<PAGE>   1
                                                                    EXHIBIT 13.1


TO OUR VALUED SHAREHOLDERS:

Nineteen ninety-nine has been a watershed year for Gateway Bancshares, Inc. and
its subsidiary, Gateway Bank & Trust. The most important event of the year was
when the bank became cumulative profitable. The bank has now covered all of its
start-up and opening expenses and the book value of the stock now exceeds the
$10.00 initial investment excluding the unrealized losses in the securities
portfolio. Secondly, we resolved the issue with Honor Technologies regarding the
dispute over the fraudulent charges with our debit card program. Earnings of the
bank during 1999 were not affected by any expense related to the dispute with
the exception of legal fees that we incurred in the defense of our position.
Thirdly, we have received approval from the Department of Banking & Finance for
the establishment of our first branch office in Fort Oglethorpe. We look forward
to its opening in mid-year and are confident that it will add a significant
contribution to the bank. Fourthly, and something I am extremely proud of is the
fact that the bank was one of four finalist in the QUALITY SERVICE AWARD
presented by Community Bankers Association of Georgia. The plaque is prominently
displayed in our foyer. Lastly, the board of directors established an annual
scholarship to be presented to a deserving high school senior at Ringgold High
School. We named the scholarship for Walter L. Jackson in honor of his
leadership, commitment, dedication, loyalty and promotion of personal welfare of
all citizens of Catoosa County. Mr. Jackson is an outstanding citizen of our
community and we feel that it is only appropriate to recognize his
accomplishments and achievements in this manner.

The century date change over created no problem for the bank or the financial
markets throughout the world. Our entire staff put in a lot of hard work and
preparation especially Jeff Hensley and Don Pinkley whom I would like to take
this opportunity to thank publicly. They were instrumental in reviewing our
existing applications, testing programs and putting in place various contingency
and resumption plans.

Our financial results for the year continue to transcend our original
projections by wide margins. We ended the year with total assets of $89,099,574,
some $12 million or 15% greater that 1998 and 143% or $52 million greater than
1997. Deposits totaled $81,144,347 some $12.5 million or 17% greater than 1998
and 169% or some $51 million greater than 1997. Loan demand was very good during
the year as we increased our loans to $62,564,092 compared to $36,464,131 in
1998 and $17,195,468 in 1997. The percentage increases over 1998 and 1997 were
71% and 264%, respectively.

Earnings for the year were $505,137 as compared to $233,832 in 1998 and a loss
of ($273,739) in 1997. This represents a 116% increase over the previous period.
The return on average assets for the year was .65% as compared to .44% in the
previous year. The return on average equity also increased substantially over
the same period from 4.10% to 8.16%.


<PAGE>   2


We stated in our comments to you in last year's report that one of our
challenges would be to focus on loan quality while growing our loan portfolio.
Our losses this year were higher than I would like at $113,924 which represents
approximately one-quarter of one percent of our average loans. This is, however,
below our peer group and one customer represented 58% of the total loss.

Growth for the bank will continue to be a challenge in the year ahead. Increased
competition continues to put pressure on earnings and I do not see any change
from that standpoint. We believe that one of our strengths lie in our staff and
the quality service they deliver. Our employees are what have made us grow, and
they contribute positively to the bottom line. The Financial Modernization Bill
that was recently passed by the Congress and recently signed into law by the
President allows banks as well as other financial providers the opportunity to
offer a greater variety of products such as insurance, securities and etc. This
will be an area that we will investigate to see the potential for us.

The bank has been managed for growth over the past two and one-half years. We
felt it was important to grow the institution in order to create revenue and get
the bank to a size that could withstand a downturn in the economy. We have begun
the process of managing the bank for profitability versus growth. We still need
to grow the bank but at acceptable levels with profitability being a more
pressing concern.

The economic front continues to look good even with the 75 basis point increase
in rates by the Federal Reserve over the past several months. The economy
continues to grow at a healthy pace fueled largely by the consumer and his
positive sentiment. Unemployment rates remain at historic low levels while
inflation is well contained. We believe that the Federal Reserve will continue
to focus on monthly employment reports. If the pool of available workers
continue to decrease, we anticipate that the Federal Reserve will continue to
worry about wage pressure and its effect on inflation and will move rates higher
to curtail any signs of early inflation.

We believe 2000 will be a good year for the bank especially with the addition of
our Fort Oglethorpe office. We hope you are pleased with the results of your
bank and continue your support of Gateway Bank & Trust. As always we solicit and
appreciate your support in doing business with the bank and encourage you to
recommend us to your friends and colleagues.

We look forward to the challenges of this year and welcome your comments and
suggestions.

/s/ Robert G. Peck
-----------------------------
Robert G. Peck
President & Chief Executive Officer


<PAGE>   3
                            GATEWAY BANCSHARES, INC.
                                  & SUBSIDIARY
                              FINANCIAL HIGHLIGHTS


             ASSETS
           (MILLIONS)

<TABLE>
<S>                           <C>
1997                          36.6


1998                          76.9


1999                          89.1
</TABLE>


            DEPOSITS
           (MILLIONS)

<TABLE>
<S>                           <C>
1997                          30.1


1998                          68.8


1999                          81.1
</TABLE>


       EARNINGS PER SHARE
            (CENTS)

<TABLE>
<S>                          <C>
1997                         (0.40)


1998                          0.34


1999                          0.74
</TABLE>


             LOANS
           (MILLIONS)

<TABLE>
<S>                           <C>
1997                          17.2


1998                          36.5


1999                          62.6
</TABLE>


            NET INCOME
            (THOUSANDS)

<TABLE>
<S>                         <C>
1997                        (273.7)


1998                         233.8


1999                         505.1
</TABLE>


        RETURN ON EQUITY
           (PERCENT)

<TABLE>
<S>                          <C>
1997                         -4.22%


1998                          4.10%


1999                          8.16%
</TABLE>

<PAGE>   4


                            GATEWAY BANCSHARES, INC.

                             DIRECTORS AND OFFICERS

<TABLE>
<CAPTION>
DIRECTORS

<S>                                     <C>                            <C>
JACK J. BABB                            WILLIAM H.H. CLARK             YVONNE G. COCHRAN
Vice President                          State Representative           President
Babb Lumber Company                                                    Gingerbread House
Daycare Center, Inc.

JEANETTE W. DUPREE                      JAMES A. GRAY                  HARLE B. GREEN
Manager                                 President                      Chairman & CFO
State Farm Insurance Agency             Carco Motor, Inc.              Gateway Bancshares, Inc.
                                                                       and Gateway Bank & Trust

WALTER LEE JACKSON                      DR. ERNEST KRESCH              ROBERT G. PECK
President                               Podiatrist                     President & CEO
Walter Jackson Chevrolet, Inc.          Advance Foot Care              Gateway Bancshares, Inc.
                                                                       And Gateway Bank & Trust


OFFICERS

BOYD M. STEELE                          JEFF R. HENSLEY
Executive Vice President                Senior Vice President
and Secretary                           and Assistant Secretary
</TABLE>










<PAGE>   5







                              GATEWAY BANK & TRUST

                               OFFICERS AND STAFF

<TABLE>
<CAPTION>
<S>                          <C>                              <C>
OFFICERS

ROBERT G. PECK               BOYD M. STEELE                   HARLE B. GREEN
President & CEO              Executive Vice President         Chairman & CFO

JEFF R. HENSLEY              KAY WILSON                       CHIP GRANT
Senior Vice President        Vice President                   Assistant Vice President

STAFF

DONNA BRITTON                MARY CARPENTER                   DONNA CORDELL
Customer Service             Financial Service                Loan Operations
Representative               Representative                   Assistant

CHARLOTTE DICKSON            DELIA DUNAGAN                    DIANE FULTON
Customer Service             Financial Service                Customer Service
Representative               Representative                   Representative

LEEANN LEWIS                 SUE MASSINGILL                   JULIE MCDONALD
Loan Operations              Administrative Assistant         Customer Service
Assistant                                                     Representative

SHELLEY NESTER               DANIELLE PICKETT                 GARY PINKLEY
Mortgage Loan                Customer Service                 Computer Systems
Originator                   Administrator                    Administrator

BRIDGETT QUEEN               LINDA SMITH                      TRUDY SNIDER
Credit Analyst               Executive Assistant              Mortgage Loan
                                                              Processor

MARCIA TEETERS               RENE TINKER                      LINDA TUCKER
Administrative Loan          Customer Service                 Operations Administrator
Administrator                Representative

MISSY VANDERSLICE            JANINE WARD
Operations Assistant         Customer Service
                             Representative
</TABLE>


This report serves as our annual disclosure statement as required by the Federal
Deposit Insurance Corporation. This statement has not been reviewed, or
confirmed for accuracy or relevance, by the Federal Deposit Insurance
Corporation.


<PAGE>   6












                            GATEWAY BANCSHARES, INC.

                                FINANCIAL REVIEW

                                      1999






<PAGE>   7




     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                  OF OPERATIONS

The Annual Report, including the Management's Discussion and Analysis which
follows, contains forward-looking statements in addition to historical
information, including, but not limited to statements regarding Management's
beliefs, current expectations, estimates and projections about the financial
services industry, the economy, and about the Company and the Bank in general.
Such forward-looking statements are subject to certain factors that could cause
actual results to differ materially from historical results or anticipated
events, trends or results. These factors include, but are not limited to (i)
increased competition with other financial institutions, (ii) lack of sustained
growth in the economy in Catoosa County, (iii) rapid fluctuations in interest
rates, (iv) the inability of the Bank to maintain regulatory capital standards,
and (v) changes in the legislative and regulatory environment. These and other
factors affecting the Company's future performance are further detailed in
publicly available reports filed from time to time by the Company with the
Securities and Exchange Commission, such as the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999 (the "1999 10-KSB").

The purpose of the following discussion is to address information relating to
the financial condition and results of operations of the Company that may not be
readily apparent from a review of the consolidated financial statements and
notes thereto, which are included in this Annual Report. This discussion should
be read in conjunction with information provided in the Company's consolidated
financial statements and accompanying footnotes; and with the statistical
information appearing in the 1999 10-KSB under the caption "Selected Statistical
Information." 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.


SUMMARY

Substantially all of the operations of the Company are conducted by its
wholly-owned subsidiary, Gateway Bank & Trust (the "Bank"). Accordingly, the
following discussion relates primarily to the Bank. The Company's principal
market areas are located in the Catoosa County, Georgia and surrounding areas.
Management believes that the economy of the area in which the Company serves is
healthy and expanding, but not at a pace that threatens stability.

Jobs are created in significant proportion in the manufacture of tufted and
durable goods, as well as in retail and service sectors. Counties served by the
Company had an unemployment-averaging 2.5% compared to the average 3.4%
experienced in the entire state of Georgia. Catoosa County is centrally located
for employment opportunities being situated on the I-75 corridor between
Chattanooga, TN and Dalton, GA. The majority of the area's residents work in
Tennessee while a smaller number are employed in adjacent counties. In the
Company's markets, population growth over the last five years has surpassed the
rate for the state. The current economic prospects in the company's markets are
good, and the Company attempts to assist those prospects by returning the
deposits of its customers to the communities from which they come in the form of
loans.

EARNINGS

The Company's net income of $505,137 for 1999 represents an increase of $271,305
over the Company's net income in 1998 of $233,832. The increase in net income
relates to the growth in the Bank's deposit and loan base during 1999. Earnings
per share was $0.74 in 1999 compared with $0.34 in 1998.


                                     Page 1
<PAGE>   8


RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income is the principal source of a financial institution's
earnings stream and represents the difference or spread between interest and fee
income generated from earning assets and the interest expense paid on deposits
and borrowed funds. Fluctuations in interest rates as well as volume and mix
changes in earning assets and interest-bearing liabilities materially impact net
interest income. (All discussions in this section assume a taxable equivalent
basis unless otherwise noted.) Net interest income was $2,920,123 in 1999, as
compared to $1,852,289 in 1998, representing an increase of $1,067,834, or
57.6%. This increase was caused primarily by the growth of the Bank's deposit
base and loan portfolio. Interest and fees on loans increased from $2,839,315 in
1998 to $4,866,731 in 1999 (an increase of 71.4%).

Interest earned on investments increased $204,727, (16.5%) from $1,240,761 in
1998 to $1,445,488 in 1999. The increase is due primarily to an increase in the
average value of investments from funds made available due to the growth in
deposits.

The trend in net interest income is also evaluated in terms of average rates
using the net interest margin and the interest rate spread. The net interest
margin, or the net yield on earning assets, is computed by dividing fully
taxable equivalent net interest income by average earning assets. This ratio
represents the difference between the average yield returned on average earning
assets and the average rate paid for funds used to support those earning assets,
including both interest-bearing and noninterest-bearing sources. The net
interest margin for 1999 was 3.88 percent compared with a net interest margin of
4.17% in 1998. This decrease was due primarily due to the growth of the Bank
related specifically to a decrease in interest earning assets as a percentage of
interest bearing liabilities.

The interest rate spread measures the difference between the average yield on
earning assets and the average rate paid on interest-bearing sources of funds.
The interest rate spread eliminates the impact of noninterest-bearing funds and
gives a more direct perspective to the effect of market interest rate movements.
The net interest spread for 1999 was 3.31% from earning assets compared to a net
interest spread of 3.47% in 1998.

The following tabulation presents certain net interest income data without
modification for assumed tax equivalency:

<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                            --------------------------------------------------------------------------
                                                  1999                        1998                        1997
                                            ------------------      ----------------------      ----------------------

<S>                                         <C>                     <C>                         <C>
Rate earned on earnings assets............        8.43%                       8.96%                       8.80%

Rate paid on borrowed funds...............        5.12%                       5.49%                       5.05%

Interest rate spread......................        3.31%                       3.47%                       3.75%

Net yield on earning assets...............        3.88%                       4.17%                       5.65%
</TABLE>

INTEREST EXPENSES

Total interest expense increased $1,096,556 (47.1%) from $2,326,944 in 1998 to
$3,423,500 in 1999. This increase was the combined effect of an increase in the
average balance of interest bearing deposits from approximately $41,294,000 in
1998 to approximately $65,013,000 in 1999 and a decrease in the average rate
paid on deposits from 5.49% in 1998 to 5.11% in 1999. The effect of these
changes increased the interest expense on interest bearing deposits from
$2,265,832 in 1998 to $3,320,842 in 1999.


                                     Page 2
<PAGE>   9


NONINTEREST INCOME

Noninterest income for 1999 and 1998 totaled $417,502 and $367,304,
respectively. These amounts are primarily from service charges on deposit
accounts, mortgage loan fees and fees on services to customers. Noninterest
income increased primarily due to the effects of growth in the Bank's deposit
base.

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                ---------------------------------------------------------
                                                      1999               1998                  1997
                                                --------------     -----------------      ---------------
<S>                                             <C>                <C>                    <C>
Service charges on deposits..................   $    213,572       $       138,915        $        41,142
Mortgage loan fees...........................        140,086               175,113                 57,258
Insurance commissions........................          6,821                 4,375                  1,881
Investment securities gains..................          9,618                12,170                    -0-
Other........................................         47,405                36,731                 11,480
                                                ------------       ---------------        ---------------
                                                $    417,502       $       367,304        $       111,761
                                                ============       ===============         ==============
</TABLE>

NONINTEREST EXPENSES

Noninterest expenses totaled $2,089,727 in 1999 and $1,696,470 in 1998. Salaries
and benefits increased $254,192 (33.3%) to $1,018,784, which reflects the Bank's
increased staffing to accommodate the growth in the Bank's loans and deposits.
Furniture and equipment expense increased $42,263 (39.4%) due to increased
depreciation and maintenance costs on equipment. Professional and regulatory
fees increased $134,574 (168.4%) due to increased services provided to the bank
for the settlement of the claim relating to fraudulent use of debit cards, and
quarterly and annual reporting requirements. Data processing fees increased
$51,760 (31.1%) and postage increased $11,309 (25.8%) due to the increased
volume of transactions from the growth of deposits and loans of the Bank.

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                    --------------------------------------------------
                                                         1999              1998                1997
                                                    --------------    -------------       ------------

<S>                                                 <C>               <C>                 <C>
Salaries and employee benefits.................     $  1,018,784      $    764,592        $    571,089
Occupancy expenses.............................          107,703            95,620              76,044
Furniture and equipment expense................          149,506           107,243             107,243
Director and committee fees....................              -0-               -0-                 -0-
Advertising....................................           55,576            70,785              55,683
Data processing................................          218,250           166,490              64,852
Insurance......................................           14,462            14,311              10,343
Postage and express............................           55,111            43,802              19,408
Printing and supplies..........................           85,029            61,443              61,902
Professional and regulatory fees...............          214,482            79,908              71,363
Taxes and licenses.............................            9,420             7,500               5,782
Allowance for loss on debit card fraud.........              -0-           150,000                 -0-
Other..........................................          161,402           134,776              85,680
                                                    ------------      ------------        ------------

                                                    $  2,089,727      $  1,696,470        $  1,083,789
                                                    ============      ============        ============
</TABLE>

INCOME TAXES

The Company attempts to maximize its net income through active tax planning. Due
to net operating losses sustained by the Company since incorporation, the
Company did not begin paying income taxes until first quarter 1999. Net
operating losses of approximately $146,000 were carried forward from 1998 and
applied to 1999 taxable income. A more detailed explanation of income tax
expense is included in the accompanying Notes to Consolidated Financial
Statements.


                                     Page 3
<PAGE>   10

FINANCIAL CONDITION

EARNING ASSETS

Average earning assets in 1999 were approximately $75,248,000 or 94.7% of
average total assets compared to $48,570,000 or 92.3% of average total assets in
1998. The mix of average earning assets comprised the following percentages:


<TABLE>
<CAPTION>
                                              1999          1998           1997
                                            --------      --------       ---------
<S>                                         <C>           <C>            <C>

Federal funds sold...................            0.8%          3.3%            9.1%
Investment securities................           31.3%         40.4%           48.6%
Loans................................           67.9%         56.3%           42.3%
                                            --------      --------       ---------
                                               100.0%        100.0%          100.0%
                                            ========      ========       =========
</TABLE>

The mix of average earning assets reflects management's attempt to maximize
interest income while maintaining acceptable levels of risk.

The Bank has intentionally avoided the growing national market in loans to
finance leveraged buy-outs participating in no leveraged buy-out loans.
Concurrently, it has avoided exposure to lesser developed country ("LDC") debt,
having no LDC loans in its portfolio.

LOANS

Loans made up the largest component of the Bank's earning assets. At December
31, 1999, the Bank's total loans were $62,564,092 compared to $36,464,131 at the
end of 1998. In 1999 average net loans represented 67.9% of average earning
assets and 64.3% of average total assets, compared to 56.3% of average earning
assets and 51.9% of average total assets in 1998. This was the result of an
increase in loan demand in the Bank's market area, combined with an increase in
the Bank's market share of loans in such area. The ratio of total loans to total
deposits increased from 53.0% in 1998 to 77.1% in 1999.

NONPERFORMING ASSETS

The following table presents information concerning outstanding balances of
nonperforming assets at December 31:

<TABLE>
<CAPTION>
                                                       1999              1998
                                                       ----              ----
                                                            (in Thousands)
<S>                                                 <C>                 <C>
Nonaccruing loans.............................      $      145          $    -0-
Loans past due 90 days or more................              39               -0-
Restructured loans............................             -0-               -0-
                                                    ----------          --------
Total nonperforming loans.....................             184               -0-
Nonaccruing securities........................             -0-               -0-
Other real estate.............................             138               -0-
                                                    ----------          --------
Total nonperforming assets....................      $      322          $    -0-
                                                    ==========          ========
Ratios:
Loan loss allowance to
   total nonperforming assets.................           2.177             24.40
                                                    ==========          ========
Total nonperforming loans to total
   loans (net of unearned interest)...........          0.0029            0.0004
                                                    ==========          ========
Total nonperforming assets to total assets....          0.0036            0.0002
                                                    ==========          ========
</TABLE>


                                     Page 4
<PAGE>   11
NONPERFORMING ASSETS - CONCLUDED

It is the general policy of the Company to stop accruing interest income and
place the recognition of interest on a cash basis when any commercial,
industrial or real estate loan is past due as to principal or interest and the
ultimate collection of either is in doubt. Accrual of interest income on
consumer installment loans is suspended when any payment of principal or
interest, or both, is more than ninety days delinquent. When a loan is placed on
a nonaccrual basis any interest previously accrued but not collected is reversed
against current income unless the collateral for the loan is sufficient to cover
the accrued interest or a guarantor assures payment of interest.

There has been no significant impact on the Company's financial statements as a
result of the provisions of Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan, or Statement of Accounting
Standards No. 118, Accounting by Creditors for Impairment of a Loan Income
Recognition and Disclosures.

PROVISION FOR LOAN LOSSES, NET CHARGE-OFFS AND ALLOWANCE FOR LOAN LOSSES

The provision for loan losses, which is charged to operations, is based on the
growth of the loan portfolio, the amount of net loan losses incurred and
management's estimation of potential future losses based on an evaluation of the
risk in the loan portfolio. Management believes that the $701,234 in the
allowance for loan losses at December 31, 1999 (1.12% total net outstanding
loans at that date) was adequate to absorb known risks in the portfolio based
upon the Company's historical experience. No assurance can be given, however,
that increased loan volume, adverse economic conditions or other circumstances
will not result in increased losses in the Company's loan portfolio.

The following table sets forth certain information with respect to the Company's
loans, net of unearned income, and the allowance for loan losses for the years
ended December 31, 1999 and 1998.

                         SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>
                                                            1999          1998
                                                            ----          ----
                                                            (in Thousands)
<S>                                                       <C>           <C>
Allowance for loan losses at beginning of year .....      $   366       $   170

Total loans charged off -- consumer loans ..........          114            39
Recoveries on loans previously charged off .........          -0-           -0-
                                                          -------       -------
Net loans charged off ..............................          114            39

Provision for loan losses ..........................          449           235
                                                          -------       -------

Allowance for loan losses at end of period .........      $   701       $   366
                                                          =======       =======

Loans, net of unearned income, at end of period ....      $62,564       $36,464
                                                          =======       =======

Average loans, net of unearned income,
   outstanding for the period ......................      $51,119       $27,335
                                                          =======       =======
Ratios:
Allowance at end of period to loans, net of
   unearned income .................................         1.12%         1.00%
Allowance at end of period to average loans,
   net of unearned income ..........................         1.37%         1.34%
Net charge-offs to average loans, net of
   unearned income .................................         0.22%         0.14%
Net charge-offs to allowance at end of period ......        16.26%        10.66%
Recoveries to prior year charge-offs ...............         0.00%         0.00%
</TABLE>


                                     Page 5
<PAGE>   12
PROVISION FOR LOAN LOSSES, NET CHARGE-OFFS, AND ALLOWANCE FOR LOAN LOSSES -
CONCLUDED

In assessing adequacy, management relies predominantly on its ongoing review of
the loan portfolio, which is undertaken both to ascertain whether there are
probable losses which must be charged off and to assess the risk characteristics
of the portfolio in the aggregate. This review takes into consideration the
judgments of the responsible lending officers and senior management, and also
those of bank regulatory agencies that review the loan portfolio as part of the
regular bank examination process.

In evaluating the allowance, management also considers the loan loss experience
of Gateway Bancshares, Inc. & Subsidiary, the amount of past due and
nonperforming loans, current and anticipated economic conditions, lender
requirements and other appropriate information.

Management allocated the reserve for loan losses to specific loan classes as
follows:

                     ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                        DECEMBER 31, 1999           December 31, 1998
                                                    -------------------------     ---------------------
                                                                     PERCENT                  Percent
                                                    AMOUNT           OF TOTAL      Amount     Of Total
                                                    ------           --------      ------     --------
                                                         (in Thousands)              (in Thousands)
<S>                                                 <C>              <C>           <C>        <C>
Domestic loans (1):
  Commercial, financial and
    agricultural ..........................          $373              53.2%        $110        30.0%
  Real estate - construction and other ....           220              31.4%          66        18.1%
  Consumer ................................           108              15.4%         190        51.9%
                                                     ----             -----         ----       -----
                                                     $701             100.0%        $366       100.0%
                                                     ====             =====         ====       =====
</TABLE>

(1)       The Company had no foreign loans.

INVESTMENT SECURITIES AND FEDERAL FUNDS SOLD

The Bank has classified its investment securities as either available for sale
or held to maturity, depending on whether the Bank has the intent and ability to
hold such securities to maturity. At December 31, 1999, $16,014,879 of the
Bank's investment securities were classified as available for sale, compared to
$24,526,907 at year end 1998. Securities classified as held to maturity were
$4,729,974 at year end 1999, as compared to $7,562,904 at year end 1998.

Restricted investments consisted of stock in the Federal Home Loan Bank, the
purchase of which was required in order to become a member and participate in
available lines of credit. These investments were $230,800 at year end 1999 and
$118,300 at year end 1998.

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 available-for-sale and held-to-maturity, it is the
intention to hold such securities for the foreseeable future. Management of the
maturity of the portfolio is necessary to provide liquidity and to control
interest rate risk. During 1999 gross investment securities sales were
approximately $7.9 million and maturities and calls were $6.1 million,
representing 33.6% and 25.9%, respectively, of the average portfolio for the
year. Gains associated with the sales totaled $9,618, accounting for 2.3% of
noninterest income, while losses totaled $(8,466), accounting for 0.4% of
noninterest


                                     Page 6
<PAGE>   13

INVESTMENT SECURITIES AND FEDERAL FUNDS SOLD - CONCLUDED

expenses. Gross unrealized gains in the portfolio amounted to $-0- and
unrealized losses amounted to $1,122,640 at year end 1999. During 1998, gross
investment securities sales were approximately $7.3 million and maturities and
calls were $13.5 million, representing 37.2% and 68.9%, respectively, of the
average portfolio for the year. Gains associated with the sales were $12,170,
accounting for 3.3% of noninterest income, while losses totaled $517, accounting
for .03% of noninterest expense. Gross unrealized gains in the portfolio
amounted to $88,007 and unrealized losses were $9,230 at year end 1998.

Mortgaged-backed securities have varying degrees of risk of impairment of
principal, as opposed to U.S. Treasury and U.S. government agency obligations,
which are considered to contain virtually no default or prepayment risks.
Impairment risk is primarily associated with accelerated prepayments,
particularly with respect to longer maturities purchased at a premium and
interest-only strip securities. The Bank's purchase of mortgage-backed
securities during 1999 did not include securities with these characteristics.
The recoverability of the Bank's investment in mortgage-backed securities is
reviewed periodically, and if necessary, appropriate adjustments would be made
to income for impaired values.

Management maintains federal funds sold as a tool in managing its daily cash
needs. Federal funds sold decreased from $4,700,000 at year end 1998 to $600,000
at year end 1999. Average federal funds sold for 1999 was approximately $608,000
or 0.8% of average earning assets, compared with approximately $1,605,000 or
3.3% of average earning assets for 1998. The decrease of 62.1% in average
federal funds sold from 1998 reflects an emphasis by management on improving
profitability by deploying more funds into higher earning assets.


DEPOSITS

The Bank's primary source of funds is derived from deposits of Bank customers.
Average deposits increased 58.4% from approximately $44,800,000 in 1998 to
approximately $70,976,000 in 1999. At December 31, 1999, total deposits were
$81,144,347, of which $75,104,608 (92.6%) were interest-bearing and $6,039,739
(7.4%) were noninterest-bearing. At year-end 1998, total deposits were
$68,835,372, of which $62,586,245 (91%) were interest-bearing and $6,249,127
(9.0%) were noninterest-bearing. Continued enhancement of existing products and
emphasis upon better customer service fuels the growth in the deposit base.
Emphasis has been placed upon attracting consumer deposits. The Bank plans to
expand its consumer base in order to continue to fund asset growth.


SHAREHOLDERS' EQUITY

Shareholders' equity decreased $(71,727) from December 31, 1998 to December 31,
1999, due to net earnings of $505,137 and the decrease in unrealized gains on
securities available for sale totaling ($576,864), net of deferred tax
liability.


LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY MANAGEMENT

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 Banks' 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 to maintain an appropriate balance between interest-sensitive assets
and


                                     Page 7
<PAGE>   14

LIQUIDITY MANAGEMENT - CONCLUDED

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 are, therefore, monitored on a
daily basis.

The asset portion of the balance sheet provides liquidity primarily through loan
principal repayments or sales of investment and trading account securities. Real
estate-construction and commercial, financial and agricultural loans that mature
in one year or less equaled approximately $17.7 million or 28.3 percent of the
total loan portfolio at December 31, 1999 and investment securities maturing in
one year or less equaled $1.7 million or 8.1 percent of the portfolio. Other
sources of liquidity include short-term investments such as Federal funds sold.

The liability portion of the balance sheet provides liquidity through various
customers' interest-bearing and noninterest-bearing deposit accounts. Funds are
also available through the purchase of federal funds from other commercial banks
from an available line of up to $4.5 million. Liquidity management involves the
daily monitoring of the sources and uses of funds to maintain an acceptable
company cash position.

In an effort to maintain and improve the liquidity position of the Bank,
management made application for membership with the Federal Home Loan Bank of
Atlanta in 1998. As a member of the Federal Home Loan Bank, the Bank is able to
improve its ability to manage liquidity and reduce interest rate risk by having
a funding source to match longer term loans. The application was approved in
1998, and the Bank received a credit line of up to $3,500,000. The Bank has made
a $1,000,000 draw from the available credit with the Federal Home Loan Bank. See
Note 9 to the Notes to Consolidated Financial Statements herein.

CAPITAL RESOURCES

A strong capital position is vital to the continued 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 the
majority of its capital requirements through the proceeds of its initial stock
offering in 1997 and the retention of earnings.

Bank regulatory authorities are placing increased emphasis on the maintenance of
adequate capital. In 1990, new 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 Tier 1 capital, which consists of common equity, amounted to
$6.3 million at December 31, 1999. Tier II capital components include
supplemental capital components such as qualifying allowance for loan losses and
qualifying subordinated debt. Tier I capital plus the Tier II capital components
is referred to as Total Risk-based capital and was $7 million at year-end 1999.
The percentage ratios, as calculated under the guidelines were 8.6 percent and
9.6 percent for Tier I and Total Risk-based capital, respectively, at year-end
1999. Both levels currently exceed the minimum ratios of four percent and eight
percent, respectively.

Another important indicator of capital adequacy in the banking industry is the
leverage ratio. The leverage ratio is defined as the ratio the Bank's Tier 1
capital minus specific intangible assets to total average assets minus specific
intangible assets. The Bank's leverage ratios as of December 31, 1999 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.


                                     Page 8
<PAGE>   15





CAPITAL RESOURCES - CONCLUDED

The table below illustrates the Bank's regulatory capital ratios at December 31,
1999 and 1998 under the year end 1999 requirements.


<TABLE>
<CAPTION>
                                                                 CAPITAL ADEQUACY RATIOS
                                                        -------------------------------------------

                                                                  YEAR ENDED DECEMBER 31,
                                                        -------------------------------------------
                                                              1999                        1998
                                                        --------------                -------------
                                                                      (in thousands)

<S>                                                     <C>                           <C>
Tier 1 Capital.......................................   $        6,252                $       6,265
Tier 2 Capital.......................................              701                          366
                                                        --------------                -------------

Total Qualifying Capital.............................   $        6,953                $       6,631
                                                        ==============                =============

Risk Adjusted Total Assets
(including off-balance sheet exposures)..............   $       72,406                $      51,983
                                                        ==============                =============

Tier 1 Risk-Based Capital Ratio......................             8.64%                       12.05%

Total Risk-Based Capital Ratio.......................             9.60%                       12.76%

Leverage Ratio.......................................             7.21%                        9.21%
</TABLE>


DBF Capital Requirement. In addition to the capital standards imposed by federal
banking regulators, the Georgia Department of Banking and Finance (DBF) imposed
a 7.50% primary capital ratio as a condition to the approval to the Bank's
charter. This standard, which exceeds the FDIC capital standard, is calculated
as the ratio of total equity to total assets. This heightened requirement is
imposed during the first three years of the Bank's operation. At December 31,
1999, the capital ratio as calculated under the DBF standard was 7.81%. The
Bank's capital ratio as calculated by the DBF was in compliance as of December
31, 1999 and 1998. Upon the third anniversary of the Bank's operations on April
21, 2000, the Bank's required capital ratio will reduce to 4.50%.



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.
The following tables show interest sensitivity gaps for these different
intervals as of December 31, 1999.


                                     Page 9
<PAGE>   16




INTEREST RATE SENSITIVITY MANAGEMENT - CONCLUDED

                       INTEREST RATE SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>
                                               0-30            31-90         91-365          1-5         Over 5
                                               Days             Days          Days          Years         Years          Total
                                               ----             ----          ----          -----         -----          -----
                                                                               (in thousands)
<S>                                          <C>           <C>              <C>           <C>             <C>           <C>
AT DECEMBER 31, 1999
Interest-earning assets (1)
Loans ..................................     $ 10,157      $     20,314     $  3,081      $    28,745     $    267      $62,564
Investment Securities:
   Taxable .............................          -0-               -0-        1,004            5,381       14,366       20,751
   Tax exempt ..........................          -0-               -0-          -0-              -0-          225          225
Federal funds sold .....................          600               -0-          -0-              -0-          -0-          600
                                             --------      ------------     --------      -----------     --------      -------
                                               10,757            20,314        4,085           34,126       14,858       84,140
                                             --------      ------------     --------      -----------     --------      -------
Interest-bearing liabilities (2)
Demand deposits ........................        2,861             2,861        2,860              -0-          -0-        8,582
Savings deposits .......................        3,640             3,640        3,639              -0-          -0-       10,919
Time deposits ..........................        4,811             5,689       24,397           20,707          -0-       55,604
Long-term borrowings ...................          -0-               -0-          -0-            1,000          -0-        1,000
                                             --------      ------------     --------      -----------     --------      -------
                                               11,312            12,190       30,896           21,707          -0-       76,105
                                             --------      ------------     --------      -----------     --------      -------

Interest sensitivity gap ...............     $   (555)     $      8,124     $(26,811)     $    12,419     $ 14,858      $ 8,035
                                             ========      ============     ========      ===========     ========      =======

Cumulative interest sensitivity gap ....     $   (555)     $      7,569     $(19,242)     $    (6,823)    $  8,035
                                             ========      ============     ========      ===========     ========

Ratio of interest-earning assets to
     interest-bearing liabilities ......          .95              1.67          .13             1.57           --
                                             ========      ============     ========      ===========     ========

Cumulative ratio .......................          .95              1.32          .65              .91         1.11
                                             ========      ============     ========      ===========     ========

Ratio of cumulative gap to total
     to interest-bearing assets ........         (.01)              .09         (.23)            (.08)         .10
                                             ========      ============     ========      ===========     ========
</TABLE>

---------------
(1) Excludes nonaccrual loans and securities.
(2) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing.
(3) Demand and savings deposits and other short term borrowings are assumed to
be subject to movement into other deposit instruments in equal amounts during
the 0-30 day period, the 31-90 day period, and the 91-365 day period.


The above table indicates that in a rising interest rate environment, the
Company's earnings may be adversely affected in the 0-365 day periods where
liabilities will reprice faster than assets. As seen in the preceding table, for
the first 30 days of repricing opportunity there is an excess of
interest-bearing liabilities over interest-earnings assets of $555 thousand. For
the first 365 days, interest-bearing liabilities exceed earning assets by $19.2
million. During this one year time frame, 71.5 percent of all interest bearing
liabilities will reprice compared to 41.8 percent of all interest-earning
assets. 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. Using this analysis, management from
time to time assumes calculated interest sensitivity gap positions to maximize
net interest income based upon anticipated movements in the general level of
interest rates.


                                    Page 10
<PAGE>   17

INFLATION AND CHANGING PRICES

A Bank's asset and liability structure is significantly different from that of
an industrial company in that substantially all assets and liabilities of a bank
are monetary in nature. Management believes the impact of inflation on financial
results depends upon the Bank'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 Report will assist in the
understanding of how well the Bank is positioned to react to changing interest
rates and inflationary trends. In particular, the summary of net interest
income, the maturity distribution, the composition of the loan and security
portfolios and the data on the interest sensitivity of loans and deposits should
be considered.


CONCLUSION

The Bank has experienced continued growth since its opening in 1997. It has
enjoyed continued increase in its customer base, as shown by the rapid increase
in deposits and loans for the 1999 fiscal year. While management remains
optimistic about the prospects for continued growth and profitability,
management does not anticipate that growth will be at the level experienced
during the Bank's initial two years of operation. No assurance can be given that
the Bank will continue to grow and be profitable.

The foregoing 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.


                                    Page 11
<PAGE>   18




                    MANAGEMENT'S STATEMENT OF RESPONSIBILITY
                            FOR FINANCIAL INFORMATION

                      Gateway Bancshares, Inc. & Subsidiary


The management of Gateway Bancshares, Inc. & 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, through its audit committee,
utilizes 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 the Board of Directors and may meet with them, with and without
management being present, to discuss auditing and financial reporting matters.


                                    Page 12
<PAGE>   19




GATEWAY BANCSHARES, INC. & SUBSIDIARY
<TABLE>
<CAPTION>
Index to Consolidated Financial Statements                                                                  Page(s)

<S>                                                                                                         <C>
Independent Auditors' Report................................................................................     14

Consolidated Statements of Financial Condition as of December 31, 1999 and 1998.............................     15

Consolidated Statements of Income for the years ended
  December 31, 1999, 1998 and 1997..........................................................................     16

Consolidated Statements of Changes in Shareholders' Equity for the years ended
  December 31, 1999, 1998 and 1997..........................................................................     17

Consolidated Statements of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997..........................................................................     18

Notes To Consolidated Financial Statements..................................................................  19-37
</TABLE>





<PAGE>   20




                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Shareholders of
Gateway Bancshares, Inc. & Subsidiary

We have audited the accompanying consolidated statements of financial condition
of Gateway Bancshares, Inc. & Subsidiary as of December 31, 1999 and 1998 and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for the years ended December 31, 1999, 1998 and 1997. 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 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 financial position of Gateway Bancshares,
Inc. & Subsidiary as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended December 31, 1999, 1998 and
1997, in conformity with generally accepted accounting principles.


/s/  Land & Associates, P.C., CPAs

Ellijay, Georgia
February 14, 2000

<PAGE>   21
                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                1999                     1998
                                                                            ------------             ------------
<S>                                                                         <C>                      <C>
ASSETS
    Cash .......................................................            $  1,354,182             $    397,459
    Due from banks .............................................               1,024,353                1,015,443
    Federal funds sold .........................................                 600,000                4,700,000

    Securities available for sale ..............................              16,014,879               24,526,907
    Securities held to maturity, estimated fair value
      of $4,470,405 for 1999 and $7,630,715 for 1998 ...........               4,729,974                7,562,904
    Restricted investments .....................................                 230,800                  118,300

    Loans ......................................................              62,564,092               36,464,131
    Allowance for loan losses ..................................                (701,234)                (366,158)
                                                                            ------------             ------------
            NET LOANS ..........................................              61,862,858               36,097,973

    Premises and equipment, net ................................               1,956,568                1,694,514
    Accrued interest ...........................................                 780,543                  678,770
    Other assets ...............................................                 545,417                  146,841
                                                                            ------------             ------------

            TOTAL ASSETS .......................................            $ 89,099,574             $ 76,939,111
                                                                            ============             ============

LIABILITIES AND SHAREHOLDERS' EQUITY
    LIABILITIES
      Deposits:
         Noninterest-bearing ...................................            $  6,039,739             $  6,249,127
         Interest-bearing ......................................              75,104,608               62,586,245
                                                                            ------------             ------------
           TOTAL DEPOSITS ......................................              81,144,347               68,835,372

      Long-term debt ...........................................               1,000,000                1,000,000
      Accrued interest .........................................                 363,948                  276,995
      Other liabilities ........................................                  76,389                  240,127
                                                                            ------------             ------------

           TOTAL LIABILITIES ...................................              82,584,684               70,352,494
                                                                            ------------             ------------

    SHAREHOLDERS' EQUITY
      Common stock, par value $5 per share,
            10,000,000 shares authorized, 679,048
            shares issued and outstanding ......................               3,395,240                3,395,240
      Capital surplus ..........................................               3,357,637                3,357,637
      Accumulated earnings (deficit) ...........................                 331,640                 (173,497)
      Accumulated other comprehensive income ...................                (569,627)                   7,237
                                                                            ------------             ------------

           TOTAL SHAREHOLDERS' EQUITY ..........................               6,514,890                6,586,617
                                                                            ------------             ------------

           TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..........            $ 89,099,574             $ 76,939,111
                                                                            ============             ============
</TABLE>

                See notes to consolidated financial statements.


                                    Page 15
<PAGE>   22


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                                              1999                 1998                 1997
                                                           -----------          -----------          -----------
<S>                                                        <C>                  <C>                  <C>
REVENUE FROM EARNING ASSETS
    Interest and fees on loans ...................         $ 4,866,731          $ 2,839,315          $   686,705
    Interest on investment securities:
     Taxable securities ..........................           1,438,356            1,240,761              391,393
     Tax exempt ..................................               7,132                  -0-                  -0-
    Interest on federal funds sold ...............              30,532               99,157               66,444
    Interest on deposits in other banks ..........                 872                  -0-                  -0-
                                                           -----------          -----------          -----------
           TOTAL REVENUE FROM EARNING ASSETS .....           6,343,623            4,179,233            1,144,542
                                                           -----------          -----------          -----------

INTEREST EXPENSE
    Interest on deposits .........................           3,320,842            2,265,832              428,696
    Interest on borrowed funds ...................             102,658               61,112                  927
                                                           -----------          -----------          -----------
           TOTAL INTEREST EXPENSE ................           3,423,500            2,326,944              429,623
                                                           -----------          -----------          -----------

NET INTEREST INCOME ..............................           2,920,123            1,852,289              714,919
    Provision for loan losses ....................             449,000              235,000              171,075
                                                           -----------          -----------          -----------

NET INTEREST INCOME
    AFTER PROVISION FOR LOAN LOSSES ..............           2,471,123            1,617,289              543,844
                                                           -----------          -----------          -----------

NONINTEREST INCOME
    Service charges on deposits ..................             213,572              138,915               41,142
    Mortgage loan fees ...........................             140,086              175,113               57,258
    Insurance commissions ........................               6,821                4,375                1,881
    Investment securities gains ..................               9,618               12,170                  -0-
    Other operating income .......................              47,405               36,731               11,480
                                                           -----------          -----------          -----------
    TOTAL NONINTEREST INCOME .....................             417,502              367,304              111,761
                                                           -----------          -----------          -----------

NONINTEREST EXPENSES
    Salaries and employee benefits ...............           1,018,784              764,592              571,089
    Occupancy expense ............................             107,703               95,620               76,044
    Furniture and equipment expense ..............             149,506              107,243               61,643
    Investment securities losses .................               8,466                  517                  662
    Other operating expenses .....................             805,268              728,498              374,351
                                                           -----------          -----------          -----------
    TOTAL NONINTEREST EXPENSES ...................           2,089,727            1,696,470            1,083,789
                                                           -----------          -----------          -----------

Cumulative effect of change in accounting
    principle, net of income tax effect ..........             (24,592)                 -0-                  -0-
                                                           -----------          -----------          -----------

NET INCOME (LOSS) BEFORE INCOME TAXES ............             774,306              288,123             (428,184)

Income tax (expense) benefit .....................            (269,169)             (54,291)             154,445
                                                           -----------          -----------          -----------

NET INCOME (LOSS) ................................         $   505,137          $   233,832          $  (273,739)
                                                           ===========          ===========          ===========

EARNINGS (LOSS) PER COMMON SHARE -
BASIC AND DILUTIVE:
Net income (loss) per common share ...............         $      0.74          $      0.34          $     (0.40)
Basic weighted average shares outstanding ........             679,048              679,048              679,048
Diluted earnings per common share ................         $      0.74          $      0.34          $     (0.40)
Diluted weighted average shares outstanding ......             680,079              679,048              679,048
</TABLE>

                See notes to consolidated financial statements.


                                    Page 16
<PAGE>   23


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                                     ACCUMULATED
                                                                                  ACCUMULATED           OTHER
                                                COMMON            CAPITAL          EARNINGS         COMPREHENSIVE
                                                 STOCK            SURPLUS          (DEFICIT)           INCOME             TOTAL
                                             -------------      -------------     ------------      -------------      -----------

<S>                                          <C>                <C>                <C>               <C>               <C>
Balance at December 31, 1996 ..........      $   3,395,240      $   3,357,637      $  (133,590)      $    (3,947)      $ 6,615,340

Comprehensive Income:
    Net Loss - 1997 ...................                -0-                -0-         (273,739)              -0-          (273,739)
    Change in net unrealized gain
      (loss) on securities available
      for sale, net of tax effect .....                -0-                -0-              -0-            18,812            18,812
                                             -------------      -------------      -----------       -----------       -----------
                                                                                                                          (254,927)

Balance at December 31, 1997 ..........          3,395,240          3,357,637         (407,329)           14,865         6,360,413

Comprehensive Income:
    Net Income - 1998 .................                -0-                -0-          233,832               -0-           233,832
    Change in net unrealized gain
      (loss) on securities available
      for sale, net of tax effect .....                -0-                -0-              -0-            (7,628)           (7,628)
                                             -------------      -------------      -----------       -----------       -----------
                                                                                                                           226,204

Balance at December 31, 1998 ..........          3,395,240          3,357,637         (173,497)            7,237         6,586,617

COMPREHENSIVE INCOME:
    NET INCOME - 1999 .................                -0-                -0-          505,137               -0-           505,137
    CHANGE IN NET UNREALIZED GAIN
      (LOSS) ON SECURITIES AVAILABLE
      FOR SALE, NET OF TAX EFFECT .....                -0-                -0-              -0-          (576,864)         (576,864)
                                             -------------      -------------      -----------       -----------       -----------
                                                                                                                           (71,727)

BALANCE AT DECEMBER 31, 1999 ..........      $   3,395,240      $   3,357,637      $   331,640       $  (569,627)      $ 6,514,890
                                             =============      =============      ===========       ===========       ===========
</TABLE>

                See notes to consolidated financial statements.


                                    Page 17
<PAGE>   24


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                            1999                 1998                 1997
                                                                        ------------         ------------         ------------
<S>                                                                     <C>                  <C>                  <C>
OPERATING ACTIVITIES:
  Net income (loss) ............................................        $    505,137         $    233,832         $   (273,739)
  Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
  Provision for depreciation and amortization ..................             174,210              133,617               90,100
  Amortization of investment security premiums
     and accretion of discounts ................................              (1,071)             (19,610)             (25,239)
  Provision for loan losses ....................................             449,000              235,000              171,075
  Deferred tax (benefit) .......................................              11,000               54,291             (155,610)
  Realized investment security gains ...........................                (858)             (11,653)                 662
  Increase in accrued interest receivable ......................            (101,773)            (399,720)            (236,206)
  Increase in accrued interest payable .........................              86,953              185,698               91,297
  Other ........................................................            (174,900)             221,740              (82,471)
                                                                        ------------         ------------         ------------
     NET CASH (USED IN) OPERATING ACTIVITIES ...................             947,698              633,195             (420,131)
                                                                        ------------         ------------         ------------

INVESTING ACTIVITIES:
  Proceeds from sales of securities held to maturity ...........           2,500,937                  -0-                  -0-
  Proceeds from sale of securities available for sale ..........           5,440,748            7,346,633              693,357
  Proceeds from maturities,calls and pay-downs of
     securities ................................................           6,125,128           13,493,225            3,680,783
  Purchase of securities available for sale ....................          (3,369,356)         (30,149,745)         (13,414,894)
  Purchase of securities held to maturity ......................            (337,106)          (7,668,713)            (943,852)
  Net increase in loans to customers ...........................         (26,352,388)         (19,307,505)         (17,196,543)
  Capital expenditures .........................................            (399,003)             (90,770)          (1,258,125)
                                                                        ------------         ------------         ------------
     NET CASH USED IN INVESTING ACTIVITIES .....................         (16,391,040)         (36,376,875)         (28,439,274)
                                                                        ------------         ------------         ------------

FINANCING ACTIVITIES:
  Net increase (decrease) in demand deposits, NOW,
     accounts and savings accounts .............................          (3,695,104)          12,811,816           18,862,014
  Net increase in certificates of deposit ......................          16,004,079           25,912,348           11,249,194
  Net proceeds from (repayments on) notes payable ..............                 -0-            1,000,000                  -0-
                                                                        ------------         ------------         ------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES .................          12,308,975           39,724,164           30,111,208
                                                                        ------------         ------------         ------------

Net increase (decrease) in cash and cash equivalents............          (3,134,367)           3,980,484            1,251,803

Cash and cash equivalents at beginning of year .................           6,112,902            2,132,418              880,615
                                                                        ------------         ------------         ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR .......................        $  2,978,535         $  6,112,902         $  2,132,418
                                                                        ============         ============         ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest .....................................................        $  3,336,547         $  2,141,246         $    338,326
  Income taxes .................................................             256,000                  -0-                  -0-
Schedule of non-cash investing and financing activities:
  Loans transferred to foreclosed real estate during
     the year ..................................................             138,503                  -0-                  -0-
  Net increase (decrease) in unrealized gains on
     securities available for sale .............................            (576,864)              (7,628)              18,812
</TABLE>

                See notes to consolidated financial statements.


                                    Page 18
<PAGE>   25


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: Gateway Bancshares, Inc. ("the Company") is a bank
holding company whose principal activity is the ownership and management of its
wholly-owned subsidiary, Gateway Bank & Trust (the "Bank"). The Bank generates
commercial (including agricultural), mortgage and consumer loans and receives
deposits from customers located primarily in Catoosa County, Georgia and the
surrounding areas. The Bank operates under a state bank charter and provides
full banking services. As a state bank, the Bank is subject to regulation by
the Georgia Department of Banking and Finance and the Federal Deposit Insurance
Corporation.

Business: The Company began organizational activities on July 11, 1995 and was
incorporated on October 3, 1995 in the State of Georgia. On December 11, 1995,
the Bank's charter was approved by the Georgia Department of Banking and
Finance. On December 13, 1995, the Bank was incorporated under the laws of the
State of Georgia. The Company completed its stock offering on June 15, 1996.
The Bank opened for business on April 21, 1997. The Bank operated as a
development stage company in the period prior to its opening for business. The
Bank provides a full range of banking services to individual and corporate
customers in Catoosa County, Georgia and the surrounding areas.

Basis of Consolidation: The consolidated financial statements include the
accounts of Gateway Bancshares, Inc. and its wholly-owned subsidiary, Gateway
Bank & Trust. All significant intercompany balances and transactions have been
eliminated.

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. Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the allowance for loan losses, and the
valuation of foreclosed real estate, deferred tax assets, and trading
activities.

The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. In connection with the
determination of the estimated losses on loans, management obtains independent
appraisals for significant collateral.

The Bank's loans are generally secured by specific items of collateral
including real property, consumer assets, and business assets. Although the
Bank has a diversified loan portfolio, a substantial portion of its debtors'
ability to honor their contracts is dependent on local economic conditions.

While management uses available information to recognize losses on loans,
further reductions in the carrying amounts of loans may be necessary based on
changes in local economic conditions. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the estimated
losses on loans. Such agencies may require the Bank to recognize additional
losses based on their judgments about information available to them at the time
of their examination. Because of these factors, it is reasonably possible that
the estimated losses on loans may change materially in the near term. However,
the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents: For purposes of the consolidated statements of cash
flows, cash and cash equivalents include cash, balances due from banks, and
federal funds sold.


                                    Page 19
<PAGE>   26


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Investments in Securities: Debt securities that management has the positive
intent and ability to hold to maturity are classified as "held-to-maturity" and
reflected at amortized cost. Debt securities not classified as
"held-to-maturity" including equity securities with readily determinable fair
value, are classified as "available-for-sale" and reflected at fair value, with
unrealized gains and losses excluded from earnings and reported in other
comprehensive income.

Purchase premiums and discounts are recognized in interest income using methods
approximating the interest method over the period to maturity. Declines in the
value of held-to-maturity and available-for-sale securities below their cost
that are deemed to be other than temporary are reflected in earnings as
realized losses. Gains and losses on the sale of securities are recorded on the
trade date and are determined using the specific identification method.

Trading securities are bought and held principally for the purpose of selling
them in the near term. The Company has no trading securities.

Restricted investment securities consists of equity stock in which the purchase
of such security was required as a condition of obtaining borrowings. These
investments are recorded at cost. Fair value is determined by the ultimate
recoverability of par value.

Loans: The Bank grants mortgage, commercial and consumer loans to customers in
the Northwest Georgia area. The ability of the Bank's debtors to honor their
contracts is dependent upon the real estate and general economic sectors in
this area. The Bank's loans are generally secured by specific items of
collateral including real property, consumer assets, and business assets.

Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts.

Unearned discounts on installment loans are recognized as income over the term
of the loans using a method that approximates the interest method.

Loan origination and commitment fees, as well as certain direct origination
costs, are deferred, if material, and amortized as a yield adjustment over the
lives of the related loans using the interest method. Amortization of deferred
loan fees is discontinued when a loan is placed on nonaccrual status.

Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
previously accrued on such loans is reversed against current period interest
income.

Allowance for Loan Losses: The allowance for loan losses is maintained at a
level which, in management's judgment, is adequate to absorb losses inherent in
the loan portfolio. The amount of the allowance is based on management's
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, economic conditions, and other risks inherent in the
portfolio. Allowances for impaired loans are generally determined based on
collateral values or the present value of estimated cash flows. Although
management uses available information to recognize losses on loans, because of
uncertainties associated with local economic conditions, collateral values, and
future cash flows on impaired loans, it is reasonably possible that a material
change could occur in the allowance for loan losses in the near term. However,
the amount of the change that is reasonably


                                    Page 20
<PAGE>   27


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

possible cannot be estimated. The allowance is increased by a provision for
loan losses, which is charged to expense and reduced by charge-offs, net of
recoveries. Changes in the allowance relating to impaired loans are charged or
credited to the provision for loan losses.

Premises and Equipment: Other premises and equipment are carried at cost less
accumulated depreciation computed on the straight-line method over the
estimated useful lives of the assets. Expenditures for repairs and maintenance
are charged to expense as incurred, and major additions and improvements are
capitalized.

Foreclosed Assets: Assets acquired through, or in lieu of, foreclosure are held
for sale and initially recorded at fair value at the date of foreclosure,
establishing a cost basis. Subsequent to foreclosure, valuations are
periodically performed by management and the assets are carried at the lower of
carrying amount or fair value less cost to sell. Costs of significant property
improvements are capitalized, whereas costs relating to holding property are
expensed. The portion of interest costs relating to development of real estate
is capitalized. Valuations are periodically performed by management, and any
subsequent write-downs are recorded as a charge to operations, if necessary, to
reduce the carrying value of a property to the lower of its cost or fair value
less cost to sell.

Earnings Per Common Share: Earnings per common share are calculated on the
basis of the weighted average number of common shares outstanding

Income Taxes: Income taxes are provided for the tax effects of the transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of the
allowance for loan losses and accumulated depreciation. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred tax assets and liabilities are
reflected at income tax rates applicable to the period in which the deferred
tax assets or liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes. The Company files consolidated income
tax returns with its subsidiary bank.

Employee Benefit Plan: The Bank has a 401-K profit-sharing plan covering
substantially all of its employees. Eligible participating employees may elect
to contribute tax deferred contributions. Bank contributions to the plan are
determined by the Board of Directors, after operating losses from prior years
have been fully recovered.

Intangibles: Intangibles assets 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. In April 1998,
the American Institute of Certified Public Accountants Statement of Position
98-5, "Reporting on the Costs of Start-up Activities," was issued, which
requires the costs of organizational and start-up activities to be expensed as
they are incurred. Costs that entities previously capitalized as start-up costs
should now be expensed, effective for years beginning after December 15, 1998.
The Company adopted this statement in 1999. The adjustment is accounted for as
the cumulative effect of a change in accounting principle, net of the income
tax effect.


                                    Page 21
<PAGE>   28


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Off Balance Sheet Financial Instruments: In the ordinary course of business the
Bank has entered into off-balance-sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they become payable.

The Bank also has available as a source of short-term financing the purchase of
federal funds from other correspondent banks from an available line of up to
$4.5 million.

Other matters: The consolidated financial statements include disclosure items
required by the Federal Deposit Insurance Corporation (the "FDIC"). These
statements has not been reviewed, or confirmed for accuracy or relevance, by
the FDIC.

Certain amounts in the prior year have been reclassified to conform with the
current year presentation.

Comprehensive Income: The Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," as of January 1, 1998. Accounting principles generally
require that recognized revenue, expenses, gains and losses be included in net
income. Although certain changes in assets and liabilities, such as unrealized
gains and losses on available-for-sale securities, are reported as a separate
component of the equity section of the balance sheet, such items along with net
income, are components of comprehensive income. The adoption of SFAS No. 130
had no effect on the Company's consolidated net income or shareholders' equity.

Segment Information: The Bank adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," effective for its years ending
December 31, 1998 and 1997. This Statement, which establishes standards for the
way that public business enterprises report information about operating
segments in annual financial statements, requires the reporting of selected
financials and descriptive information about its reportable operating segments.
The Company operates a commercial bank, through its wholly-owned subsidiary,
and provides financial services to its customers in the Northwest Georgia area.
The services provided constitute one business segment, and are all related to
accepting deposits from customers, providing loans for customers, related
banking and financial services and management of the bank's assets and
liabilities. The Company's internal reporting considers all activities as one
business segment. The Company considers its entire operations as one operating
segment. The adoption of SFAS No. 131 had no effect on the Company's
consolidated net income or stockholders' equity.

Pensions and Other Post-retirement Benefits: The Company adopted SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-retirement Benefits," as
of January 1, 1998. This statement, which standardizes the disclosure
requirements for pensions and other post-retirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain other disclosures previously required. The
adoption of SFAS No. 132 had no effect on the Company's consolidated net income
or shareholders' equity.


                                    Page 22
<PAGE>   29


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONCLUDED

Other Pronouncements: In June 1996, the FASB issued SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." SFAS No. 125 was amended by SFAS No. 127, which deferred the
effective date of certain provisions of SFAS No. 125 until January 1, 1998.
SFAS No. 125 is to be applied prospectively to transfers and servicing of
financial assets and extinguishments of liabilities after December 31, 1996.
This statement utilizes the financial components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognized the financial and servicing assets it controls and the liabilities
when extinguished. Adoption of SFAS No. 125 did not have an impact on the
Company's consolidated financial statements.

In December 1996, the FASB issued SFAS No. 126, "Exemption from Certain
Required Disclosures about Financial Instruments for Certain Nonpublic
Entities," which amends FASB No. 107, "Disclosures about Fair Value of
Financial Instruments." This statement allows an entity to be exempt from SFAS
No. 107 disclosures if the following criteria are met: a) the entity is a
nonpublic entity, b) the entity's total assets are less than $100 million on
the date of the financial statements, and (c) the entity has not held or issued
any derivative financial instruments, as defined in FASB No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments," other than loan commitments, during the reporting period. This
statement did not have an impact the Company's consolidated financial
statements.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
simplifies previous standards for reporting earnings per share. Under SFAS No.
128, earnings per share is stated on the income statement based on two separate
measurements: basic and diluted. Basic earnings per share excludes dilution and
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that shared in the earnings
of the entity. The adoption of this statement did not have a material effect on
the Company's consolidated financial statements.

NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS

The Bank is required to maintain average reserve balances either in vault cash
or on deposit with the Federal Reserve Bank. The Bank was in compliance with
these requirements.


             (The remainder of this page intentionally left blank.)


                                    Page 23
<PAGE>   30


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 3 - INVESTMENT SECURITIES

At December 31, 1999, the Company's available-for-sale securities reflected net
unrealized losses of $863,071, which resulted in a decrease in other
comprehensive income of $569,627, net of deferred tax benefit. At December 31,
1998, the Company's available-for-sale securities reflected net unrealized
gains of $10,966, which resulted in an increase in other comprehensive income
of $7,237, net of deferred tax liability.

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, 1999 and 1998 are presented below.

<TABLE>
<CAPTION>
                                                                                      GROSS               GROSS
                                                AMORTIZED        UNREALIZED         UNREALIZED          ESTIMATED
                                                  COST             GAINS              LOSSES            FAIR VALUE
                                              ------------       ----------        ------------        ------------

<S>                                           <C>                <C>               <C>                 <C>
AS OF DECEMBER 31, 1999:
SECURITIES AVAILABLE-FOR-SALE:
     U.S. GOVERNMENT AND AGENCY
        SECURITIES ...................        $  6,037,984        $     -0-        $    368,815        $  5,669,169
     MORTGAGE-BACKED SECURITIES ......          10,339,966              -0-             473,631           9,866,335
     EQUITY SECURITIES ...............             500,000              -0-              20,625             479,375
                                              ------------        ---------        ------------        ------------
                                              $ 16,877,950        $     -0-        $    863,071        $ 16,014,879
                                              ============        =========        ============        ============

SECURITIES HELD-TO-MATURITY:
     U.S. GOVERNMENT AND AGENCY
       SECURITIES ....................        $  4,505,225        $     -0-        $    245,070        $  4,260,155
     MUNICIPAL SECURITIES ............             224,749              -0-              14,499             210,250
                                              ------------        ---------        ------------        ------------
                                              $  4,729,974        $     -0-        $    259,569        $  4,470,405
                                              ============        =========        ============        ============

As of December 31, 1998:
Securities Available-for-Sale:
     U.S. government and agency
        securities ...................        $ 12,312,094        $  19,886        $        -0-        $ 12,331,980
     Mortgage-backed securities ......          12,203,847              310               9,230          12,194,927
                                              ------------        ---------        ------------        ------------
                                              $ 24,515,941        $  20,196        $      9,230        $ 24,526,907
                                              ============        =========        ============        ============

Securities Held-to-Maturity:
     U.S. government and agency
       securities ....................        $  7,512,918        $  67,811        $        -0-        $  7,580,729
     Municipal securities ............              49,986              -0-                 -0-              49,986
                                              ------------        ---------        ------------        ------------
                                              $  7,562,904        $  67,811        $        -0-        $  7,630,715
                                              ============        =========        ============        ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                 BOOK VALUE (AT COST)
                                                                           --------------------------------
RESTRICTED INVESTMENTS:                                                       1999                   1998
-----------------------                                                    ----------            ----------

<S>                                                                        <C>                   <C>
    Federal Home Loan Bank stock.............................              $  230,800            $  118,300
                                                                           ==========            ==========
</TABLE>


                                    Page 24
<PAGE>   31


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 3 - INVESTMENT SECURITIES - CONCLUDED

The contractual maturities of securities available for sale at December 31,
1999 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>
                                                                              AMORTIZED                      ESTIMATED
                                                                                COST                        FAIR VALUE
                                                                           ----------------              ----------------

<S>                                                                        <C>                           <C>
AS OF DECEMBER 31, 1999:
Securities Available-for-Sale:
     Due in one year or less..................................             $            -0-              $            -0-
     Due after one year through five years....................                    4,580,264                     4,391,051
     Due after five years through ten years...................                   10,092,415                     9,549,358
     Due after ten years......................................                    2,205,271                     2,074,470
     Restricted equity securities.............................                      230,800                       230,800
                                                                           ----------------              ----------------
                                                                           $     17,108,750              $     16,245,679
                                                                           ================              ================
Securities Held-to-Maturity:
     Due in one year or less..................................             $      1,003,926              $        960,900
     Due after one year through five years....................                    1,002,239                       966,540
     Due after five years through ten years...................                    2,499,060                     2,332,715
     Due after ten years......................................                      224,749                       210,250
                                                                           ----------------              ----------------
                                                                           $      4,729,974              $      4,470,405
                                                                           ================              ================
</TABLE>

Proceeds from sales of available-for-sale securities were $5,440,748,
$7,346,633, and $693,357 for the years ended December 31, 1999, 1998 and 1997,
respectively. Gross realized gains and losses on investments in debt securities
available-for-sale for the years ended December 31 were as follows:

<TABLE>
<CAPTION>
                                                                             1999           1998           1997
                                                                          ----------     ----------     ---------

       <S>                                                                <C>            <C>            <C>
       Gross realized gains.....................................          $    9,618     $   12,170     $     -0-
       Gross realized losses....................................               8,466            517           662
</TABLE>

The carrying value of investment securities pledged to secure public funds on
deposit and for other purposes as required by law amounted to approximately
$8,868,029 and $11,369,000 at December 31, 1999 and 1998.


             (The remainder of this page intentionally left blank.)


                                    Page 25
<PAGE>   32


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 4 - LOANS

The Bank grants loans to customers primarily in the Northwest Georgia area. The
major classifications of loans as of December 31, 1999 and 1998 were as follows
(000's omitted):

<TABLE>
<CAPTION>
                                                              1999                     1998
                                                            --------                 --------

<S>                                                         <C>                      <C>
Commercial, financial and agricultural .....                $ 15,064                 $ 10,421
Real estate - construction .................                   7,222                    6,008
Real estate - other ........................                  31,638                   13,289
Consumer ...................................                   8,576                    6,713
Other loans ................................                      64                       33
                                                            --------                 --------
                                                              62,564                   36,464
Allowance for loan losses ..................                    (701)                    (366)
                                                            --------                 --------
Net loans ..................................                $ 61,863                 $ 36,098
                                                            ========                 ========
</TABLE>

As of December 31, 1999, the total recorded investment in impaired loans, all
of which had allowances determined in accordance with SFAS No. 114 and No. 118,
amounted to approximately $362,000. As of December 31, 1998, there were loans
which the Bank had specifically classified as impaired. The allowance for loan
losses related to impaired loans amounted to approximately $96,000 and $-0- at
December 31, 1999 and 1998, respectively. Other nonaccrual loans at December
31, 1999 and 1998 amounted to $145,074 and $15,508, respectively. For the year
ended December 31, 1999 and 1998, the difference between gross interest income
that would have been recorded in such period if nonaccruing loans had been
current in accordance with their original terms and the amount of interest
income on those loans that was included in such period's net income was
negligible.

The Bank has no commitments to loan additional funds to the borrowers of
nonaccrual loans.

NOTE 5 - ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses for the year ended December 31, 1999
and 1998 were as follows:

<TABLE>
<CAPTION>
                                                              1999                     1998
                                                            --------                 --------

<S>                                                         <C>                      <C>
Balance at beginning of year ...............                $366,158                 $170,000
                                                            --------                 --------

Charge-offs ................................                (114,017)                 (38,842)
Recoveries .................................                      93                      -0-
                                                            --------                 --------
      Net chargeoffs .......................                (113,924)                 (38,842)
                                                            --------                 --------

Provision for loan losses ..................                 449,000                  235,000
                                                            --------                 --------

Balance at end of year .....................                $701,234                 $366,158
                                                            ========                 ========
</TABLE>


                                    Page 26
<PAGE>   33


                     GATEWAY BANCSHARES, INC. & SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1999 AND 1998


NOTE 6 - FORECLOSED REAL ESTATE

At December 31, 1999, the Bank had foreclosed real estate expected to be
disposed of in the near term of $138,503. There were no foreclosure losses in
1999 and 1998, nor were there any losses on subsequent write-downs in 1999 and
1998.

NOTE 7 - PREMISES AND EQUIPMENT

Premises and equipment as of December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                             1999                     1998
                                                          ----------               ----------

<S>                                                       <C>                      <C>
Buildings and improvements .................              $1,139,784               $1,137,774
Furniture and equipment ....................                 741,097                  695,691
Vehicles ...................................                  68,997                   68,997
Construction in progress ...................                 351,587                      -0-
                                                          ----------               ----------
                                                           2,301,465                1,902,462
Less allowance for depreciation ............                (344,897)                (207,948)
                                                          ----------               ----------

                                                          $1,956,568               $1,694,514
                                                          ==========               ==========
</TABLE>

The provision for depreciation charged to occupancy and furniture and equipment
expense for the years ended December 31, 1999, 1998 and 1997, was $136,949,
$121,719, and $81,051, respectively.

NOTE 8 - DEPOSITS

The major classifications of deposits as of December 31, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                                1999                     1998
                                                            ------------             ------------

<S>                                                         <C>                      <C>
Noninterest-bearing demand .................                $  6,039,739             $  6,249,127
Interest-bearing demand ....................                   8,581,674               13,291,271
Savings ....................................                  10,919,377                9,694,496
Time .......................................                  34,808,877               25,306,466
Certificates of deposit of $100,000 or more                   20,794,680               14,294,012
                                                            ------------             ------------

                                                            $ 81,144,347             $ 68,835,372
                                                            ============             ============
</TABLE>

The maturities of time certificates of deposit and other time deposits issued
by the Bank at December 31, 1999 are as
follows (000's omitted):

<TABLE>

      <S>                            <C>
      2000.......................    $ 34,896
      2001-2002..................      19,816
      2003-2007..................         892
                                     --------
                                     $ 55,604
                                     ========
</TABLE>


                                    Page 27
<PAGE>   34

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998

NOTE 9 - LONG-TERM DEBT

<TABLE>
<CAPTION>
Notes payable consists of:                                                                1999                       1998
                                                                                   ----------------           ----------------
<S>                                                                                <C>                        <C>
Note payable on a $1 million line of credit at Federal Home Loan Bank, with a
maturity date of January 13, 2003; interest rate of 5.72 per cent; secured by
interest in mortgage loans of the Company.....................................     $      1,000,000           $      1,000,000
                                                                                   ================           ================

Maturities of long-term debt following December 31, 1999 are as follows:

                         2000...............................                       $            -0-
                         2001...............................                                    -0-
                         2002...............................                                    -0-
                         2003...............................                              1,000,000
                                                                                   ----------------
                                                                                   $      1,000,000
                                                                                   ================
</TABLE>

NOTE 10 - OTHER OPERATING EXPENSES

Other operating expenses consist of the following:

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                             ------------------------------------------------------------------
                                                                  1999                       1998                      1997
                                                             -------------              -------------             -------------
 <S>                                                         <C>                        <C>                       <C>
 Advertising and marketing............................       $      55,576              $      70,785             $      55,683
 Data processing......................................             218,250                    166,490                    64,852
 Insurance............................................              14,462                     14,311                    10,343
 Postage, freight and express.........................              55,111                     43,802                    19,408
 Printing and supplies................................              85,029                    111,477                   117,871
 Professional and regulatory fees.....................             214,482                     79,908                    71,363
 Taxes and licenses...................................               9,420                      7,500                     5,782
 Other ...............................................             152,938                     84,225                    29,049
 Allowance for losses on debit card transactions......                 -0-                    150,000                       -0-
                                                             -------------              -------------             -------------

   Total other operating expenses.....................       $     805,268              $     728,498             $     374,351
                                                             =============              =============             =============
</TABLE>





             (The remainder of this page intentionally left blank.)


                                    Page 28
<PAGE>   35
                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998



NOTE 11 - INCOME TAXES

There were current taxes payable of approximately $40,000 as of December 31,
1999.

The consolidated provision for income tax benefit (expense) consists of the
following:

<TABLE>
<CAPTION>
                                                                                        YEARS ENDED DECEMBER 31,
                                                            ---------------------------------------------------------------------
                                                                 1999                       1998                      1997
                                                            ----------------          -----------------          ----------------
<S>                                                         <C>                       <C>                        <C>
 Current:
   Federal............................................      $   (256,000)             $       (-0-)              $         -0-
 Deferred:
   Federal............................................           (13,169)                  (54,291)                    154,445
                                                            ------------              ------------               -------------

                                                            $   (269,169)             $    (54,291)              $     154,445
                                                            ============              ============               =============
</TABLE>

The provision for federal income taxes differs from that computed by applying
federal statutory rates to income before federal income tax expense, as
indicated in the following analysis:

<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                            ------------------------------------------------
                                                               1999               1998                1997
                                                            ----------          --------           ---------
<S>                                                         <C>                 <C>                <C>
 Federal statutory rate of 34% ...................          $ 263,264           $ 97,962           $(145,582)
 Deduct tax effect of:
   Tax-exempt interest ...........................             (4,675)              (992)                900
   Other adjustments .............................             10,580             (3,342)             (9,763)
   Valuation allowance ...........................                -0-            (46,021)                -0-
                                                            ---------           --------           ---------

 Income tax expense (benefit) ....................          $ 269,169           $ 54,291           $(154,445)
                                                            =========           ========           =========
</TABLE>

A cumulative net deferred tax asset is included in other assets. The components
of the asset as of December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                                  1999              1998
                                                                                ---------         ---------
<S>                                                                             <C>               <C>
Deferred tax asset: ..................................................          $ 512,968         $ 143,184
Deferred tax liability ...............................................           (108,296)          (46,758)
                                                                                ---------         ---------
                                                                                $ 404,672         $  96,426
                                                                                =========         =========

Net operating loss carryover .........................................          $     -0-         $  12,449
Net unrealized losses (gains) on securities available for sale .......            293,444            (3,728)
Depreciation .........................................................           (108,296)          (43,030)
Provision for loan losses ............................................            210,069           105,889
Other ................................................................              9,455            24,846
                                                                                ---------         ---------
                                                                                $ 404,672         $  96,426
                                                                                =========         =========
</TABLE>


                                    Page 29
<PAGE>   36

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998


NOTE 12 - LEASES

As Lessee: The Company has entered into a lease arrangement for real estate for
which rental expenses amounted to $23,426, $20,480 and $20,480 in 1999, 1998 and
1997, respectively. This lease has been classified as an operating lease, and
relates to a ground lease of the Company's main office. Under the lease
agreement, the Company is required to pay annual rent of $20,480 for the first
three years. Subsequent to the third year, the Company will pay annual rent as
adjusted by the Consumer Price Index through the end of its 20 year term. The
Company has three options to renew the lease for 10 years for each option.
Future minimum rentals (assuming no change in the Consumer Price Index) under
the lease agreement are:

<TABLE>
             <S>                                         <C>
             2000.................................       $    23,426
             2001.................................            23,426
             2002.................................            23,426
             2003.................................            23,426
             2004.................................            23,426
            Thereafter............................           257,686
                                                         -----------
                                                         $   374,816
                                                         ===========
</TABLE>


NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Financial instruments whose contract amount represents credit risk were as
follows:

<TABLE>
<CAPTION>
                                                                                       1999                   1998
                                                                                   ------------            -----------
  <S>                                                                              <C>                     <C>
  Commitments to extend credit...........................................          $  7,791,000            $ 6,227,000
  Standby letters of credit..............................................               232,960                 48,287
</TABLE>


Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-cash basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation. Collateral held varies but may include accounts receivable,
inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Standby letters of
credit generally have fixed expiration dates or other termination clauses and
may require payment of a fee. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Bank's policy for obtaining collateral, and the nature of such
collateral, is essentially the same as that involved in making commitments to
extend credit.

The Bank has not been required to perform on any financial guarantees during the
past two years. The Bank has not incurred any losses on its commitments in 1999
or 1998.


                                    Page 30
<PAGE>   37

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998


NOTE 14 - COMMITMENTS AND CONTINGENCIES

Litigation: The Bank may become party to litigation and claims arising in the
normal course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation and claims
are not material to the financial statements.

NOTE 15 - CONCENTRATIONS OF CREDIT

All of the Bank's loans, commitments and standby letters of credit have been
granted to customers in the Bank's market area. Substantially all such customers
are depositors of the Bank. The concentrations of credit by type of loan are set
forth in Note 4. The commitments to extend credit relate primarily to unused
real estate draw lines.

The Bank maintains its cash accounts at various commercial banks. The total cash
balances are insured by the FDIC up to $100,000. Total uninsured balances held
at other commercial banks amount to $95,196 and $635,767 at December 31, 1999
and 1998, respectively.

NOTE 16 - EMPLOYEE BENEFIT PLAN

The Company adopted a defined contribution plan covering substantially all
employees; 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 Bank's contribution to the plan is
determined by the Board of Directors and is currently subject to regulatory
restriction. Contributions in the amount of $24,000 were made by the Bank in
1999. No contributions were made by the Bank in 1998 and 1997.

NOTE 17 - STOCK OPTION PLAN

In 1999, the Company adopted plans under which options for 164,350 common shares
were issued to its directors and executive officers at an exercise price of $12
per share, the market value of the shares at the time of issuance. Stock option
transactions as of December 31, are as follows:

<TABLE>
<CAPTION>
                                                                  1999
                                                              ------------
      <S>                                                     <C>
      Shares outstanding at beginning of year (plan).......            -0-
      Granted..............................................        171,850
      Exercised............................................
                                                                       -0-
      Canceled.............................................
                                                                       -0-
                                                              ------------
      Shares outstanding at end of year....................        171,850
                                                              ============

      Exercisable at end of year...........................            -0-
                                                              ============
</TABLE>

Under the plan, options to purchase common stock shares vest beginning one year
from the grant date in 1999 on an equal incremental basis over a period of five
years. Options not exercised by the tenth anniversary date or upon leaving
employment are canceled.


                                    Page 31
<PAGE>   38

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998



NOTE 17 - STOCK OPTION PLAN - CONCLUDED

The Company applies APB Opinion 25, Accounting for Stock Issued to Employees,
and related Interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans. No
compensation cost has been charged against income for its stock option plan. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of FASB Statement 123, Accounting for
Stock-Based Compensation, the Company's net income would have been reduced to
the pro-forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                    1999
                                                               ------------
      <S>                                                      <C>
      Net income
        As reported........................................    $    505,137
        Pro forma..........................................    $    496,631
</TABLE>

NOTE 18- SHAREHOLDERS' EQUITY

The Company raised $6,790,480 in capital as part of its initial offering of
which $3,395,240 was allocated to common stock and $3,395,240 was allocated to
capital surplus. Legal, printing and other costs of issuance of stock amounting
to $37,603, were applied against capital surplus.

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 Bank must
recover net operating losses incurred to date prior to declaring dividends.

As of December 31, 1999 and 1998, the Bank could not declare dividends without
regulatory consent.

NOTE 19 - REGULATORY CAPITAL

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possible additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework from prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in following
table) of total risk-based capital and Tier 1 capital (as defined in the
regulations) to risk weighted assets (as defined), and of Tier I capital (as
defined) to adjusted total assets (as defined). Management believes,


                                    Page 32
<PAGE>   39

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998


NOTE 19 - REGULATORY CAPITAL - CONCLUDED

as of December 31, 1999 and 1998, that the Bank meets all capital adequacy
requirements to which it is subject.

As of December 31, 1999 the Bank had not received notification from the
regulatory authorities categorizing the Bank's capitalization status. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the
table. There are no conditions or events since notification that management
believes have changed the Bank's category.

The Company's actual capital amounts (000's omitted) and ratios are also
presented in this table.


<TABLE>
<CAPTION>
                                                                                                             TO BE WELL
                                                                                                        CAPITALIZED UNDER
                                                                           FOR CAPITAL                  PROMPT CORRECT
                                                    ACTUAL               ADEQUACY PURPOSES               ACTION PROVISIONS
                                               -----------------        -------------------            --------------------
                                               AMOUNT      RATIO        AMOUNT        RATIO            AMOUNT         RATIO
                                               ------      -----        ------        -----            ------         -----
<S>                                            <C>        <C>           <C>           <C>             <C>             <C>
AS OF DECEMBER 31, 1999:
TOTAL CAPITAL
  (TO RISK-WEIGHTED ASSETS)                    $6,953      9.60%        >$5,792       >8.0%           >$7,241         >10.0%
                                                                        -             -               -               -
TIER 1 CAPITAL
  (TO RISK-WEIGHTED ASSETS)                    $6,252      8.64%        >$2,896       >4.0%           >$4,344         > 6.0%
                                                                        -             -               -               -
TIER 1 CAPITAL
  (TO AVERAGE ASSETS)                          $6,252      7.21%        >$3,471       >4.0%           >$4,338         > 5.0%
                                                                        -             -               -               -


As of December 31, 1998:
Total Capital
  (to Risk-Weighted Assets)                    $6,631     12.76%        >$4,159       >8.0%           >$5,198         >10.0%
                                                                        -             -               -               -
Tier 1 Capital
  (to Risk-Weighted Assets)                    $6,265     12.05%        >$2,079       >4.0%           >$3,119         > 6.0%
                                                                        -             -               -               -
Tier 1 Capital
  (to Average Assets)                          $6,265      9.21%        >$2,719       >4.0%           >$3,399         > 5.0%
                                                                        -             -               -               -
</TABLE>

Bank regulatory authorities also impose restrictions on the amounts of dividends
that may be declared by the subsidiary bank. The primary source of funds
available to the Company to pay shareholder dividends and other expenses is from
its subsidiary bank. As of December 31, 1999, the Company could not declare
dividends without regulatory consent.

NOTE 20 - RELATED PARTY TRANSACTIONS

Loans: Certain directors, executive officers and principal shareholders,
including their immediate families and associates were loan customers of the
Bank during 1999 and 1998. Such loans are made in the ordinary course of
business at normal credit terms, including interest rates and collateral and do
not represent more than a normal risk of collection. An analysis of related
party activity during 1999 and 1998 is presented below.



                                    Page 33
<PAGE>   40

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998



NOTE 20 - RELATED PARTY TRANSACTIONS - CONCLUDED

<TABLE>
<CAPTION>
                                                                                   1999                   1998
                                                                            --------------           ---------------
<S>                                                                         <C>                      <C>
Beginning of Year.......................................................... $      965,322           $       527,404
New Loans..................................................................         50,000                   823,004
Reductions.................................................................        (72,768)                 (385,086)
                                                                            --------------           ---------------

End of Year................................................................ $    1,088,090           $       965,322
                                                                            ==============           ===============
</TABLE>

Deposits: Deposits held for related parties were $2,976,740 and $3,440,945 at
December 31, 1999 and 1998, respectively.

Lease: The Bank leases the property on which the Bank's building is located. The
lessor is an affiliate of one of the directors of the Bank. Rents paid under the
lease agreements were comparable to those that would have been paid to unrelated
parties.

NOTE 21 - CONDENSED PARENT INFORMATION

<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION                                            DECEMBER 31,
--------------------------------                                  ------------------------------
                                                                      1999               1998
                                                                  ----------          ----------
<S>                                                               <C>                 <C>
ASSETS
Cash and cash equivalents ..............................          $  255,760          $  275,845
Investment in Subsidiary (equity method) eliminated upon
      consolidation ....................................           6,252,369           6,290,635
Other assets ...........................................              15,314              23,310
                                                                  ----------          ----------
         TOTAL ASSETS ..................................          $6,523,443          $6,589,790
                                                                  ==========          ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
      Other liabilities ................................          $    8,553          $    3,173
         TOTAL LIABILITIES .............................               8,553               3,173
         TOTAL SHAREHOLDERS' EQUITY ....................           6,514,890           6,586,617
                                                                  ----------          ----------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....          $6,523,443          $6,589,790
                                                                  ==========          ==========
</TABLE>


                                     Page 34
<PAGE>   41



                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998



NOTE 21 - CONDENSED PARENT INFORMATION - CONTINUED

<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                            -------------------------------------------------------
 STATEMENT OF INCOME                                                             1999                 1998                1997
 -------------------                                                        ----------------    -----------------    --------------

<S>                                                                         <C>                 <C>                  <C>
 INCOME
   Interest income.................................................         $      10,868       $        36,033      $      38,077

 EXPENSES
   Other expenses..................................................                42,755                35,511             27,962
                                                                            -------------       ---------------      -------------

 Income before equity in undistributed earnings (loss) of
 subsidiary........................................................               (31,887)                  522             10,115

 Equity in undistributed earnings (loss) of subsidiary.............               526,524               221,236           (288,668)

 Income tax benefit................................................                10,500                12,074              4,814
                                                                            -------------       ---------------      -------------

 NET INCOME (LOSS).................................................         $     505,137       $       233,832      $    (273,739)
                                                                            =============       ===============      =============
</TABLE>


<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                            -------------------------------------------------------
 STATEMENT OF CASH FLOWS                                                         1999                 1998                1997
 -----------------------                                                    ----------------    -----------------   ---------------

<S>                                                                         <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................................           $   505,137         $   233,832         $  (273,739)
Adjustments to reconcile net income to net cash
provided by operating activities:
  Provision for amortization.......................................                 6,422               2,569               2,569
  Equity in undistributed (income) loss of
         subsidiary................................................              (526,524)           (221,236)            288,668
  Other                                                                            (5,120)            (10,400)             (3,314)
                                                                              -----------         -----------         -----------
    NET CASH PROVIDED BY (USED IN) OPERATING
            ACTIVITIES.............................................               (20,085)              4,765              14,184
                                                                              -----------         -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Contribution of capital to subsidiary..............................                   -0-            (500,000)                -0-
Maturity of investment securities..................................                   -0-                 -0-             498,931
                                                                              -----------         -----------         -----------

    NET CASH PROVIDED BY (USED IN) INVESTING
            ACTIVITIES.............................................                   -0-            (500,000)            498,931
                                                                              -----------         -----------         -----------
</TABLE>


                                                                     (continued)


                                     Page 35
<PAGE>   42

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998



NOTE 21 - CONDENSED PARENT INFORMATION - CONCLUDED

<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                            -------------------------------------------------------
STATEMENT OF CASH FLOWS - CONCLUDED                                              1999                 1998                1997
-----------------------------------                                         ----------------    -----------------   ---------------

<S>                                                                         <C>                 <C>                 <C>
CASH FLOWS FROM FINANCING ACTIVITIES                                                   -0-                 -0-                 -0-
                                                                               -----------         -----------         -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                               (20,085)           (495,235)            513,115

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                     275,845             771,080             257,965
                                                                               -----------         -----------         -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                       $   255,760         $   275,845         $   771,080
                                                                               ===========         ===========         ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for:
      Interest........................................................         $       -0-         $       -0-         $       -0-
      Income taxes....................................................                 -0-                 -0-                 -0-
      Non-cash investing and financing activities.....................                 -0-                 -0-                 -0-
</TABLE>


                                     Page 36
<PAGE>   43

                      GATEWAY BANCSHARES, INC. & SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998



CORPORATE INFORMATION

There is no established trading market for Bank Shares, which have been traded
inactively in private transactions. Therefore, no reliable information is
available as to trades of shares of the Company's common stock, or as to the
prices at which such shares have traded. Management has reviewed the limited
information available as to the ranges at which shares of the Company's common
stock have sold. The following data regarding shares is provided for information
purposes only, and should not be viewed as indicative of the actual or market
value of shares of the Company's common stock.

<TABLE>
<CAPTION>
                                                                                ESTIMATED PRICE RANGE PER SHARE
                                                           -----------------------------------------------------------------------
                                                                          1999                                   1998
                                                           ------------------------------------   --------------------------------
                                                                HIGH                 LOW               High               Low
                                                           ----------------    ----------------   ----------------    ------------

<S>                                                        <C>                 <C>                <C>                 <C>
First Quarter......................................        $   18.00           $   12.00          $   11.00           $   11.00
Second Quarter.....................................            18.00               12.50              11.00               11.00
Third Quarter......................................            12.50               12.50              12.50               11.00
Fourth Quarter.....................................            12.50               12.00              12.50               11.00
</TABLE>

The Company's Common Stock was held by approximately 662 shareholders of record
at December 31, 1999.


DIVIDENDS

The Bank is subject to restrictions on the payment of dividends under Georgia
law and the regulations of the Department of Banking and Finance. The Company is
also subject to limits on payment of dividends by the rules, regulations and
policies of federal banking authorities. No assurance can be given that any
dividends will be declared by the Company in the future, or if declared, what
the amount should be or whether such dividends would continue. Future dividend
policy will depend on the Bank's earnings, capital position, financial condition
and other factors. The Company has not paid any dividends to date.

FORM 10-KSB

A copy of the Company's 1999 Annual Report on Form 10-KSB, filed with the
Securities and Exchange Commission, is available at no charge to each
shareholder upon written request to:

Jeff Hensley
Gateway Bancshares, Inc.
P O. Box 129
Ringgold, Georgia  30736



General Counsel
Powell, Goldstein, Frazer & Murphy, LLP
Atlanta, Georgia

Independent Auditors
Land & Associates, P.C.
Ellijay, Georgia



                                     Page 37