<PAGE>   1
 
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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
                                  FORM 10-KSB
 
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<S>                    <S>
     (MARK ONE)
         [X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED,
                       EFFECTIVE OCTOBER 7, 1996].

                       FOR FISCAL YEAR ENDED DECEMBER 31, 1996

                                                OR

        [  ]           TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
                       FOR THE TRANSITION PERIOD 
                       FROM                 TO
                            ---------------    ---------------
                                      
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                        COMMISSION FILE NUMBER: 33-80855
 
                            GATEWAY BANCSHARES, INC.
 
                 (Name of Small Business Issuer in Its Charter)
 
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<C>                                                <C>
                  GEORGIA                                           58-2202210
      (State or Other Jurisdiction of                            (I.R.S. Employer
       Incorporation or Organization)                          Identification No.)

     5102 ALABAMA HIGHWAY, P.O. BOX 129                               30736
             RINGGOLD, GEORGIA                                      (Zip Code)
  (Address of Principal Executive Offices)
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        Issuer's Telephone Number, Including Area Code:   (706) 965-5500
 
          Securities registered pursuant to Section 12(b) of the Act:
 
                                     NONE.
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                                     NONE.
 
     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 past 90 days.   Yes [X]  No [ ]
 
     Check if 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: $221,224
 
     Aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within the past 60 days:
$5,247,430
 
                    APPLICABLE ONLY TO CORPORATE REGISTRANTS
 
     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 679,048 AS OF MARCH 19, 1997.
 
     Transitional Small Business Disclosure format (check one): Yes [ ]  No [X]
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
                                     NONE.
 
                             EXHIBIT INDEX ON PAGE
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                               TABLE OF CONTENTS
 
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                                                                           PAGE
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<S>          <C>                                                           <C>
PART I...................................................................   1
ITEM 1.      DESCRIPTION OF BUSINESS.....................................   1
ITEM 2.      DESCRIPTION OF PROPERTIES...................................   8
ITEM 3.      LEGAL PROCEEDINGS...........................................   9
ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........   9
PART II..................................................................  10
ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
             STOCKHOLDER MATTERS.........................................  10
ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS...................................  11
ITEM 7.      FINANCIAL STATEMENTS........................................  16
ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE....................................  34
PART III.................................................................  31
ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
             PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
             ACT.........................................................  31
ITEM 10.     EXECUTIVE COMPENSATION......................................  32
ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT..................................................  33
ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............  34
ITEM 13.     EXHIBITS, LISTS AND REPORTS ON FORM 10-KSB..................  35
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<PAGE>   3
 
                                     PART I
 
ITEM 1.  DESCRIPTION OF BUSINESS
 
                                  THE COMPANY
 
     The Company was incorporated as a Georgia business corporation on October
3, 1995, and became a bank holding company by acquiring all of the Common Stock
of Gateway Bank & Trust (In Organization) (the "Bank"). The Company expects that
the Bank will begin operation in the second quarter of 1997. The Bank is the
only subsidiary of the Company.
 
     The Company was organized to facilitate the Bank's ability to serve its
customers' requirements for financial services. The holding company structure
provides flexibility for expansion of the Company's banking business through the
possible acquisition of other financial institutions and the provision of
additional banking-related services that a traditional commercial bank may not
provide under present laws. For example, banking regulations require the Bank to
maintain a minimum ratio of capital to assets. In the event that the Bank's
growth prevents it from maintaining this minimum ratio, the Company may borrow
funds, subject to capital adequacy guidelines of the Federal Reserve and
contribute them to the capital of the Bank and otherwise raise capital in a
manner unavailable to the Bank under the existing banking regulations.
 
     The Company has no present plans to acquire any additional operating
subsidiaries. The Company may, however, make additional acquisitions in the
future in the event that the acquisitions are deemed to be in the best interests
of the Company and its shareholders. Such acquisitions, if any, will be subject
to certain regulatory approvals and requirements. See "Business -- Bank Holding
Company Regulation."
 
                                    THE BANK
 
GENERAL
 
     The Bank plans to begin business in the second quarter of 1997 as a
full-service commercial bank and trust company. The Bank will offer personal and
business checking accounts, interest-bearing checking accounts, savings accounts
and various types of certificates of deposit. The Bank will also offer
consumer/installment loans, construction loans, commercial loans and home equity
lines of credit. In addition, the Bank will provide such services as official
bank checks and money orders, Mastercard credit cards, safe deposit box,
traveler's checks, bank-by-mail, direct deposit of payroll and Social Security
check, U.S. Savings Bonds, wire transfer of funds and a night depository.
 
PHILOSOPHY
 
     The philosophy of the Bank's management ("Management") is to emphasize
prompt and responsive personal service to residents of Ringgold, Georgia, as
well as other communities located in Catoosa County, in order to attract
customers and acquire market share controlled by other financial institutions in
the Bank's market area. Management believes that the Bank will offer residents
in Catoosa and surrounding counties the benefits associated with a locally owned
and managed bank. Management intends to implement an active call program, by
which officers and directors promote these efforts by personally describing the
products, services and philosophy of the Bank. In addition, the President,
Executive Vice President and Chief Financial Officer of the Bank have
substantial banking experience in Catoosa County, which gives the Bank an
important asset in its efforts to provide products and services designed to meet
the needs of the Bank's customer base. The Bank's directors are active members
of the business communities in Ringgold and around Catoosa County, and their
continued active community involvement provides them with an opportunity to
promote the Bank and its products and services.
 
                                        1
<PAGE>   4
 
MARKET AREA AND COMPETITION
 
     The Bank is located in Ringgold, Georgia. The Bank's primary market area is
defined as Catoosa County, Georgia, from which the Bank expects to draw a
majority of its business. The Bank's marketing efforts will also be focused in
the adjacent counties of Walker and Whitfield in Georgia and Hamilton County in
Tennessee. The Bank will compete for deposits and loan customers with other
financial institutions whose resources are equal to or greater than those
available to the Bank and the Company. There are four commercial banks with nine
offices and two federal credit unions located in Catoosa County. These financial
institutions offer all of the services that the Bank will offer.
 
LOAN PORTFOLIO
 
     LENDING POLICY.  The Bank is being established to support Catoosa County
and the immediately-surrounding counties of Walker and Whitfield in Georgia and
Hamilton County in Tennessee. Consequently, the Bank will aggressively seek
creditworthy loans within a limited geographic area. The Bank's primary
commercial lending function will be to make consumer loans to individuals and
commercial loans to small and medium-sized businesses and professional concerns.
In addition, the Bank plans to make real-estate-related loans, including
construction loans for residential and commercial properties, and primary and
secondary mortgage loans for the acquisition or improvement of personal
residences. The Bank plans to avoid concentrations of loans to a single industry
or based on a single type of collateral.
 
     The Bank's legal lending limits will be 15% of its statutory capital base
for unsecured loans and 25% of its statutory capital base for secured loans. The
Bank's statutory capital base is determined by the sum of its common stock,
paid-in capital, appropriated retained earnings, and capital debt, or the amount
of net assets of the Bank, whichever is the lower amount. Of the Bank's initial
$6,000,000 in capital, $3,000,000 will be allocated to common stock, $2,400,000
to paid-in capital and $600,000 will be set aside as an expense fund to cover
pre-opening expenses and potential losses in its first year of operation. The
$600,000 expense fund will not be included in the Bank's statutory capital base.
Accordingly, the Bank's initial legal lending limits will be $810,000 for
unsecured loans and $1,350,000 for secured loans. While the Bank expects
generally to employ more conservative lending limits, the Board of Directors
will have discretion to lend up to the legal lending limits as described above.
 
     REAL ESTATE LOANS.  The Bank will make and hold real estate loans,
consisting primarily of single-family residential construction loans for
one-to-four unit family structures. The Bank will require a first lien position
on the land associated with the construction project and will offer these loans
to professional building contractors and homeowners. Loan disbursements will
require on-site inspections to assure the project is on budget and that the loan
proceeds are being used for the construction project and not being diverted to
another project. The loan-to-value ratio for such loans will be predominantly
75% of the lower of the as-built appraised value or project cost, and will be a
maximum of 80% if the loan is amortized. Loans for construction can present a
high degree of risk to the lender, depending upon, among other things, whether
the builder can sell the home to a buyer, whether the buyer can obtain permanent
financing, whether the transaction produces income in the interim and the nature
of changing economic conditions.
 
     CONSUMER LOANS.  The Bank plans to make consumer loans, consisting
primarily of installment loans to individuals for personal, family and household
purposes, including loans for automobiles, home improvements and investments.
Risks associated with consumer loans include, but are not limited to, fraud,
deteriorated or non-existing collateral, general economic downturn and customer
financial problems.
 
     COMMERCIAL LOANS.  Commercial lending will be directed principally toward
small to mid-size businesses whose demand for funds fall within the legal
lending limits of the Bank. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes. Risks associated with these loans can be significant and
include, but are not limited to, fraud, bankruptcy, economic downturn,
deteriorated or non-existing collateral and changes in interest rates.
 
     INVESTMENTS.  In addition to loans, the Bank will make other investments
primarily in obligations of the United States or obligations guaranteed as to
principal and interest by the United States and other taxable
 
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<PAGE>   5
 
securities. No investment in any of those instruments will exceed any applicable
limitation imposed by law or regulation.
 
     DEPOSITS.  The Bank plans to establish solid core deposits, including
checking accounts, money market accounts, a variety of certificates of deposit,
and IRA accounts. The primary means used to attract deposits will be an
aggressive marketing plan in the overall service area, a broad product line, and
competitive services. The primary sources of deposits will be residents of, and
businesses and their employees located in, Catoosa County, and to a lesser
extent, Walker County and Whitfield County in Georgia and Hamilton County in
Tennessee obtained through personal solicitation by the Bank's officers and
directors, direct mail solicitations and advertisements published in the local
media. Deposits will be generated by offering a broad array of competitively
priced deposit services, including demand deposits, regular savings accounts,
money market deposits (transaction and investment), certificates of deposit,
retirement accounts, and other deposit or funds transfer services which may be
permitted by law or regulation and which may be offered to remain competitive in
the market.
 
     ASSET AND LIABILITY MANAGEMENT.  The Bank intends to manage its assets and
liabilities to provide an optimum and stable net interest margin, a profitable
after-tax return on assets and return on equity, and adequate liquidity. These
management functions will be conducted within the framework of written loan and
investment policies which the Bank will adopt. The Bank will attempt to maintain
a balanced position between rate sensitive assets and rate sensitive
liabilities. Specifically, it will chart assets and liabilities on a matrix by
maturity, effective duration, and interest adjustment period, and endeavor to
manage any gaps in maturity ranges.
 
                                   EMPLOYEES
 
     At December 31, 1996, the Company and its subsidiaries employed three
full-time employees and two part-time employees. The Company considers its
relationship with its employees to be excellent.
 
                           SUPERVISION AND REGULATION
 
     The following discussion sets forth the material elements of the regulatory
framework applicable to banks and bank holding companies and provides certain
specific information related to the Company.
 
GENERAL
 
     The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). As such, the Company is
subject to the supervision, examination, and reporting requirements of the BHC
Act and the regulations of the Federal Reserve.
 
     The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (a) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the voting shares of the bank; (b) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (c) it may merge or consolidate with any other bank
holding company.
 
     The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, which is discussed below.
 
                                        3
<PAGE>   6
 
     The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks by
bank holding companies, such that the Company, and any other bank holding
company located in Georgia may now acquire a bank located in any other state,
and any bank holding company located outside Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether.
 
     In February 1996, the Georgia Legislature adopted the "Georgia Interstate
Branching Act" effective June 1, 1997. The Georgia Interstate Branching Act will
permit Georgia-based banks and bank holding companies owning or acquiring banks
outside of Georgia and all non-Georgia banks and bank holding companies owning
or acquiring banks in Georgia to merge any lawfully acquired bank into an
interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branches on a limited basis beginning July 1, 1996.
Beginning July 1, 1998, the number of de novo branches which may be established
will no longer be limited.
 
     The BHC Act generally prohibits the Company from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity reasonably can be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices. For example, factoring accounts receivable, acquiring or
servicing loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing services, acting as
agent or broker in selling credit life insurance and certain other types of
insurance in connection with credit transactions, and performing certain
insurance underwriting activities all have been determined by the Federal
Reserve to be permissible activities of bank holding companies. The BHC Act does
not place territorial limitations on permissible non-banking activities of bank
holding companies. Despite prior approval, the Federal Reserve has the power to
order a holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.
 
     The bank subsidiary of the Company will be a member of the Federal Deposit
Insurance Corporation (the "FDIC"), and as such, its deposits will be insured by
the FDIC to the maximum extent provided by law. Such subsidiary will also be
subject to numerous state and federal statutes and regulations that affect its
business, activities, and operations, and it will be supervised and examined by
one or more state or federal bank regulatory agencies.
 
     The FDIC and the Georgia Department of Banking and Finance (the "Georgia
Department") will regularly examine the operations of the Bank and are given
authority to approve or disapprove mergers, consolidations, the establishment of
branches, and similar corporate actions. The FDIC and the Georgia Department
also have the power to prevent the continuance or development of unsafe or
unsound banking practices or other violations of law.
 
PAYMENT OF DIVIDENDS
 
     The Company will be a legal entity separate and distinct from its banking
subsidiary. The principal sources of cash flow of the Company, including cash
flow to pay dividends to its shareholders, will be dividends
 
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<PAGE>   7
 
by the Bank. There are statutory and regulatory limitations on the payment of
dividends by the Bank to the Company as well as by the Company to its
shareholders.
 
     If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
 
     The payment of dividends by the Company and the Bank may also be affected
or limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines.
 
CAPITAL ADEQUACY
 
     The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve and the appropriate federal banking
regulator in the case of Bank. There are two basic measures of capital adequacy
for bank holding companies that have been promulgated by the Federal Reserve: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company to be considered in compliance.
 
     The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
 
     The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least half
of Total Capital must comprise common stock, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves ("Tier 2 Capital").
 
     In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3% for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies generally are required to maintain a Leverage Ratio
of at least 3%, plus an additional cushion of 100 to 200 basis points. The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. Furthermore, the Federal Reserve has indicated that it
will consider a "tangible Tier 1 Capital Leverage Ratio" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities.
 
     The Bank will be subject to risk-based and leverage capital requirements
adopted by the FDIC, which are substantially similar to those adopted by the
Federal Reserve for bank holding companies.
 
     Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional
 
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restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. See "-- Prompt Corrective Action."
 
     The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have, pursuant to
FDICIA, recently adopted final regulations, which will become mandatory on
January 1, 1998, requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. The bank regulatory agencies have
concurrently proposed a methodology for evaluating interest rate risk which
would require banks with excessive interest rate risk exposure to hold
additional amounts of capital against such exposures. The market risk rules will
apply to any bank or bank holding company whose trading activity equals 10% or
more of its total assets, or whose trading activity equals $1 billion or more.
 
SUPPORT OF SUBSIDIARY INSTITUTIONS
 
     Under Federal Reserve policy, the Company is expected to act as a source of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, the Company may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
 
     Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(a) the default of a commonly controlled FDIC-insured depository institution or
(b) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of the Company are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking affiliates, and a potential loss of the
Company's investment in such other subsidiary depository institutions.
 
PROMPT CORRECTIVE ACTION
 
     FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
 
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<PAGE>   9
 
     The capital levels established for each of the categories are as follows:
 
<TABLE>
<CAPTION>
                                                 TOTAL           TIER 1 RISK-
   CAPITAL CATEGORY     TIER 1 CAPITAL     RISK-BASED CAPITAL    BASED CAPITAL        OTHER
   ----------------     ---------------    ------------------    -------------    --------------
<S>                     <C>                <C>                   <C>              <C>
Well Capitalized......  5% or more         10% or more           6% or more       Not subject to
                                                                                  a capital
                                                                                  directive
Adequately
  Capitalized.........  4% or more         8% or more            4% or more       --
Undercapitalized......  less than 4%       less than 8%          less than 4%     --
Significantly
  Undercapitalized....  less than 3%       less than 6%          less than 3%     --
Critically
  Undercapitalized....  2% or less         --                    --               --
                        tangible
                        equity.........
</TABLE>
 
     For purposes of the regulation, the term "tangible equity" includes core
capital elements counted as Tier 1 Capital for purposes of the risk-based
capital standards, plus the amount of outstanding cumulative perpetual preferred
stock (including related surplus), minus all intangible assets with certain
exceptions. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
 
     An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan, subject to certain limitations.
The obligation of a controlling holding company under FDICIA to fund a capital
restoration plan is limited to the lesser of 5% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
 
FDIC INSURANCE ASSESSMENTS
 
     Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, assigns an institution to one
of three capital categories: (a) well capitalized; (b) adequately capitalized;
and (c) undercapitalized. These three categories are substantially similar to
the prompt corrective action categories described above, with the
"undercapitalized" category including institutions that are undercapitalized,
significantly undercapitalized, and critically undercapitalized for prompt
corrective action purposes. An institution is also assigned by the FDIC to one
of three supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which may
include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined based
on the capital category and supervisory category to which it is assigned. Under
the final risk-based assessment system, as well as the prior transitional
system, there are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied. Assessment rates for members of both the Bank Insurance Fund
("BIF") and the Savings Association
 
                                        7
<PAGE>   10
 
Insurance Fund ("SAIF") for the first half of 1995, as they had during 1994,
ranged from 23 basis points (0.23% of deposits) for an institution in the
highest category (i.e., "well capitalized" and "healthy") to 31 basis points
(0.31% of deposits) for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern"). These rates were
established for both funds to achieve a designated ratio of reserves to insured
deposits (i.e., 1.25%) within a specified period of time.
 
     Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning 1996, the deposit insurance premiums for 92% of all BIF members in the
highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.
 
     Recognizing that the disparity between the SAIF and BIF premium rates had
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, on July 28, 1995, the FDIC,
the Treasury Department, and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at a
reserve ratio of 1.25%. This proposal contemplated elimination of the disparity
between the assessment rates on BIF and SAIF deposits following recapitalization
of the SAIF.
 
     A variation of this proposal designated the Deposit Insurance Funds Act of
1996 (the "Funds Act") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by the Funds
Act, the FDIC implemented a special one-time assessment of approximately 65.7
basis points (0.657%) on a depository institution's SAIF-insured deposits held
as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions).
 
     In addition, the FDIC proposed a revision in the SAIF assessment rate
schedule that effected, as of October 1, 1996 (a) a widening in the assessment
rate spread among institutions in the different capital and risk assessment
categories, (b) an overall reduction of the assessment rate range assessable on
SAIF deposits of from 0 to 27 basis points, and (c) a special interim assessment
rate range for the last quarter of 1996 of from 18 to 27 basis points on
institutions subject to FICO assessments. Effective January 1, 1997, FICO
assessments will be imposed on both BIF- and SAIF-insured deposits in annual
amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January, 2000, BIF- and SAIF-insured institutions
will share the FICO interest costs at equal rates currently estimated 2.43 basis
points. The Funds Act further provides that BIF and SAIF are to be merged,
creating the "Deposit Insurance Fund," on January 1, 1999, provided that bank
and savings association charters are combined by that date.
 
     Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
 
PROPOSED LEGISLATION AND REGULATORY ACTION
 
     New regulations and statutes are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or what form any proposed regulation or statute will be adopted or the
extent to which the business of the Company may be affected by such regulation
or statute.
 
ITEM 2.  DESCRIPTION OF PROPERTIES
 
     The Company's corporate office and the Bank are located at 5102 Alabama
Highway, Ringgold, Georgia. The building is being leased by the Bank.
 
     On August 9, 1995, the organizers of the Company entered into a Ground
Lease For Lease (the "Lease Agreement") to lease vacant property located at 5102
Alabama Highway for 20 years with options to renew the lease for additional 10
years thereafter. The maximum term is fifty years but may be limited to forty
years
 
                                        8
<PAGE>   11
 
in certain events. The annual rental for the first three years of the lease term
is $20,480. Annual rent for the fourth and subsequent years will be increased
each year by the increase in the Consumer Price Index as set forth in The Wall
Street Journal or other nationally recognized publication.
 
     The organizers of the Bank obtained two appraisals of the property, the
size of which is approximately 210 feet by 310 feet. The first, dated July 20,
1995, appraised the property at $3.75 per square foot. The second appraisal,
dated August 8, 1995, appraised the property at $3.44 per square foot. Copies of
the appraisals of the property were filed with the Bank's application to the
Department of Banking and the FDIC.
 
     A director of the Company is a co-owner of the property. In the opinion of
the organizers, the terms of this Lease Agreement are at least as favorable to
the Company as terms available from unrelated third parties.
 
     The organizers plan to have a 12,000 square foot, two-story building
constructed on the property. There will be six teller stations and four
drive-through stations.
 
     The Company does not invest in real estate, interests in real estate, real
estate mortgages, or securities of or interests in persons primarily engaged in
real estate activities.
 
ITEM 3.  LEGAL PROCEEDINGS
 
     There are no material pending legal proceedings to which the Company is a
party or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company or any associate of any of the foregoing, is a
party or has an interest adverse to the Company.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
                                        9
<PAGE>   12
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
         RELATED STOCKHOLDER MATTERS
 
     There is currently no market for the shares of Common Stock and it is not
likely that an active trading market will develop for the shares in the future.
There are no present plans for the Company's Common Stock to be traded on any
stock exchange or over-the-counter market. As a result, investors who need or
wish to dispose of all or part of their shares may be unable to do so except in
private, directly negotiated sales.
 
                                       10
<PAGE>   13
 
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
     The purpose of the following discussion is to address information relating
to the financial condition and results of operations of the Company and its
subsidiary for the past year and the period since inception. This discussion and
analysis is intended to supplement and highlight information contained in the
accompanying consolidated financial statements and the selected financial data
presented elsewhere in this report. Unless otherwise noted, the discussion of
net interest income in this financial review is presented on a taxable
equivalent basis to facilitate performance comparisons among various taxable and
tax-exempt assets.
 
INTRODUCTION
 
     The Company was in the developmental stages at December 31, 1996. It is a
one-bank holding company which expects to provide a full range of banking
services to individual and business customers in the Catoosa County, Georgia and
surrounding areas through its wholly owned subsidiary, Gateway Bank & Trust. The
Company and the Bank were formed in 1995. The Bank has been granted a charter by
the Georgia Department of Banking and Finance, and expects to begin full
operation in second quarter 1997. The Company expects that conditions to
receiving a permit to commence operations from the Georgia Department of Banking
and Finance will be met. The Bank's facilities are presently under construction
in Ringgold, Georgia. The Company is funding operations from income earned on
investments and from capital raised through the issue of its common stock in
1996. Further discussion of the Company's financial condition and results of
operation is included in Notes 1 through 15 to the Company's consolidated
financial statements presented in another section of this annual report on Form
10-KSB.
 
EARNINGS SUMMARY
 
     The Company's loss of $131,833 represents the excess of pre-opening and
operating costs over interest income on investments and deposits in other banks.
The Company's loss per share in 1996 was $0.19.
 
RESULTS OF OPERATIONS
 
  INTEREST INCOME
 
     Interest income on investments is the principal source of the Company's
earnings stream. Fluctuations in interest rates as well as volume and mix
changes in earning assets materially affect interest income. Interest income was
$221,224 in 1996 which reflects earnings on funds invested from proceeds of the
Company's sale of stock.
 
  INTEREST EXPENSE
 
     The Company incurred interest expense on temporary organizational loans
incurred to fund pre-opening expenses until such time as the offering of its
common stock was complete. These loans were paid in June, 1996, from proceeds of
the stock offering.
 
  NON-INTEREST EXPENSE
 
     Non-interest expense totaled $348,485 for 1996, and $1,502 in 1995. The
increase reflects the hiring of staff, acquisition of office space and other
expenses necessary for the operation of the Company. The Company currently has a
staff of four people and expects to hire an additional thirteen within the next
six months.
 
  INCOME TAXES
 
     The Company's net operating losses incurred in 1996 and 1995 totaling
$133,590, are to be utilized in subsequent years to offset net income. Future
tax liabilities are to be reduced by these liabilities which include losses
sustained during the pre-opening stage of the Company.
 
                                       11
<PAGE>   14
 
FINANCIAL CONDITION
 
  EARNING ASSETS
 
     The Company's earning assets include interest bearing deposits in other
banks, federal funds sold, and investment securities.
 
     The mix of earning assets reflects management's attempt to maximize
interest income while maintaining acceptable levels of risk and maintaining
liquidity for the completion of the Bank's facilities and initial operations
upon opening of the Bank.
 
  NON-EARNING ASSETS
 
     Non-earning assets include premises and equipment of $548,390 and $5,000 at
December 31, 1996 and 1995, respectively. Depreciation has been provided for
those assets that have been placed in service in 1996. The Company expended
$548,568 for building construction, furniture, fixtures and equipment in 1996,
for a cumulative total of $553,568. The Company expects to spend approximately
$1,200,000 for the completion of the building and additional furniture, fixtures
and equipment prior to opening the bank.
 
     The Company began leasing the site for the Bank beginning in September,
1996, at the rate of $1,707 per month. The Bank building is currently under
construction. The lease term is for a maximum of fifty years, including
extensions after the initial twenty-year period, and subject to certain
conditions after the initial forty-year period.
 
     Accrued interest was $42,844 at December 31,1996, and is derived from the
investment by the Company and the Bank of available proceeds from the stock
offering by the Company.
 
     Other assets consist of the organization costs of the Company and the Bank.
Organization costs are primarily consulting, legal and regulatory fees related
to the incorporation and initial organization of the Company and the Bank.
Organization costs have been capitalized and are amortized on a straight line
basis over a period of five years. Total organization costs are $59,492 of which
$1,284 has been amortized in 1996.
 
  INVESTMENT SECURITIES AND FEDERAL FUNDS SOLD
 
     The composition of the Company's investment securities portfolio reflects
the Company's investment strategy of maximizing portfolio yields subject to risk
and liquidity considerations. The primary objectives of the Company's investment
strategy are to maintain an appropriate level of liquidity and provide a tool to
assist in controlling the Company's interest rate position while at the same
time producing adequate levels of interest income. For securities classified as
investment securities, it is the intention to hold such securities for the
foreseeable future except for providing funds for the completion of the Bank's
facilities and to fund additional costs to be incurred prior to opening the
Bank. Management of the maturity of the portfolio is necessary to provide
liquidity and to control interest rate risk. During 1996 gross investment
securities sales were $1 million and maturities were $3.95 million. No gains or
losses were realized on securities transactions. Gross unrealized gains in the
portfolio amounted to $793 at year end 1996 and unrealized losses amounted to
$9,069.
 
  LIABILITIES
 
     Liabilities consist primarily of building construction contract amounts
payable at year-end 1996, and short term loans to fund organizational and
pre-opening costs at year-end 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  CAPITAL RESOURCES
 
     A strong capital position is vital to the profitability of the Company
because it promotes depositor and investor confidence and provides a solid
foundation for future growth of the organization. The Company has provided for
its capital requirements with proceeds from its initial stock offering. During
1996, the Company issued 679,048 shares of its common stock at $10 per share.
The Company allocated $3,395,240 to common stock, and $3,357,637, (after the
payment of $37,603 in stock issue costs), to additional paid in capital. In
 
                                       12
<PAGE>   15
 
June, 1996, the Company capitalized the Bank by the purchase of all the Bank's
outstanding common stock for $6,000,000.
 
     Bank regulatory authorities are placing increased emphasis on the
maintenance of adequate capital. In 1990, risk-based capital requirements became
effective. The guidelines take into consideration risk factors, as defined by
regulators, associated with various categories of assets, both on and off the
balance sheet. Under the guidelines, capital strength is measured in two tiers
which are used in conjunction with risk-adjusted assets to determine the
risk-based capital ratios. The Bank's capital exceeds the required ratios at
year-end 1996. The Bank will be subject to these guidelines upon receiving a
permit to begin operation from the Georgia Department of Banking and Finance,
(DBF). In addition to the capital standards imposed by federal banking
regulators, the DBF has imposed an 8% capital ratio for the first three years of
operation as a condition to the approval of the Bank's charter. This standard,
which exceeds the requirements as discussed above, is calculated as the ratio of
total equity to total assets, each as adjusted for unrealized gains and losses
on securities and the allowance for loan losses. After the initial three years
of operation, the Bank will be subject to a 6% ratio.
 
     Other important indicators of capital adequacy in the banking industry are
the leverage ratio and the tangible leverage ratio. The leverage ratio is
defined as the ratio that the Bank's shareholders equity minus goodwill bears to
total assets minus goodwill. The tangible leverage ratio is defined as the
Bank's shareholders equity minus all intangibles, divided by total assets minus
all intangibles. The Bank's leverage ratios as of December 31, 1996 exceeded the
regulatory minimum requirements which are generally 3% plus an additional
cushion of at least 100-200 basis points depending on risk profiles and other
factors.
 
  LIQUIDITY
 
     Liquidity is defined as the ability of a company to convert assets into
cash or cash equivalents without significant loss. Liquidity management involves
maintaining the Company's ability to meet the day-to-day cash flow requirements
of the subsidiary's customers, whether they are depositors wishing to withdraw
funds or borrowers requiring funds to meet their credit needs. Without proper
liquidity management, the Company would not be able to perform the primary
function of a financial intermediary and would, therefore, not be able to meet
the production and growth needs of the communities it serves.
 
     The primary function of assets and liabilities management is not only to
assure adequate liquidity in order for the Company to meet the needs of its
customer base, but also to maintain an appropriate balance between
interest-sensitive assets and interest-sensitive liabilities so that the Company
can also meet the investment requirements of its shareholders. Daily monitoring
of the sources and uses of funds is necessary to maintain an acceptable cash
position that meets both requirements. In a banking environment, both assets and
liabilities are considered sources of liquidity funding and both will,
therefore, be monitored on a daily basis.
 
     The asset portion of the balance sheet provides liquidity primarily through
loan principal repayments or sales of investment securities. The Bank had no
loans as of year-end 1996. Investment securities maturing in one year or less
equaled $3.6 million, or 71.5 percent of the portfolio. Other sources of
liquidity include short-term investments such as Federal funds sold.
 
  INTEREST RATE SENSITIVITY MANAGEMENT
 
     Interest rate sensitivity is a function of the repricing characteristics of
the Company's portfolio of assets and liabilities. These repricing
characteristics are the time frames within which the interest-bearing assets and
liabilities are subject to change in interest rates either at replacement or
maturity during the life of the instruments. Sensitivity is measured as the
difference between the volume of assets and liabilities in the Company's current
portfolio that are subject to repricing in future time periods. The differences
are known as interest sensitivity gaps and are usually calculated separately for
segments of time ranging from zero to thirty days, thirty-one to ninety days,
ninety-one days to one year, one to five year, over five year, and on a
cumulative basis.
 
                                       13
<PAGE>   16
 
     Changes in the mix of earning assets or supporting liabilities can either
increase or decrease the net interest margin without affecting interest rate
sensitivity. In addition, the interest rate spread between an asset and its
supporting liability can vary significantly while the timing of repricing for
both the asset and the liability remain the same, thus impacting net interest
income. It should be noted, therefore, that a matched interest-sensitive
position by itself will not ensure maximum net interest income. Management
continually evaluates the condition of the economy, the pattern of market
interest rates and other economic data to determine the types of investments
that should be made and at what maturities. Upon opening of the Bank, management
from time to time will use this analysis and assume calculated interest
sensitivity gap positions to maximize net interest income based upon anticipated
movements in the general level of interest rates.
 
  IMPACT OF INFLATION AND CHANGING PRICES
 
     A bank's asset and liability structure is substantially different from that
of an industrial company in that virtually all assets and liabilities of a bank
are monetary in nature. Management believes the impact of inflation on financial
results depends upon the Company's ability to react to changes in interest rates
and by such reaction to reduce the inflationary impact on performance. Interest
rates do not necessarily move in the same direction, or at the same magnitude,
as the prices of other goods and services. As discussed previously, management
seeks to manage the relationship between interest-sensitive assets and
liabilities in order to protect against wide interest rate fluctuations,
including those resulting from inflation.
 
     Various information shown elsewhere in this Annual Report will assist in
the understanding of how well the Company is positioned to react to changing
interest rates and inflationary trends. In particular, the summary of net
interest income, the maturity distributions, the composition of the security
portfolios and the data on the interest sensitivity of liabilities should be
considered.
 
  CONCLUSION
 
     Management of the Bank expects to complete its building, acquire all
necessary furniture, fixtures and equipment, hire and train staff, and receive
its permit to commence operation from the Georgia Department of Banking and
Finance within the first six months of 1997. While no assurance can be given
that the Bank will grow and be profitable, management remains optimistic as to
the prospects for growth and profitability, based on the growth of the Catoosa
County, Georgia area, the proximity to Chattanooga, Tennessee, and management's
perception of the need for a community bank.
 
     The foregoing statement is a forward-looking statement which reflects
significant assumptions and subjective judgments believed by management to be
reasonable as of the date of this Report. It does not constitute a forecast or
prediction of actual results, and actual performance and financial results may
differ materially from those anticipated due to a variety of factors, including
but not limited to (i) increased competition with other financial institutions,
(ii) lack of sustained growth in the local economy, (iii) rapid fluctuations in
interest rates, and (iv) changes in the legislative and regulatory environment.
The foregoing list should not be construed as exhaustive and the Company
disclaims any obligation to subsequently update or revise any forward-looking
statements after the date of this Report.
 
                                       14
<PAGE>   17
 
                    MANAGEMENT'S STATEMENT OF RESPONSIBILITY
                           FOR FINANCIAL INFORMATION
 
                    Gateway Bancshares, Inc. and Subsidiary
 
     The management of Gateway Bancshares, Inc. and Subsidiary is responsible
for the preparation, integrity, and objectivity of the financial statements,
related financial data, and other information in this annual report. The
financial statements are prepared in accordance with generally accepted
accounting principles and include amounts based on management's best estimates
and judgment where appropriate. Financial information appearing throughout this
annual report is consistent with the financial statements.
 
     In meeting its responsibility both for the integrity and fairness of these
statements and information, management depends on the accounting systems and
related internal accounting controls that are designed to provide reasonable
assurances that (i) transactions are authorized and recorded in accordance with
established procedures, (ii) assets are safeguarded, and (iii) proper and
reliable records are maintained.
 
     The concept of reasonable assurance is based on the recognition that the
cost of internal control systems should not exceed the related benefits. As an
integral part of internal control systems, the Company maintains a professional
staff of internal auditors who monitor compliance and assess the effectiveness
of internal control systems and coordinate audit coverage with independent
certified public accountants.
 
     The responsibility of the Company's independent certified public
accountants is limited to an expression of their opinion as to the fairness of
the financial statements presented. Their opinion is based on an audit conducted
in accordance with generally accepted auditing standards as described in their
report.
 
     The Board of Directors is responsible for insuring that both management and
the independent certified public accountants fulfill their respective
responsibilities with regard to the financial statements. The Audit Committee
meets periodically with both management and the independent certified public
accountants to assure that each is carrying out its responsibilities. The
independent certified public accountants have full and free access to the Audit
Committee and Board of Directors and may meet with them, with and without
management being present, to discuss auditing and financial reporting matters.
 
                                       15
<PAGE>   18
 
ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS
 
     The financial statements and supplementary data required by Regulation S-X
and by Item 302 of Regulation S-K are set forth in the pages listed below.
 
GATEWAY BANCSHARES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
 
<TABLE>
<CAPTION>
                                                              PAGE(S)
                                                              -------
<S>                                                             <C>
Financial Statements                                            
Independent Auditor's Report................................    17
Consolidated Statements of Financial Condition as of
  December 31, 1996 and 1995................................    18
Consolidated Statements of Income for the years (period)
  ended December 31, 1996 and 1995..........................    19
Consolidated Statements of Shareholders' Equity for the
  years (period) ended December 31, 1996 and 1995...........    23
Consolidated Statements of Cash Flows for the years (period)
  ended December 31, 1996 and 1995..........................    21
Notes To Consolidated Financial Statements..................    22
</TABLE>
 
                                       16
<PAGE>   19
 
                 [HENSLEY, LAND & ASSOCIATES, P.C. LETTERHEAD]
 
                          INDEPENDENT AUDITOR'S REPORT
 
To the Board of Directors and Shareholders
of Gateway Bancshares, Inc. and Subsidiary
 
     We have audited the accompanying consolidated statements of financial
condition of Gateway Bancshares, Inc., (a development stage company), and
Subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity and cash flows for the years (period)
ended December 31, 1996 and 1995 and for the period from July 11, 1995
(inception) to December 31, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Gateway Bancshares, Inc., (a development stage company) and Subsidiary as of
December 31, 1996 and 1995, and the consolidated results of their operations and
their cash flows for the years (period) ended December 31, 1996 and 1995 and for
the period from July 11, 1995 (inception) to December 31, 1996, in conformity
with generally accepted accounting principles.
 
                                          Hensley, Land & Associates, P.C.
 
Ellijay, Georgia
March 19, 1997
 
                                       17
<PAGE>   20
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
                    GATEWAY BANCSHARES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                              --------------------------
                                                                 1996            1995
                                                              ----------      ----------
<S>                                                           <C>             <C>
                                         ASSETS
Cash........................................................  $      -0-      $      -0-
Due from banks..............................................      30,615             196
Federal funds sold..........................................     850,000             -0-
Securities available for sale...............................   1,491,574             -0-
Securities held to maturity, estimated fair value of
  $3,678,250 for 1996.......................................   3,682,579             -0-
Premises and equipment, net.................................     548,390           5,000
Accrued interest............................................      42,844             -0-
Other assets................................................      58,208          71,312
                                                              ----------      ----------
          Total Assets......................................  $6,704,210      $   76,508
                                                              ==========      ==========
                          LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Notes payable.............................................  $      -0-      $   78,255
  Other liabilities.........................................      88,870             -0-
                                                              ----------      ----------
          Total Liabilities.................................      88,870          78,255
                                                              ----------      ----------
Shareholders' Equity
  Common stock, par value $5 per share, 10,000,000 shares
     authorized, 679,048 shares issued and outstanding for
     1996 and 1 for 1995....................................   3,395,240               5
  Additional paid in capital................................   3,357,637               5
  Deficit accumulated during the pre-opening stage..........    (133,590)         (1,757)
  Unrealized gains (losses) on investment securities
     available for sale, net of deferred or tax benefit.....      (3,947)            -0-
                                                              ----------      ----------
          Total Shareholders' Equity........................   6,615,340          (1,747)
                                                              ----------      ----------
          Total Liabilities and Shareholders' Equity........  $6,704,210      $   76,508
                                                              ==========      ==========
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       18
<PAGE>   21
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
                    GATEWAY BANCSHARES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
<TABLE>
<CAPTION>
                                                       FOR THE YEAR     FOR THE PERIOD     FOR THE PERIOD
                                                          ENDING            ENDING          JULY 11, 1995
                                                       DEC 31, 1996      DEC 31, 1995      TO DEC 31, 1996
                                                      ---------------   --------------   -------------------
<S>                                                   <C>               <C>              <C>
Interest Income
  Interest on investment securities:
     Taxable securities.............................     $ 157,273         $   -0-            $ 157,273
     Interest on federal funds sold.................        28,142             -0-               28,142
     Interest on deposits in other banks............        35,809             -0-               35,809
                                                         ---------         -------            ---------
          Total Interest Income.....................       221,224             -0-              221,224
                                                         ---------         -------            ---------
Interest Expense
  Interest on notes payable.........................         4,572             255                4,827
                                                         ---------         -------            ---------
          Total Interest Expense....................         4,572             255                4,827
                                                         ---------         -------            ---------
Net Interest Income (Loss)..........................       216,652            (255)             216,397
                                                         ---------         -------            ---------
Noninterest Expenses
  Salaries and employee benefits....................       229,277             -0-              229,277
  Occupancy expense.................................        23,277             -0-               23,277
  Furniture and equipment expense...................         6,837             -0-                6,837
  Other operating expenses..........................        89,094           1,502               90,596
                                                         ---------         -------            ---------
          Total Noninterest Expenses................       348,485           1,502              349,987
                                                         ---------         -------            ---------
Income (Loss) before income taxes...................      (131,833)         (1,757)            (133,590)
Income tax (provision) benefit......................           -0-             -0-                  -0-
                                                         ---------         -------            ---------
Net Income (Loss)...................................     $(131,833)        $(1,757)           $(133,590)
                                                         =========         =======            =========
Earnings (Loss) Per Common Share -- Primary and
  Fully Diluted
  Net earnings (Loss) common share..................     $   (0.19)        $ (0.01)           $   (0.20)
  Weighted average common shares outstanding........       679,048         679,048              679,048
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       19
<PAGE>   22
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
                    GATEWAY BANCSHARES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
            FOR THE YEARS (PERIOD) ENDING DECEMBER 31, 1996 AND 1995
       AND FOR THE PERIOD JULY 11, 1995 (INCEPTION) TO DECEMBER 31, 1996
 
<TABLE>
<CAPTION>
                                                          ACCUMULATED      UNREALIZED
                                COMMON       CAPITAL       EARNINGS      GAINS (LOSSES)
                                STOCK        SURPLUS       (DEFICIT)     ON SECURITIES       TOTAL
                              ----------    ----------    -----------    --------------    ----------
<S>                           <C>           <C>           <C>            <C>               <C>
Balance at July 11, 1995....  $      -0-    $      -0-     $     -0-        $   -0-        $      -0-
Net Loss -- 1995............         -0-           -0-        (1,757)           -0-            (1,757)
Issuance of Common Stock....           5             5           -0-            -0-                10
                              ----------    ----------     ---------        -------        ----------
Balance at December 31,
  1995......................           5             5        (1,757)           -0-            (1,747)
Issuance of Common Stock....   3,395,240     3,395,240           -0-            -0-         6,790,480
Stock offering costs........         -0-       (37,603)          -0-            -0-           (37,603)
Retirement of Common Stock..          (5)           (5)          -0-            -0-               (10)
Net Loss -- 1996............         -0-           -0-      (131,833)           -0-          (131,833)
Net Changes in Unrealized
  Gains (losses) on
  Securities................         -0-           -0-           -0-         (3,947)           (3,947)
                              ----------    ----------     ---------        -------        ----------
Balance at December 31,
  1996......................  $3,395,240    $3,357,637     $(133,590)       $(3,947)       $6,615,340
                              ==========    ==========     =========        =======        ==========
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       20
<PAGE>   23
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                    GATEWAY BANCSHARES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
<TABLE>
<CAPTION>
                                                     FOR THE          FOR THE
                                                   YEAR ENDING     PERIOD ENDING     FOR THE PERIOD
                                                   DECEMBER 31,    DECEMBER 31,     JULY 11, 1995 TO
                                                       1996            1995         DECEMBER 31, 1996
                                                   ------------    -------------    -----------------
<S>                                                <C>             <C>              <C>
Operating activities:
  Net income (loss)..............................  $  (131,833)      $ (1,757)         $  (133,590)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Provision for depreciation and
       amortization..............................        6,462            -0-                6,462
     Amortization of investment security premiums
       and accretion of discounts................     (115,539)           -0-             (115,539)
     Increase in accrued interest receivable.....      (42,844)           -0-              (42,844)
     Increase (decrease) in accrued interest
       expense...................................         (255)           255                  -0-
     Change in other assets and liabilities......      100,690        (71,312)              29,378
                                                   -----------       --------          -----------
          Net cash used in operating
            activities...........................     (183,319)       (72,814)            (256,133)
                                                   -----------       --------          -----------
Investing activities:
  Proceeds from sales of securities available for
     sale........................................    1,000,000            -0-            1,000,000
  Proceeds from maturity of securities available
     for sale....................................    3,949,173            -0-            3,949,173
  Purchase of securities available for sale......   (2,495,347)           -0-           (2,495,347)
  Purchase of securities held to maturity........   (7,516,387)           -0-           (7,516,387)
  Capital expenditures...........................     (548,568)        (5,000)            (553,568)
                                                   -----------       --------          -----------
          Net cash provided by investing
            activities...........................   (5,611,129)        (5,000)          (5,616,129)
                                                   -----------       --------          -----------
Financing activities:
  Proceeds from notes payable....................      189,000         78,000              267,000
  Repayment of notes payable.....................     (267,000)           -0-             (267,000)
  Issuance of common stock.......................    6,790,480             10            6,790,490
  Stock issue costs..............................      (37,603)           -0-              (37,603)
  Retirement of common stock.....................          (10)           -0-                  (10)
                                                   -----------       --------          -----------
          Net cash provided by financing
            activities...........................    6,674,867         78,010            6,752,877
                                                   -----------       --------          -----------
Net increase in cash and cash equivalents........      880,419            196              880,615
Cash and cash equivalents at beginning of year...          196            -0-                  -0-
                                                   -----------       --------          -----------
Cash and cash equivalents at end of year.........  $   880,615       $    196          $   880,615
                                                   ===========       ========          ===========
Supplemental disclosures of cash flow
  information:
  Cash paid during the year for:
     Interest....................................  $     4,827       $    -0-          $       -0-
     Income taxes................................  $       -0-       $    -0-          $       -0-
Supplemental schedule of non-cash investing and
  financing activities:
  None
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       21
<PAGE>   24
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                     GATEWAY BANCHARES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Principles of Consolidation:  The consolidated financial statements include
the accounts of Gateway Bancshares, Inc. (the "Company") and its wholly-owned
subsidiary, Gateway Bank & Trust (the "Bank"). The Company was formed in October
1995 for the purpose of acquiring all the outstanding stock of Gateway Bank &
Trust, and operating as a bank holding company. On June 21, 1996 Gateway Bank &
Trust was capitalized and became a wholly owned subsidiary of the Company.
Transactions by the organizers prior to the formation of the Company have been
assumed by the Company. Unless otherwise indicated herein, the financial results
of the Company refer to the Company and the Bank on a consolidated basis.
Intercompany accounts have been eliminated upon consolidation.
 
     Nature of Operations:  The Bank is intended to provide a full range of
banking services to individual and small to medium business customers in Catoosa
County, Georgia and surrounding areas. On December 11, 1995, the charter for
Gateway Bank & Trust was approved by the Georgia Department of Banking and
Finance. The Company and Bank are incorporated under the laws of the State of
Georgia. The Bank's facilities are under construction and are scheduled to be
completed in second quarter, 1997. The Bank is scheduled to open, subject to
DBF's issue of the permit to begin business, in second quarter, 1997.
 
     Investments in Securities:  The Company classifies its investments into
three categories: trading, held to maturity, and available for sale. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held to maturity securities are those for which the Company has
the ability and intent to hold until maturity. All other securities not included
in trading or held to maturity are classified as available for sale.
 
     Trading and available for sale securities are recorded at fair value. Held
to maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized gains and losses
on trading securities are included in earnings. Unrealized gains and losses, net
of the related tax effect, on securities available for sale are excluded from
earnings and are reported as a separate component of shareholders' equity until
realized.
 
     The Company has no trading securities.
 
     Premiums and discounts are amortized or accreted over the life of the
related security, until the earlier of the call date or maturity date, as an
adjustment of the yield using the effective interest method. Dividend and
interest income are recognized when earned. Realized gains and losses on the
sale of securities classified as available for sale and held to maturity are
included in earnings and are determined by using the specific identification
method for determining the amortized cost of the securities sold.
 
     Premises and Equipment:  Premises and equipment are stated at cost less
accumulated depreciation. Expenditures for additions and major improvements that
significantly extend the useful lives of the assets are capitalized.
Expenditures for repairs and maintenance are charged to expense as incurred. The
carrying value of assets traded in are used to adjust the carrying values of the
new assets acquired by trade. Assets which are disposed of are removed from the
accounts and the resulting gains or losses are recorded in operations.
 
     Depreciation is provided beginning with the date the asset is placed into
service generally by accelerated and straight-line methods based on the
estimated useful lives of the respective assets.
 
     Earnings Per Common Share:  Earnings per common share are calculated on the
basis of the weighted average number of common shares outstanding since the
completion of the stock offering. Periods prior to the completion of the
offering have been restated, likewise to facilitate comparison.
 
     Income Taxes:  Provisions for income taxes are based on amounts reported in
the statement of income (after exclusion of non-taxable income such as interest
on state and municipal securities) and include deferred
 
                                       22
<PAGE>   25
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
taxes on temporary differences in the recognition of income and expense for tax
and financial statement purposes. Deferred tax assets and liabilities are
included in the financial statements at currently enacted income tax rates
applicable to the period in which the deferred tax assets and liabilities are
expected to be realized or settled as prescribed in SFAS No. 109, Accounting for
Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets
and liabilities are adjusted through the provision for income taxes.
 
     Intangibles:  Intangibles consist primarily of legal, consulting and
regulatory fees charged to organizational costs. Organizational costs are
generally amortized over 5 years using the straight-line method.
 
     Cash Flow Information:  For purposes of the statements of cash flows, the
Company considers cash, due from banks and federal funds sold as cash and cash
equivalents.
 
     Use of Estimates:  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
     Recently Issued Accounting Standards:  In 1995 and 1996, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of," SFAS No. 122, "Accounting for
Mortgage Servicing Rights," SFAS No. 123 "Accounting for Stock-Based
Compensation," SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," and SFAS No. 126,
"Exemption from Certain Required Disclosures about Financial Instruments for
Certain Nonpublic Entities." Management does not believe the adoption of these
statements has a material effect on the Company's consolidated financial
statements.
 
     Reclassifications:  Certain items in the prior year have been reclassified
to conform to current year presentation.
 
NOTE 2 -- RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
 
     The Company is required to maintain deposits of $15,000 in accordance with
an agreement with the Georgia Department of Transportation. Such restriction is
to be released upon completion of certain highway access improvements to the
Bank's facilities.
 
NOTE 3 -- INVESTMENT SECURITIES
 
     At December 31, 1996, the Company's available for sale securities reflected
net unrealized losses of $3,947 which resulted in a decrease in stockholders'
equity of $3,947, net of the deferred tax asset and valuation allowance.
 
                                       23
<PAGE>   26
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
     The carrying amounts of investment securities as shown in the statement of
financial condition of the Bank and their approximate fair values at December
31, 1996 are presented below.
 
<TABLE>
<CAPTION>
                                                                    GROSS        GROSS      ESTIMATED
                                                     AMORTIZED    UNREALIZED   UNREALIZED      FAIR
                                                        COST        GAINS        LOSSES       VALUE
                                                     ----------   ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>          <C>
As of December 31, 1996:
Securities Available for Sale:
  U.S. government and agency securities............  $1,495,521      $-0-        $3,947     $1,491,574
                                                     ==========      ====        ======     ==========
Securities Held to Maturity:
  U.S. government and agency securities............  $3,682,579      $793        $5,122     $3,678,250
                                                     ==========      ====        ======     ==========
</TABLE>
 
     The contractual maturities of securities available for sale at December 31,
1996 are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
 
<TABLE>
<CAPTION>
                                                                                       ESTIMATED
                                                                  AMORTIZED               FAIR
                                                                     COST                VALUE
                                                              ------------------   ------------------
<S>                                                           <C>                  <C>
As of December 31, 1996:
Securities Available for Sale:
Due after one year through five years.......................      $1,495,521           $1,491,574
                                                                  ==========           ==========
Securities Held to Maturity:
Due in one year or less.....................................      $3,682,579           $3,678,250
                                                                  ==========           ==========
</TABLE>
 
     Proceeds from sales of investments in debt securities during 1996 were
$1,000,000. No gross gain nor gross loss was realized on this sale.
 
NOTE 4 -- PREMISES AND EQUIPMENT
 
     Premises and equipment were as follows:
 
<TABLE>
<CAPTION>
                                                                1996       1995
                                                              --------   --------
<S>                                                           <C>        <C>
Vehicles....................................................  $ 42,772   $    -0-
Buildings and improvements (in progress)....................   391,189      5,000
Furniture and equipment.....................................   119,607        -0-
                                                              --------   --------
                                                               553,568      5,000
Less allowance for depreciation.............................     5,178        -0-
                                                              --------   --------
                                                              $548,390   $  5,000
                                                              ========   ========
</TABLE>
 
     The provision for depreciation charged to occupancy and furniture and
equipment expense for the year ended December 31, 1996 was $5,178. No
depreciation expense was recognized for the period July 11, 1995 through
December 31, 1995.
 
NOTE 5 -- NOTE PAYABLE
 
     Organization and pre-opening expenses were funded in 1996 and 1995 with
borrowings under a $40,500 loan from the organizers, and a line of credit with
an independent bank for $250,000 at the prime rate. These loans were paid in
full with proceeds from the sale of the Company's stock.
 
                                       24
<PAGE>   27
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
NOTE 6 -- OTHER OPERATING EXPENSES
 
     Other operating expenses consist of the following:
 
<TABLE>
<CAPTION>
                                                                             FOR THE PERIOD
                                                                            JULY 11, 1995 TO
                                                          1996      1995      DEC 31, 1996
                                                         -------   ------   ----------------
<S>                                                      <C>       <C>      <C>
Advertising............................................  $ 7,058   $  -0-       $ 7,058
Insurance..............................................    7,893      558         8,451
Other..................................................   15,704      673        16,377
Postage................................................    2,968       38         3,006
Professional fees......................................   50,653      -0-        50,653
Stationery and supplies................................    4,818      233         5,051
                                                         -------   ------       -------
                                                         $89,094   $1,502       $90,596
                                                         =======   ======       =======
</TABLE>
 
NOTE 7 -- INCOME TAXES
 
     The Company had no income taxes payable as of December 31, 1996.
 
     The components of the net deferred income tax asset and liability included
in other assets are as follows:
 
<TABLE>
<CAPTION>
                                                                1996     1995
                                                              --------   ----
<S>                                                           <C>        <C>
Deferred tax asset:
Federal.....................................................  $ 46,679   $-0-
Deferred tax liability:
Federal.....................................................      (658)   -0-
                                                              --------   ----
Deferred income tax asset...................................    46,021    -0-
Less valuation allowance....................................   (46,021)   -0-
                                                              --------   ----
Net deferred income tax asset...............................  $    -0-   $-0-
                                                              ========   ====
</TABLE>
 
     The tax effects of each type of income and expense item that gave rise to
deferred taxes are:
 
<TABLE>
<CAPTION>
                                                               1996      1995
                                                              -------    ----
<S>                                                           <C>        <C>
Net operating loss carryover................................  $44,856    $-0-
Depreciation................................................     (658)    -0-
Other.......................................................    1,823     -0-
                                                              -------    ----
                                                              $46,021    $-0-
                                                              =======    ====
</TABLE>
 
     The principal sources of temporary differences resulting in deferred income
taxes included in the accompanying statement of income and the tax effect of
each are as follows:
 
<TABLE>
<CAPTION>
                                                                1996      1995
                                                              --------    ----
<S>                                                           <C>         <C>
Net operating loss carryover................................  $ 44,856    $-0-
Depreciation................................................      (658)    -0-
Other.......................................................     1,823     -0-
                                                              --------    ----
                                                                46,021     -0-
Less valuation allowance....................................   (46,021)    -0-
                                                              --------    ----
                                                              $    -0-    $-0-
                                                              ========    ====
</TABLE>
 
                                       25
<PAGE>   28
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
     Securities transactions had no income tax effect for 1996 or 1995.
 
     The effective tax rate of 34 percent is the same as the federal statutory
rate. There were no significant items causing increases or decreases from the
statutory rate.
 
     The change in the valuation allowance was $46,021 in 1996. Net operating
losses for tax purposes of $18,955 will expire in the years subsequent to 2010.
 
     Management has elected to maintain a valuation allowance for its net
deferred tax assets until the Bank's permit to open is received.
 
     The components of income tax expense for the years are as follows:
 
<TABLE>
<CAPTION>
                                                                1996      1995
                                                              --------    ----
<S>                                                           <C>         <C>
Current federal income tax expense..........................  $    -0-    $-0-
Deferred income tax expense arising primarily from net
  operating loss............................................   (46,021)    -0-
Less valuation allowance....................................    46,021     -0-
                                                              --------    ----
Income Tax Provision........................................  $    -0-    $-0-
                                                              ========    ====
</TABLE>
 
     A reconciliation of income tax expense with the amount computed by applying
the statuary income tax rate to income before taxes is as follows:
 
<TABLE>
<CAPTION>
                                                                1996      1995
                                                              --------    -----
<S>                                                           <C>         <C>
Federal annualized rate of 34% of (loss) before income
  taxes.....................................................  $(44,823)   $(597)
Deduct tax effect of:
Valuation allowance.........................................   (46,021)     -0-
Other adjustments...........................................    (1,198)     597
                                                              --------    -----
                                                              $    -0-    $ -0-
                                                              ========    =====
</TABLE>
 
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
 
     Contractual Obligations:  The Company has entered into various contracts
for the completion of the Bank's building, furniture, fixtures, and equipment.
The Company expects to expend approximately $1,200,000 to complete these
obligations.
 
     Litigation:  The Company is not aware of any material pending legal
proceedings to which the Company or the Bank is a party or to which any of their
property is subject, other than ordinary routine legal proceedings incidental to
the business of the Company.
 
NOTE 9 -- LEASES
 
     The Bank has entered into lease arrangements for equipment and land for
which rental expense amounted to $12,827 in 1996. These leases have been
classified as operating leases. At December 31, 1996, he only lease agreement
remaining in force related to a ground lease for construction of the Bank's main
office. Under the lease agreement, the Bank is required to pay annual rent of
$20,480 for the first three years. Subsequent to the third year, the Bank will
pay annual rent as adjusted by the Consumer Price Index through the end of its
 
                                       26
<PAGE>   29
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
20 year term. The Bank has two options to renew the lease for 10 years for each
option. Future minimum rentals (assuming no change in the Consumer Price Index)
under the renewed lease agreement are:
 
<TABLE>
<S>                                                           <C>
1997........................................................  $ 20,480
1998........................................................    20,480
1999........................................................    20,480
2000........................................................    20,480
2001........................................................    20,480
Thereafter..................................................  $286,720
                                                              --------
                                                              $389,120
                                                              ========
</TABLE>
 
NOTE 10 -- CONCENTRATIONS
 
     The Company maintains its cash accounts at commercial banks in Georgia,
Tennessee and Alabama. The total cash balances are insured by the FDIC up to
$100,000. All cash balances held at other commercial banks were insured at
December 31, 1996 and 1995.
 
NOTE 11 -- SHAREHOLDERS' EQUITY
 
     The Company raised $6,790,480 in capital as part of its initial stock
offering of which $3,395,240 was allocated to common stock and $3,395,240 was
allocated to additional paid in capital. Legal, printing, regulatory and other
costs of issuance of stock amounting to $37,603, were applied against additional
paid in capital.
 
     The Board of Directors of any state-chartered bank in Georgia may declare
and pay cash dividends on its outstanding capital stock without any request for
approval of the Company's regulatory agency if the following conditions are met:
 
          1. Total classified assets at the most recent examination of the Bank
     do not exceed 80% of equity capital.
 
          2. The aggregate amount of dividends declared in the calendar year
     does not exceed 50% of the prior year's net income.
 
          3. The ratio of equity capital to adjusted assets shall not be less
     than 6%, (8% during the first 3 years of the Bank's operation). In
     addition, the Company must recover net operating losses incurred to date
     prior to declaring dividends.
 
     As of December 31, 1996, the Company could not declare dividends without
regulatory consent.
 
NOTE 12 -- REGULATORY MATTERS
 
     The Bank will be subject to various regulatory capital requirements
administered by the federal banking agencies when it receives its permit to open
from the Georgia Department of Banking and Finance.
 
NOTE 13 -- EMPLOYEE BENEFIT PLAN
 
     The Company has adopted a defined contribution plan covering substantially
all employees in 1997. The plan is qualified under Section 401(k) of the
Internal Revenue Code. Under the provisions of the plan, eligible participating
employees may elect to contribute up to the maximum amount of tax deferred
contribution allowed by the Internal Revenue Code. The Company's contribution to
the plan is determined by the Board of Directors. No contributions have been
made by the Company in 1996 and 1995.
 
                                       27
<PAGE>   30
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
NOTE 14 -- RELATED PARTY TRANSACTIONS
 
     Organization and pre-opening expenses were partially funded with a loan of
$40,500, at no interest, from the Directors of the company. The Company repaid
the loan in 1996 upon completion of its stock offering. The Company entered into
an option agreement in 1995, and subsequently a ground lease agreement in 1996
pursuant to which the Bank leases the property on which the Bank's building will
be located. The lessor is co-owned by a Director of the Company. Rents paid
under the lease agreement are based on independent appraisals of the property
and totaled $6,827 in 1996 and $-0- in 1995. Lease payments are initially $1,707
per month, with property taxes and utilities to be borne by the lessee.
Obligations under the lease are to be adjusted annually for changes in the
consumer price index after the first three years.
 
     Other:  The Company purchased a vehicle from a company owned by a Director.
The purchase price was comparable to that which would have been paid to an
unrelated party.
 
NOTE 15 -- CONDENSED PARENT COMPANY INFORMATION
 
STATEMENT OF FINANCIAL CONDITION
 
<TABLE>
<CAPTION>
                                                                 1996        1995
                                                              ----------    -------
<S>                                                           <C>           <C>
ASSETS
  Cash and due from banks...................................  $    2,965    $   196
  Federal funds sold........................................     255,000        -0-
  Securities held to maturity...............................     498,931        -0-
  Investments in Subsidiary                                                     -0-
     (equity method) eliminated upon consolidation..........   5,846,884        -0-
  Intangibles, net..........................................      11,560     10,288
  Other assets..............................................         -0-     66,024
                                                              ----------    -------
          Total Assets......................................  $6,615,340    $76,508
                                                              ==========    =======
LIABILITIES AND SHAREHOLDERS' EQUITY
  Note payable..............................................  $       --    $78,255
                                                              ----------    -------
          Total Liabilities.................................          --     78,255
                                                              ----------    -------
          Total Shareholders' Equity (Deficit)..............   6,615,340     (1,747)
                                                              ----------    -------
          Total Liabilities and Shareholders' Equity........  $6,615,340    $76,508
                                                              ==========    =======
</TABLE>
 
                                       28
<PAGE>   31
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
STATEMENT OF INCOME
 
<TABLE>
<CAPTION>
                                                     FOR THE             FOR THE         FOR THE PERIOD
                                                   YEAR ENDING        PERIOD ENDING     JULY 11, 1995 TO
                                                DECEMBER 31, 1996   DECEMBER 31, 1995   DECEMBER 31, 1996
                                                -----------------   -----------------   -----------------
<S>                                             <C>                 <C>                 <C>
INCOME
From subsidiary -- eliminated upon
  consolidation...............................      $     -0-            $   -0-            $     -0-
Interest income on investment securities......         12,656                -0-               12,656
Interest on federal funds sold................          6,832                -0-                6,832
                                                    ---------            -------            ---------
                                                       19,488                -0-               19,488
                                                    ---------            -------            ---------
EXPENSES
Interest......................................            -0-                255                  255
Other expenses................................          2,152              1,502                3,654
                                                    ---------            -------            ---------
                                                        2,152              1,757                3,909
                                                    ---------            -------            ---------
Income (loss) before income taxes and equity
  in undistributed earnings of subsidiary.....         17,336             (1,757)              15,579
Income tax (provision) benefits...............            -0-                -0-                  -0-
                                                    ---------            -------            ---------
Income before equity in undistributed earnings
  of subsidiary...............................         17,336             (1,757)              15,579
Equity in undistributed earnings (loss) of
  subsidiary..................................       (149,169)               -0-             (149,169)
                                                    ---------            -------            ---------
          Net Income (loss)...................      $(131,833)           $(1,757)           $(133,590)
                                                    =========            =======            =========
</TABLE>
 
                                       29
<PAGE>   32
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             GATEWAY BANCHARES, INC. AND SUBSIDIARY -- (CONTINUED)
                         (A DEVELOPMENT STAGE COMPANY)
 
STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                            FOR THE
                                                                                            PERIOD
                                                                                            ENDING
                                                           FOR THE YEAR   FOR THE YEAR   JULY 11, 1995
                                                              ENDING         ENDING           TO
                                                           DEC 31, 1996   DEC 31, 1995   DEC 31, 1996
                                                           ------------   ------------   -------------
<S>                                                        <C>            <C>            <C>
Cash flows from operating activities:
Net loss.................................................  $  (131,833)     $ (1,757)     $  (133,590)
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Equity in undistributed loss of subsidiaries...........      147,412           -0-          147,412
  Provision for amortization.............................        1,284           -0-            1,284
  Amortization of investment security premiums and
     accretion of discounts..............................      (12,657)          -0-          (12,657)
Increase (decrease) in other assets and liabilities......       64,970       (76,057)         (11,087)
                                                           -----------      --------      -----------
          Net cash provided by (used in) operating
            activities...................................       69,176       (77,814)          (8,638)
                                                           -----------      --------      -----------
Cash flows from investing activities:
Purchase of securities held to maturity..................     (486,274)          -0-         (486,274)
Acquisition of bank subsidiary...........................   (6,000,000)          -0-       (6,000,000)
Payments for pre-opening and capital expenditures during
  the pre-opening on behalf of the subsidiary............     (222,603)          -0-         (222,603)
                                                           -----------      --------      -----------
          Net cash used in investing activities..........   (6,708,877)          -0-       (6,708,877)
                                                           -----------      --------      -----------
Cash flows from financing activities:
Reimbursement by the Bank for payments for pre-opening
  and capital expenditures during pre-opening stage......      222,603           -0-          222,603
Proceeds from issuance of common stock...................    6,790,480            10        6,790,490
Payments in short-term borrowing.........................      (78,000)       78,000              -0-
Payment of stock issue costs.............................      (37,603)          -0-          (37,603)
Redemption of common stock...............................          (10)          -0-              (10)
                                                           -----------      --------      -----------
          Net cash provided by (used in) financing
            activities...................................    6,897,470        78,010        6,975,480
                                                           -----------      --------      -----------
Net increase in cash and cash equivalents................      257,769           196          257,965
Cash and cash equivalents at beginning of year...........          196           -0-              -0-
                                                           -----------      --------      -----------
Cash and cash equivalents at end of year.................  $   257,965      $    196      $   257,965
                                                           ===========      ========      ===========
</TABLE>
 
                                       30
<PAGE>   33
 
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     Not Applicable.
 
                                    PART III
 
ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
     The following table sets forth for each director and executive officer of
the Company (i) the person's name, (ii) his or her age at December 31, 1996,
(iii) the year he or she was first elected as a director of the Company, and
(iv) his or her positions with the Company other than as a director and his or
her other business experience for the past five years.
 
<TABLE>
<CAPTION>
                                          DIRECTOR                POSITION WITH THE COMPANY
NAME (AGE)                                 SINCE                   AND BUSINESS EXPERIENCE
----------                                --------                -------------------------
<S>                                       <C>        <C>
Jack Joseph Babb (68)...................    1995     Real Estate Developer;
                                                       Vice President, Babb Lumber Co.;
                                                       President, Townsend Realty
William H. H. Clark (60)................    1995     Retired Military Officer;
                                                       President, J.H. Clark Farms, Inc.;
                                                       President, Ringgold Preservation Corp.
Patricia Yvonne Cochran (40)............    1995     Business Owner/Administrator,
                                                       Gingerbread House Child Care Center,
                                                       Kids Preparatory Pre-School
Jeannette Wilson Dupree (57)............    1995     Insurance Agent, State Farm
                                                       Insurance Company
James A. Gray, Sr. (56).................    1996     Automobile Dealer, President
                                                       Carco Motor, Inc.
Harle B. Green(1) (50)..................    1995     Chairman of the Board
                                                       of the Company;
                                                       Chief Financial Officer
Walter Lee Jackson (64).................    1995     Automobile Dealer, President
                                                       Walter Jackson Chevrolet, Inc.,
                                                       Jackson Chevrolet-Olds, Geo, Inc.
Ernest Kresch (36)......................    1995     Pediatric Physician
Robert G. Peck(2) (46)..................    1996     President and Chief Executive Officer
                                                       of the Company
Boyd M. Steele(3) (48)..................    1996     Executive Vice President of the Company
</TABLE>
 
---------------
 
(1) Mr. Green has served as Chairman of the Board of the Company since its
    inception in October 1995. Mr. Green retired from full-time banking in 1991.
    From 1991 through 1995, Mr. Green provided banking consulting services for a
    bank in Chattanooga, Tennessee.
(2) Mr. Peck has served as President and Chief Executive Officer of the Company
    since January 23, 1996. Prior to becoming an officer of the Company, Mr.
    Peck served as Senior Vice President of a community bank.
(3) Mr. Steele has served as Executive Vice President of the Company since
    January 23, 1996. Mr. Steele also serves as Chief Loan Officer of the Bank.
    Prior to becoming an officer of the Company, Mr. Steele served as Senior
    Vice President of a community bank.
 
                                       31
<PAGE>   34
 
     The Company is not subject to filings required by Section 16 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is filing of this Annual Report on Form 10-KSB pursuant to Section 15(d)
of the Exchange Act.
 
ITEM 10.  EXECUTIVE COMPENSATION
 
EXECUTIVE COMPENSATION
 
                           SUMMARY COMPENSATION TABLE
 
     The following table presents the total compensation of the Company paid
during fiscal year 1996 to its chief executive officer. No executive officer of
the Company earned over $100,000 in salary and bonus during fiscal year 1996.
<TABLE>
<CAPTION>
                                             ANNUAL COMPENSATION                         LONG-TERM COMPENSATION
                               -----------------------------------------------   ---------------------------------------
                                                                                           AWARDS              PAYOUTS
                                                                                 --------------------------   ----------
                                                                OTHER ANNUAL       RESTRICTED      OPTIONS/      LTIP
      NAME AND POSITION        YEAR   SALARY($)    BONUS($)    COMPENSATION($)   STOCK AWARDS($)   SARS(#)    PAYOUTS($)
      -----------------        ----   ----------   ---------   ---------------   ---------------   --------   ----------
<S>                            <C>    <C>          <C>         <C>               <C>               <C>        <C>
Robert G. Peck...............  1996    65,675.62         --       1,233.18                 0             0            0
President and Chief Executive
  Officer*
 
<CAPTION>
 
                                  ALL OTHER
      NAME AND POSITION        COMPENSATION($)
      -----------------        ---------------
<S>                            <C>
Robert G. Peck...............            0
President and Chief Executive
  Officer*
</TABLE>
 
---------------
 
* Harle Green served as the Company's Chief Executive Officer from the Company's
  incorporation in October 1995 until January 23, 1996, at which time Mr. Peck
  became the Company's Chief Executive Officer. Mr. Green now serves as the
  Company's Chief Financial Officer and is Chairman of the Board of Directors.
 
     The Company has not granted any options since its inception.
 
COMPENSATION OF DIRECTORS
 
     Directors of the Company will not be compensated for their services as
directors until the Bank earns a cumulative profit.
 
                                       32
<PAGE>   35
 
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth certain information regarding the Common
Stock owned, as of December 31, 1996, (i) by each of the Company's directors,
(ii) by each executive officer, and (iii) by all of the Company's directors and
executive officers as a group. The Company did not have any shareholders as of
December 31, 1996 who beneficially owned more than 5% of the shares of the
Company's outstanding Common Stock.
 
<TABLE>
<CAPTION>
                                                                                     PERCENT
                                                                                       OF
                      NAME AND ADDRESS                        NUMBER OF SHARES(1)     CLASS
                      ----------------                        -------------------    -------
<S>                                                           <C>                    <C>
(I) DIRECTORS
Jack Joseph Babb............................................         23,100(2)         3.4%
  Route 6, 43 B
  Crestview Circle
  P. O. Box 308351
  Ringgold, GA 30736
William H. H. Clark.........................................         10,000(3)         1.5%
  406 Alabama Rd.
  Ringgold, GA 30736
Patricia Yvonne Cochran.....................................          5,000(4)          .7%
  460 Hillcrest Circle
  Ringgold, GA 30736
Jeannette Wilson Dupree.....................................         16,105(5)         2.4%
  8423 Alabama Highway
  Ringgold, GA 30736
James A. Gray, Sr...........................................         20,000(6)         2.9%
  1309 Ooletwah-Ringgold Rd.
  Ringgold, GA 30736
Harle B. Green..............................................         15,100(7)         2.2%
  8319 Alabama Highway    
  Ringgold, GA 30736
Walter Lee Jackson..........................................         18,810(8)         2.8%
  Route 6, Crestview Circle
  P. O. Box 670
  Ringgold, GA 30736
Ernest Kresch...............................................         32,500(9)         4.8%
  3216 Three Notch Rd.
  Ringgold, GA 30736
Robert G. Peck..............................................          5,000(10)         .7%
  259 Cannonball Lane
  Ringgold, GA 30736
(II) EXECUTIVE OFFICERS*
Boyd M.Steele...............................................          5,000             .7%
  190 Laurel Circle
  Ringgold, Georgia 30736
(III) ALL DIRECTORS AND EXECUTIVE OFFICERS, AS A GROUP......        154,305           22.7%
</TABLE>
 
---------------
 
   * Mr. Green and Mr. Peck are also executive officers of the Company.
 (1) Except as otherwise indicated, the persons named in the table have sole
     voting and investment power with respect to all shares shown as
     beneficially owned by them. The information shown above is based upon
     information furnished by the named persons and based upon "beneficial
     ownership" concepts set forth in rules promulgated under the Exchange Act.
     Under such rules, a person is deemed to be a
 
                                       33
<PAGE>   36
 
     "beneficial owner" of a security if that person has or shares "voting
     power," which includes the power to vote or to direct the voting of such
     security, or "investment power," which includes the power to dispose or to
     direct the disposition of such security. A person is also deemed to be a
     beneficial owner of any security of which that person has the right to
     acquire beneficial ownership within 60 days. More than one person may be
     deemed to be a beneficial owner of the same securities.
 (2) Consists of (i) 7,500 shares owned jointly by Mr. Babb and his spouse, (ii)
     7,500 shares held in an IRA account for Mr. Babb, (iii) 7,500 shares owned
     directly by Mr. Babb's spouse as to which beneficial ownership is shared,
     and (iv) 600 shares held in custodian accounts by Mr. Babb's spouse as to
     which beneficial ownership is shared.
 (3) Consists of 10,000 shares owned directly by Ringgold Mining & Manufacturing
     Co., Inc. as to which beneficial ownership is shared.
 (4) Consists of 5,000 shares owned jointly by Ms. Cochran and her spouse.
 (5) Consists of (i) 1,000 shares owned directly by Ms. Dupree, (ii) 9,550
     shares owned jointly by Ms. Dupree and her spouse, (iii) 2,290 shares held
     in an IRA account for Ms. Dupree, and (iv) 3,265 shares held in an IRA
     account for Ms. Dupree's spouse as to which beneficial ownership is shared.
 (6) Consists of 20,000 shares owned jointly by Mr. Gray and his spouse.
 (7) Consists of (i) 3,000 shares owned jointly by Mr. Green and his spouse,
     (ii) 12,000 shares held is an IRA account for Mr. Green, and (iii) 100
     shares held by Ms. Green as custodian as to which beneficial ownership is
     shared.
 (8) Consists of (i) 16,208 shares owned jointly by Mr. Jackson and his spouse,
     (ii) 4,107 shares held in an IRA account for Mr. Jackson, and (iii) 2,185
     shares held in an IRA account for Mr. Jackson's spouse as to which
     beneficial ownership is shared.
 (9) Consists of (i) 30,500 shares owned directly by Mr. Kresch and (ii) 2,000
     shares in a Simplified Employee Pension Plan for Mr. Kresch as to which
     beneficial ownership is shared.
(10) Consists of 5,000 shares held in an IRA account for Mr. Peck.
(11) Consists of 5,000 owned directly by Mr. Steele.
 
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
CERTAIN TRANSACTIONS
 
     It is possible that the Company and the Bank will have banking and other
business transactions in the ordinary course of business with directors and
officers of the Company and the Bank, including members of their families or
corporations, partnerships or other organizations in which such directors and
officers have a controlling interest. If such transactions occur, (a) they will
be on substantially the same terms (including price, or interest rate and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties, and any banking transactions will not be expected to involve
more than the normal risk of collectibility or present other unfavorable
features to the Company and the Bank, and (b) they will be on terms no less
favorable than could be obtained from an unaffiliated third party and will be
approved by a majority of the directors, including a majority of the
disinterested directors.
 
     To facilitate the Bank's formation, each of the organizers made a personal
loan of $4,500 to the Company. Additionally, the organizers arranged a line of
credit from First Tennessee Bank National Association ("First Tennessee"),
Chattanooga, Tennessee in the aggregate amount of $250,000 to pay organizational
and pre-opening expenses for the Bank, which was personally guaranteed by the
organizers. The line of credit and interest costs were repaid from offering
proceeds on June 21, 1996.
 
     The Company entered into an Option Agreement for Lease of Real Estate,
dated as of August 9, 1995, with William H.H. Clark and his brother Roddy J.H.
Clark, to lease property on which the Bank will be located. Mr. William H.H.
Clark is a director of the Company and part owner of the property with Mr. Roddy
J.H. Clark. Subsequently, the Bank entered into a Ground Lease Agreement with
Ringgold Mining and Manufacturing Company, dated as of July 1, 1996, pursuant to
which the Bank leases the property on which the Bank's building will be located.
See "Item 2. Description of Properties."
 
                                       34
<PAGE>   37
 
ITEM 13.  EXHIBITS, LISTS AND REPORTS ON FORM 10-KSB
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                   EXHIBIT
  -------                                  -------
  <C>       <C>  <S>
    3.1     --   Articles of Incorporation.(1)
    3.2     --   Bylaws.(1)
    4.1     --   Instruments Defining the Rights of Security Holders. See
                 Articles of Incorporation at Exhibit 3.1 hereto and Bylaws
                 at Exhibit 3.2 hereto.
   10.1     --   Ground Lease Agreement by and between Gateway Bancshares,
                 Inc. and Ringgold Mining and Manufacturing Company, dated as
                 of May 1, 1996.(2)
   10.2     --   Escrow Agreement by and between First Tennessee Bank,
                 National Association and Gateway Bancshares, Inc. (In
                 Organization), dated December 15, 1995.(1)
   21.1     --   Subsidiaries of Gateway Bancshares, Inc.
   24.1     --   Power of Attorney (appears on the signature pages to this
                 Annual Report on 10-KSB).
   27       --   Financial Data Schedule (for SEC use only)
</TABLE>
 
     (b) Reports on Form 8-K filed in the fourth quarter of 1996: None.
---------------
 
(1) Incorporated herein by reference to exhibit of same number in the Company's
    Registration Statement on Form SB-2, Registration No. 33-80855, filed
    December 20, 1995.
(2) Incorporated herein by reference to exhibit of same number in the Company's
    Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996.
 
     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE EXCHANGE ACT BY NONREPORTING ISSUERS.
 
     The Company completed its initial offering of its Common Stock on June 15,
1996 pursuant to its Registration Statement on Form SB-2 Registration No.
33-80855. The Company intends to hold its annual meeting of shareholders in June
1997. The Company will file its Proxy Statement and Annual Report to
Shareholders with the Securities and Exchange Commission on or before the date
such items are mailed to shareholders.
 
                                       35
<PAGE>   38
 
                                   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.
 
                                          GATEWAY BANCSHARES, INC.
 
                                          By:       /s/ Robert G. Peck
                                            ------------------------------------
                                                       Robert G. Peck
                                               President and Chief Executive
                                                           Officer
 
Date: February 19, 1997
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
the signature page to this Report constitutes and appoints Robert G. Peck and
Harle B. Green, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments to this Report, and to file the same, with all exhibits hereto, and
other documents in connection herewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
 
     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 and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                      DATE
                      ---------                                     -----                      ----
<C>                                                      <S>                             <C>
 
                /s/ Jack Joseph Babb                     Director                        February 19, 1997
-----------------------------------------------------
                  Jack Joseph Babb
 
               /s/ William H.H. Clark                    Director                        February 19, 1997
-----------------------------------------------------
                 William H.H. Clark
 
             /s/ Patricia Yvonne Cochran                 Director                        February 19, 1997
-----------------------------------------------------
               Patricia Yvonne Cochran
 
             /s/ Jeannette Wilson Dupree                 Director                        February 19, 1997
-----------------------------------------------------
               Jeannette Wilson Dupree
 
                 /s/ Harle B. Green                      Director, Chief Financial       February 19, 1997
-----------------------------------------------------      Officer (Principal
                   Harle B. Green                          Financial and Accounting
                                                           Officer)
 
               /s/ Walter Lee Jackson                    Director                        February 19, 1997
-----------------------------------------------------
                 Walter Lee Jackson
 
                  /s/ Ernest Kresch                      Director                        February 19, 1997
-----------------------------------------------------
                    Ernest Kresch
 
                 /s/ Robert G. Peck                      Director, President, Chief      February 19, 1997
-----------------------------------------------------      Executive Officer
                   Robert G. Peck
</TABLE>
 
                                       36
<PAGE>   39
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                         PAGE NUMBER IN
EXHIBIT                                                                   SEQUENTIALLY
NUMBER                               EXHIBIT                             NUMBERED COPY
-------                              -------                             --------------
<C>        <S>                                                           <C>
   3.1     Articles of Incorporation.(1)                                            N/A
   3.2     Bylaws.(1)                                                               N/A
   4.1     Instruments Defining the Rights of Security Holders. See
           Articles of Incorporation at Exhibit 3.1 hereto and Bylaws
           at Exhibit 3.2 hereto.                                                   N/A
  10.1     Ground Lease Agreement by and between Gateway Bancshares,
           Inc. and Ringgold Mining and Manufacturing Company, dated as
           of May 1, 1996.(2)                                                       N/A
  10.2     Escrow Agreement by and between First Tennessee Bank,
           National Association and Gateway Bancshares, Inc. (In
           Organization), dated December 15, 1995.(2)                               N/A
  21.1     Subsidiaries of Gateway Bancshares, Inc.
  24.1     Power of Attorney (appears on the signature pages to this
           Annual Report on 10-KSB).
  27       Financial Data Schedule (for SEC use only)
</TABLE>
 
---------------
 
(1) Incorporated herein by reference to exhibit of same number in the Company's
    Registration Statement on Form SB-2, registration No. 33-80855, filed
    December 20, 1995.
(2) Incorporated herein by reference to exhibit of same number in the Company's
    Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996.
 
                                       37