SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


     [X]  Quarterly  Report  Pursuant  to Section 13 or 15 (d) of the Securities
          Exchange Act of 1934 for the quarterly period ended September 30, 2004

     [ ]  Transition report under Section 13 or 15(d) of the Exchange Act for
          the  transition  period  from  _____  to  _____

                       Commission file number:   000-24137


                            GATEWAY BANCSHARES, INC.
        (Exact name of small business issuer as specified in its charter)


               Georgia                               58-2202210
      (State of Incorporation)           (I.R.S. Employer Identification No.)


                              5102 Alabama Highway
                            Ringgold, Georgia  30736
                    (Address of principal executive offices)


                                 (706) 965-5500
                (Issuer's telephone number, including area code)


Check  whether  the  issuer  (1)  has  filed all reports required to be filed by
Section  13  or  15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and  (2) has been subject to such filing requirements for the past 90
days.          Yes [ X ]     No [   ]

State the number of shares outstanding of each of the issuer's classes of common
equity,  as  of  the  latest  practicable  date:

               Class
               -----

     Common Stock, $5.00 par value             652,638    as of November 9, 2004


Transitional Small Business Disclosure Format: Yes [   ]    No [ X ]


<PAGE>
                            GATEWAY BANCSHARES, INC.

                         September 30, 2004 Form 10-QSB


                                TABLE OF CONTENTS


                                                                        Page No.
                                                                        --------

PART I.   FINANCIAL INFORMATION

  Item 1. Financial Statements (unaudited)

          Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . .   3

          Consolidated Statements of Income. . . . . . . . . . . . . . . . .   4

          Consolidated Statement of Changes in Stockholders' Equity. . . . .   5

          Consolidated Statements of Cash Flows. . . . . . . . . . . . . . .   6

          Notes to Consolidated Financial Statements . . . . . . . . . . . .   7

  Item 2. Management's Discussion and Analysis of Financial Condition and
            Results of Operations. . . . . . . . . . . . . . . . . . . . . .  10

  Item 3. Controls and Procedures. . . . . . . . . . . . . . . . . . . . . .  16

PART II.  OTHER INFORMATION

  Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .  16

  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. . . .  17

  Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . .  17

  Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . .  17

  Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . .  17

  Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

  Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18


                                   * * * * *


                                      - 2 -
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       GATEWAY  BANCSHARES,  INC.  AND  SUBSIDIARY
                              CONSOLIDATED  BALANCE  SHEETS


                                                          September 30,
                                                              2004         December 31,
                                                           (unaudited)          2003
                                                         ---------------  --------------
<S>                                                      <C>              <C>
ASSETS
  Cash and due from banks                                $    4,915,939   $   8,989,083
  Federal funds sold                                          2,600,000       4,340,000
  Securities available-for-sale                              24,300,307      33,692,972
  Federal Home Loan Bank stock, at cost                         509,300         298,200
  Loans                                                     127,849,785     118,557,379
  Allowance for loan losses                                  (1,798,627)     (1,664,578)
                                                         ---------------  --------------
  Net loans                                                 126,051,158     116,892,801

  Premises and equipment, net                                 3,152,430       2,956,709
  Accrued interest                                              857,593         772,900
  Other assets                                                2,677,861       1,375,060
                                                         ---------------  --------------

      Total assets                                       $  165,064,588   $ 169,317,725
                                                         ===============  ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits:
    Noninterest-bearing                                  $   14,389,828   $  12,308,701
    Interest-bearing                                        127,949,013     135,772,401
                                                         ---------------  --------------

      Total deposits                                        142,338,841     148,081,102

  Long-term borrowings:
    Federal Home Loan Bank advances                           2,000,000       2,500,000
    Notes payable                                             3,609,000       3,609,000
  Federal funds purchased and securities sold
    under agreements to repurchase                            3,643,036       3,206,203
  Accrued interest payable                                      210,538         261,288
  Other liabilities                                             645,237         500,767
                                                         ---------------  --------------

      Total liabilities                                     152,446,652     158,158,360
                                                         ---------------  --------------

STOCKHOLDERS' EQUITY
  Common stock ($5 par value: 10,000,000 shares
    authorized, 652,638 shares issued and outstanding)        3,263,190       3,263,190
  Additional paid-in capital                                  3,416,127       3,296,440
  Retained earnings                                           5,939,475       4,638,896
  Accumulated other comprehensive income:
    Unrealized gains (losses) on investment securities
      available-for-sale, net of tax                               (856)        (39,161)
                                                         ---------------  --------------

      Total stockholders' equity                             12,617,936      11,159,365
                                                         ---------------  --------------

      Total liabilities and stockholders' equity         $  165,064,588   $ 169,317,725
                                                         ===============  ==============
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
statements.


                                      - 3 -
<PAGE>
<TABLE>
<CAPTION>
                                       GATEWAY  BANCSHARES,  INC.  AND  SUBSIDIARY
                                           CONSOLIDATED  STATEMENTS  OF  INCOME
                                                       (unaudited)


                                                                      Three Months Ended                Nine Months Ended
                                                                 -------------------------------  -------------------------------
                                                                  September 30,   September 30,    September 30,   September 30,
                                                                      2004             2003            2004             2003
                                                                 ---------------  --------------  ---------------  --------------
<S>                                                              <C>              <C>             <C>              <C>
INTEREST INCOME
  Loans                                                          $    2,293,533   $    1,953,660  $    6,515,071   $    5,489,774
  Interest on securities:
    Taxable interest                                                    177,627          160,431         558,723          542,497
    Nontaxable interest                                                  39,083           37,939         117,397          100,878
  Interest on federal funds sold                                          2,813            2,985          11,577           34,271
                                                                 ---------------  --------------  ---------------  --------------

      Total interest income                                           2,513,056        2,155,015       7,202,768        6,167,420
                                                                 ---------------  --------------  ---------------  --------------

INTEREST EXPENSE
  Interest on deposits                                                  602,401          669,724       1,835,952        2,036,288
  Interest on notes payable                                              39,848           10,386         110,598           19,580
  Interest on Federal Home Loan Bank advances                            28,720           29,730          83,644           90,030
  Interest on securities sold under agreement to repurchase and
    on federal funds purchases                                           17,370            7,455          34,382           15,700
                                                                 ---------------  --------------  ---------------  --------------

      Total interest expense                                            688,339          717,295       2,064,576        2,161,598
                                                                 ---------------  --------------  ---------------  --------------

NET INTEREST INCOME                                                   1,824,717        1,437,720       5,138,192        4,005,822
  Provision for loan losses                                             275,000          200,000         545,000          460,000
                                                                 ---------------  --------------  ---------------  --------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                   1,549,717        1,237,720       4,593,192        3,545,822
                                                                 ---------------  --------------  ---------------  --------------

NONINTEREST INCOME
  Service charges on deposits                                           390,907          270,832       1,066,701          729,151
  Mortgage loan fees                                                     88,083          165,483         241,880          444,657
  Insurance commissions                                                   2,474            2,510           6,664           10,047
  Gains (losses) on sale of securities                                  (54,839)          29,337         (58,925)         213,141
  Other income                                                           51,334           31,658         162,953           95,112
                                                                 ---------------  --------------  ---------------  --------------

      Total noninterest income                                          477,959          499,820       1,419,273        1,492,108
                                                                 ---------------  --------------  ---------------  --------------

NONINTEREST EXPENSE
  Salaries and employee benefits                                        773,482          658,845       2,212,165        1,933,934
  Occupancy expense                                                      71,600           69,246         205,645          166,105
  Furniture and equipment expense                                        56,170           51,010         154,448          142,938
  Other operating expenses                                              383,091          382,317       1,218,199        1,072,570
                                                                 ---------------  --------------  ---------------  --------------

      Total noninterest expense                                       1,284,343        1,161,418       3,790,457        3,315,547
                                                                 ---------------  --------------  ---------------  --------------

Income before income taxes                                              743,333          576,122       2,222,008        1,722,383
Income taxes                                                            254,428          179,193         771,322          589,449
                                                                 ---------------  --------------  ---------------  --------------

      Net income                                                 $      488,905   $      396,929  $    1,450,686   $    1,132,934
                                                                 ===============  ==============  ===============  ==============

EARNINGS PER COMMON SHARE, BASIC AND DILUTED

  Net income per common share                                    $         0.75   $         0.60  $         2.22   $         1.68

  Basic weighted average shares outstanding                             652,638          658,171         652,638          673,711

  Diluted earnings per common share                              $         0.67   $         0.57  $         2.00   $         1.59

  Diluted weighted average shares outstanding                           725,175          697,554         725,175          713,698
</TABLE>

The  Notes  to  Consolidated  Financial Statements are an integral part of these
statements.


                                      - 4 -
<PAGE>
<TABLE>
<CAPTION>
                                          GATEWAY BANCSHARES, INC.  AND  SUBSIDIARY
                                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                                         (unaudited)


                                                                                                                       Accumulated
                                                                       Total                  Additional                  Other
                                                     Comprehensive   Stockholder    Common      Paid-in     Retained  Comprehensive
                                                         Income        Equity       Stock       Capital     Earnings      Income
                                                      ------------  ------------  ----------  -----------  -----------  ----------
<S>                                                   <C>           <C>           <C>         <C>          <C>          <C>

BALANCE, December 31, 2003                                          $11,159,365   $3,263,190   $3,296,440  $4,638,896   $  (39,161)

 Stock options compensation                                             119,687            -      119,687           -            -

 Cash dividends                                                        (150,107)           -            -    (150,107)           -

 Comprehensive income:
  Net income                                          $ 1,450,686     1,450,686            -           -    1,450,686            -

  Other comprehensive income, net of tax:
   Unrealized holding gains (losses) on securit
    for sale, net of reclassification adjustment           38,305        38,305            -           -            -       38,305
                                                      ------------  ------------  -----------  ----------  -----------  ----------

  Total comprehensive income                          $ 1,488,991
                                                      ============

BALANCE, September 30, 2004                                         $12,617,936   $3,263,190   $3,416,127  $5,939,475   $    (856)
                                                                    ============  ===========  ==========  ===========  ===========
</TABLE>

The  Notes  to  Consolidated  Financial Statements are an integral part of these
statements.


                                      - 5 -
<PAGE>
<TABLE>
<CAPTION>
                             GATEWAY  BANCSHARES,  INC.  AND  SUBSIDIARY
                              CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                                             (unaudited)


                                                                           Nine Months Ended
                                                                     --------------------------------
                                                                      September 30,    September 30,
                                                                          2004             2003
                                                                     ---------------  ---------------
<S>                                                                  <C>              <C>
CASH FLOW FROM OPERATING ACTIVITIES
  Net income                                                         $    1,450,686   $    1,132,934
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
      Provision for loan losses                                             545,000          460,000
      Depreciation and amortization                                         157,212          124,854
      Stock options compensation                                            119,687           89,688
      Net amortization on securities                                        216,227          385,094
      Loss (gain) on sale of securities                                      58,926         (213,142)
      Deferred income taxes                                                (108,617)        (119,574)
      Changes in other operating assets and liabilities:
        Accrued interest receivable                                         (84,693)         (64,022)
        Accrued interest payable                                            (50,750)         (30,857)
        Other assets and liabilities                                     (1,088,943)        (169,613)
                                                                     ---------------  ---------------

          Net cash provided by operating activities                       1,214,735        1,595,362
                                                                     ---------------  ---------------

CASH FLOW FROM INVESTING ACTIVITIES
  Net increase in loans                                                  (9,703,357)     (15,212,499)
  Proceeds from maturities, calls, and principal pay-downs
    of securities                                                        10,182,122       15,369,745
  Proceeds from sales of available-for-sale securities                    3,139,337       10,380,568
  Purchase of available-for-sale securities                              (4,142,163)     (27,505,056)
  Purchase of Federal Home Loan Bank stock                                 (211,100)         (38,200)
  Purchase of premises and equipment                                       (337,183)        (183,426)
                                                                     ---------------  ---------------

          Net cash used in investing activities                          (1,072,344)     (17,188,868)
                                                                     ---------------  ---------------

CASH FLOW FROM FINANCING ACTIVITIES
  Net increase (decrease) in deposits                                    (5,742,261)       9,898,667
  Net increase (decrease) in federal funds purchased and securities
    sold under agreements to repurchase                                     436,833         (576,208)
  Payments on Federal Home Loan Bank advances                              (500,000)      (1,500,000)
  Proceeds from notes payable                                                     -          300,000
  Cash dividends                                                           (150,107)               -
  Repurchases of common stock                                                     -         (660,350)
  Exercise of stock options                                                       -          134,560
                                                                     ---------------  ---------------

          Net cash provided by (used in) financing activities            (5,955,535)       7,596,669
                                                                     ---------------  ---------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                (5,813,144)      (7,996,837)

CASH AND CASH EQUIVALENTS, beginning of period                           13,329,083       14,499,445
                                                                     ---------------  ---------------

CASH AND CASH EQUIVALENTS, end of period                             $    7,515,939   $    6,502,608
                                                                     ===============  ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for:
    Interest                                                         $    2,115,326   $    2,192,455
    Income taxes                                                            948,059          780,632
                                                                     ===============  ===============
</TABLE>

The  Notes  to  Consolidated  Financial Statements are an integral part of these
statements.


                                      - 6 -
<PAGE>
                   GATEWAY  BANCSHARES,  INC.  AND  SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)
                               September 30, 2004

NOTE  1  -  BASIS  OF  PRESENTATION
-----------------------------------

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

The  accompanying unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting  principles  for  interim
financial  information  and  with the instructions to Form 10-QSB and Regulation
S-B.  Accordingly,  they  do  not  include  all of the information and footnotes
required by U.S. generally accepted accounting principles for complete financial
statements.  In  management's  opinion,  all  adjustments  (consisting of normal
recurring  accruals)  considered  necessary  for  a  fair presentation have been
included.  Operating  results for the nine-month period ended September 30, 2004
are  not necessarily indicative of the results that may be expected for the year
ending  December  31,  2004.  For  further  information,  refer to the financial
statements  and  footnotes thereto included in the Company's annual report filed
under  cover  of  Form  10-KSB  for  the  year  ended  December  31,  2003.

NOTE  2  -  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
-----------------------------------------------------------------------------

Organization
------------

Gateway  Bancshares,  Inc.  (the  Company)  is  a one-bank holding company which
engages  in  providing  a  full range of banking services through its subsidiary
bank,  Gateway  Bank & Trust (the Bank), in Ringgold, Georgia. The Bank received
preliminary  charter  approval  in  1995.  In  April 1997 the Bank was granted a
charter  by  the  Georgia  Department  of  Banking  and  Finance  and began full
operations.  Further discussion of the Company's financial condition and results
of  operations  is  included  in the Company's consolidated financial statements
presented  in  the  Company's  annual  report  on Form 10-KSB for the year ended
December  31,  2003.

Net  Income  Per  Common  Share
-------------------------------

Net  income  per  common share is based on the weighted-average number of shares
outstanding  for  the  periods  presented.

NOTE  3  -  INVESTMENT  SECURITIES
----------------------------------

The  Company  has applied the accounting and reporting requirements of Statement
of Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities (SFAS No. 115).  This pronouncement requires that all
investments  in  debt  securities  be  classified  as  either  held-to-maturity
securities,  which are reported at amortized cost; trading securities, which are
reported  at  fair value, with unrealized gains and losses included in earnings;
or  available-for-sale  securities,  which  are  reported  at  fair  value, with
unrealized  gains  and  losses excluded from earnings and reported in a separate
component  of  stockholders'  equity  (net  of  deferred  taxes).

At  September  30,  2004,  the  Company  had  net unrealized losses of $1,381 on
available-for-sale  securities.  As  a  result,  the  decrease  in stockholders'
equity,  net  of  deferred taxes, was $856.  There were no trading securities at
September 30, 2004.  The net increase in stockholders' equity


                                      - 7 -
<PAGE>
as  a result of the SFAS No. 115 adjustment from December 31, 2003, to September
30,  2004,  was  $38,305.

NOTE  4  -  BORROWED  FUNDS
---------------------------

In  September  2000,  the  Bank obtained a $1 million loan from the Federal Home
Loan Bank.  The note requires quarterly interest payments at an interest rate of
6.09  percent,  and  matures  on September 15, 2010.  This note is subject to an
early  conversion  option effective September 15, 2003, which allows the Federal
Home  Loan  Bank  to  covert  this note into a floating rate advance tied to the
three-month LIBOR.  The Bank has not exercised this option.  The note is secured
by  a  blanket  lien  on  single-family  first  mortgage  loans.

In August 2002, the Bank obtained four additional advances of $500,000 each from
the  Federal  Home Loan Bank.  One advance with an interest rate of 2.24 percent
was  paid  at  maturity  on  August  27,  2003.  The two remaining notes require
monthly  interest  payments  at  rates of  3.33 percent and 3.84 percent.  These
notes  have  staggered  maturities  of  August  29,  2005  and  August 28, 2006,
respectively.  All advances are secured by a blanket lien on single-family first
mortgage  loans  and  securities  pledged  to  the  Federal  Home  Loan  Bank.

In  December,  2003,  the  Company  formed  a wholly owned Connecticut statutory
trust,  Gateway  Bancshares  Statutory Trust I, (the "Trust"), which issued $3.5
million  aggregate  principal  amount  of trust preferred securities.  The trust
preferred  securities represent guaranteed preferred beneficial interests in the
Company's  junior  subordinated  deferrable  interest debentures that qualify as
Tier  I  capital  subject  to  the  limitations  under  Federal  Reserve  Board
guidelines.  The  Company owns all of the $109,000 aggregate principal amount of
the  common  securities  of  the  Trust.  The  proceeds from the issuance of the
common  securities  and the trust preferred securities were used by the Trust to
purchase  $3.6  million  of junior subordinated debentures of the Company, which
pay  interest at a floating rate equal to the three-month LIBOR plus 2.85%.  The
debentures  represent  the  sole  asset  of  the  Trust.

The  trust  preferred securities accrue and pay quarterly distributions based on
the liquidation value of $1,000 per capital security at a floating rate equal to
the  three-month  LIBOR  plus  2.85%.  The  Company has entered into contractual
agreements  which,  taken  collectively,  constitute  a  full  and unconditional
guarantee on a subordinated basis by the Company of the obligations of the Trust
under  the  trust  preferred securities.  The Company's guarantee, however, does
not  apply  if  the  Company  does not make payments on the debentures and, as a
result,  the  Trust  does not have sufficient funds to make payments.  The trust
preferred  securities are mandatorily redeemable upon maturity of the debentures
on  December  17, 2033, or upon earlier redemption of the debentures as provided
in  the indenture.  The Company has the right to redeem the debentures purchased
by  the  Trust in whole or in part, on or after December 17, 2008.  As specified
in  the  indenture, if the debentures are redeemed on or after December 17, 2008
and prior to maturity, the redemption price will be the principal amount and any
accrued  but unpaid interest.  Additionally, the Company may redeem, at any time
(and  possibly  before  December  17,  2008),  within  120  days  following  the
occurrence  of  a  change  in  banking, tax, investment company or other laws or
regulations  that  results  in  specified  changes in the treatment of the trust
preferred  securities  for  tax  or  regulatory  capital  purposes  or under the
Investment  Company  Act  of  1940.  If  the  debentures  are  redeemed prior to
December  17,  2008, the redemption price will be in the range of 100% to 104.6%
of  the  principal  amount  plus  any  accrued  and  unpaid  interest.


                                      - 8 -
<PAGE>
NOTE  5  -  STOCK  OPTION  PLAN
-------------------------------

The  Company  has  a  stock  option  plan that provides for both incentive stock
options  and  nonqualified stock options.  The maximum number of shares that can
be  issued  or  optioned  under  the  plan  is  200,000  shares.  In the case of
incentive  stock  options, the exercise price shall not be less than 100 percent
(110  percent  for  persons  owning  more  than  10  percent  of  the  Company's
outstanding  common  stock)  of the fair market value of the common stock on the
date  of  grant.  In  the case of nonqualified stock options, the purchase price
may  be  equal  to,  less than, or more than the fair market value of the common
stock  on  the  date of grant.  All options have been granted at the fair market
value  of  the  shares at the date of grant.  If not exercised, the options will
expire  from  2009  to  2011.

The  Company accounts for its stock option plan under the fair value recognition
provisions  of  Statement of Financial Accounting Standards No. 123, "Accounting
for  Stock-Based  Compensation,"  (SFAS  No.  123)  for  stock-based  employee
compensation.  A  summary of activity in the Company's stock option plan for the
period  ended  September  30,  2004,  is  as  follows:

                                                                   Weighted
                                                                   Average
                                                        Number     Exercise
                                                       of Shares    Price
                                                       ---------  ---------

  Unexercised options outstanding, December 31, 2003     147,750  $   12.07

    Stock options exercised                                    -          -

    Stock options forfeited                                    -          -
                                                       ---------  ---------

  Unexercised options outstanding, September 30, 2004    147,750  $   12.07
                                                       =========  =========

Each  of  the  outstanding  options to purchase common shares vest beginning one
year  from  the  grant  date on an equal incremental basis over a period of five
years.  At  September  30,  2004,  the number of options exercisable is 143,550.
The  range of exercise prices and weighted-average remaining contractual life of
outstanding  options  under the stock option plan were $12.00 to $13.00 and 4.66
years,  respectively.

Under  SFAS  No.  123,  the  fair value of stock options at the date of grant is
charged  to  compensation  costs  over  the  vesting period.  Compensation costs
recognized  in  the  accompanying statements of income for the nine-month period
ended  September  30,  2004  and  2003  were $119,687 and $89,688, respectively.

NOTE 6 -RECENTLY ISSUED ACCOUNTING STANDARDS
--------------------------------------------

On  March  31,  2004,  the  FASB issued an exposure draft of a proposed standard
that,  if  adopted,  will significantly change the accounting for employee stock
options,  commonly  referred to as equity-based compensation.  If adopted in its
current  form, the exposure draft will require all companies to expense employee
stock  options using a fair value method.  Comments are expected on the exposure
draft,  which  may  impact  the form of the final standard.  Because the Company
voluntarily  elected  to begin expensing stock options in 2002, adoption of this
standard is not expected to have a significant impact on the Company's financial
position  and  results  of  operations.


                                      - 9 -
<PAGE>
PART I - FINANCIAL INFORMATION

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

This  discussion  is  intended  to  assist  in an understanding of the Company's
financial  condition and results of operations.  This analysis should be read in
conjunction  with the financial statements and related notes appearing in Item 1
of  the September 30, 2004, Form 10-QSB and Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in the Company's Form
10-KSB  for  the  year  ended  December  31,  2003.

FORWARD-LOOKING  STATEMENTS

This  Quarterly Report on Form 10-QSB contains forward-looking statements within
the  meaning  of  the  Private Securities Litigation Reform Act (the "Act").  In
addition,  certain  statements  in  future  filings  by  the  Company  with  the
Securities  and  Exchange Commission, in press releases, and in oral and written
statements  made  by  or  with  the  approval  of  the  Company  may  contain
forward-looking  statements  within  the  meaning  of  the  Act.  Examples  of
forward-looking  statements  include  but are not limited to: (1) projections of
revenues, income or loss, earnings or loss per share, the payment or non-payment
of  dividends,  capital  structure  and other financial items; (2) statements of
plans  and  objectives  of  the Company or its management or Board of Directors,
including  those  relating  to  products  or  services; (3) statements of future
economic  performance  and  (4)  statements  of  assumptions  underlying  such
statements.  Words  such  as  "believes,"  "anticipates,"  "expects," "intends,"
"targeted,"  and  similar  expressions  are intended to identify forward-looking
statements  but  are  not  the  exclusive  means of identifying such statements.

Forward-looking  statements  involve  risks  and  uncertainties, which may cause
actual  results  to  differ  materially  from  those  in  the  forward-looking
statements.  Facts  that  could  cause  actual  results  to  differ  from  those
discussed in the forward-looking statements include, but are not limited to: (1)
the  strength  of  the  U.S.  economy  in  general and the strength of the local
economies  in  which operations are conducted; (2) the effects of and changes in
trade monetary and fiscal policies and laws, including interest rate policies of
the  Board  of  Governors of the Federal Reserve System; (3) inflation, interest
rate,  market  and  monetary  fluctuations;  (4)  the  timely development of and
acceptance  of  new  products  and services and perceived overall value of these
products and services by users; (5) changes in consumer spending, borrowing, and
saving  habits;  (6) technological changes; (7) consumer spending, borrowing and
saving  habits;  (8)  acquisitions; (9) the ability to increase market share and
control  expenses; (10) the effect of changes in laws and regulations (including
laws  and  regulations concerning taxes, banking, securities and insurance) with
which  the Company and its subsidiary must comply; (11) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies,
as  well  as  the  Financial  Accounting  Standards  Board;  (12) changes in the
Company's  organization,  compensation,  and  benefit  plans; (13) the costs and
effects  of litigation and of unexpected or adverse outcomes in such litigation;
and  (14)  the  success  of  the  Company  at managing the risks involved in the
foregoing.

Such  forward-looking  statements  speak  only  as  of  the  date  on  which the
statements  are  made,  and  the  Company undertakes no obligation to update any
forward-looking  statement  to reflect events or circumstances after the date on
which  the  statement is made to reflect the occurrence of unanticipated events.


                                     - 10 -
<PAGE>
CRITICAL  ACCOUNTING  POLICIES

Management  has  determined  that  the accounting for the allowance for loan and
lease  losses  is a critical accounting policy with respect to the determination
of  financial  condition  and  reporting  of  results  of  operations.

Management  determines the required allowances by classifying loans according to
credit  quality and collateral security and applying historical loss percentages
to  each  category.  Additionally,  as necessary, management determines specific
allowances  related  to  impaired  loans  based on the present value of expected
future  cash flows discounted at the loan's effective interest rate, or the fair
value  of the collateral if the loan is collateral dependent. A key component in
the  accounting  policy  is  management's  ability to timely identify changes in
credit  quality,  which  may  impact  the  Company's  financial  results.

Management  recognizes  that  in making loans, credit losses will be experienced
and  that  the risk of loss will vary with, among other things, the type of loan
being  made, the creditworthiness of the borrower over the term of the loan and,
in  the  case  of  a  secured  loan,  the  quality of the security for the loan.
Management's  policy  is to maintain an appropriate allowance for estimated loan
and  lease  losses  on  the  portfolio  as  a whole. The allowances are based on
estimates  of  the  historical  loan  loss  experience,  evaluation  of economic
conditions  and  regular  periodic  reviews of the Bank's loan portfolio by both
internal  personnel  and  a  third  party review firm. The Bank's loan portfolio
consists  mostly  of  commercial  and  real estate loans to companies in various
industries,  whose  financial  performance  may  be  impacted differently by the
local,  regional  or  national  economies  and  stage  of  the  economic  cycle.
Management  believes  that  the  effects of any reasonably likely changes in the
economy  would  be  limited  somewhat  due  to  the  diversification of the loan
portfolio  and  the Bank's normal collateral requirements for such loans.  While
management  uses  available information to recognize losses on loans and leases,
future  adjustments  in  the  allowance  may  be  necessary  based on changes in
economic  conditions,  which  could have a significant detrimental impact to the
Company's  financial  condition  and results of operation. Additionally, various
regulatory  agencies,  as  an  integral  part  of  their  examination  process,
periodically  review  the  Company's  allowance for loans and lease losses. Such
agencies  may  require  the  Company to recognize additions to the allowance for
loan  and  lease  losses  based on their judgment about information available to
them  at  the  time  of  their  examination.

RESULTS  OF  OPERATIONS

EARNINGS  SUMMARY

The  Company's  net income for the nine months ended September 30, 2004 and 2003
was  $1,450,686  and  $1,132,934,  respectively.  The  increase  in  net  income
resulted  primarily  from  net loan growth and an increased net interest margin.

INTEREST  INCOME

Interest income on loans and securities is the principal source of the Company's
earnings  stream.  Fluctuations  in  interest  rates  as  well as volume and mix
changes in earning assets materially affect interest income. Interest income was
$7,202,768 and $6,167,420 for the nine months ended September 30, 2004 and 2003,
respectively.  The  increase  in  interest  income  is  a result of overall loan
growth  during  the  past  year.


                                     - 11 -
<PAGE>
INTEREST  EXPENSE

Interest  expense  on  deposits  and  other borrowings for the nine months ended
September  30,  2004  and 2003 was $2,064,576 and $2,161,598, respectively.  The
decrease in interest expense is a result of overall lower interest rates in 2004
than  2003.  Additionally,  the  Bank has successfully lowered all deposit rates
during  the  past  year  without  sacrificing  growth  in  deposits.

PROVISION  FOR  LOAN  LOSSES

The  provision  for  loan  losses represents the charge against current earnings
necessary  to maintain the allowance for loan losses at a level which management
considers  adequate  to provide for probable losses in the loan portfolio.  This
level  is  determined  based  upon  management's  assessment of current economic
conditions,  the composition of the loan portfolio and the levels of nonaccruing
and  past  due  loans.  The  provision for loan losses was $545,000 for the nine
months  ended September 30, 2004.  The allowance for loan losses as a percent of
outstanding  loans  was  1.41  percent at September 30, 2004 and 1.40 percent at
December  31,  2003.

NONINTEREST  INCOME

Noninterest  income  for  the  nine months ended September 30, 2004 and 2003 was
$1,419,273 and $1,492,108, respectively.  Noninterest income consisted primarily
of service charges on customer deposits ($1,066,701 for the first nine months of
2004 and $729,151 for the same period in 2003), mortgage loan fees ($241,880 for
the  first  nine  months  of  2004  and  $444,657  for the same period in 2003),
gains(losses)  on  sales  of  securities ($(58,925) for the first nine months of
2004  and  $213,141  for the same period in 2003), ATM and credit card fees, and
rental  of  safe deposit boxes.  The net decrease primarily resulted from losses
instead  of  gains  on  sales of securities and a decrease in mortgage loan fees
partially  offset  by  an  increase  in  the  Bank's  fee  structure.

NONINTEREST  EXPENSE

Noninterest  expense totaled $3,790,457 and $3,315,547 for the nine months ended
September  30,  2004  and  2003,  respectively.  The  largest  components  of
noninterest  expense  consist  of  salaries  and  employee  benefits  and  other
operating  expenses.  Other  operating  expenses  consist  primarily  of  data
processing,  advertising,  professional fees, supplies, printing and postage and
other  miscellaneous  expenses.  For  the  nine months ended September 30, 2004,
salaries  and  employee benefits were $278,231 more than the same time period in
2003  due to the hiring of additional staff and increased incentive compensation
and  401(k) matching funds provided to the employees.  For the nine months ended
September  30,  2004, other operating expenses were  $145,629 more than the same
period  in  2003 due to increased data processing fees and printing and supplies
expenses  directly  related  to  the  growth  in customer accounts and increased
state,  county  and  city  taxes  and  bank  correspondent  charges.

INCOME  TAXES

Income tax expense was $771,322 and $589,449 for the nine months ended September
30, 2004 and 2003, respectively.  The increase is a direct result of an increase
in  taxable  income  in  2004  as  compared  to  2003.


                                     - 12 -
<PAGE>
FINANCIAL CONDITION

EARNING ASSETS

The  Company's  earning assets include loans, securities and federal funds sold.
The  mix  of  earning  assets reflects management's attempt to maximize interest
income  while  maintaining  acceptable  levels  of  risk.

SECURITIES AND FEDERAL FUNDS SOLD

The  composition  of  the  Company's 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
available-for-sale,  management  intends  to  hold  such  securities  for  the
foreseeable  future  except to fund increases in loan demand.  Management of the
maturity  of  the  portfolio  is  necessary  to provide liquidity and to control
interest  rate  risks.

Securities  and  federal  funds  sold decreased $11,132,665 or 29.3 percent from
December  31,  2003,  to  September  30,  2004.  The securities portfolio may be
analyzed  in  order  to  purchase  or  sell  various  term  investments.  Term
investments  may  provide  a  source of liquidity and may serve as collateral to
secure  certain  government  deposits.  Securities  at  September  30,  2004 and
December  31,  2003 were $24,300,307 and $33,692,972, respectively, reflecting a
decrease  of  $9,392,665.  Federal funds sold decreased $1,740,000 from December
31,  2003  to  September  30,  2004.  This decline is related to the increase in
loans  and  a  decrease  in  public  fund  deposits  during  the  same  period.

LOANS

Loans  represent  the single largest category of the Company's earning assets at
September  30,  2004.  At  September 30, 2004, the Company had outstanding loans
amounting  to $126,051,158 net of its allowance for loan losses, or 76.3 percent
of  total  assets, compared to net loans of $116,892,801, or 69 percent of total
assets  at  December  31,  2003.  The  Company  will continue to search for loan
opportunities  in  its  market  area  while  assuming acceptable levels of risk.

ASSET QUALITY

Asset  quality  is  measured  by  three  key  ratios: (1) the ratio of loan loss
allowance to total nonperforming assets (defined as nonaccrual loans, loans past
due  90  days  or greater, restructured loans, nonaccruing securities, and other
real  estate),  (2)  nonperforming assets to total assets, and (3) nonperforming
assets  to  total  loans.  At  September 30, 2004, the Company had nonperforming
assets  of  $879,037,  which  was  48.9  percent  of  the loan loss allowance of
$1,798,627.  Nonperforming  assets were .68 percent of all loans and .53 percent
of  total assets.  At December 31, 2003, the Company had nonperforming assets of
$444,000,  which  was  26.7  percent  of  the loan loss allowance of $1,664,578.
Nonperforming  assets at December 31, 2003 were .37 percent of all loans and .26
percent  of  total  assets.


                                     - 13 -
<PAGE>
NONEARNING  ASSETS

Nonearning assets include premises and equipment of $3,152,430 and $2,956,709 at
September  30,  2004  and  December  31,  2003,  respectively.  The  increase of
$195,721  in  premises  and equipment from December 31, 2003 is primarily due to
additions of $337,183 outpacing the depreciation expense.  The additions include
leasehold  improvements,  furniture,  and  equipment  for  the Bank's operations
center  which  opened  in  May  2004.

The  Bank  leases  the site for its main office at the rate of $2,165 per month.
The  lease  term is for a maximum of fifty years, including extensions after the
initial  twenty-year period, and subject to certain conditions after the initial
forty-year  period.  The  operations  center  is  leased at a rate of $3,500 per
month  with  the  lease  expiring  in  seven  years  on  May  31,  2011.

Accrued  interest  receivable was $857,593 at September 30, 2004, an increase of
$84,693  from December 31, 2003.  The increase is primarily due to the growth in
the  loan  portfolio.

Other assets consist primarily of prepaid expenses, deferred income taxes, other
real  estate,  and  bank  owned life insurance.   Deferred income taxes consists
primarily of tax benefits related to timing differences in the tax and financial
reporting  treatment  of the allowance of loan losses, as well as other factors.
Other assets increased $1,302,801 from December 31, 2003, to September 30, 2004.
This  increase  is  mostly  due  to the Bank purchasing $750,000 bank owned life
insurance  and  moving  $426,000  from  loans  to  other  real  estate.

DEPOSITS

At  September  30,  2004,  the  Company had outstanding deposits of $142,338,841
compared  to  $148,081,102 at December 31, 2003. The decrease in deposits is due
to  approximately  $14  million  Catoosa  County  property  tax  deposits  being
withdrawn  in  early 2004 which were held at December 31, 2003. Deposits are the
Company's  primary  source  of  funds  to  support  its  earning  assets.
Noninterest-bearing deposits increased from $12,308,701 at December 31, 2003, to
$14,389,828  at  September 30, 2004. Time deposits of $100,000 or more increased
by  $5,124,087.

OTHER  LIABILITIES

Other  liabilities  consist  primarily  of accrued interest payable and accounts
payable.  Accrued  interest payable decreased $50,750 from December 31, 2003, to
September  30,  2004.  The  decrease  is due to slightly lower interest rates in
2004  and  lower  balances  in  savings  and  certificates  of  deposit.

STOCKHOLDERS' EQUITY

Stockholders'  equity  increased $1,458,571 from December 31, 2003, to September
30,  2004,  due  in  part  to net income of $1,450,686 for the nine months ended
September  30,  2004.  The  equity adjustment for unrealized gains on securities
available-for-sale  decreased $38,305 during the nine months ended September 30,
2004  resulting  in  an  unrealized  loss  of  $856.  This  decrease  is


                                     - 14 -
<PAGE>
due  to  the  decline in market values on securities during the same period. The
Company  also  paid  dividends  of  $150,107  in  2004.

RELATED PARTY TRANSACTIONS

In  the  normal course of business, the Bank makes loans to directors, executive
officers  and  principal shareholders on substantially the same terms, including
interest  rates  and  collateral, as those prevailing at the time for comparable
transactions with other borrowers.  Extensions of credit to directors, executive
officers,  and  principal shareholders totaled $4,110,000 at September 30, 2004.

OFF-BALANCE SHEET ARRANGEMENTS

The  Bank is a party to financial instruments with off-balance-sheet risk in the
normal  course  of business to meet the financing needs of its customers.  These
financial  instruments include standby letters of credit and various commitments
to  extend  credit.  At September 30, 2004, commitments under standby letters of
credit  and  undisbursed  loan  commitments  aggregated $23,343,000.  The Bank's
credit  exposure  for  these  financial  instruments  is  represented  by  their
contractual  amounts.  The  Bank  does  not  anticipate any material losses as a
result  of  the commitments under standby letters of credit and undisbursed loan
commitments.

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 Bank's ability to meet the day-to-day cash flow requirements of
its  customers,  whether  they  are  depositors  wishing  to  withdraw  funds or
borrowers  requiring funds to meet their credit needs.  Without proper liquidity
management,  the  Bank  would  not  be able to perform the primary function of a
financial  intermediary  and  therefore would not be able to meet the production
and  growth  needs  of  the  communities  it  serves.

The  primary  function  of  asset and liability management is not only to assure
adequate liquidity in order for the Bank to meet the needs of its customer base,
but  also  to  maintain an appropriate balance between interest-sensitive assets
and interest-sensitive liabilities so that the Bank can also meet the investment
requirements  of  its stockholders.  Daily monitoring of the sources and uses of
funds  is  necessary  to  maintain  an  acceptable cash position that meets both
requirements.  In  the  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 securities.  Outstanding loans that mature in
one  year  or  less  totaled  approximately $83.7 million at September 30, 2004.
Securities  maturing  in  one  year or less totaled approximately $179 thousand.

The  liability  portion  of the balance sheet provides liquidity through various
customers'  interest-bearing  and  noninterest-bearing  deposit  accounts.  At
September  30,  2004,  funds were also available through the purchase of federal
funds  from correspondent commercial banks. Purchases can be made from available
lines  of  up  to  an  aggregate  of  approximately  $8.4  million.


                                     - 15 -
<PAGE>
At September 30, 2004, no federal funds had been purchased. Liquidity management
involves  the  daily  monitoring of the sources and uses of funds to maintain an
acceptable  cash  position.

CAPITAL RESOURCES

A  strong  capital position is vital to the profitability of the Company because
it  promotes  depositor  and investor confidence and provides a solid foundation
for future growth of the organization.  The Company has provided for its capital
requirements  with  proceeds from its initial stock offering in 1996 and through
the  retention  of  earnings.

FEDERAL HOME LOAN BANK ADVANCES

In order to maintain and improve its liquidity position, the Bank is a member of
the Federal Home Loan Bank of Atlanta (FHLB).  As a member of the FHLB, the Bank
is  able  to  manage  its  liquidity  and  reduce interest rate risk by having a
funding  source  to match longer term loans.  The terms of the Bank's loans from
the  FHLB  are  summarized  in  Note  4 to the Consolidated Financial Statements
appearing  in  this  report.

REGULATORY CAPITAL REQUIREMENTS

Regulatory  capital guidelines administered by the federal banking agencies take
into  consideration  risk  factors associated with various categories of assets,
both  on and off the balance sheet.  Under the guidelines, the Company's capital
strength  is  measured  in  two  tiers  which  are  used  in  conjunction  with
risk-adjusted  assets  to  determine  the  risk-based  capital  ratios.  Tier  I
capital,  which  consists  of  common  equity  less  unrealized  gains  on
available-for-sale  securities  plus  qualifying  trust  preferred  securities,
amounted  to  $16.1  million  at September 30, 2004.  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 $17.8
million  at  September 30, 2004.  The percentage ratios as calculated under FDIC
guidelines  were  11.7  percent and 13.0 percent for Tier I and total risk-based
capital,  respectively,  to  risk-weighted  assets  at September 30, 2004.  Both
levels  exceeded  the  minimum ratios to be well capitalized of 6 percent and 10
percent,  respectively.  Management  has  reviewed  and will continue to monitor
asset  mix, product pricing, and the loan loss allowance, which are the areas it
believes  are  most  affected  by  these  requirements.

ITEM 3. CONTROLS AND PROCEDURES

At  September  30,  2004,  an evaluation was performed under the supervision and
with  the  participation  of  the  Company's  management,  including  the  Chief
Executive  Officer  and  Chief  Financial  Officer,  of the effectiveness of the
design and operation of the Company's disclosure controls and procedures.  Based
on  that  evaluation,  the  Company's  management, including the Chief Executive
Officer  and  Chief  Financial  Officer, concluded that the Company's disclosure
controls  and  procedures  were  effective  at  timely alerting them to material
information relating to the Company (including its consolidated subsidiary) that
is required to be included in the Company's periodic filings with the Securities
and  Exchange  Commission.  There have been no changes in the Company's internal
control  over  financial  reporting  during the quarter ended September 30, 2004
that  have  materially  affected, or are reasonably likely to materially affect,
the  Company's  internal  control  over  financial  reporting.

PART II - OTHER INFORMATION


                                     - 16 -
<PAGE>
ITEM 1- LEGAL PROCEEDINGS

Neither  the  Company  nor  the Bank is a party to any pending legal proceedings
which  management  believes  would  have  a  material  adverse  effect  upon the
operations  or  financial  condition  of  the  Bank.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - NONE

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - NONE

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE

ITEM 5 - OTHER INFORMATION

Stockholder  proposals submitted for consideration at the next annual meeting of
stockholders must be received by the Company no later than November 29, 2004, to
be  included in the 2005 proxy materials.  A stockholder must notify the Company
before  February  9,  2005,  of a proposal for the 2005 annual meeting which the
stockholder  intends  to  present other than by inclusion in the Company's proxy
material.  If  the  Company  does  not  receive such notice prior to February 9,
2005,  proxies  solicited  by  the  management  of  the  Company  will  confer
discretionary authority upon the management of the Company to vote upon any such
matter.

ITEM 6 - EXHIBITS

(a)  Exhibits:

       Exhibit Number    Description of Exhibit
       --------------    ----------------------

          11             Computation  of  Net  Income  Per  Share

          31.1           Certification  of  Chief  Executive Officer Pursuant to
                         Rule  13a-14(a)  under  the  Securities Exchange Act of
                         1924  as  Adopted  Pursuant  to  Section  302  of  the
                         Sarbanes-Oxley  Act  of  2002

          31.2           Certification  of  Chief  Financial Officer Pursuant to
                         Rule  13a-14(a)  under  the  Securities Exchange Act of
                         1924  as  Adopted  Pursuant  to  Section  302  of  the
                         Sarbanes-Oxley  Act  of  2002

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


                                     - 17 -
<PAGE>
                                   SIGNATURES


In  accordance  with the requirements of the Exchange Act, the registrant caused
this  report  to  be  signed  on  its  behalf by the undersigned, thereunto duly
authorized.


GATEWAY BANCSHARES, INC.



                    /s/  Robert  G.  Peck                       November 9, 2004
                    ----------------------                      ----------------
                    Robert  G.  Peck,                           Date
                    President and CEO
                    (Principal Executive Officer)



                    /s/  Harle  B.  Green                       November 9, 2004
                    ----------------------                      ----------------
                    Harle  B.  Green,                           Date
                    Chairman and Chief Financial Officer
                    (Principal Financial Officer)


                                     - 18 -
<PAGE>