<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 September 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)
 
<TABLE>
<S>                                              <C>
      KENTUCKY                                61-1269067
    ------------                             ------------
(State or other jurisdiction of      (IRS Employer Identification No.)
 incorporation or organization)
</TABLE>
 
             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 November 7, 1997, there were issued and outstanding 1,081,665 
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
 
                               *****************
 
<TABLE>
<S>         <C>                                        <C>
Part I.       Financial Information

Item 1.       Consolidated Financial Statements

              Consolidated Balance Sheets (as of
              September 30, 1997 (unaudited) and
              December 31, 1996)................................  3

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

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

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

              Consolidated Statements of Cash Flows
              (for the nine months ended September 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.................  17

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

</TABLE>


<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                       SEPTEMBER 30,
                                                           1997       DECEMBER 31,
                      ASSETS                            (UNAUDITED)       1996
           ------------------------------              -------------  -------------
<S>                                                    <C>            <C>
 
<CAPTION>
CASH AND CASH EQUIVALENTS............................  $   5,019,588  $   1,348,415
INVESTMENT SECURITIES HELD TO MATURITY...............     12,321,549     17,523,931
LOANS RECEIVABLE, net................................     21,420,513     19,075,792
MORTGAGE-BACKED SECURITIES HELD TO MATURITY..........     23,129,509     27,663,022
ACCRUED INTEREST RECEIVABLE..........................        237,530        430,055
FORECLOSED REAL ESTATE...............................         43,963          --
OFFICE PROPERTIES AND EQUIPMENT......................        342,809        358,497
INCOME TAXES REFUNDABLE..............................         57,755         15,323
OTHER ASSETS.........................................         35,288         23,902
                                                        -------------  -------------
                                                       $  62,608,504  $  66,438,937
                                                        -------------  -------------
                                                        -------------  -------------

      LIABILITIES AND STOCKHOLDERS' EQUITY
     --------------------------------------

DEPOSITS.............................................  $  44,859,991  $  49,194,746
DEFERRED INCOME TAXES PAYABLE........................        158,499        111,808
ACCRUED INTEREST PAYABLE.............................         35,858         32,864
OTHER LIABILITIES....................................        183,978         70,866
                                                        -------------  -------------
     Total liabilities...............................     45,238,326     49,410,284
                                                        -------------  -------------

STOCKHOLDERS' EQUITY: 
  Common stock.......................................         10,817         10,758
  Employee benefit plans.............................       (810,355)      (918,319)
  Additional paid-in capital.........................      8,013,803      7,930,355
  Retained earnings-substantially restricted.........     10,155,913     10,005,859
                                                        -------------  -------------
     Total stockholders' equity......................     17,370,178     17,028,653
                                                        -------------  -------------
                                                       $  62,608,504  $  66,438,937
                                                        -------------  -------------
                                                        -------------  -------------
</TABLE>
 
                                       3
<PAGE>
                     GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                      CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                        FOR THE THREE  MONTHS ENDED
                                                        SEPTEMBER 30,  SEPTEMBER 30,
                                                            1997           1996
                                                        -------------  -------------
                                                         (UNAUDITED)    (UNAUDITED)
<S>                                                   <C>            <C>
INTEREST INCOME: 
  Loans Receivable-
   Mortgage loans....................................   $   386,149    $   333,774
   Other loans.......................................         9,833         10,203
  Investment securities..............................       221,857        344,506
  Mortgage-backed and related securities.............       422,799        494,780
  Other interest-earning assets......................        41,641         13,259
                                                         -------------  -------------
     Total interest income...........................     1,082,279      1,196,522
                                                         -------------  -------------

INTEREST EXPENSE: 
  Passbook savings...................................        23,598         38,506
  Certificates of deposit............................       528,891        610,590
  FHLB advances......................................           325           --
                                                         -------------  -------------

     Total interest expense..........................       552,814        649,096
                                                         -------------  -------------
     Net interest income.............................       529,465        547,426

PROVISION FOR LOAN LOSSES............................         --             --
                                                         -------------  -------------
     Net interest income after provision 
      for loan losses................................       529,465        547,426
                                                         -------------  -------------

NON-INTEREST INCOME: 
  Other..............................................         4,285          3,036
                                                         -------------  -------------

     Total non-interest income.......................         4,285          3,036
                                                         -------------  -------------

NON-INTEREST EXPENSE:
  Compensation and benefits..........................       116,779         90,821
  Occupancy and equipment............................        10,529          9,110
  SAIF deposit insurance premiums....................         5,883        369,655
  Professional services..............................       189,970         15,851
  Other taxes........................................        14,310         13,620
  Other..............................................        72,203         49,951
                                                         -------------  -------------
     Total non-interest expense......................       409,674        549,008
                                                         -------------  -------------

INCOME BEFORE PROVISION FOR INCOME TAXES.............       124,076          1,454

PROVISION FOR INCOME TAXES...........................        40,196         (2,033)
                                                         -------------  -------------

NET INCOME...........................................   $    83,880    $     3,487
                                                         -------------  -------------
                                                         -------------  -------------

NET INCOME PER SHARE                                    $       .08    $       .00
                                                         -------------  -------------
                                                         -------------  -------------

</TABLE>
 
                                       4

<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                      FOR THE NINE MONTHS ENDED
                                                     ----------------------------
<S>                                                  <C>            <C>
                                                        SEPTEMBER 30,  SEPTEMBER 30,
                                                            1997           1996
                                                       -------------  -------------
                                                        (UNAUDITED)    (UNAUDITED)

INTEREST INCOME:
  Loans receivable-
   Mortgage loans....................................   $ 1,115,833    $   972,795
   Other loans.......................................        29,144         33,367
  Investment securities..............................       731,074        992,480
  Mortgage-backed and related securities.............     1,333,558      1,450,110
  Other interest-earning assets......................       107,577        113,001
                                                         -----------    -----------
     Total interest income...........................     3,317,186      3,561,753
                                                         -----------    -----------

INTEREST EXPENSE:
  Passbook savings...................................        72,740        137,989
  Certificates of deposit............................     1,634,898      1,893,396
  FHLB advances......................................        14,953          --
                                                         -----------    -----------
     Total interest expense..........................     1,722,591      2,031,385
                                                         -----------    -----------

     Net interest income.............................     1,594,595      1,530,368

PROVISION FOR LOAN LOSSES............................         --             --
                                                         -----------    -----------

  Net interest income after provision 
    for loan losses..................................     1,594,595      1,530,368
                                                         -----------    -----------

NON-INTEREST INCOME:
  Gains on foreclosed real estate....................         --            14,181
  Gain on investments................................         1,500          2,000
  Other..............................................         9,635          7,580
                                                         -----------    -----------
     Total non-interest income.......................        11,135         23,761

                                                         -------------  -------------
NON-INTEREST EXPENSE:
  Compensation and benefits..........................       336,203        281,537
  Occupancy and equipment............................        28,172         28,042
  SAIF deposit insurance premiums....................        18,779        430,467
  Professional services..............................       321,585        108,956
  Other taxes........................................        49,151         45,327
  Other..............................................       186,233        167,169
                                                         -----------    -----------
     Total non-interest expense......................       940,123      1,061,498
                                                         -----------    -----------

INCOME BEFORE PROVISION FOR INCOME TAXES.............       665,607        492,631

PROVISION FOR INCOME TAXES...........................       233,235        150,285
                                                         -----------    -----------

NET INCOME..........................................    $   432,372    $   342,346
                                                         -----------    -----------
                                                         -----------    -----------

NET INCOME PER SHARE                                    $       .41    $       .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, nine months ended September 30,
  1997 (unaudited).........................     --           --             --             432,372        432,372
DIVIDENDS DECLARED, $.30 per share
  (unaudited)..............................     --                530         5,459       (309,306)      (303,317)
STOCK OPTIONS EXERCISED, 5,900 shares
  (unaudited)..............................         59       --              50,970         28,964         79,993
ESOP SHARES RELEASED, 4,308 shares
  (unaudited)..............................     --             43,080        27,019         (1,976)        68,123
RRP STOCK AMORTIZED, 4,438 shares
  (unaudited)..............................     --             64,354       --            --               64,354
                                             ---------  -------------  ------------  -------------  -------------
BALANCES, September 30, 1997 (unaudited)...  $  10,817  $    (810,355) $  8,013,803  $  10,155,913  $  17,370,178
                                             ---------  -------------  ------------  -------------  -------------
                                             ---------  -------------  ------------  -------------  -------------
</TABLE>
 
                                       6
<PAGE>
                      GATEWAY BANCORP, INC. AND SUBSIDIARY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                               FOR THE NINE MONTHS ENDED
                                                              ----------------------------
<S>                                                           <C>            <C>
                                                               SEPTEMBER 30,   SEPTEMBER 30,
                                                                  1997            1996

OPERATING ACTIVITIES:            
------------------------------------------------------------  -------------  -------------
                                                               (UNAUDITED)     (UNAUDITED)
Net income..................................................   $   432,372    $   342,346
Adjustments to reconcile net income to net
 cash provided by operating activities-
  Gain on investments.......................................         1,500          2,000
  Provision for depreciation................................        16,178         15,428
  Amortization and accretion................................       (53,416)       (55,167)
  Provision for deferred income taxes.......................        46,691         (3,487)
  ESOP compensation.........................................        68,123          9,000
  RRP compensation..........................................        64,354         68,164
  FHLB stock dividends......................................       (43,300)       (39,400)
  Net change in--
    Accrued interest receivable.............................       192,525        152,917
    Other assets............................................       (11,386)       (41,415)
    Income taxes refundable.................................       (42,432)      (184,542)
    Accrued interest payable................................         2,994         14,133
    Other liabilities.......................................       113,112         13,750
    Accrued SAIF special assessment.........................         --           338,631
                                                                -------------  -------------

      Net cash provided by operating activities.............       787,315        632,358
                                                                -------------  -------------

INVESTING ACTIVITIES:
  Net increase in loans.....................................    (2,388,684)    (1,221,139)
  Purchases of investment securities........................         --       (13,280,499)
  Maturities of investment securities.......................     5,200,000     15,920,030
  Sales and calls of investment securities..................        50,000        350,000
  Purchases of mortgage-backed securities...................         --        (5,837,034)
  Principal collected on mortgage-backed securities.........     4,581,111      4,425,316
  Purchases of office properties and equipment..............          (490)       (11,469)
                                                                -------------  -------------

      Net cash provided by investing activities.............     7,441,937        345,205
                                                                -------------  -------------

FINANCING ACTIVITIES:
  Net decrease in savings accounts..........................      (294,901)      (389,142)
  Net decrease in certificates of deposit...................    (4,039,854)    (1,408,359)
  Advances from the FHLB....................................     3,250,000         --
  Repayment of FHLB advances................................    (3,250,000)        --
  Dividends paid............................................      (303,317)    (1,647,763)
  Purchase of common stock..................................         --        (1,187,046)
  Stock options exercised...................................        79,993         --
                                                                -------------  -------------

      Net cash used for financing activities................    (4,558,079)    (4,632,310)
                                                                -------------  -------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............     3,671,173     (3,654,747)

CASH AND CASH EQUIVALENTS, beginning of period..............     1,348,415      6,542,257
                                                                ------------   -------------

CASH AND CASH EQUIVALENTS, end of period....................   $ 5,019,588    $ 2,887,510
                                                                ------------   -------------
                                                                ------------   -------------

SUPPLEMENTAL DISCLOSURES OF 
 CASH FLOW INFORMATION:
  Income taxes paid.........................................   $   240,000    $   309,000
                                                                ------------   -------------
                                                                ------------   -------------
  Interest paid on deposit accounts.........................   $ 1,719,597    $ 2,017,252
                                                                -------------  -------------
                                                                -------------  -------------
Loans taken into foreclosed real estate.....................   $    43,963    $    --
                                                                -------------  -------------
                                                                -------------  -------------
</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 nine 
months ended September 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 nine months ended September 30, 
1997 and 1996 was computed using the weighted average (1,042,518 and 
1,124,875, 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 18,515 and 14,207 shares released to the 
ESOP at September 30, 1997 and December 31, 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 September 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 nine 
months ended September 30, 1997 was $25,650 and $68,123, respectively, and 
during the three and nine months ended September 30, 1996 was $3,000 and 
$9,000, respectively.


                                      9

<PAGE>

(7) RECOGNITION AND RETENTION PLAN AND TRUST
 
    The Company has established a Recognition and Retention Plan and Trust 
("RRP"). As of September 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 
September 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 September 30, 1997, the deferred cost of unearned RRP shares totaled 
$496,034 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 $21,644 and $64,354 for the three and nine 
months ended September 30, 1997, and $22,721 and $68,164 for the three and 
nine months ended September 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 September 30, 
1997 an aggregate of 75,911 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 
nine months ended September 30, 1997 and 1996. 5,900 options were exercised 
during the three months ended September 30, 1997 at an aggregate price of 
$79,993, leaving options outstanding of 70,011, of which 27,327 were 
exercisable at September 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 ("Merger"), as amended on September 2, 1997, with Peoples Bancorp, 
Inc. ("Peoples"), an Ohio multi-bank holding company headquartered in 
Marietta, Ohio, whereby Peoples agreed to acquire 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 and Plan of Merger.
 
    The Company mailed proxy materials on October 29, 1997 to holders of 
record of the Company's common stock at the close of business on October 21, 
1997 in connection with the Special Meeting of Stockholders ("Special 
Meeting") to be held on December 4, 1997. At the Special Meeting, the 
Company's stockholders will consider and vote upon the Agreement and Plan of 
Merger.


                                      10

<PAGE>

      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
CHANGES IN FINANCIAL CONDITION
 
GENERAL.  At September 30, 1997, the Company's total assets amounted to $62.6 
million as compared to $66.4 million at December 31, 1996, a decrease of $3.8 
million, or 5.7%. The $3.8 million decrease consisted primarily of decreases 
in investment securities held to maturity and mortgage-backed securities held 
to maturity of $5.2 million and $4.6 million, respectively, partially offset 
by increases in cash and cash equivalents and loans receivable, net, of $3.7 
million and $2.3 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 $3.7 million increase, from $1.3 million at December 31, 
1996 to $5.0 million at September 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 $5.2 million decrease, 
from $17.5 million at December 31, 1996 to $12.3 million at September 30, 
1997, resulted from maturing securities with no corresponding reinvestments. 
Maturity proceeds were used primarily to fund loan commitments and maturing 
savings deposits.
 
At September 30, 1997, the market value of the Company's investment 
securities portfolio was less than the carrying value by approximately 
$26,000, 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 $4.6 million decrease, from $27.7 million at 
December 31, 1996 to $23.1 million at September 30, 1997, consisted entirely 
of principal repayments. Such proceeds were used primarily to fund loan 
commitments and maturing savings deposits.
 
At September 30, 1997, the market value of the Company's mortgage-backed 
securities portfolio exceeded the carrying value by approximately $411,000. 
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 $21.4 million at September 30, 1997, an increase of 
12.0%. 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 


                                      11

<PAGE>

of the loan portfolio, representing $20.9 million, or 97.4%, of total gross 
loans, while consumer loans, consisting of loans secured by deposit accounts, 
totaled $.6 million, or 2.6%, of total gross loans outstanding at September 
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 .42% at December 31, 1996 to .38% at September 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 nine 
months ended September 30, 1997 and 1996.
 
Total non-performing loans (non-accruing loans and accruing loans greater 
than 90 days delinquent) totaled $518,000 and $209,000, respectively, or 
2.42% and 1.09% of total loans outstanding, respectively, at September 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 
September 30, 1997 and December 31, 1996, respectively. Of the Company's 
non-performing loans at September 30, 1997, $478,300 consist of eight 
single-family residential loans, while $39,700 consists of one commercial 
real estate loan.
 
The Company had no loans specifically classified as impaired at September 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 $343,000 at September 30, 1997 as 
compared to $358,000 at December 31, 1996.
 
LIABILITIES.  The Company's liabilities consist primarily of customer 
deposits. Liabilities decreased $4.2 million, or 8.5%, from $49.4 million at 
December 31, 1996 to $45.2 million at September 30, 1997. Deposits decreased 
$4.3 million, or 8.7%, from $49.2 million at December 31, 1996 to $44.9 
million at September 30, 1997. Such decreases are attributed by management 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 nine months ended September 30, 1997. The Company had no 
comparable borrowings during the nine months ended September 30, 1996.
 
STOCKHOLDERS' EQUITY. The Company's stockholders' equity totaled $17.4 
million at September 30, 1997, as compared to $17.0 million at December 31, 
1996. The $.4 million increase for the period ended September 30, 1997 was 
primarily attributable to net income for the period of $432,372, the release 
of common stock to the employee benefit plans, and the payments received by 
the Company in connection with the issuance of 5,900 common shares for stock 
options exercised, offset by the payment of dividends.

                                      12

<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 AND SEPTEMBER 30, 1996
 
NET INCOME.  Net income increased $80,393, from $3,487 for the three months 
ended September 30, 1996 to $83,880 for the three months ended September 30, 
1997. Net income per share was $.08 and $.00 for the 1997 and 1996 quarters, 
respectively. The increase resulted primarily from decreases in interest 
expense and non-interest expense of $96,282 and $139,334, or 14.8% and 25.4%, 
respectively, offset by a reduction in interest income of $114,243, or 9.5%, 
and an increase in the provision for income taxes of $42,229. If not for the 
one-time assessment by the Federal Deposit Insurance Corporation to restore 
the Savings Association Insurance Fund ("SAIF") to the statutorily prescribed 
level of 1.25% of insured deposits, net income for the 1996 quarter would 
have been $226,983, or $.20 per share.
 
INTEREST INCOME.  The $114,243 decrease in interest income, from $1,196,522 
for the three months ended September 30, 1996 to $1,082,279 for the three 
months ended September 30, 1997, was primarily due to lower volumes of 
interest-earning assets, except for loans receivable and interest-bearing 
cash balances, partially offset by higher yielding investment securities and 
mortgage-backed securities. The reduction in the level of interest earning 
assets is attributable to the use of cash to fund savings deposit withdrawals 
which totaled $1,457,825 for the three months ended September 30, 1997. The 
Company continues to offer competitive interest rates on all deposit 
instruments.
 
INTEREST EXPENSE.  The $96,282 decrease in interest expense, from $649,096 
for the three months ended September 30, 1996 to $552,814 for the three 
months ended September 30, 1997, resulted primarily from a lower volume of 
interest-bearing liabilities during the 1997 quarter as compared to the 1996 
quarter, and to a lesser extent, from lower rates paid on deposits.
 
PROVISION FOR LOAN LOSSES.  The Company recorded no provision for loan losses 
for the three months ended September 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. Non-interest income increased slightly, from $3,036 for 
the three months ended September 30, 1996 to $4,285 for the three months 
ended September 30, 1997. Historically, non-interest income has not been a 
significant component of the Company's net income, or operations.
 
NON-INTEREST EXPENSE. Non-interest expense decreased $139,334, from $549,008 
for the three months ended September 30, 1996 to $409,674 for the three 
months ended September 30, 1997. The decrease was primarily attributable to a 
reduction during the 1997 quarter as compared to the 1996 quarter in SAIF 
deposit insurance premiums of $363,772, partially offset by increases in 
professional services, compensation and benefits and other non-operating 
expenses of $174,119, $25,958 and $22,252, respectively. The decrease in SAIF 
deposit insurance premiums resulted from the 1996 one-time assessment of 
$338,631, along with lower 1997 premiums due to a reduced premium rate, from 
$.23 per hundred of insured deposits during 1996 to $.064 per hundred during 
1997, along with lower levels during 1997 of insured deposits. Professional 
services and other non-operating expenses increased due to increased costs 
associated with the Merger. Compensation and benefits increased primarily due 
to a $22,650 increase in ESOP compensation expense attributable to a 
reduction in the 1997 quarter as compared to the 1996 quarter in dividends on 
unallocated ESOP shares available for debt service on the ESOP loan.

                                      13

<PAGE>

PROVISION FOR INCOME TAXES.  The provision for income taxes increased $42,229 
for the quarter ended September 30, 1997 as compared to the quarter ended 
September 30, 1996 due to the $122,622 increase in pretax income.
 
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND SEPTEMBER 30, 1996
 
NET INCOME.  Net income increased $90,026, or 26.3%, from $342,346 for the 
nine months ended September 30, 1996 to $432,372 for the nine months ended 
September 30, 1997. Net income per share was $.41 and $.30 for the 1997 and 
1996 nine month periods, respectively, an increase of 36.7%. The increase 
resulted primarily from decreases in interest expense and non-interest 
expense of $308,794 and $121,375, or 15.2% and 11.4%, respectively, offset by 
decreases in interest income and non-interest income of $244,567 and $12,626, 
or 6.9% and 53.1%, respectively, and an increase in the provision for income 
taxes of $82,950, or 55.2%. Earnings would have been $565,842 or $.50 per 
share, for the 1996 nine month period if not for the one-time SAIF assessment.
 

INTEREST INCOME.  The $244,567 decrease in interest income, from $3,561,753 
for the nine months ended September 30, 1996 to $3,317,186 for the nine 
months ended September 30, 1997, was primarily due to lower volumes of 
interest-earning assets during the 1997 period as compared to the 1996 
period, except for loans receivable, partially offset by higher yielding 
investment securities and mortgage-backed securities. The reduction in the 
level of interest earning assets is attributable to the use of cash to fund 
savings deposit withdrawals which totaled $4,334,755 for the nine months 
ended September 30, 1997. The Company continues to offer competitive interest 
rates on all deposit instruments.
 
INTEREST EXPENSE.  The $308,794 decrease in interest expense, from $2,031,385 
for the nine months ended September 30, 1996 to $1,722,591 for the nine 
months ended September 30, 1997, was primarily due to the lower volume of 
interest-bearing liabilities during the 1997 nine month period as compared to 
the 1996 period, and to a lesser extent, from lower rates paid on deposits.
 
PROVISION FOR LOAN LOSSES.  The Company recorded no provision for loan losses 
for the nine months ended September 30, 1997 and 1996. Management has 
determined that the allowance for loan losses is adequate during both periods 
after considering non-performing loans, past due loans, the overall quality 
of the loan portfolio, and prior loan loss experience.
 
NON-INTEREST INCOME. The $12,626 decrease in non-interest income, from 
$23,761 for the nine months ended September 30, 1996 to $11,135 for the nine 
months ended September 30, 1997, was primarily the result of $14,181 during 
the 1996 period of partial recoveries on prior years foreclosed real estate 
loans, with no comparable recoveries during the 1997 nine month period.
 
NON-INTEREST EXPENSE. Non-interest expense decreased $121,375, from 
$1,061,498 for the nine months ended September 30, 1996 to $940,123 for the 
nine months ended September 30, 1997. The decrease was primarily due to a 
reduction in the 1997 period as compared to the 1996 period in SAIF deposit 
insurance premiums of $411,688, partially offset by increases in compensation 
and benefits of $54,666, professional services expenses of $212,629, and 
other non-operating expenses of $19,064. The decrease in SAIF deposit 
insurance premiums resulted from the 1996 special assessment along with the 
reduced 1997 premiums referred to above. Professional services and other 
non-operating expenses increased primarily due to increased costs associated 
with the Merger. Compensation and benefits increased primarily due to a 

                                      14

<PAGE>


$59,123 increase in ESOP compensation expense caused by the reduction in 
dividends during the 1997 period available for debt service, as noted above.
 
PROVISION FOR INCOME TAXES.  The provision for income taxes increased $82,950 
for the nine months ended September 30, 1997 as compared to the nine months 
ended September 30, 1996, due to the $172,976 increase in pretax income.
 
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 September 30, 1997, the Bank had 
no outstanding advances from the Federal Home Loan Bank of Cincinnati or 
other borrowings. During the nine months ended September 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 September 30, 1997, the total 
approved loan commitments outstanding amounted to $163,000. 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 September 30, 1997, 
totaled $30.3 million. Management believes that a significant portion of 
maturing deposits will remain with the Bank. At September 30, 1997, the Bank 
had a liquidity ratio of 25.4% which exceeded the required minimum liquid 
asset ratio of 5.0% of assets.
 
At September 30, 1997, the Bank had regulatory capital which was well in 
excess of applicable limits. At September 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 September 30, 1997, the Bank's tangible capital was 
$15.5 million or 25.6% of adjusted total assets, core capital was $15.5 
million or 25.6% of adjusted total assets and risk-based capital was $15.6 
million or 81.7% of adjusted risk-weighted assets, exceeding the requirements 
by $14.6 million, $13.7 million and $14.1 million, respectively.
 
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.


                                      15

<PAGE>

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
 
In addition to historical information, forward-looking statements are 
contained herein that are subject to risks and uncertainties, that could 
cause actual results to differ materially from those reflected in the 
forward-looking statements. Factors that could cause future results to vary 
from current expectations, include, but are not limited to, the impact of 
economic conditions (both generally and more specifically in the markets in 
which Gateway operates), the impact of competition for Gateway's customers 
from other providers of financial services, the impact of government 
legislation and regulation (which changes from time to time and over which 
Gateway has no control), and other risks detailed in this Form 10-Q and in 
Gateway's other Securities and Exchange Commission filings. Readers are 
cautioned not to place undue reliance on these forward-looking statements, 
which reflect management's analysis only as of the date hereof. Gateway 
undertakes no obligation to publicly revise these forward-looking statements, 
to reflect events or circumstances that arise after the date hereof. Readers 
should carefully review the risk factors described in other documents Gateway 
files from time to time with the Securities and Exchange Commission.
 
                                      16

<PAGE>
PART II--OTHER INFORMATION
 
<TABLE>
<CAPTION>
<S>          <C>
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
              ---------------------------------------------------
              Not applicable.

Item 5.       Other Information
              -----------------
              Not applicable.

Item 6.       Exhibits and Reports on Form 8-K
              --------------------------------
</TABLE>
              a) Exhibits:
<TABLE>
<CAPTION>
            <S>         <C>                                                   <C>
               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

</TABLE>
 
------------------------
 
(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) No Form 8-K reports were filed during the quarter.
 
                                      17
<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: November 7, 1997       By: /S/ Rebecca R. Jackson 
                             -----------------------------------------------
                             Rebecca R. Jackson, President and 
                             Chief Executive Officer  


                                
Date: November 7, 1997       By: /S/ Pamela Howard
                             -----------------------------------------------
                             Pamela Howared, Assistant Secretary/
                             Treasurer (Chief Accounting Officer) 


                                      18