Conversion of        No. 1 to Registration
        Beloit Savings Bank, as      Statement on Form-1 (No.
        amended                      33-32351) filed on March 5,
                                     1990.

10.12   Blackhawk State Bank         Exhibit 10.12 to 1996 Form
        Officer Bonus Plan, as       10-KSB, dated March 28, 1997
        amended *<F3>

10.2    Written description of       Proxy Statement for its
        Plan for Life Insurance      Annual Meeting of
        of Blackhawk State           Stockholders, on May 8,
        Bank *<F3>                   1991, dated April 4, 1991

10.3    Blackhawk Bancorp, Inc.      Exhibit 10.3 to 1990 Form
        Employee Stock Ownership     10-K, dated March 31,
        Plan *<F3>                   1990

10.31   Amendment to Blackhawk       Exhibit 10.31 to 1994
        Bancorp, Inc. Employee       Form 10-KSB, dated March
        Stock Ownership              29, 1995
        Plan *<F3>

10.4    Blackhawk Bancorp, Inc.      Exhibit 10.4 to
        Employee Stock Ownership     Amendment No. 1 to
        Trust *<F3>                  Registration Statement
                                     Form S-1 (No. 33-32351)

10.5    Blackhawk Bancorp, Inc.      Exhibit 10.5 to
        Directors' Stock Option      Amendment No. 1 to
        Plan *<F3>                   Registration Statement
                                     Form S-1 (No. 33-32351)

10.6    Blackhawk Bancorp, Inc.      Exhibit 10.6 to
        Executive Stock Option       Registration Statement
        Plan *<F3>                   Form S-1 (No. 33-32351)

10.7    Form of Severance Payment    Exhibit 10.8 to
        Agreement entered into       Amendment No. 1 to
        between Blackhawk State      Registration Statement
        Bank and Messrs. Calkins,    Form S-1 (No. 33-32351)
        Kelley and Rusch *<F3>

10.71   Form of Severance            Exhibit 10.8 to 1994 Form
        Payment Agreement entered    10-KSB, dated March 29,
        into between Blackhawk       1995
        State Bank and Mr.
        Conerton *<F3>

10.8    Blackhawk Bancorp, Inc.      Exhibit 10.9 to 1994 Form
        Directors' Stock Option      10-KSB, dated March 29,
        Plan *<F3>                   1995

10.9    Blackhawk Bancorp, Inc.      Proxy Statement for its
        Executive Stock Option       Annual Meeting of Stockholders
        Plan*<F3>                    on May 13, 1998, dated April
                                     2, 1998

16.1    Letter on Change in                                      X       38
        Certifying Accountant

21      Subsidiaries of                                          X       39
        Registrant

99      Financial Statements                                     X       40

99.1    Certification Pursuant to                                X       40
        18 U. S. C. Section 1350,
        as Adopted Pursuant to
        Section 906 of the
        Sarbanes-Oxley Act of
        2002

99.2    Certification Pursuant to                                X       41
        18 U. S. C. Section 1350,
        as Adopted Pursuant to
        Section 906 of the
        Sarbanes-Oxley Act of
        2002

*<F3>  Each management contract and compensatory plan or arrangement required
       to be filed as an exhibit to this report is identified in the Exhibit
       Index by an asterisk following the description of the exhibit.