<PAGE>


                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                     FORM 10-QSB
 (Mark One)
          
 [ X ]                QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarterly period ended  June 30, 1997 
                                                    --------------
                                           

                                          OR

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

      For the transition period from ___________________ to ____________________

   Commission File Number       0-25204                         
                              ----------------------------------

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


                KENTUCKY                                  61-1269067  
        -------------------------------       ---------------------------------
        (State or other jurisdiction of       (IRS Employer Identification No.)
         incorporation or organization)


           2717 LOUISA STREET, CATLETTSBURG, KENTUCKY       41129               
--------------------------------------------------------------------------------
                       (Address of principal executive offices)
                                      (Zip Code)


                                     (606) 739-4126                  
                   --------------------------------------------------
                   (Issuer's telephone number, including area code)

     Check whether the issuer (1) 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:

  As of August 8, 1997, there were issued and outstanding 1,075,754 shares
  of the Registrant's Common Stock.                                         
                                                                            
                                                                            
                                                                            
                                                                            
                  
  Transitional Small Business Disclosure Format (check one):


Yes                    No      X       
    -----------------     -------------

                                           
<PAGE>


                         GATEWAY BANCORP, INC. AND SUBSIDIARY

                                  TABLE OF CONTENTS

                                  *****************

Part I.    Financial Information

Item 1.    Consolidated Financial Statements
 
           Consolidated Balance Sheets (as of June 30, 1997
           (unaudited) and December 31, 1996). . . . . . . . . . .     3

           Consolidated Statements of Income (for the three
           months ended June 30, 1997 and 1996 (unaudited)). . . .     4

           Consolidated Statements of Income (for the six
           months ended June 30, 1997 and 1996 (unaudited)). . . .     5

           Consolidated Statements of Changes in
           Stockholders' Equity (for the six months 
           ended June 30, 1997 (unaudited) and the year 
           ended December 31, 1996). . . . . . . . . . . . . . . .     6

           Consolidated Statements of Cash Flows (for the six
           months ended June 30, 1997 and 1996 (unaudited)). . . .     7

           Notes to Consolidated Financial Statements. . . . . . .  8-10

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations . . . . . . . . . . 11-16


Part II.   Other Information

Item 1.    Legal Proceedings . . . . . . . . . . . . . . . . . . .    17

Item 2.    Changes in Securities . . . . . . . . . . . . . . . . .    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 and Reports on Form 8-K. . . . . . . . . . . .    18

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . .    19

<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                       JUNE 30,
                                                                                         1997       DECEMBER 31,
                                    ASSETS                                            (UNAUDITED)       1996
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
CASH AND CASH EQUIVALENTS..........................................................  $   2,361,532  $   1,348,415
INVESTMENT SECURITIES HELD TO MATURITY.............................................     14,355,165     17,523,931
LOANS RECEIVABLE, net..............................................................     21,005,191     19,075,792
MORTGAGE-BACKED SECURITIES HELD TO MATURITY........................................     25,202,763     27,663,022
ACCRUED INTEREST RECEIVABLE........................................................        371,848        430,055
FORECLOSED REAL ESTATE.............................................................         43,963           --
OFFICE PROPERTIES AND EQUIPMENT....................................................        348,813        358,497
INCOME TAXES REFUNDABLE............................................................        105,764         15,323
OTHER ASSETS.......................................................................         33,290         23,902
                                                                                     -------------  -------------
                                                                                     $  63,828,329  $  66,438,937
                                                                                     -------------  -------------
                                                                                     -------------  -------------
                         LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS...........................................................................  $  46,317,816  $  49,194,746
DEFERRED INCOME TAXES PAYABLE......................................................        165,288        111,808
ACCRUED INTEREST PAYABLE...........................................................         31,676         32,864
OTHER LIABILITIES..................................................................         51,372         70,866
                                                                                     -------------  -------------
  Total liabilities................................................................     46,566,152     49,410,284
                                                                                     -------------  -------------
STOCKHOLDERS' EQUITY:
  Common stock.....................................................................         10,758         10,758
  Employee benefit plans...........................................................       (846,209)      (918,319)
  Additional paid-in capital.......................................................      7,950,404      7,930,355
  Retained earnings-substantially restricted.......................................     10,147,224     10,005,859
                                                                                     -------------  -------------
    Total stockholders' equity.....................................................     17,262,177     17,028,653
                                                                                     -------------  -------------
                                                                                     $  63,828,329  $  66,438,937
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>
 
                                     - 3 -
<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                                                         FOR THE THREE MONTHS ENDED
                                                                                         --------------------------
<S>                                                                                       <C>           <C>
                                                                                           JUNE 30,     JUNE 30,
                                                                                             1997         1996
                                                                                          (UNAUDITED)  (UNAUDITED)
                                                                                          -----------  -----------
INTEREST INCOME:                                                                                      
  Loans receivable-                                                                                   
    Mortgage loans......................................................................   $ 374,582    $  319,689
    Other loans.........................................................................      10,294        11,405
    Investment securities...............................................................     258,181       348,021
    Mortgage-backed and related securities..............................................     448,535       489,027
    Other interest-earning assets.......................................................      28,668        12,976
                                                                                          -----------   ----------
     Total interest income..............................................................   1,120,260     1,181,118
                                                                                          -----------   ----------
INTEREST EXPENSE:                                                                                     
  Passbook savings......................................................................      24,399        29,110
  Certificates of deposit...............................................................     546,846       658,502
  FHLB advances.........................................................................       8,899          --
                                                                                          -----------   ----------
     Total interest expense.............................................................     580,144       687,612
                                                                                          -----------   ----------
     Net interest income................................................................     540,116       493,506
                                                                                                      
PROVISION FOR LOAN LOSSES...............................................................        --            --
                                                                                          -----------   ----------
     Net interest income after provision for loan losses................................     540,116       493,506
                                                                                          -----------   ----------
NON-INTEREST INCOME:                                                                                  
  Gains on foreclosed real estate.......................................................        --          10,094
  Gain on investments...................................................................        --           2,000
  Other.................................................................................       2,481         2,454
                                                                                          -----------   ----------
     Total non-interest income..........................................................       2,481        14,548
                                                                                          -----------   ----------
NON-INTEREST EXPENSE:                                                                                 
  Compensation and benefits.............................................................     110,789        94,930
  Occupancy and equipment...............................................................       8,897         8,659
  SAIF deposit insurance premium........................................................       6,280        30,357
  Professional services.................................................................      88,001        57,442
  Other taxes...........................................................................      20,531        18,087
  Other.................................................................................      56,496        61,256
                                                                                          -----------   ----------
     Total non-interest expense.........................................................     290,994       270,731
                                                                                          -----------   ----------
INCOME BEFORE PROVISION FOR INCOME TAXES................................................     251,603       237,323
PROVISION FOR INCOME TAXES..............................................................      96,370        68,663
                                                                                          -----------   ----------
NET INCOME..............................................................................   $ 155,233    $  168,660
                                                                                          -----------   ----------
                                                                                          -----------   ----------
NET INCOME PER SHARE....................................................................   $     .14    $      .15
                                                                                          -----------   ----------
                                                                                          -----------   ----------
</TABLE>

                                     - 4 -
<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                         FOR THE SIX MONTHS ENDED
                                                                                         ------------------------
                                                                                           JUNE 30,     JUNE 30,
                                                                                             1997         1996
                                                                                         -----------  -----------
                                                                                         (UNAUDITED)   (UNAUDITED)
<S>                                                                                       <C>          <C>
INTEREST INCOME:
  Loans receivable-Mortgage loans.......................................................   $ 729,684   $  639,021
  Other loans...........................................................................      19,311       23,164
  Investment securities.................................................................     509,217      647,974
  Mortgage-backed and related securities................................................     910,759      955,330
  Other interest-earning assets.........................................................      65,936       99,742
                                                                                          -----------  ----------
    Total interest income...............................................................   2,234,907    2,365,231
                                                                                          -----------  ----------
INTEREST EXPENSE:
  Passbook savings......................................................................      49,142       59,908
  Certificates of deposit...............................................................   1,106,007    1,322,381
  FHLB advances.........................................................................      14,628       --
                                                                                          -----------  ----------
    Total interest expense..............................................................   1,169,777    1,382,289
                                                                                          -----------  ----------
    Net interest income.................................................................   1,065,130      982,942

PROVISION FOR LOAN LOSSES...............................................................      --           --
                                                                                          -----------  ----------
    Net interest income after provision for loan losses.................................   1,065,130      982,942
                                                                                          -----------  ----------
NON-INTEREST INCOME:
  Gains on foreclosed real estate.......................................................      --           14,181
  Gain on investments...................................................................      --            2,000
  Other.................................................................................       6,850        4,544
                                                                                          -----------  ----------
    Total non-interest income...........................................................       6,850       20,725
                                                                                          -----------  ----------
NON-INTEREST EXPENSE:
  Compensation and benefits.............................................................     219,424      190,716
  Occupancy and equipment...............................................................      17,643       18,932
  SAIF deposit insurance premium........................................................      12,896       60,812
  Professional services.................................................................     131,615       93,105
  Other taxes...........................................................................      34,841       31,707
  Other.................................................................................     114,030      117,218
                                                                                          -----------  ----------
    Total non-interest expense..........................................................     530,449      512,490
                                                                                            -----------  ----------
INCOME BEFORE PROVISION FOR INCOME TAXES..............................................       541,531      491,177
PROVISION FOR INCOME TAXES..............................................................     193,039      152,318
                                                                                          -----------  ----------
NET INCOME..............................................................................   $ 348,492   $  338,859
                                                                                          -----------  ----------
                                                                                          -----------  ----------
NET INCOME PER SHARE....................................................................   $     .33   $      .30
                                                                                          -----------  ----------
                                                                                          -----------  ----------
</TABLE>

                                       -5-
<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                         RETAINED
                                                             EMPLOYEE     ADDITIONAL     EARNINGS-        TOTAL
                                                COMMON        BENEFIT       PAID-IN    SUBSTANTIALLY  STOCKHOLDERS'
                                                 STOCK         PLANS        CAPITAL      RESTRICTED      EQUITY
                                             -----------  -------------  ------------  ------------- -------------
<S>                                          <C>          <C>            <C>           <C>            <C>
BALANCES, December 31, 1995................   $  11,970   $  (1,098,907)  $9,502,671   $  10,062,529  $  18,478,263
NET INCOME, year ended December 31, 1996...      --            --             --             529,582        529,582
DIVIDENDS DECLARED, $.40 per share.........      --            --           (432,777)       --             (432,777)
ESOP SHARES RELEASED, 6,461 shares.........      --              64,610         (108)       --               64,502
RRP STOCK AMORTIZED, 7,998 shares..........      --             115,978       --            --              115,978
PURCHASE OF 121,216 TREASURY SHARES........      (1,212)       --         (1,139,431)       (586,252)    (1,726,895)
                                             -----------  -------------  ------------  -------------  -------------
BALANCES, December 31, 1996................      10,758        (918,319)   7,930,355      10,005,859     17,028,653
NET INCOME, six months ended June 30, 1997
  (unaudited)..............................      --            --             --             348,492        348,492
DIVIDENDS DECLARED, $.20 per share
  (unaudited)..............................      --            --              5,000        (205,151)      (200,151)
ESOP SHARES RELEASED, 2,940 shares
  (unaudited)..............................      --              29,400       15,049          (1,976)        42,473
RRP STOCK AMORTIZED, 2,946 shares
  (unaudited)..............................      --              42,710       --            --               42,710
                                             -----------  -------------  ------------  -------------  -------------
BALANCES, June 30, 1997 (unaudited)........   $  10,758   $    (846,209)  $7,950,404   $  10,147,224  $  17,262,177
                                             -----------  -------------  ------------  -------------  -------------
                                             -----------  -------------  ------------  -------------  -------------
</TABLE>

                                       -6-
<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                     FOR THE SIX MONTHS ENDED
                                                                                     ------------------------
                                                                                      JUNE 30,     JUNE 30,
                                                                                        1997         1996
                                                                                      ---------    ---------
<S>                                                                                   <C>            <C>
OPERATING ACTIVITIES:...............................................................  (Unaudited)  (Unaudited)
  Net income........................................................................  $  348,492   $  338,859
  Adjustments to reconcile net income to net cash provided by operating
    activities-
    Gain on investments.............................................................       --          (2,000)
    Provision for depreciation......................................................      10,174       10,285
    Amortization and accretion......................................................     (34,091)     (45,230)
    Provision for deferred income taxes.............................................      53,480       24,873
    ESOP compensation...............................................................      42,473        6,000
    RRP compensation................................................................      42,710       45,443
    FHLB stock dividends............................................................     (28,300)     (26,000)
    Net change in--
      Accrued interest receivable...................................................      58,207       32,949
      Other assets..................................................................      (9,388)     (25,292)
      Income taxes refundable.......................................................     (90,441)    (111,555)
      Accrued interest payable......................................................      (1,188)       4,419
      Other liabilities.............................................................     (19,494)     (28,316)
                                                                                      -----------   ----------
        Net cash provided by operating activities...................................     372,634      224,435
                                                                                      -----------   ----------
INVESTING ACTIVITIES:
  Net increase in loans.............................................................  (1,973,362)    (302,183)
  Purchases of investment securities................................................       --     (13,030,499)
  Maturities of investment securities...............................................   3,200,000   12,924,030
  Sales and calls of investment securities..........................................       --         350,000
  Purchases of mortgage-backed securities...........................................       --      (4,933,375)
  Principal collected on mortgage-backed securities.................................   2,491,416    3,028,748
  Purchases of office properties and equipment......................................        (490)     (11,469)
                                                                                      -----------   ----------
      Net cash provided by (used for) investing activities..........................   3,717,564   (1,974,748)
                                                                                      -----------   ----------
FINANCING ACTIVITIES:
  Net decrease in savings accounts..................................................    (133,251)    (203,005)
  Net increase (decrease) in certificates of deposit................................  (2,743,679)     291,369
  Advances from the FHLB............................................................   3,250,000       --
  Repayment of FHLB advances........................................................  (3,250,000)      --
  Dividends paid....................................................................    (200,151)  (1,535,556)
  Purchase of common stock..........................................................       --        (937,296)
                                                                                      -----------   ----------
      Net cash used for financing activities........................................  (3,077,081)  (2,384,488)
                                                                                      -----------   ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................   1,013,117   (4,134,801)
CASH AND CASH EQUIVALENTS, beginning of period......................................  1,348,415     6,542,257
                                                                                      -----------   ----------
CASH AND CASH EQUIVALENTS, end of period............................................  $2,361,532   $2,407,456
                                                                                      -----------   ----------
                                                                                      -----------   ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Income taxes paid.................................................................  $  230,000   $  239,000
                                                                                      -----------   ----------
                                                                                      -----------   ----------
  Interest paid on deposit accounts.................................................  $1,170,965   $1,377,870
                                                                                      -----------   ----------
</TABLE>

                                           -7-
<PAGE>



               GATEWAY BANCORP, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of Financial Statement Presentation

      Gateway Bancorp, Inc. (the "Company") was incorporated under Kentucky 
law in October 1994 by Catlettsburg Federal Savings and Loan Association in 
connection with its conversion (the "Conversion") to a federally-chartered 
stock savings bank known as "Catlettsburg Federal Savings Bank" (the "Bank"). 
The Conversion was completed on January 18, 1995.  See Note 2 herein.

      The accompanying consolidated financial statements were prepared in 
accordance with instructions to Form 10-QSB, and therefore, do not include 
information or footnotes necessary for a complete presentation of financial 
position, results of operations and cash flows in conformity with generally 
accepted accounting principles.  However, all normal, recurring adjustments 
which, in the opinion of management, are necessary for a fair presentation of 
the financial statements, have been included.  These financial statements 
should be read in conjunction with the audited financial statements and the 
notes thereto for the year ended December 31, 1996.  The results for the six 
months ended June 30, 1997 are not necessarily indicative of the results that 
may be expected for the year ended December 31, 1997.

      Business

      The Company's principal business is conducted through the Bank which 
conducts business from its main office located in Catlettsburg, Kentucky, and 
one full-service branch located in Grayson, Kentucky.  The Bank's deposits 
are insured by the Savings Association Insurance Fund ("SAIF") to the maximum 
extent permitted by law.  The Bank is subject to examination and 
comprehensive regulation by the Office of Thrift Supervision ("OTS"), which 
is the Bank's chartering authority and primary regulator.  The Bank is also 
subject to regulation by the Federal Deposit Insurance Corporation ("FDIC"), 
as the administrator of the SAIF, and to certain reserve requirements 
established by the Federal Reserve Board ("FRB").  The Bank is a member of 
the Federal Home Loan Bank of Cincinnati ("FHLB").

      Principles of Consolidation

      The consolidated financial statements include the accounts of the 
Company, the Bank, and the Bank's one wholly-owned subsidiary.   All 
significant intercompany transactions have been eliminated in consolidation. 
Additionally, certain reclassifications may have been made in order to 
conform with the current period's presentation.  The accompanying 
consolidated financial statements have been prepared on the accrual basis.

                                   -8-


<PAGE>

(2)   CONVERSION TRANSACTION

      On January 18, 1995, (i) the Bank converted from a federally- chartered 
mutual savings and loan association to a federally-chartered stock savings 
bank and (ii) the Company acquired all of the common stock of the Bank in the 
Conversion. As part of the Conversion, the Company issued 1,244,570 shares of 
its Common Stock.  Total proceeds of $12,445,700 were reduced by $500,000 for 
shares to be purchased by the Employee Stock Ownership Plan ("ESOP") and by 
approximately $737,200 for conversion expenses.  As a result of the 
Conversion, the Company contributed approximately $5,900,000 of additional 
capital to the Bank and retained the balance of the proceeds.

(3)   NET INCOME PER SHARE

      Net income per share for the three and six months ended June 30, 1997 
and 1996 was computed using the weighted average (1,041,240 and 1,140,618, 
respectively) number of shares outstanding.  Shares which have not been 
committed to be released to the ESOP are not considered to be outstanding for 
purposes of calculating net income per share.

(4)   DIVIDENDS PER SHARE

      For purposes of recording dividends, dividends paid on unallocated ESOP 
shares are not considered dividends for financial reporting purposes, and are 
used for debt service. There were 17,147 and 11,014 shares released to the 
ESOP at June 30, 1997 and June 30, 1996, respectively.  Dividends on 
allocated shares used for debt service are charged to retained earnings and 
paid by releasing additional shares to the ESOP with the same corresponding 
value.

(5)   PURCHASE OF COMMON STOCK

      Through June 30, 1997, the Company had purchased 168,816 shares of its 
outstanding common stock on the open market at an aggregate cost of 
$2,416,160.  In accordance with the 1988 amendment to the Kentucky Business 
Corporation Act, the purchase of these shares has been recorded as a purchase 
of common stock shares, which are authorized but unissued.  The shares are 
available for reissuance.

(6)   EMPLOYEE STOCK OWNERSHIP PLAN

      The Company has established the ESOP for employees of the Company and 
the Bank effective upon the Conversion. Full-time employees of the Company 
and the Bank who have been credited with at least 1,000 hours of service 
during a twelve month period and who have attained age 21 are eligible to 
participate in the ESOP.  The Company loaned the ESOP $500,000 for the 
initial purchase of the ESOP shares.  The loan is due and payable in forty 
(40) equal quarterly installments of $12,500 beginning March 31, 1995, plus 
interest at the rate of 8.75% per annum.  The Company will make scheduled 
discretionary cash contributions to the ESOP sufficient to amortize the 
principal and interest on the loan.  The Company accounts for its ESOP in 
accordance with Statement of Position 93-6, "Employer's Accounting For 
Employee Stock Ownership Plans."  As shares are committed to be released to 
participants, the Company reports compensation expense equal to the average 
market price of the shares during the period.  ESOP compensation expense 
recorded during the three and six months ended June 30, 1997 and 1996 was 
$22,360 and $42,473, and $3,000 and $6,000, respectively.                     

                                  -9-

<PAGE>

(7)   RECOGNITION AND RETENTION PLAN AND TRUST

      The Company has established a Recognition and Retention Plan and Trust 
("RRP").  As of June 30, 1997, the Company had purchased 49,782 shares in the 
open market to fund the RRP at an aggregate cost of $721,839.  As of June 30, 
1997, 32,228 of the shares available under the RRP have been awarded to the 
Company's Board of Directors and the Bank's executive officers and other key 
employees, subject to vesting and other provisions of the RRP.

      At June 30, 1997, the deferred cost of unearned RRP shares totaled 
$517,679 and is recorded as a charge against stockholders' equity.  
Compensation expense will be recognized ratably over the five year vesting 
period only for those shares awarded.  The Company recorded compensation 
expense related to the RRP of $21,598 and $42,710 for the three and six 
months ended June 30, 1997, and $22,707 and $45,443 for the three and six 
months ended June 30, 1996.

(8)   STOCK OPTION PLAN

      The Company established a Stock Option Plan (the "Plan") in 1995.  A 
total of 124,457 shares may be issued pursuant to the Plan.  Through June 30, 
1997 an aggregate of 74,667 stock options have been granted to the Company's 
Board of Directors, and the Bank's executive officers and other key 
employees.  These options are subject to vesting provisions as well as other 
provisions of the Plan.  Such options were not dilutive during the three and 
six months ended June 30, 1997 and 1996.  No options have been exercised as 
of June 30, 1997.

      No compensation expense has been recognized in these interim financial 
statements for the value of stock options earned as permitted by Statement of 
Financial Accounting Standards No. 123, Accounting for Stock Based 
Compensation.

(9)   SAIF INSURANCE ASSESSMENT
 
      Beginning January 1, 1997, the Bank's SAIF assessments were reduced to 
$.064 for every $100 of insured deposits, from the prior level of $.23 per 
$100 of insured deposits.  Such reduction reflects the consequences of the 
1996 legislation which eliminated the deposit insurance premium differential 
between SAIF-insured institutions and Bank Insurance Fund-insured 
institutions.

(10)  PENDING ACQUISITION

      On June 17, 1997, the Company entered into an Agreement and Plan of 
Merger ("Agreement") with Peoples Bancorp, Inc. ("Peoples"), an Ohio 
multi-bank holding company headquartered in Marietta, Ohio, whereby Peoples 
agreed to acquire the Company and the Bank.  The Agreement provides for the 
acquisition of 100% of the Company's outstanding common stock.  The purchase 
consideration consists of $18.75 per share of the Company's common stock, 
which may be paid in cash, Peoples common stock or both, at the election of 
each stockholder, as more fully described in the Agreement.  The transaction 
is subject to the approval of the Company's stockholders and the receipt of 
all required regulatory approvals, as well as other customary conditions.

                                  -10-


<PAGE>

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

Changes in Financial Condition

General.  At June 30, 1997, the Company's total assets amounted to $63.8 
million as compared to $66.4 million at December 31, 1996, a decrease of $2.6 
million, or 3.9%.  The $2.6 million decrease consisted primarily of decreases 
in investment securities held to maturity and mortgage-backed securities held 
to maturity of $3.1 million and $2.5 million, respectively, partially offset 
by increases in cash and cash equivalents and loans receivable, net, of $1.1 
million and $1.9 million, respectively.

Cash and Cash Equivalents.  These balances consist of cash on hand and 
short-term (liquid) interest-bearing deposits in other financial 
institutions.  The $1.1 million increase, from $1.3 million at December 31, 
1996 to $2.4 million at June 30, 1997, was primarily due to the retention of 
proceeds from maturing investment securities and principal repayments on 
mortgage-backed securities during the period, less cash requirements to fund 
loan demand and maturing savings deposits.  

Investment Securities.  Investment securities consist primarily of U.S. 
Treasury and U.S. Governmental agency securities.  The $3.1 million decrease, 
from $17.5 million at December 31, 1996 to $14.4 million at June 30, 1997, 
resulted from maturing securities with no corresponding reinvestments.  
Maturity proceeds were used primarily to fund loan commitments and maturing 
savings deposits.

At June 30, 1997, the market value of the Company's investment securities 
portfolio was less than the carrying value by approximately $150,000, as 
compared to an unrealized loss of approximately $100,000 at December 31, 
1996.  These changes in market value are not deemed to be significant and the 
Company intends, and has the ability, to hold its investment securities to 
maturity.

Mortgage-Backed Securities.  Mortgage-backed securities have always been a 
primary component of the Company's interest-earning assets, due to the 
relatively low demand for competitive-rate, single family mortgage loans in 
the Company's lending area.  The $2.5 million decrease, from $27.7 million at 
December 31, 1996 to $25.2 million at June 30, 1997 consisted entirely of 
principal repayments.  Such proceeds were used primarily to fund loan 
commitments and maturing savings deposits.

At June 30, 1997, the market value of the Company's mortgage-backed 
securities portfolio exceeded the carrying value by approximately $394,000.  
This compared to an unrealized gain of approximately $40,000 at December 31, 
1996.  The Company intends, and has the ability, to hold its mortgage-backed 
securities to maturity.

Loans Receivable, net.  Loans receivable, net, increased from $19.1 million 
at December 31, 1996 to $21.0 million at June 30, 1997, an increase of 9.9%.  
Such increase resulted from a continuing emphasis on a competitive loan 
pricing policy as part of the Company's strategy to increase its mortgage 
loan market share.

Loan Concentrations.  The Company does not have a concentration of its loan 
portfolio in any one industry or to any one borrower.  Real estate lending 
(both mortgage and construction loans) continues to be the largest component 
of the loan portfolio, representing $20.4 million, or 97.1%, 

                                  -11-


<PAGE>


of total gross loans, while consumer loans, consisting of loans secured by 
deposit accounts, totaled $.6 million, or 2.9%, of total gross loans 
outstanding at June 30, 1997.

The Company's lending is concentrated to borrowers who reside in and/or which 
are collateralized by real estate located in Boyd, Carter and Greenup County, 
Kentucky.  Employment in these areas is highly concentrated in the petroleum 
and steel industries. Therefore, many debtors' ability to honor their 
contracts is dependent upon these economic sectors.

Allowance for Loan Losses.  The allowance for loan losses as a percentage of 
total loans decreased from .47% at December 31, 1996 to .39% at June 30, 
1997.  The total dollar amount of the allowance remained unchanged totaling 
$81,000 at both periods.

There were no loans charged off or recoveries during the three and six months 
ended June 30, 1997 and 1996. 

Total non-performing loans (non-accruing loans and accruing loans greater 
than 90 days delinquent) totaled $529,000 and $209,000, respectively, or 
2.52% and 1.09% of total loans outstanding, respectively, at June 30, 1997 
and December 31, 1996.  Total non-performing assets (non-performing loans and 
foreclosed real estate) totaled .90% and .31% of total assets at June 30, 
1997 and December 31, 1996, respectively.  Of the Company's non-performing 
loans at June 30, 1997, $487,000 consist of seven single-family residential 
loans, while $42,000 consists of one commercial real estate loan.

The Company had no loans specifically classified as impaired at June 30, 1997 
or 1996, and had no troubled debt restructurings during the periods then 
ended.

Office Properties and Equipment.  The Company's net investment in facilities 
and equipment totaled approximately $349,000 at June 30, 1997 as compared to 
$358,000 at December 31, 1996. 

Liabilities.  The Company's liabilities consist primarily of customer 
deposits.  Liabilities decreased $2.8 million, or 5.8%, from $49.4 million at 
December 31, 1996 to $46.6 million at June 30, 1997.  Deposits decreased $2.9 
million, or 5.9%, from $49.2 million at December 31, 1996 to $46.3 million at 
June 30, 1997. Such decreases can be attributed to relatively unchanged 
market rates of interest paid on deposits during the period when compared to 
higher yielding investment alternatives available to the Company's customers. 
 

Occasionally, borrowings from the FHLB of Cincinnati are utilized to satisfy 
short-term liquidity needs.  The Company borrowed and repaid $3.2 million 
from the FHLB during the six months ended June 30, 1997.  The Company had no 
comparable borrowings during the six months ended June 30, 1996.

Stockholders' Equity.  The Company's stockholders' equity totaled $17.3 
million at June 30, 1997, as compared to $17.0 million at December 31, 1996. 
The $.3 million increase for the period ended June 30, 1997 was primarily 
attributable to net income for the period of $348,000 and the release of 
common stock to the employee benefit plans, offset by the payment of 
dividends.  

Comparison of Operating Results for the Three Months Ended 
June 30, 1997 and June 30, 1996

Net Income.  Net income decreased $13,427, or 8.0%, from $168,660 for the 
three months ended June 30, 1996 to $155,233 for the three months ended June 
30, 1997.  Net income per share was $.14 and $.15 for the 1997 and 1996 
quarters, respectively. The decrease resulted from decreases 

                                  -12-


<PAGE>

in interest income and non-interest income of $60,858 and $12,067, or 5.2% 
and 82.9%, respectively, and increases in non-interest expenses and the 
provision for income taxes of $20,263 and $27,707, or 7.5% and 40.4%, 
respectively, offset by a reduction in interest expense of $107,468, or 15.6%.

Interest Income.  The $60,858 decrease in interest income, from $1,181,118 
for the three months ended June 30, 1996 to $1,120,260 for the three months 
ended June 30, 1997 was primarily due to lower volumes of interest-earning 
assets, except for loans receivable, partially offset by higher yielding 
investment securities and mortgage-backed securities.

Interest Expense.  The $107,468 decrease in interest expense, from $687,612 
for the three months ended June 30, 1996 to $580,144 for the three months 
ended June 30, 1997 resulted primarily from a lower volume of 
interest-bearing liabilities, and to a lesser extent, from lower rates paid 
on deposits.

Provision for Loan Losses.  No provision for loan losses was necessary during 
the 1997 or 1996 quarter ended June 30, reflecting management's determination 
that the allowance for loan losses was adequate at both reporting periods.  
In making this determination, management makes a review of non-performing 
loans, the overall quality of the loan portfolio, levels of past due loans, 
and prior loan loss experience.

Non-Interest Income. The $12,067 decrease in non-interest income, from 
$14,548 for the three months ended June 30, 1996 to $2,481 for the three 
months ended June 30, 1997,  resulted primarily from $10,094 in partial 
recoveries during the 1996 period of prior losses on foreclosed real estate, 
with no comparable recoveries during the 1997 period.

Non-Interest Expense.  Non-interest expense increased $20,263, from $270,731 
for the three months ended June 30, 1996 to $290,994 for the three months 
ended June 30, 1997.  This resulted primarily from increases in compensation 
and benefits of $15,859 and professional services expenses of $30,559, 
partially offset by a reduction in SAIF deposit insurance premiums and other 
expenses of $24,077 and $4,760, respectively.  The increase in compensation 
and benefits was largely due to a $16,360 increase in ESOP compensation 
expense for the 1997 quarter as compared to the 1996 quarter.  During the 
1996 quarter, the Company had more dividends available which had been paid on 
unallocated ESOP shares to meet debt service requirements on the ESOP loan, 
thus reducing the Company's required contributions in the 1996 quarter as 
compared to the 1997 period.  The increase in professional services expenses 
was primarily the result of additional expenses incurred during the 1997 
quarter in connection with the pending acquisition of the Company by Peoples 
Bancorp, Inc.  See Note 10 to the Consolidated Financial Statements.  The 
reduction in the SAIF deposit insurance premiums reflects the consequences of 
the 1996 legislation which lowered the Bank's deposit insurance assessment 
from $.23 per hundred of insured deposits to $.064 per hundred.  The 
reduction in other expenses primarily reflects a lower Kentucky Corporate 
License Fee in the 1997 quarter as compared to the 1996 quarter, such fee 
being assessed on the stockholders' equity of Gateway, on an unconsolidated 
basis.

Provision for Income Taxes.  The provision for income taxes increased $27,707 
for the quarter ended June 30, 1997 as compared to the quarter ended June 30, 
1996.  The increase is due to the reduction in the 1997 quarter as compared 
to the 1996 quarter in Kentucky net operating loss carrybacks.  Gateway is 
subject to Kentucky income taxes on an unconsolidated basis, whereas the Bank 
is not. 

                                      -13-

<PAGE>

Comparison of Operating Results for the Six Months Ended 
June 30, 1997 and June 30, 1996

Net Income.  Net income increased $9,633, or 2.8%, from $338,859 for the six 
months ended June 30, 1996 to $348,492 for the six months ended June 30, 
1997.  Net income per share was $.33 and $.30 for the 1997 and 1996 six month 
periods, respectively.  The increase resulted from a decrease in interest 
expense of $212,512, or 15.4%, which was offset by decreases in interest 
income of $130,324, or 5.5%, non-interest income of $13,875, or 66.9%, and 
increases in non-interest expenses of $17,959, or 3.5%, and the provision for 
income taxes of $40,721, or 26.7%.

Interest Income.  The $130,324 decrease in interest income, from $2,365,231 
for the six months ended June 30, 1996 to $2,234,907 for the comparable 1997 
period was primarily due to lower volumes of interest earning assets, except 
for loans receivable, partially offset by higher yielding investment 
securities and mortgage-backed securities.  The average yield on 
interest-earning assets increased from 6.63% for the six months ended June 
30, 1996 to 6.94% for the six months ended June 30, 1997.

Interest Expense.  The $212,512 decrease in interest expense, from $1,382,289 
for the six months ended June 30, 1996 to $1,169,777 for the comparable 1997 
period resulted primarily from a lower volume of interest-bearing 
liabilities, and to a lesser extent, from lower rates paid on deposits.  The 
average rate paid on interest-bearing liabilities fell to 4.89% from 5.14% 
for the six months ended June 30, 1997 as compared to the six months ended 
June 30, 1996.  

The difference in the yield on interest-earning assets and the rate paid on 
interest-bearing liabilities resulted in an interest rate spread of 2.05% for 
the six months ended June 30, 1997 as compared to 1.49% for the six months 
ended June 30, 1996, primarily due to higher yielding mortgage-backed 
securities and investment securities, along with the decline in rates paid on 
interest-bearing liabilities, offset by a slightly lower yielding loan 
portfolio.

Provision for Loan Losses.  The Company recorded no provision for loan losses 
for the six months ended June 30, 1997 and 1996. Management's decision to 
make no provision for loan losses reflects their assessment that the current 
loan loss allowance is adequate. Management considers non-performing loans, 
past due loans, the overall quality of the loan portfolio, and prior loan 
loss experience in making this determination.

Non-Interest Income.  The $13,875 decrease in non-interest income, from 
$20,725 for the six months ended June 30, 1996 to $6,850 for the six months 
ended June 30, 1997, resulted primarily from $14,181 in partial recoveries 
during the 1996 period of prior losses on foreclosed real estate, with no 
comparable recoveries during the 1997 period.

Non-Interest Expense.  Non-interest expense increased $17,959, from $512,490 
for the six months ended June 30, 1996 to $530,449 for the six months ended 
June 30, 1997.  This resulted primarily from increases in compensation and 
benefits of $28,708 and professional services expenses of $38,510, partially 
offset by a reduction in SAIF deposit insurance premiums of $47,916.  The 
increase in compensation and benefits was largely due to a $36,473 increase 
in ESOP compensation expense for the 1997 period as compared to the 1996 
period.  During the 1996 period, the Company had more dividends available 
which had been paid on unallocated ESOP shares to meet debt service 
requirements on the ESOP loan, thus reducing the Company's required 
contributions in the 1996 period as compared to the 1997 period.  The 
increase in professional services expenses was primarily the result of 
additional expenses incurred during the 1997 six month period in 

                                  -14-


<PAGE>

connection with the pending acquisition of the Company by Peoples Bancorp, 
Inc.  See Note 10 to the Consolidated Financial Statements. The reduction in 
the SAIF deposit insurance premiums reflects the consequences of the 1996 
legislation which lowered the Bank's deposit insurance assessment from $.23 
per hundred of insured deposits to $.064 per hundred.

Provision for Income Taxes.  The provision for income taxes increased 
$40,721, from $152,318 for the six months ended June 30, 1996 to $193,039 for 
the comparable 1997 period, primarily due to increased pre-tax income.  The 
effective tax rates were 35.6% and 31.0% for the six months ended June 30, 
1997 and 1996, respectively.  The increase in the effective tax rate resulted 
from the reduction in the 1997 period in available Kentucky net operating 
loss carrybacks which resulted in state tax refunds during the 1996 period.  
The Company is subject to Kentucky income taxes whereas the Bank is not.

Liquidity and Capital Resources

The Company's liquidity, represented by cash and cash equivalents, is a 
product of its operating, investing and financing activities.  The Bank's 
primary sources of funds are deposits, amortization, prepayments and 
maturities of outstanding loans and mortgage-backed securities, maturities of 
investment securities and other short-term investments and funds provided 
from operations.  While scheduled payments from the amortization of loans and 
mortgage-backed securities and maturing investment securities and short term 
investments are relatively predictable sources of funds, deposit flows and 
loan prepayments are greatly influenced by general interest rates, economic 
conditions and competition.  In addition, the Bank invests excess funds in 
overnight deposits and other short-term interest-earning assets which provide 
liquidity to meet lending requirements.  At June 30, 1997, the Bank had no 
outstanding advances from the Federal Home Loan Bank of Cincinnati or other 
borrowings.  During the six months ended June 30, 1997, the Bank borrowed, 
and subsequently repaid, $3,250,000 from the FHLB to meet short-term 
liquidity needs.

Liquidity management is both a daily and long-term function of business 
management.  Excess liquidity is generally invested in short-term investments 
such as overnight deposits.  On a longer-term basis, the Bank maintains a 
strategy of investing in various investment and mortgage-backed securities 
and residential mortgage loans.  The Bank uses its sources of funds primarily 
to meet its ongoing commitments, and to maintain a portfolio of 
mortgage-backed and investment securities.  At June 30, 1997, the total 
approved loan commitments outstanding amounted to $168,500.  At the same 
date, there were no commitments under unused lines of credit.  Certificates 
of deposit scheduled to mature in one year or less at June 30, 1997, totaled 
$32.2 million.  Management believes that a significant portion of maturing 
deposits will remain with the Bank.   At June 30, 1997, the Bank had a 
liquidity ratio of 21.9% which exceeded the required minimum liquid asset 
ratio of 5.0% of assets.

At June 30, 1997, the Bank had regulatory capital which was well in excess of 
applicable limits.  At June 30, 1997, the Bank was required to maintain 
tangible capital of 1.5% of adjusted total assets, core capital of 3.0% of 
adjusted total assets and risk-based capital of 8.0% of adjusted 
risk-weighted assets.  At June 30, 1997, the Bank's tangible capital was 
$15.3 million or 24.7% of adjusted total assets, core capital was $15.3 
million or 24.7% of adjusted total assets and risk-based capital was $15.4 
million or 80.2% of adjusted risk-weighted assets, exceeding the requirements 
by $14.4 million, $13.4 million and $13.8 million, respectively.

                                  -15-


<PAGE>

Recent Accounting Pronouncements

In management's opinion, there are no recent accounting pronouncements which 
have been adopted, or pending pronouncements that, if adopted, which have had 
or would have a significant effect on the Company's financial position or 
results of operations.

                                  -16-
<PAGE>

PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          There are no material legal proceedings to which the
          Registrant or any of its subsidiaries is a part, or to
          which any of their property is subject.

Item 2.   Changes in Securities

          Not applicable.

Item 3.   Defaults Upon Senior Securities

          Not applicable.

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

          a)    An annual meeting of stockholders ("Annual Meeting")
                was held on May 15, 1997.

          b)    Not applicable.

          c)    Two matters were voted upon at the Annual Meeting. 
                The stockholders approved matters brought before the
                Annual Meeting.  The matters voted upon together with
                the applicable voting results were as follows:

                1)   Proposal to elect two directors for a three
                     year term expiring in 2000 - John H. Fugeman
                     and Harold Freedman each received votes for
                     945,085; not voted 128,619; withheld 2,050.

                2)   Proposal to ratify the appointment by the Board
                     of Directors of Kelley, Galloway & Company, PSC
                     as the Company's independent auditors for the
                     fiscal year ending December 31, 1997 - votes
                     for 944,910; against 800; abstain 1,425; not
                     voted 128,619.

          d)    Not applicable.

Item 5.   Other Information

          Not applicable.

                                    - 17 -


<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

          a)   Exhibits:

                No.   Description                                          Page
                ---   -----------                                          ----

                3.1   Articles of Incorporation of Gateway Bancorp, Inc.1/

                3.2   Bylaws of Gateway Bancorp, Inc.1/

                3.3   Articles of Correction of Gateway Bancorp, Inc. dated
                      April 11, 1995 2/

                3.4   Articles of Amendment of Gateway Bancorp, Inc. dated
                      June 18, 1996 2/

                27    Financial Data Schedule                               E-1

--------------------------
1/  Incorporated by reference from the Registration Statement on Form
S-1 (Registration No. 33-84784) filed by the Registrant with the
Securities and Exchange Commission ("Commission") on October 4, 1994,
as amended.

2/  Incorporated by reference from the Form 10-QSB for the quarterly
period ended June 30, 1996 filed by the Registrant with the
Commission on August 13, 1996.

    b)    Reports on Form 8 - K

          On May 1, 1997, the Company filed a report to
          indicate that on April 25, 1997, Peoples Bancorp,
          Inc. ("Peoples"), an Ohio multi-bank holding company
          headquartered in Marietta, Ohio, and the Company
          signed a letter of intent ("Letter of Intent")
          providing for the acquisition by Peoples of the
          Company and the Bank.  The Letter of Intent and a
          press release with respect to the Letter of Intent
          were filed as exhibits to the report.

          On June 24, 1997, the Company filed a report to
          indicate that on June 17, 1997, Peoples and the
          Company had entered into an Agreement and Plan of
          Merger ("Agreement") whereby Peoples would acquire
          100% of the Company's outstanding common stock for
          $18.75 per share, to be payable in cash, Peoples
          common stock, or both, at the election of each
          stockholder, as more fully described in the
          Agreement.  The transaction is subject to the
          approval of the Company's stockholders and the
          receipt of all required regulatory approvals, as well
          as other customary conditions.  The Agreement and a
          press release with respect to the Agreement were
          filed as exhibits to the report.

                                    - 18 -

<PAGE>

SIGNATURES

    In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                       GATEWAY BANCORP, INC.               

Date: August 8, 1997                   By:  /s/ Rebecca R. Jackson 
      --------------                        -----------------------------------
                                            Rebecca R. Jackson, President and
                                            Chief Executive Officer


Date: August 8, 1997                   By:  /s/ Pamela Howard                  
      --------------                        -----------------------------------
                                            Pamela Howard, Assistant Secretary/
                                            Treasurer (chief accounting officer)

                                    - 19 -