As filed with the Securities and Exchange Commission on May 10, 2007
Registration No. 333-141520

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Gateway Community Financial Corp.
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(Exact name of registrant as specified in charter)

United States 6035 01-0569172
- --------------------------------- ------------------ -------------------
(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation or organization) Identification No.)

381 Egg Harbor Drive, Sewell, New Jersey 08080
(856) 589-6600
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(Address and telephone number of principal executive offices)

Robert C. Ahrens, President and Chief Executive Officer
381 Egg Harbor Drive, Sewell, New Jersey 08080
(856) 589-6600
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(Name, address and telephone number of agent for service)

Please send copies of all communications to:

Samuel J. Malizia, Esq.
Tiffany A. Hasselman, Esq.
MALIZIA SPIDI & FISCH, PC
901 New York Ave., N.W.
Suite 210 East
Washington, D.C. 20001
(202) 434-4660

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine^

PROSPECTUS
GATEWAY COMMUNITY FINANCIAL CORP.
(Holding Company for Gloucester County Federal Savings Bank)

UP TO 3,105,000 SHARES OF COMMON STOCK (SUBJECT TO
INCREASE TO UP TO 3,570,750 SHARES)

Gateway Community Financial Corp. is offering for sale shares of its common
stock that will represent 45% of its outstanding common stock upon completion of
this offering. The remaining 55% of the common stock outstanding upon completion
of this offering will be held by Gateway Community Financial, MHC, the mutual
holding company parent of Gateway Community Financial Corp. Upon completion of
the offering, Gateway Community Financial Corp. will have between 5,100,000 and
6,900,000 shares outstanding, including shares that will be held by Gateway
Community Financial, MHC. The total number of shares of Gateway Community
Financial Corp. common stock outstanding upon completion of the offering is
subject to an independent appraisal that must be updated before the offering can
be completed and may be increased to an adjusted maximum of 7,935,000 shares
without resoliciting subscribers. The shares sold in the offering would, in that
case, total 3,570,750 shares.

The offering is expected to expire at __:__ _.m., Eastern time, on
____________, 2007. We may extend this expiration date without notice to you
until ____________, 2007, unless the Office of Thrift Supervision approves a
later date.

Sandler O'Neill & Partners, L.P. will use its best efforts to assist us in
our selling efforts, but is not required to purchase any of the common stock
that is being offered for sale. Purchasers will not pay a commission to purchase
shares of common stock in the offering. All shares being sold are being offered
at a price of $10.00 per share. The offering will not be completed if we do not
sell a minimum of 2,295,000 shares. We have applied to have our common stock
listed for trading on the Nasdaq Global Market under the symbol "GCFC."

The minimum purchase is 25 shares. Once submitted, orders are irrevocable
unless the offering is terminated or extended beyond ____________, 2007. If the
offering is extended beyond ____________, 2007, subscribers will have the right
to modify or rescind their purchase orders. We will hold funds received with
orders in a deposit account that we have established at Gloucester County
Federal Savings Bank for that sole purpose. We may decide during the offering
also to hold funds received with orders in a deposit account at another insured
depository institution. In either case, we will pay interest on all funds
received at a rate equal to Gloucester County Federal Savings Bank's regular
passbook savings rate. If we do terminate the offering, we will promptly return
your funds with interest. If we extend the offering beyond ____________, 2007,
you will be given an opportunity to confirm, modify or rescind your order, and
if an affirmative response is not received, we will promptly return your funds
with interest.

THIS INVESTMENT INVOLVES A DEGREE OF RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
PLEASE READ RISK FACTORS BEGINNING ON PAGE ___.
OFFERING SUMMARY
Price Per Share: $10.00

Maximum,
Minimum Midpoint Maximum as adjusted
------- -------- ------- -----------

Number of shares..................... 2,295,000 2,700,000 3,105,000 3,570,750
Gross proceeds....................... $22,950,000 $27,000,000 $31,050,000 $35,707,500
Estimated offering expenses(1)....... $768,000 $810,000 $851,000 $899,000
Estimated net proceeds............... $22,182,000 $26,190,000 $30,199,000 $34,809,000
Estimated net proceeds per share..... $9.67 $9.70 $9.73 $9.75

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(1) See Plan of Distribution and Marketing Arrangements on page___ for a
description of the fees payable to Sandler O'Neill & Partners, L.P. in
connection with this offering.

THESE SECURITIES ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND ARE NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, THE FEDERAL DEPOSIT INSURANCE CORPORATION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

SANDLER O'NEILL + PARTNERS, L.P.

The date of this prospectus is May 14, 2007.

TABLE OF CONTENTS

Page
----

Summary...................................................................................................
Risk Factors..............................................................................................
A Warning About Forward-Looking Statements................................................................
Use of Proceeds...........................................................................................
Our Policy Regarding Dividends............................................................................
Market for the Stock......................................................................................
Capitalization............................................................................................
Pro Forma Data............................................................................................
Historical and Pro Forma Capital Compliance...............................................................
Recent Developments.......................................................................................
Selected Financial and Other Data.........................................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations.....................
Business of Gateway Community Financial, MHC..............................................................
Business of Gateway Community Financial Corp..............................................................
Business of Gloucester County Federal Savings Bank........................................................
Regulation................................................................................................
Taxation..................................................................................................
Management................................................................................................
The Offering..............................................................................................
Restrictions on Acquisition of Gateway Community Financial Corp...........................................
Description of Capital Stock..............................................................................
Registrar and Transfer Agent..............................................................................
Legal and Tax Opinions....................................................................................
Experts...................................................................................................
Change in Independent Auditor.............................................................................
Registration Requirements.................................................................................
Where You Can Find Additional Information.................................................................
Index to Consolidated Financial Statements................................................................

[Map page]

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SUMMARY

This summary contains an overview of the key aspects of the offering. To
understand this offering fully, you should read this entire document carefully,
including the consolidated financial statements and the notes to the
consolidated financial statements beginning on page F-1 of this document.
Throughout this document, the terms "we", "us" or "our" refer to Gateway
Community Financial Corp. or Gloucester County Federal Savings Bank, or both, as
the context indicates.

GATEWAY COMMUNITY FINANCIAL, MHC
GATEWAY COMMUNITY FINANCIAL CORP.
GLOUCESTER COUNTY FEDERAL SAVINGS BANK

Gateway Community Financial Corp. is a federally-chartered corporation
that holds all of the capital stock of Gloucester County Federal Savings Bank, a
federally-chartered savings bank with roots in the community going back to 1903.
Currently, 100% of the outstanding stock of Gateway Community Financial Corp. is
held by Gateway Community Financial, MHC, a federally-chartered mutual holding
company. Upon completion of this offering, 55% of the outstanding stock of
Gateway Community Financial Corp. will be held by Gateway Community Financial,
MHC and 45% will be held by public stockholders.

Gloucester County Federal Savings Bank offers a wide range of
traditional deposit and lending services, including one-to-four family mortgage
loans, home equity loans and lines of credit, commercial real estate loans,
construction loans, commercial loans and lines of credit and consumer loans.
Gloucester County Federal Savings Bank currently operates five offices located
in Gloucester and Camden Counties, New Jersey. Gateway Community Financial
Corp.'s principal executive offices are located at the administrative offices of
Gloucester County Federal Savings Bank at 381 Egg Harbor Road, Sewell, New
Jersey 08080. The phone number at that address is (856) 589-6600. Gloucester
County Federal Savings Bank maintains a website at www.gcfbank.com.

This chart shows our current corporate structure (before this
offering).

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Gateway Community Financial, MHC
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| 100%
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Gateway Community Financial Corp.
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| 100%
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Gloucester County Federal Savings Bank
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This chart shows our new corporate structure (after this offering).
Upon completion of the offering, Gloucester County Federal Savings Bank will
change its name to "GCF Bank."

- ----------------------------- -----------------------------
Gateway Community Minority Public
Financial, MHC Stockholders
- ----------------------------- -----------------------------
| 55% | 45%
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Gateway Community Financial Corp.
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| 100%
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GCF Bank
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1
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PURPOSE OF THE OFFERING

The primary reason for our decision to sell stock is to support our future
growth plans. We currently qualify as a well-capitalized institution, however,
our regulatory capital ratios are below peer and state median levels and we do
not expect that our current capital and net income can support the asset growth
we would like to achieve. The proceeds of the offering will increase our
capital, allowing us to seek to implement a growth strategy while maintaining a
solid capital position. Our growth strategy calls for increasing deposits at our
existing branches and using those funds to originate loans and grow the loan
portfolio, and we intend to supplement internal growth with the acquisition of
other financial institutions or branches, if appropriate acquisition
opportunities arise.

Selling stock will also mean that Gloucester County Federal Savings Bank's
depositors, employees, management and directors will have an opportunity to
acquire an equity ownership interest in us and thereby obtain an economic
interest in our future operations. In addition, we intend to utilize stock
benefit plans as a means of attracting and retaining qualified and experienced
officers, directors and employees. In connection with the offering, we will
establish an employee stock ownership plan under which all eligible full time
employees of the Bank will receive shares of Gateway Community Financial Corp.
common stock.

USE OF PROCEEDS

Gloucester County Federal Savings Bank will receive a minimum of 50% of the
net proceeds from the offering as a capital contribution and will use those
proceeds for general business purposes. The offering proceeds may also be used
to finance the possible acquisition of other financial institutions or branches,
if appropriate opportunities arise. We do not, however, have any current
understandings, agreements or arrangements in connection with branching or
acquisitions.

We will lend a portion of the offering proceeds to the Gloucester County
Federal Savings Bank Employee Stock Ownership Plan to enable it to buy up to 8%
of the shares sold in the offering. The balance of the offering proceeds will be
retained by Gateway Community Financial Corp. and deposited with or loaned to
Gloucester County Federal Savings Bank, providing the Bank with funds to support
the Bank's lending activities. This will enable the bank to reduce its
outstanding borrowings. Gateway Community Financial Corp. may also use the
offering proceeds it retains for general corporate purposes, including
repurchasing shares of its common stock, paying cash dividends or supporting
acquisitions of other financial institutions, branches or financial services
companies. We do not, however, have any current understandings, agreements or
arrangements for any such acquisitions.

CONDUCT OF THE OFFERING

Rights to subscribe for shares of Gateway Community Financial Corp. common
stock have the following order of priority:

o Priority 1 - depositors of Gloucester County Federal Savings Bank at the
close of business on December 31, 2005 with deposits of at least $50.00.

o Priority 2 - the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan.

o Priority 3 - depositors of Gloucester County Federal Savings Bank at the
close of business on March 31, 2007 with deposits of at least $50.00.

o Priority 4 - depositors of Gloucester County Federal Savings Bank at the
close of business on April 30, 2007 with deposits of at least $50.00.

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PLEASE NOTE: SUBSCRIPTION RIGHTS ARE NOT TRANSFERABLE, AND PERSONS WITH
SUBSCRIPTION RIGHTS MAY NOT SUBSCRIBE FOR SHARES FOR THE BENEFIT OF ANY OTHER
PERSON. IF YOU VIOLATE THIS PROHIBITION, YOU MAY LOSE YOUR RIGHTS TO PURCHASE
SHARES AND MAY FACE CRIMINAL PROSECUTION AND/OR OTHER SANCTIONS.

If we receive subscriptions for a number of shares that exceeds the maximum
of the offering range, we may be unable to fill, or may only partially fill,
your order. Shares will be allocated in the order of the priorities shown above
pursuant to a formula outlined in the plan of stock issuance adopted by our
board of directors.

We are offering for sale a minimum of 2,295,000 shares and a maximum of
3,105,000 shares. The independent appraisal that we used to set the number of
shares being offered must be updated before we can complete the stock offering,
and this could result in the number of shares being increased to up to an
adjusted maximum of 3,570,750 shares. We may sell that number of shares without
any notice to you. If the updated independent appraisal is higher than the
adjusted maximum, we will be required to return all stockholders' funds to them
with interest.

If we sell between the maximum and the adjusted maximum number of shares,
the Gloucester County Federal Savings Bank Employee Stock Ownership Plan will
have the first priority right to purchase the additional shares to the extent
that its subscription has not previously been filled. Any shares remaining will
be allocated in the order of the priorities described above. See The Offering -
Subscription Offering for a description of the allocation procedure.

We may offer shares not sold in the subscription offering to the general
public in a community offering. In the community offering, we will give a
preference first to natural persons and trusts of natural persons who reside in
Gloucester and Camden Counties, New Jersey (the counties in which Gloucester
County Federal Savings Bank has offices), second to other residents of New
Jersey, and third to the general public. This part of the offering may commence
concurrently with the subscription offering or any time thereafter and may
terminate at any time without notice but no later than ____________, 2007,
unless extended.

Shares not sold in the subscription or community offering may be offered
for sale in a syndicated community offering, which would be an offering to the
general public on a best efforts basis managed by Sandler O'Neill & Partners,
L.P. This part of the offering may terminate at any time without notice but no
later than ____________, 2007, unless extended.

We have the right to reject, in whole or in part, any orders for stock
received in the community offering and syndicated community offering.

DEADLINE FOR ORDERING STOCK

The subscription offering will expire at __:__ _.m., Eastern time, on
____________, 2007. We may extend this expiration date without notice to you for
up to 45 days, until ____________, 2007. Once submitted, your order is
irrevocable unless the offering is extended beyond ____________, 2007. We may
request permission from the Office of Thrift Supervision to extend the offering
beyond ____________, 2007, but in no event may the offering be extended beyond
____________, 2009. If the offering is extended beyond ____________, 2007, we
will notify each subscriber, and subscribers will have the right to confirm,
modify or rescind their subscriptions. If an affirmative response is not
received, a subscriber's subscription will be canceled and funds will be
returned promptly with interest.

We may cancel the offering at any time prior to completion. If we do,
orders for common stock already submitted will be canceled and subscribers'
funds will be returned promptly with interest.

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PURCHASE LIMITATIONS

Limitations on the purchase of stock in the offering have been set by the
plan of stock issuance adopted by our Board of Directors. These limitations
include the following:

o The minimum purchase is 25 shares.

o No individual may purchase more than 15,000 shares.

o The purchases of individuals who are considered to be associates of each
other or who are deemed to be acting in concert with each other will be
limited so that no more than 25,000 shares in aggregate are purchased by
such individuals. Persons with joint account relationships are presumed to
be acting in concert with each other.

o Persons with a joint account may only purchase up to an aggregate of 15,000
shares if that is the only account under which they have subscription
rights - they are not entitled to place multiple orders that would in the
aggregate exceed 15,000 shares. If, however, persons with a joint account
have one or more other accounts at Gloucester County Federal Savings Bank
(including a second joint account that is identical to the first joint
account), they may place orders using those accounts in order to reach the
higher 25,000 share limit for associates and persons acting in concert.

PLEASE CALL THE STOCK INFORMATION CENTER IF YOU HAVE ANY QUESTIONS ABOUT
HOW MANY SHARES YOU MAY ORDER, INCLUDING WHETHER OTHER PERSONS ORDERING STOCK
WILL BE DEEMED TO BE YOUR ASSOCIATES OR ACTING IN CONCERT WITH YOU. CONTACT
INFORMATION FOR THE STOCK INFORMATION CENTER APPEARS ON PAGE __.

If determined to be necessary or desirable by the Board of Directors, the
plan may be amended by a two-thirds vote of the full Board, with the concurrence
of the Office of Thrift Supervision. Thus, we may increase or decrease the
purchase limitations. In the event the maximum purchase limitation is increased,
persons who subscribed for the maximum will be notified and permitted to
increase their subscription.

PROCEDURE FOR ORDERING STOCK

If you want to place an order for shares in the offering, you must complete
an original stock order form and send it to us together with full payment. You
must sign the certification that is on the reverse side of the stock order form.
We must receive your stock order form before the end of the subscription
offering or the end of the community offering, as appropriate. Once we receive
your order, you cannot cancel or change it without our consent. We may, in our
sole discretion, reject orders received in the community offering or syndicated
community offering either in whole or in part. If your order is rejected in
part, you cannot cancel the remainder of your order.

To ensure that we properly identify your subscription rights, you must
provide on your stock order form all of the information requested for each of
your deposit accounts as of the eligibility dates (December 31, 2005 and March
31, 2007). If you fail to do so, your subscription may be reduced or rejected if
the offering is oversubscribed.

You may pay for shares in the subscription offering or the community
offering in any of the following ways:

o In cash, if delivered in person. If you choose to pay by cash, you must
deliver the stock order and certification form and payment in person to any
branch office of Gloucester County Federal Savings Bank and it will be
exchanged for a bank check or money order. Please do not send cash in the
mail.

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o By check or money order made payable to Gateway Community Financial Corp.

o By authorizing withdrawal from an account at Gloucester County Federal
Savings Bank. To use funds in a Gloucester County Federal Savings Bank IRA
account, you must transfer your account to an unaffiliated institution or
broker. Since IRA account transfers take time to complete, please contact
the stock information center as soon as possible for assistance.

We will hold funds received with orders in a deposit account that we have
established at Gloucester County Federal Savings Bank for that sole purpose. We
may decide during the offering also to hold funds received with orders in a
deposit account at another insured depository institution. In either case, we
will pay interest on all funds received at a rate equal to Gloucester County
Federal Savings Bank's regular passbook savings rate from the date we receive
your funds until the offering is completed or terminated.

All funds authorized for withdrawal from deposit accounts with us,
including certificates of deposit, will continue to earn interest at the
applicable account or certificate of deposit rate until the offering is
completed or terminated. However, if, as a result of a withdrawal from a
certificate of deposit, the balance falls below the minimum balance requirement,
the remaining funds will be transferred to a savings account and will earn
interest at our regular passbook savings rate. There will be no early withdrawal
penalty for withdrawals from certificates of deposit used to pay for stock.

PROPOSED STOCK PURCHASES BY MANAGEMENT

Our directors and executive officers and their associates have indicated
that they intend to purchase an aggregate of approximately 235,000 shares of
common stock in the offering. If 2,700,000 shares are sold (the midpoint of the
offering range), their anticipated purchases would represent 8.7% of the shares
sold in the offering and 3.9% of the 6,000,000 total shares outstanding after
the offering, including shares issued to Gateway Community Financial, MHC. At
the maximum of the offering range, these percentages decrease to 7.6% and 3.4%.

OUR ESTIMATED PRO FORMA VALUE

The independent appraisal by Feldman Financial Advisors, Inc., dated as of
March 13, 2007, established the estimated pro forma market value of Gateway
Community Financial Corp. This appraisal was based on our current and projected
financial condition and results of operations and considered the effect of the
additional capital to be raised in the stock offering as well as the effect of
the stock benefit plans we expect to implement.

Feldman Financial Advisors has estimated that as of March 13, 2007, the
pro forma market value of Gateway Community Financial Corp. ranged from a
minimum of $51 million to a maximum of $69 million. This valuation is based on
the full pro forma market value of Gateway Community Financial Corp. as though
100% of the stock was being sold to the public. The Board of Directors
considered our present level of capital and our business plans and determined
that shares representing 45% of the full valuation should be offered for sale in
this offering.

The valuation is based in large part on comparative market value
methodology, which utilizes a peer group and evaluates our value relative to the
market value of companies deemed to be appropriate peer group companies. In
accordance with Office of Thrift Supervision appraisal guidelines, the peer
group companies for a minority offering are other mutual holding companies. In
that the market pricing ratios for the peer group companies may reflect a
discount for the controlling majority interest owned by the mutual holding
companies, that discount would also be reflected in our pro forma market value
since our market value is estimated in relation to the peer group companies'
market value. The percentage of the

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minority shares held by insiders of the peer group companies would generally not
be expected to have any significant impact on the market value of the minority
interest held by public stockholders, and Feldman Financial Advisors did not
make any adjustments to our estimated pro forma market value in connection with
the amount of our shares expected to be owned by our directors, officers and
employees.

Peer Group Analysis. The appraisal incorporated an analysis of a peer group
of ten publicly traded mutual holding companies that Feldman Financial Advisors
deemed comparable to us. The companies in the peer group range in asset size
from $266 million to $562 million and have market capitalizations ranging from
$32 million to $114 million. Feldman Financial Advisors examined how we compare
to the peer group on various bases, including earnings prospects, market area,
management, acquisition activity in the state of New Jersey, stock market
conditions, subscription interest, liquidity and dividend policy.

Feldman Financial Advisors also took into account that this type of
offering is typically priced at a discount on a price-to-book basis to publicly
traded companies due to the low returns on equity that are expected
post-offering. One measure of profitability is the return on equity, which
evaluates the resulting net income in relation to average equity. Since it will
take a period of time to invest and leverage the additional capital provided by
the offering, the return on equity for Gateway Community Financial Corp. is
expected to be low compared to other publicly traded mutual holding companies
that have been in existence for longer periods. Feldman Financial Advisors also
took into account that this type of offering is typically priced at a discount
on a price-to-book basis to publicly traded companies due to the inherent
uncertainty regarding the degree of success any issuer will have in effectively
deploying capital. After the offering, Gateway Community Financial Corp. will be
faced with the challenge of successfully investing the additional capital to
generate profitable and competitive earnings returns in a difficult interest
rate environment.

Feldman Financial Advisors relied primarily on the comparative market value
methodology in determining the estimated pro forma market value of Gloucester
Financial Corp. In applying this methodology, Feldman Financial Advisors
analyzed financial and operational comparisons of Gloucester County Federal
Savings Bank with the selected peer group. The pro forma market value of the
common stock was determined based on the market pricing ratios of the peer
group, subject to certain valuation adjustments based on the fundamental
differences with the peer group. Feldman Financial Advisors utilized the results
of this overall analysis to establish the appropriate pricing ratios that
resulted in the range of pro forma market value. Consistent with Office of
Thrift Supervision appraisal guidelines, Feldman Financial Advisors' analysis
relied primarily on two key market valuation ratios: the price to earnings
multiple and the price to book value ratio. The price to earnings multiple is
ratio of the offering price to net income per share and the price to book value
ratio is the ratio of the offering price to stockholders' equity per share, or
"book value."

Pricing Ratios on a Fully-Converted Basis. Shown below are the average and
median price to earnings multiples and price to book value ratios of the peer
group companies and our price to earnings multiple and price to book value ratio
at the minimum, midpoint, maximum and adjusted maximum of our pro forma market
value as estimated by the appraisal. These pricing ratios are calculated on a
fully- converted basis, as though we had sold the full amount (100%) of our
estimated pro forma market value instead of only 45% of that value. The pricing
ratios for the peer group have also been adjusted to assume that they were fully
public, with all of their outstanding shares held by public stockholders.

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Price-to-earnings Price-to-book
multiple value ratio
-------- -----------

Pricing ratios for peer group on a fully-converted basis:
Average........................................................ 34.1x 91.4%
Median......................................................... 28.2x 95.4%
Pro forma pricing ratios for Gateway Community
Financial Corp. on a fully-converted basis:
Minimum...................................................... 58.8x 70.1%
Midpoint....................................................... 62.5x 74.5%
Maximum...................................................... 66.7x 78.1%
Maximum, as adjusted....................................... 66.7x 81.5%

The independent appraisal is not necessarily indicative of the post-stock
offering trading value; therefore you should not assume or expect that the
valuation of Gateway Community Financial Corp. as indicated above means that the
common stock will trade at or above the $10.00 purchase price after the stock
offering is completed. YOU SHOULD NOT ASSUME THAT GATEWAY COMMUNITY FINANCIAL
CORP.'S COMMON STOCK WILL NOT TRADE BELOW $10.00 PER SHARE.

After-Market Performance of Peer Group. The following table provides
information regarding the after-market performance of the peer group of publicly
traded mutual holding companies included in the appraisal prepared by Feldman
Financial Advisors. This table is not intended to indicate how our stock may
perform. Furthermore, the data presented in the table reflects a small number of
transactions with a wide variation in time periods that the issuers have existed
as publicly traded mutual holding companies.

After-Market Appreciation
Date -------------------------
of Initial After After Through
Company (Market/Symbol) Offering 1 Day 1 Month 3/13/07
- ---------------------- -------- ----- ------- -------

AJS Bancorp, Inc. (OTCBB: AJSB) 12/17/01 32.0% 32.5% 146.0%
Colonial Bankshares, Inc. (Nasdaq: COBK) 06/30/05 6.0% 7.5% 39.5%
FedFirst Financial Corp. (Nasdaq: FFCO) 04/07/05 (6.6)% (14.5)% (10.0)%
Lake Shore Bancorp, Inc. (Nasdaq: LSBK) 04/04/06 7.0% 2.9% 21.8%
Magyar Bancorp, Inc. (Nasdaq: MGYR) 01/24/06 6.5% 6.0% 41.5%
Naugatuck Valley Financial (Nasdaq: NVSL) 10/01/04 8.0% 4.2% 22.8%
Ocean Shore Holding Co. (Nasdaq: OSHC) 12/22/04 21.5% 6.3% 32.8%
Pathfinder Bancorp, Inc. (Nasdaq: PBHC) 11/16/95 20.0% 40.0% 157.8%
PSB Holdings, Inc. (Nasdaq: PSBH) 10/05/04 5.0% 4.5% 6.1%
Service Bancorp, Inc. (OTCBB: SERC) 10/08/98 0.0% (10.0)% 205.5%

Average - peer group 9.9% 7.9% 66.4%
Median - peer group 6.8% 5.3% 36.2%

The stock price of a particular company is subject to various factors,
including, but not limited to, the amount of proceeds a company raises, the
company's historical and anticipated operating results, the nature and quality
of the company's assets, the company's market area, and the quality of
management and management's ability to deploy proceeds (such as through loans
and investments, the acquisition of other financial institutions or other
businesses, the payment of dividends and common stock repurchases). In addition,
stock prices may be affected by general market and economic conditions, the
interest rate environment, the market for financial institutions and merger or
takeover transactions, the presence of professional and other investors who
purchase stock on speculation, as well as other unforeseeable events not in the
control of management. Before you make an investment decision, we urge you to
carefully read this prospectus, including, but not limited to, the Risk Factors
section beginning on page ___. YOU SHOULD NOT ASSUME THAT GATEWAY COMMUNITY
FINANCIAL CORP.'S COMMON STOCK WILL TRADE AT PRICES SIMILAR TO OTHER MUTUAL
HOLDING COMPANIES.

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CONDITIONS TO COMPLETING THE OFFERING

We cannot complete the offering unless:

o we sell at least 2,295,000 shares, the minimum of the offering range; and

o we receive final authorization from the Office of Thrift Supervision to
complete the offering.

Office of Thrift Supervision authorization does not constitute a
recommendation or endorsement of an investment in our stock by the Office of
Thrift Supervision.

MARKET FOR GATEWAY COMMUNITY FINANCIAL CORP.'S COMMON STOCK

We applied to have our common stock listed for trading on the Nasdaq Global
Market under the symbol "GCFC." Sandler O'Neill & Partners, L.P. currently
intends to become a market maker in the common stock, but it is under no
obligation to do so. We cannot assure you that other market makers will be
obtained or that an active and liquid trading market for the shares of common
stock will develop or if developed, will be maintained. After our common stock
begins trading, you may contact a stock broker to buy or sell shares.

DIVIDENDS

We have not yet established a dividend policy, and we have not yet made
plans as to the amount or timing of cash dividends that Gateway Community
Financial Corp. may pay after the offering. The timing, amount and frequency of
dividends will be determined by the Board of Directors. There are also
restrictions on our ability to pay dividends. See Our Policy Regarding
Dividends.

If we pay dividends to stockholders of Gateway Community Financial Corp.,
it is anticipated that dividends payable to Gateway Community Financial, MHC
would be waived. We must receive the non- objection of the Office of Thrift
Supervision for any dividend waiver by Gateway Community Financial, MHC. See
Regulation - Regulation of Gateway Community Financial Corp.

RESTRICTIONS ON THE ACQUISITION OF GATEWAY COMMUNITY FINANCIAL CORP. AND
GLOUCESTER COUNTY FEDERAL SAVINGS BANK

Federal regulations, as well as provisions contained in the charter and
bylaws of Gateway Community Financial Corp. and Gloucester County Federal
Savings Bank, restrict the ability of any person, firm or entity to acquire
Gateway Community Financial Corp., Gloucester County Federal Savings Bank, or
their capital stock. These restrictions include the requirement that a potential
acquirer of common stock obtain the prior approval of the Office of Thrift
Supervision before acquiring in excess of 10% of the voting stock of Gateway
Community Financial Corp. or Gloucester County Federal Savings Bank. The Office
of Thrift Supervision may grant such approval after the passage of three years
following the offering. Because a majority of the shares of outstanding common
stock of Gateway Community Financial Corp. must be owned by Gateway Community
Financial, MHC, any acquisition of Gateway Community Financial Corp. must be
approved by Gateway Community Financial, MHC, and Gateway Community Financial,
MHC would not be required to pursue or approve a sale of Gateway Community
Financial Corp. even if such sale were favored by a majority of Gateway
Community Financial Corp.'s public stockholders. Additionally, Office of Thrift
Supervision regulations prohibit anyone from acquiring more than 10% of Gateway
Community Financial Corp.'s common stock for a period of three years following
the offering, unless such prohibition is waived by the Office of Thrift
Supervision. The current policy of the Office of Thrift Supervision is not to
waive this prohibition.

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Additionally, certain provisions within Gateway Community Financial Corp.'s
charter and bylaws limit the rights of stockholders and may deter potential
takeovers or make it more difficult and expensive to pursue a change in control
or takeover attempt that our Board of Directors opposes. Amendments to these
provisions require the approval of 80% of the outstanding shares if not approved
by the Board of Directors. As a result, you may not have an opportunity to
participate in such a transaction, and the trading price of our stock may not
rise to the level of other institutions that are more vulnerable to hostile
takeovers. Such provisions include:

o the election of directors to staggered three-year terms;
o provisions restricting stockholders from calling special meetings of
stockholders;
o the absence of cumulative voting by stockholders in elections of
directors;
o advance notice requirements for stockholder nominations and new
business; and
o the limitation of the voting rights of a single stockholder to no more
than 10% of the then-outstanding shares, including shares held by
Gateway Community Financial, MHC, for a period of five years from the
date this stock offering is completed.

TAX EFFECTS OF THE OFFERING

The minority stock offering will not be a taxable transaction for purposes
of federal or state income taxes for Gateway Community Financial, MHC, Gateway
Community Financial Corp., Gloucester County Federal Savings Bank or persons
eligible to subscribe for stock in the offering. See Material Federal and State
Tax Consequences of the Offering.

STOCK BENEFIT PLANS

We intend to establish certain benefit plans that will use our stock to
provide additional compensation to employees and directors. The Gloucester
County Federal Savings Bank Employee Stock Ownership Plan, for the benefit of
employees eligible to participate in the plan, intends to purchase 8% of the
shares sold in the offering. We also intend to adopt a stock option plan and a
restricted stock plan for the benefit of directors and officers no sooner than
six months after the offering.

The stock option plan and restricted stock plan will comply with all
applicable Office of Thrift Supervision regulations in effect at the time the
plans are adopted. Those regulations are subject to change. We will submit the
stock options plan and restricted stock plan to stockholders for their approval,
at which time we will provide stockholders with detailed information about the
plans and the required approval. Under current Office of Thrift Supervision
Regulations, the plans must be approved by a majority of the total votes
eligible to be cast by our public stockholders - meaning all stockholders other
than our mutual holding company parent, Gateway Community Financial, MHC, which
will own 55% of our outstanding stock upon completion of the offering and will
continue to hold a majority of our outstanding stock so long as we remain in
mutual holding company form. The Office of Thrift Supervision has proposed
changes to its regulations regarding equity incentive plans that would eliminate
the requirement to obtain the separate vote of the public stockholders for the
plans if they are implemented more than one year after completion of a mutual
holding company stock offering. In the event that the proposed Office of Thrift
Supervision regulations are adopted in final form, Gateway Community Financial,
MHC, as the holder of a majority of the shares of Gateway Community Financial
Corp. would control the outcome of any vote to approve an equity incentive plan
that occurs more than one year after the completion of the offering.

Officers, directors, and employees will not be required to pay cash for
shares received under the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan or shares received under the restricted stock plan, but will be
required to pay the exercise price to exercise stock options. The exercise price
for the options will be at least equal to the market price of our common stock
on the date of grant.

The stock benefit plans will result in additional annual employee
compensation and benefit expenses which will reduce our earnings. See Pro Forma
Data, for an illustration of the possible reduction in net income and
stockholders equity resulting from these benefit plans. Additionally, the
implementation of the stock option plan and restricted stock plan would dilute
your ownership interest in Gateway Community Financial Corp. by up to 4.7% and
1.9%, respectively if newly issued shares are used to fund stock options and
awards made under the restricted stock plan instead of outstanding shares
purchased in the open market by Gateway Community Financial Corp. It is our
current intention, however, to purchase stock in the open market to fund the
restricted stock plan and stock option plan to avoid stockholder dilution. The
cost of purchasing shares in the open market will depend on the trading price of
the stock at the time the purchases are made. We would expect to be able to use
existing equity to fund the purchase of shares.

The following table presents information, at the maximum of the offering
range, regarding the number of shares and options expected to be made available
under the stock benefit plans. THE VALUE OF THE SHARE AWARDS IS BASED ON AN
ASSUMED VALUE OF $10.00 PER SHARE; HOWEVER, THIS DOES NOT MEAN YOU SHOULD ASSUME
THE STOCK WILL TRADE AT OR ABOVE $10.00 PER SHARE. IT COULD TRADE BELOW $10.00
PER SHARE. The value of the option grants was determined using the Black-Scholes
option-pricing formula. See Pro Forma Data. Ultimately, the value of awards
under the stock benefit plans will depend on the actual trading price of our
stock at a particular time, which depends on numerous factors, some of which are
out of our control.

At the Maximum of the Offering Range
--------------------------------------------------------------------------------
Persons Percentage of
Eligible Number Percentage of Total Shares
to of Shares Outstanding
Receive Estimated Shares/ Sold in After
------- --------- ------- ------- -----

Awards Value Options the Offering the Offering
Employee Stock Ownership Plan......... Employees $2,484,000 248,400 8.0% 3.6%

Directors
Restricted stock...................... and Officers $1,352,000 135,200 4.4% 1.96%

Directors
Stock options......................... and Officers $1,376,067 338,100 10.9% 4.9%

If we implement the restricted stock plan within one year of the offering
and Gloucester County Federal Savings Bank's tangible capital following the
stock offering is less than 10%, then the number of shares that may be awarded
under the restricted stock plan will be reduced and may not exceed 1.47% of the
total shares outstanding rather than the 1.96% shown in the table above. If, at
our discretion, we further reduce the restricted stock plan to 1.3%, we may keep
the number of shares in the employee stock ownership plan at 3.6%. If we reduce
the restricted stock plan to only 1.47% of the outstanding shares, however, then
the employee stock ownership plan would also be reduced, to 3.4%.

See Management - Stock Benefit Plans and Pro Forma Data for more
information about the stock benefit plans.

POSSIBLE CONVERSION OF GATEWAY COMMUNITY FINANCIAL, MHC TO STOCK FORM

In the future, Gateway Community Financial, MHC may convert from the mutual
holding company form of organization, wherein a majority of the outstanding
stock is held by the mutual holding company, to a corporation with 100% of its
shares held by public stockholders. This type of conversion transaction is
commonly known as a "second-step conversion." The Board of Directors has no
current plans to undertake a second-step conversion transaction.

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RISK FACTORS

This investment entails various risks including the possible loss of
principal. You may not be able to sell the stock at or above the $10.00 offering
price. YOU SHOULD CAREFULLY READ THE INFORMATION UNDER RISK FACTORS BEGINNING ON
PAGE __.

STOCK INFORMATION CENTER

FOR ASSISTANCE, PLEASE CONTACT THE STOCK INFORMATION CENTER AT (___)
___-____. The stock information center's hours of operation are generally __:__
a.m. to __:__ p.m., Eastern time, Monday through Friday. The stock information
center is closed on weekends and holidays.

- --------------------------------------------------------------------------------

RISK FACTORS

In addition to the other information in this document, you should
consider carefully the following risk factors in evaluating an investment in our
common stock.

WE REPORTED A NET LOSS FOR THE QUARTER ENDED MARCH 31, 2007, AND WE EXPECT THAT
WE MAY REPORT A LOSS FOR THE QUARTER ENDED JUNE 30, 2007 AS A WHOLE. THERE IS NO
ASSURANCE THAT OUR PROFITABILITY WILL IMPROVE IN THE NEAR TERM.

Like many smaller financial institutions, our non-interest expense, which
consists primarily of the costs associated with operating our business,
represents a high percentage of the income we are able to produce. Our cost to
produce income is measured by our efficiency ratio, which is calculated as our
non- interest expense divided by the sum of our net interest income and
non-interest income. For the years ended December 31, 2006 and 2005, our
efficiency ratio was 98.4% and 82.7%, respectively. Generally, this means that
we spent approximately $0.83 to generate $1.00 of income in 2005 and
approximately $0.98 to generate $1.00 of income in 2006.

For 2005, our net income of $1.6 million included a $917,000 (pre-tax)
credit to income as a result of a recovery of that amount of loan loss
provisions out of the allowance for loan losses (following the extraordinarily
high provisions that were made to the allowance in 2002 and 2003 in connection
with the problems uncovered in the commercial loan portfolio at that time). Net
income for 2006 fell sharply to $379,000 and consisted primarily of a $348,000
(pre-tax) credit for a recovery of that amount of loan loss provisions out of
the allowance for loan losses. The drop in net income for 2006 was attributable
to the fact that net interest income of $6.9 million for the year was exceeded
by noninterest expense of $7.6 million. Our net interest income declined
primarily as a result of a reduction of our net interest rate spread and margin
due to the flat or inverted yield curve environment in which we are operating.
We reported a net loss of $200,000 for the quarter ended March 31, 2007 as our
net interest income continued to fail to cover our operating expenses for the
quarter. See Recent Developments at page __ for a discussion of our results of
operations for the quarter. If the flat or inverted yield curve environment
persists, we may not be able to alleviate the reduction in our net interest rate
spread and margin, which could prevent us from achieving profitability from our
core operations in the near term.

Additionally, our results of operations for 2007 may be adversely affected
by charges that could be incurred in connection with the closing or
consolidation of one of our existing branches, which has been underperforming.
There is no current plan or understanding as to the closing or consolidation of
the branch; management expects, however, to make a determination about the
closing or consolidation of such branch before the end of 2007.

IN RECENT YEARS WE HAD MATERIAL PROBLEMS WITH OUR ASSET QUALITY, AND WE CHARGED
OFF A SIGNIFICANT AMOUNT OF LOANS, PRIMARILY IN THE COMMERCIAL LOAN PORTFOLIO.
IF WE EXPERIENCE ADDITIONAL LOAN LOSSES GOING FORWARD THAT EXCEED THE AMOUNT WE
HAVE RESERVED FOR LOAN LOSSES, OUR EARNINGS WILL BE ADVERSELY AFFECTED.

The risk of credit losses on loans varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the value and marketability of the collateral for the loan. Management maintains

an allowance for loan losses based upon historical experience, an evaluation of
economic conditions and regular reviews of delinquencies and loan portfolio
quality.

In recent years we experienced significant problems with our commercial
loan portfolio, which represented approximately 34% of our total loans at the
time we discovered the deficiencies in the portfolio. Over the last five years,
our net charge-offs of commercial real estate and commercial loans amounted to
$9.8 million. If our assumptions and judgments about the ultimate collectibility
of the loan portfolio prove to be incorrect and the allowance for loan losses is
inadequate to absorb losses or if we are required to make material additions to
the allowance, our earnings and capital could be significantly and adversely
affected.

THERE ARE RISKS ASSOCIATED WITH OUR PLAN TO COMMENCE ACTIVELY RE-GROWING OUR
COMMERCIAL REAL ESTATE AND COMMERCIAL LOANS SINCE THAT TYPE OF LENDING POSES
HIGHER RISKS AND WE EXPERIENCED SIGNIFICANT TROUBLE WITH THIS TYPE OF LENDING IN
THE PAST.

The repayment risk related to commercial loans is considered to be greater
than the risk related to residential loans. Unlike residential mortgage loans,
which generally are made on the basis of the borrower's ability to make
repayment from his or her employment and other income, and which are secured by
real property with values that tend to be more easily ascertainable, commercial
loans typically are made on the basis of the borrower's ability to make
repayment from the cash flow of the borrowers' business, which may include lease
income. In addition, commercial loans generally result in larger balances to
single borrowers, or related groups of borrowers, than one- to four-family
loans.

At December 31, 2006, our loan portfolio included $19.0 million of
commercial real estate mortgage loans and commercial loans representing
approximately 9% of our total loans compared to $67.1 million or 34% of our
total loans at December 31, 2002. In recent years, we experienced significant
problems with our commercial lending activities. Over the last five years, our
net charge-offs of commercial real estate and commercial loans amounted to $9.8
million. The size of the commercial real estate and commercial loan portfolios
as a percentage of total loans decreased as we worked through

problems in those portfolios and we were from 2003 to 2005, barred by the Office
of Thrift Supervision from any new commercial lending. We now intend to actively
re-commence origination of these types of loans. We have hired two commercial
lender s, one in March 2007 and one in May 2007. See Mangement's Discussion and
Analysis - Asset Quality and Provisions for Loan Losses at page __.

WE INTEND TO INCREASE OUR ORIGINATIONS OF CERTAIN HIGHER YIELDING CONSUMER
LOANS, BUT SUCH LOANS PRESENT HIGHER RISK.

In 2004, we began originating loans for the purchase and refinance of
manufactured housing. This portfolio totaled $8.6 million at March 31, 2007, up
from $7.5 million at December 31, 2006, and we intend to grow this portfolio to
approximately $30 million. In the first quarter of 2007, we established a
program for financing the purchase of non-commercial use, personal airplanes. As
of March 31, 2007, we had originated $1.4 million of aircraft loans , and our
current goal is to grow that portfolio to as much as $15 million by the end of
2007. We intend to originate aircraft loans to borrowers throughout the United
States, not just in our primary market area. These types of loans are generally
considered to involve a higher degree of credit risk and if we experience losses
in these portfolios, our earnings would be adversely affected.

CHANGES IN INTEREST RATES MAY ADVERSELY AFFECT OUR NET INTEREST RATE SPREAD AND
NET INTEREST MARGIN, WHICH WOULD HURT OUR EARNINGS.

We derive our income mainly from the difference or "spread" between the
interest earned on loans, securities and other interest-earning assets, and
interest paid on deposits, borrowings and other interest-bearing liabilities. In
general, the larger the spread, the more we earn. When market rates of interest
change, the interest we receive on our assets and the interest we pay on our
liabilities will fluctuate. This can cause decreases in our spread and can
adversely affect our income.

Several years ago market interest rates were at historically low levels.
However, between June 2004 and June 2006, the U.S. Federal Reserve steadily
increased its target federal funds rate, raising it 17 times, from 1.00% to
5.25%. While the federal funds rate and other short-term market interest rates,
which we use as a guide to our deposit pricing, have increased, intermediate-
and long-term market interest rates, which we use as a guide to our loan
pricing, have not increased proportionately. This has led to a "flattening" of
the market yield curve, which has even "inverted" recently as short-term rates
have exceeded longer-term rates. The relatively flat yield curve has hurt our
net interest rate spread and net interest margin because the interest rates we
pay on our deposits have repriced upwards faster than the interest rates that we
earn on our loans and investments. As of December 31, 2006, we had $113.5
million in certificates of deposit that will mature within one year. If the
yield curve remains flat, these deposits are expected to reprice upwards faster
than loans and investments, which will reduce our net interest income.

Interest rates also affect how much money we lend. For example, when
interest rates rise, the cost of borrowing increases and loan originations tend
to decrease. In addition, changes in interest rates can affect the average life
of loans and investment securities. A reduction in interest rates generally
results in increased prepayments of loans and mortgage-backed securities, as
borrowers refinance their debt in order to reduce their borrowing cost. This
causes reinvestment risk, because we generally are not able to reinvest
prepayments at rates that are comparable to the rates we earned on the prepaid
loans or securities. Changes in market interest rates could also reduce the
value of our financial assets. If we are unsuccessful in

managing the effects of changes in interest rates, our financial condition and
results of operations could suffer.

OUR RETURN ON EQUITY IS CURRENTLY LOW AND WILL DECREASE AFTER THIS OFFERING.
THIS COULD NEGATIVELY IMPACT THE PRICE OF OUR STOCK.

The net proceeds from the offering will substantially increase our equity
capital. It will take a significant period of time to prudently invest this
capital. For the year ended December 31, 2006, our return on average equity,
which is the ratio of our earnings divided by our average equity capital, was
1.33%. After the offering, our estimated ratio of pro forma earnings divided by
pro forma stockholders` equity is expected to be approximately 1.10% at the
midpoint of the appraisal of $27 million. Because the stock market values a
company based in part on its return on equity, our low return on equity could
negatively affect the trading price of our stock. See Pro Forma Data.

STRONG COMPETITION WITHIN OUR MARKET AREA MAY LIMIT OUR GROWTH AND
PROFITABILITY.

Competition in the banking and financial services industry in New Jersey is
intense. Many of our competitors have substantially greater resources and
lending limits than we do and offer services that we do not or cannot provide.
Price competition for loans might result in us originating fewer loans, or
earning less on our loans, and price competition for deposits might result in a
decrease in our total deposits or higher rates on our deposits. Competition in
the market for hiring experienced lenders and other highly- qualified bank
officers is also a challenge, which may restrict our ability to grow.

OUR BUSINESS IS GEOGRAPHICALLY CONCENTRATED IN SOUTHERN NEW JERSEY, AND A
DOWNTURN IN CONDITIONS IN OUR MARKET AREA COULD HAVE AN ADVERSE IMPACT ON OUR
PROFITABILITY.

A substantial amount of our loans are to individuals and businesses in
southern New Jersey. Any decline in the economy of this market could have an
adverse impact on our earnings. Adverse economic changes may also have a
negative effect on the ability of our borrowers to make timely repayments of
their loans. Additionally, because we have a significant amount of real estate
loans, decreases in local real estate values could adversely affect the value of
property used as collateral. If we are required to liquidate a significant
amount of collateral during a period of reduced real estate values to satisfy
the debt, our earnings and capital could be adversely affected.

ADDITIONAL COMPENSATION AND BENEFIT EXPENSES FOLLOWING THE OFFERING WILL
NEGATIVELY IMPACT OUR PROFITABILITY.

Following the offering, we will recognize additional annual employee
compensation and benefit expenses stemming from the shares granted to employees,
officers and directors under new benefit plans, including the Gloucester County
Federal Savings Bank Employee Stock Ownership Plan. We cannot predict the actual
amount of the new stock-related compensation and benefit expenses because
applicable accounting standards require that they be based on the fair market
value of the shares of common stock at specific points in the future; however,
we expect them to be material. See Pro Forma Data beginning on page __ for an
estimate of the expenses from the ESOP, restricted stock plan and option plan .
At the maximum of the offering range, the expenses are estimated to be $568,000
annually.

NEW EXPENSES THAT WE WILL INCUR AS A PUBLIC COMPANY WILL AFFECT OUR EARNINGS.

Following the offering, our non-interest expense is likely to increase as a
result of the financial accounting, legal and various other additional
non-interest expenses usually associated with operating as a public company,
particularly as a result of the requirements of the Sarbanes-Oxley Act of 2002.
In addition, the Bank's senior management will be required to devote a
significant amount of time to such matters, diverting their full attention from
regular operations.

THE IMPLEMENTATION OF STOCK-BASED BENEFIT PLANS MAY DILUTE YOUR OWNERSHIP
INTEREST IN GATEWAY COMMUNITY FINANCIAL CORP.

We intend to adopt a stock option plan and a restricted stock plan
following the stock offering. These stock benefit plans will be funded through
either open market purchases or from the issuance of authorized but unissued
shares. Stockholders would experience a reduction in ownership interest in the
event newly issued shares are used to fund stock options and awards made under
the restricted stock plan. The use of newly issued shares of stock to fund the
restricted stock plan instead of open market purchases would dilute the voting
interests of existing stockholders by approximately 1.9%. The use of newly
issued shares of stock to fund exercises of options granted under the stock
option plan instead of open market purchases would dilute the voting interests
of existing stockholders by approximately 4.7%.

PROVISIONS IN OUR CHARTER AND BYLAWS LIMITING THE RIGHTS OF STOCKHOLDERS MAY
DETER POTENTIAL TAKEOVERS AND MAY REDUCE THE TRADING PRICE OF OUR STOCK.

Provisions in our charter and bylaws may make it difficult and expensive to
pursue a change in control or takeover attempt that our Board of Directors
opposes. As a result, you may not have an opportunity to participate in such a
transaction, and the trading price of our stock may not rise to the level of
other institutions that are more vulnerable to hostile takeovers. Such
provisions include:

o the election of directors to staggered three-year terms;
o provisions restricting stockholders from calling special meetings of
stockholders;
o the absence of cumulative voting by stockholders in elections of
directors;
o advance notice requirements for stockholder nominations and new
business; and
o a provision that limits the voting rights of a single stockholder to
no more than 10% of the then-outstanding shares, including shares held
by Gateway Community Financial, MHC, for a period of five years from
the date this stock offering is completed.

PERSONS WHO PURCHASE STOCK IN THE OFFERING WILL OWN A MINORITY OF GATEWAY
COMMUNITY FINANCIAL CORP.'S COMMON STOCK AND WILL NOT BE ABLE TO EXERCISE VOTING
CONTROL OVER MOST MATTERS PUT TO A VOTE OF STOCKHOLDERS, INCLUDING ANY PROPOSAL
REGARDING THE ACQUISITION OF GATEWAY COMMUNITY FINANCIAL CORP.

Gateway Community Financial, MHC will own 55% of Gateway Community
Financial Corp.'s common stock after the offering. The MHC's Board of Directors
is comprised of the same persons as Gateway Community Financial Corp.'s Board of
Directors and will generally be able to exercise voting control over matters put
to a vote of stockholders of Gateway Community Financial Corp., such as a vote
on a sale or merger of Gateway Community Financial Corp. or other transaction in
which stockholders could receive a premium for their shares and the election of
directors of Gateway Community Financial Corp.

In addition, our directors, and officers are expected to purchase
approximately 235,000 shares of stock in this stock offering. If 2,700,000
shares are sold (the midpoint of the offering range), their anticipated
purchases would represent 8.7% of the shares sold in the offering and 3.9% of
the 6,000,000 total shares outstanding after the offering, including shares
issued to Gateway Community Financial, MHC. At the maximum of the offering
range, these percentages decrease to 7.6% and 3.4%. In addition, the officers,
employees and directors may receive up to 5.6% of the stock owned by the public
under the restricted stock plan and stock option plan.

OUR STOCK PRICE MAY DECLINE WHEN TRADING COMMENCES.

We cannot guarantee that if you purchase shares in the offering you will be
able to sell them at or above the $10.00 purchase price. After the shares of our
common stock begin trading, the trading price of the common stock will be
determined by the marketplace, and will be influenced not only by our operating
results but by many factors outside of our control, including prevailing
interest rates, investor perceptions and general industry, geopolitical and
economic conditions. Publicly traded stocks, including stocks of financial
institutions, have recently experienced substantial market price volatility.
These market fluctuations might not be related to the operating performance of
particular companies whose shares are traded.

WE OPERATE IN A HIGHLY REGULATED ENVIRONMENT AND MAY BE ADVERSELY AFFECTED BY
CHANGES IN LAWS AND REGULATIONS.

We are subject to extensive regulation, supervision and examination by the
Office of Thrift Supervision and the Federal Deposit Insurance Corporation. Such
regulation and supervision govern the activities in which an institution and its
holding companies may engage and are intended primarily for the protection of
the insurance fund and depositors. Regulatory authorities have extensive
discretion in connection with their supervisory and enforcement activities,
including the imposition of restrictions on the operation of an institution, the
classification of assets by the institution and the adequacy of an institution's
allowance for loan losses. Any change in such regulation and oversight, whether
in the form of regulatory policy, regulations, or legislation, including changes
in the regulations governing mutual holding companies, could have a material
impact on us and our operations.

A WARNING ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be
identified by the use of words such as "believes," "expects," "anticipates,"
"estimates" or similar expressions. Forward-looking statements include:

o statements of our goals, intentions and expectations;

o statements regarding our business plans, prospects, growth and operating
strategies;

o statements regarding the quality of our loan and investment portfolios; and

o estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks and
uncertainties. Actual results may differ materially from those contemplated by
the forward-looking statements due to, among others, the following factors:

o general economic conditions, either nationally or in our market area, that
are worse than expected;

o changes in the interest rate environment that reduce our interest margins
or reduce the fair value of financial instruments;

o our ability to enter into new markets and/or expand product offerings
successfully and take advantage of growth opportunities;

o increased competitive pressures among financial services companies;

o changes in consumer spending, borrowing and savings habits;

o legislative or regulatory changes that adversely affect our business;

o adverse changes in the securities markets;

o our ability to successfully manage our growth; and

o changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Financial Accounting Standards Board or the Public
Company Accounting Oversight Board.

Any of the forward-looking statements that we make in this prospectus and
in other public statements we make may turn out to be wrong because of
inaccurate assumptions we might make, because of the factors illustrated above
or because of other factors that we cannot foresee. Consequently, no
forward-looking statement can be guaranteed.

USE OF PROCEEDS

We are conducting this stock offering principally to raise capital to
support our anticipated future growth. The actual net proceeds will depend on
the expenses incurred by us in connection with the offering and the total number
of shares of stock issued in the offering, which depends on the independent
valuation and market considerations. Although the actual net proceeds from the
sale of the common stock cannot be determined until the offering is completed,
we estimate that net proceeds from the sale of common stock will be between
$22.2 million and $30.2 million, or $34.8 million at the adjusted maximum. The
net proceeds may vary significantly because total expenses of the stock offering
may be significantly more or less than those estimated. Payments for shares made
through withdrawals from existing deposit accounts at Gloucester County Federal
Savings Bank will not result in the receipt of new funds for investment but will
result in a reduction of Gloucester County Federal Savings Bank's deposits and
interest expense as funds are transferred from interest-bearing certificates or
other deposit accounts.

Gateway Community Financial Corp. intends to use proceeds from the offering
as follows:

MAXIMUM,
MINIMUM MIDPOINT MAXIMUM As Adjusted
------- -------- ------- -----------
Percent Percent Percent Percent
of Net of Net of Net of Net
Amount Proceeds Amount Proceeds Amount Proceeds Amount Proceeds
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)

Estimated net proceeds....... $22,182 $26,190 $30,199 $34,809
Less:
Investment in the Bank....... 11,091 50.0% 13,095 50.0% 15,100 50.0% 187,405 50.0%

Loan to the Employee
Stock Ownership Plan.... 1,836 8.3% 2,160 8.2% 2,484 8.2% 2,857 8.2%

Proceeds retained by
Gateway Community
Financial Corp............ $9,255 41.7% $10,935 41.8% $12,615 34.8% $14,547 41.8%

Gloucester County Federal Savings Bank will receive at least 50% of the net
proceeds from the offering as a capital contribution and will use those proceeds
for general business purposes. The Bank will receive such additional amount as
may be necessary so that the ratio of the Bank's tangible capital to its total
assets upon completion of the offering is at least 10%. The proceeds will
provide the opportunity for the Bank to significantly grow its assets and
maintain status as a well-capitalized financial institution under applicable
banking regulations. The offering proceeds may also be used to finance the
possible acquisition of other financial institutions or branches, if appropriate
opportunities arise. We do not, however, have any current understandings,
agreements or arrangements in connection with branching or acquisitions.

We will lend a portion of the offering proceeds to the Gloucester County
Federal Savings Bank Employee Stock Ownership Plan to enable it to buy up to 8%
of the shares sold in the offering. If it does not buy the full amount of its
intended common stock purchase in the offering, it may purchase shares of common
stock in the open market after the stock offering. If the purchase price of the
common stock is higher than $10 per share, the amount of proceeds required for
the purchase by the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan will increase.

The balance of the offering proceeds will be retained by Gateway Community
Financial Corp. and deposited with or loaned to Gloucester County Federal
Savings Bank, providing funds to support the Bank's operations. This will enable
the Bank to reduce its outstanding Federal Home Loan Bank borrowings. Gateway
Community Financial Corp. may also use the offering proceeds it retains for
general corporate purposes, including repurchasing shares of its common stock,
paying cash dividends or supporting acquisitions of other financial
institutions, branches or financial services companies. We do not, however, have
any current understandings, agreements or arrangements for any such
acquisitions.

OUR POLICY REGARDING DIVIDENDS

We have not yet determined what our dividend policy will be, and we have no
plans or understandings as to the amount or timing of cash dividends that
Gateway Community Financial Corp. may pay after the offering. Future
declarations of dividends by the Board of Directors will depend on a number

of factors, including investment opportunities, growth objectives, financial
condition, profitability, tax considerations, minimum capital requirements,
regulatory limitations, stock market characteristics and general economic
conditions. The timing, frequency and amount of dividends will be determined by
the Board. THERE CAN BE NO ASSURANCE THAT DIVIDENDS WILL IN FACT BE PAID ON THE
STOCK OR THAT, IF PAID, DIVIDENDS WILL NOT BE REDUCED OR ELIMINATED IN FUTURE
PERIODS.

Gateway Community Financial Corp.'s ability to pay dividends may also
depend on the receipt of dividends from Gloucester County Federal Savings Bank,
which is subject to a variety of regulatory limitations on the payment of
dividends. See Regulation - Regulation of Gloucester County Federal Savings Bank
- - Dividend and Other Capital Distribution Limitations. Furthermore, as a
condition to the Office of Thrift Supervision giving its authorization to
conduct the stock offering, we have agreed that we will not initiate any action
within one year of completion of the stock offering involving the payment of a
special distribution or return of capital to stockholders of Gateway Community
Financial Corp.

If Gateway Community Financial Corp. pays dividends to its stockholders, it
is anticipated that dividends payable to Gateway Community Financial, MHC would
be waived. We must notify the Office of Thrift Supervision of any proposed
dividend waiver by Gateway Community Financial, MHC. The Office of Thrift
Supervision reviews dividend waiver notices on a case-by-case basis, and, in
general, does not object to any such waiver if: (i) the waiver would not be
detrimental to the safe and sound operations of the subsidiary savings
association and (ii) the mutual holding company's board of directors determines
that such waiver is consistent with such directors' fiduciary duties to the
mutual holding company's members.

MARKET FOR THE STOCK

There is not, at this time, any market for Gateway Community Financial
Corp.'s stock. We have applied to have our common stock listed for trading on
the Nasdaq Global Market under the symbol "GCFC." Sandler O'Neill & Partners,
L.P. has advised us that it intends to make a market in our common stock
following the offering, but it is under no obligation to do so.

The development of an active trading market depends on the existence of
willing buyers and sellers, the presence of which is not within our control, or
that of any market maker. The number of active buyers and sellers of our stock
at any particular time may be limited. Under such circumstances, you could have
difficulty selling your shares of common stock. WE CANNOT ASSURE YOU THAT AN
ACTIVE AND LIQUID TRADING MARKET FOR THE SHARES OF COMMON STOCK WILL DEVELOP OR,
IF DEVELOPED, WILL BE MAINTAINED. NOR CAN WE ASSURE YOU THAT, IF YOU PURCHASE
SHARES OF COMMON STOCK IN THE OFFERING, YOU WILL BE ABLE TO SELL THEM AT A PRICE
EQUAL TO OR ABOVE $10.00 PER SHARE.

CAPITALIZATION

Set forth below is the historical capitalization as of December 31, 2006 of
Gateway Community Financial Corp. and the pro forma capitalization of Gateway
Community Financial Corp. as of December 31, 2006 after giving effect to the
offering and to the assumptions set forth under Pro Forma Data. No effect has
been given to the issuance of additional shares of stock pursuant to any stock
option plan that may be adopted by Gateway Community Financial Corp. and
presented for approval by the stockholders after the offering. An amount equal
to 4.9% of the total number of shares outstanding after the offering, including
shares held by Gateway Community Financial, MHC, would be reserved for issuance
upon the exercise of options to be granted under the stock option plan following
the stock offering. See Management - Stock Benefit Plans - Stock Option Plan.

Pro Forma Capitalization at December 31, 2006
----------------------------------------------------------
Maximum,
Minimum Midpoint Maximum as adjusted
2,295,000 2,700,000 3,105,000 3,570,750
Historical, at shares sold shares sold shares sold shares sold
December 31, at $10.00 at $10.00 at $10.00 at $10.00
2006 per share per share per share per share
---- --------- --------- --------- ---------
(In thousands)

Deposits(1)................................... $315,962 $315,962 $315,962 $315,962 $315,962
Borrowings.................................... 4,400 4,400 4,400 4,400 4,400
-------- -------- -------- -------- --------
Total deposits and borrowings.............. $320,362 $320,362 $320,362 $320,362 $320,362
======== ======= ======== ======== ========

Stockholders' equity:
Preferred stock, $0.10 par value,
5,000,000 shares authorized, no shares
issued or outstanding..................... - $ - $ - $ - $ -
Common stock, $0.10 par value,
25,000,000 shares authorized, assuming
shares outstanding as shown(1)(2)......... 1 510 600 690 794
= === === === ===
Additional paid-in capital(1)(2).............. 249 21,921 25,839 29,758 34,264
Retained earnings............................. 28,686 28,686 28,686 28,686 28,686
Accumulated other comprehensive loss.......... (33) (33) (33) (33) (33)
Less:
Common stock acquired by
the Gloucester County Federal Savings Bank
Employee Stock Ownership Plan(3)............ - (1,836) (2,160) (2,484) (2,857)
Common stock acquired by
the restricted stock plan(4)................ - (1,000) (1,176) (1,352) (1,555)
-------- -------- -------- -------- --------
Total stockholders' equity................. $ 28,903 $ 48,248 $ 51,756 $ 55,265 $ 57,299
======== ======= ======== ======== ========

______________

(1) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the offering. Withdrawals to purchase common stock will
reduce pro forma deposits by the amounts of the withdrawals.

(2) Pro forma data includes shares to be held by Gateway Community
Financial, MHC after completion of the stock offering. Gateway
Community Financial, MHC is currently the sole stockholder of Gateway
Community Financial Corp. and holds 10,000 shares of common stock of
Gateway Community Financial Corp. Upon completion of the offering,
Gateway Community Financial, MHC will hold 55% of the total shares of
Gateway Community Financial Corp. to be outstanding. Total outstanding
shares upon completion of the offering will be 5,100,000, 6,000,000,
6,900,000 and 7,935,000, at the minimum, midpoint, maximum and adjusted
maximum, respectively.

(3) The historical stockholders' equity includes the initial capitalization
of the mid-tier holding company upon its formation in 2001. The pro
forma stockholders' equity includes this initial capitalization. The
pro forma additional paid-in capital amounts represent the net offering
proceeds, less the par value of all shares outstanding upon completion
of the offering. Total outstanding shares upon completion of the
offering will be 5,100,000, 6,000,000, 6,900,000 and 7,935,000, at the
minimum, midpoint, maximum and adjusted maximum, respectively.

(4) Assumes that 8% of the shares sold in the offering will be purchased by
the Gloucester County Federal Savings Bank Employee Stock Ownership
Plan, and that the funds used to acquire those shares will be borrowed
from Gateway Community Financial Corp., concurrent with the offering.
For an estimate of the impact of the loan on earnings, see Pro Forma
Data. Gloucester County Federal Savings Bank intends to make scheduled
discretionary contributions to the Gloucester County Federal Savings
Bank Employee Stock Ownership Plan sufficient to enable it to service
and repay its debt over a ten year period. The amount of shares to be
acquired by the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan is reflected as a reduction of stockholders' equity. See
Management - Stock Benefit Plans - Employee Stock Ownership Plan. If
the Gloucester County Federal Savings Bank Employee Stock Ownership

Plan is unable to purchase stock in the stock offering due to an
oversubscription in the offering by Eligible Account Holders having
first priority, and the purchase price in the open market is greater
than the original $10.00 price per share, there will be a corresponding
reduction in stockholders' equity.

(5) Assumes that an amount equal to 1.96% of the total number of shares
outstanding after the offering, including shares held by Gateway
Community Financial, MHC, is purchased by the restricted stock plan
following the stock offering. The stock purchased by the restricted
stock plan is reflected as a reduction of stockholders' equity. See
footnote (2) to the table under Pro Forma Data.

PRO FORMA DATA

The actual net proceeds from the sale of the stock cannot be determined
until the offering is completed. The net proceeds to Gateway Community Financial
Corp. are currently estimated to be between $22.2 million and $30.2 million
($34.8 million at the adjusted maximum), based on the following assumptions:

o shares sold in the offering will be sold in either the subscription
offering or the community offering, with no shares being sold in a
syndicated community offering; and

o expenses of the offering, including the fees and expenses of Sandler
O'Neill & Partners, L.P., are estimated to be between approximately
$768,000 at the minimum and $851,000 at the maximum ($899,000 at the
adjusted maximum).

The following table sets forth Gateway Community Financial Corp.'s
historical net income and stockholders' equity prior to the offering and pro
forma net income and stockholders' equity giving effect to the offering. In
preparing this table, we have made the following assumptions:

o Pro forma net income has been calculated assuming the stock had been sold
at the beginning of the period and the net proceeds had been invested at an
average yield of 5.0% for the year ended December 31, 2006, which
approximates the yield on a one-year U.S. Treasury bill on December 31,
2006. The yield on a one-year U.S. Treasury bill, rather than an arithmetic
average of the average yield on interest-earning assets and the average
rate paid on deposits, has been used to estimate income on net proceeds
because we believe that the one-year U.S. Treasury bill rate is a more
accurate estimate of the rate that would be obtained on an investment of
net proceeds from the offering. The pro forma after-tax yield (based upon a
40.0% tax rate) on the net proceeds is assumed to be 3.00% for the year
ended December 31, 2006.

o We assumed that 8.0% of the shares sold in the offering were purchased in
the offering by the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan (ESOP) at a price of $10.00 per share using funds borrowed
from Gateway Community Financial Corp. We assumed that Gloucester County
Federal Savings Bank would make annual contributions to the Gloucester
County Federal Savings Bank Employee Stock Ownership Plan in an amount at
least equal to the principal and interest requirement of the loan. We have
assumed a 10-year amortization period for the loan. The stock acquired by
the Gloucester County Federal Savings Bank Employee Stock Ownership Plan is
reflected as a reduction of stockholders' equity. See Management - Stock
Benefit Plans - Employee Stock Ownership Plan.

o We assumed that the stock option plan had been approved by stockholders of
Gateway Community Financial Corp. and that Gateway Community Financial
Corp. had reserved for future issuance upon the exercise of options to be
granted under the plan an amount of stock equal to 4.9% of the total number
of shares outstanding after the offering, including shares held by Gateway
Community

Financial, MHC. We assumed that options for all shares reserved under the
plan were granted to plan participants at the beginning of the period and
that 30% of the options granted were non- qualified options for income tax
purposes. We assumed that the options would vest at a rate of 20% per year
and that compensation expense would be recognized on a straight-line basis
over the 5-year vesting period. See Management - Stock Benefit Plans -
Stock Option Plan.

o We assumed that the restricted stock plan had been approved by stockholders
of Gateway Community Financial Corp. and that the restricted stock plan had
acquired an amount of stock equal to 1.96% of the total number of shares
outstanding after the offering, including shares held by Gateway Community
Financial, MHC, at the beginning of the periods presented through open
market purchases at a price of $10.00 per share using funds contributed to
the restricted stock plan by Gloucester County Federal Savings Bank. We
assumed that all shares held by the plan were granted to plan participants
at the beginning of the period, that the shares would vest at a rate of 20%
per year and that compensation expense will be recognized on a
straight-line basis over the 5-year vesting period. See Management - Stock
Benefit Plans - Restricted Stock Plan.

o We did not include any withdrawals from deposit accounts to purchase shares
in the offering.

o Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares of
stock, as adjusted in the pro forma earnings per share to give effect to
the purchase of shares by the Gloucester County Federal Savings Bank
Employee Stock Ownership Plan.

o Pro forma stockholders' equity amounts have been calculated as if the stock
had been sold on December 31, 2006 and no effect has been given to the
assumed earnings effect of the transaction.

The following pro forma data relies on the assumptions we outlined above,
and this data does not represent the fair market value of the common stock, the
current value of assets or liabilities, or the amount of money that would be
distributed to stockholders if Gateway Community Financial Corp. were
liquidated. The pro forma data does not predict how much we will earn in the
future. YOU SHOULD NOT USE THE FOLLOWING INFORMATION TO PREDICT FUTURE RESULTS
OF OPERATIONS.

The following table summarizes historical and pro forma data of Gateway
Community Financial Corp. at or for the year ended December 31, 2006 based on
the assumptions set forth above and in the notes to the tables and should not be
used as a basis for projections of market value of the stock following the stock
offering. Pro forma stockholders' equity and pro forma book value per share do
not take into account the impact of the bad debt reserve if Gateway Community
Financial Corp. were liquidated.

PRO FORMA
AT OR FOR THE YEAR ENDED DECEMBER 31, 2006
Maximum,
Minimum Midpoint Maximum as adjusted
2,295,000 2,700,000 3,105,000 3,570,750
shares sold shares sold shares sold shares sold
at $10.00 at $10.00 at $10.00 at $10.00
per share per share per share per share
--------- --------- --------- ---------
(Dollars in thousands,
except share and per share amounts)

Gross proceeds................................................. $22,950 $27,000 $31,050 $35,708
Less expenses.................................................. (768) (810) (851) (899)
Net proceeds................................................. 22,182 26,190 30,199 34,809
Less ESOP funded by Gateway Community Financial (1,836) (2,160) (2,484) (2,857)
Corp...........................................................
Less restricted stock plan adjustment.......................... (1,000) (1,176) (1,352) (1,555)
------- ------- ------- -------
Estimated investable net proceeds........................... $19,346 $22,854 $26,363 $30,397
======= ======= ======= =======

Net Income:
Historical ................................................. $ 379 $ 379 $ 379 $ 379
Pro forma income on net proceeds............................ 580 686 791 912
Pro forma ESOP adjustment(1)................................ (110) (130) (149) (171)
Pro forma restricted stock plan adjustment(2)............... (120) (141) (162) (187)
Pro forma option adjustment(3).............................. (190) (223) (257) (295)
------- ------- ------- -------
Pro forma net income........................................ $ 539 $ 571 $ 602 $ 638
======= ======= ======= =======
Earnings Per Share:
Historical ................................................. $ 0.08 $ 0.07 $ 0.06 $ 0.05
Pro forma income on net proceeds............................ 0.12 0.12 0.12 0.12
Pro forma ESOP adjustment(1)................................ (0.02) (0.02) (0.02) (0.02)
Pro forma restricted stock plan adjustment(2)............... (0.02) (0.02) (0.02) (0.02)
Pro forma option adjustment(3).............................. 0.04) (0.04) (0.04) (0.04)
------- ------- ------- -------
Pro forma earnings per share(4)............................. $ 0.11 $ 0.10 $ 0.09 $ 0.08
======= ======= ======= =======

Stockholders' Equity:
Historical ................................................. $28,903 $28,903 $28,903 $28,903
Estimated net proceeds...................................... 22,182 26,190 30,199 34,809
Less: common stock acquired by ESOP(1)...................... (1,836) (2,160) (2,484) (2,857)
Less: common stock acquired by restricted stock plan(2)..... (1,000) (1,176) (1,352) (1,555)
------- ------- ------- -------
Pro forma stockholders' equity.............................. $48,250 $51,757 $55,266 $59,300
======= ======= ======= =======

Book Value Per Share:
Historical ................................................. $ 5.67 $ 4.82 $ 4.19 $ 3.64
Estimated net proceeds...................................... 4.35 4.37 4.38 4.39
Less: common stock acquired by ESOP(1)...................... (0.36) (0.36) (0.36) (0.36)
Less: common stock acquired by restricted stock plan(2)..... (0.20) (0.20) (0.20) (0.20)
------- ------- -------- -------
Pro forma book value per share(4)........................... $ 9.46 $ 8.63 $ 8.01 $ 7.47
======= ======= ======= =======
Offering price as a percentage of pro forma
book value per share........................................ 105.4% 115.9% 124.8% 133.9%

Offering price to pro forma earnings per share................. 90.9x 100.0x 111.1x 125.0x

________________
(1) The expense of Gloucester County Federal Savings Bank's contribution to its
Employee Stock Ownership Plan (ESOP) is based on an assumed average fair
value of $10.00 per share. If the fair market value is different than
$10.00 per share

at the time the shares are released to ESOP participants, the related
expense recognized will be different. A higher fair market value will
result in higher compensation expense for the Bank.

(2) The issuance of authorized but unissued shares of stock to the restricted
stock plan instead of open market purchases would dilute the voting
interests of stockholders that purchased shares in the offering by
approximately 1.9%. If the actual cost of the shares acquired by the
restricted stock plan is different than $10.00 per share, the expense
recognized will be different. There can be no assurance that stockholder
approval of the restricted stock plan will be obtained or that the actual
purchase price of the shares will be equal to $10.00 per share. See
Management - Stock Benefit Plans - Restricted Stock Plan.

(3) The pro forma net income assumes that the options granted under the stock
option plan have a value of $4.07 per option, which was determined using
the Black-Scholes-Merton option pricing formula using the following
assumptions: (i) the trading price on date of grant was $10.00 per share;
(ii) exercise price is equal to the trading price on the date of grant;
(iii) dividend yield of 0%; (iv) vesting period of 5 years and expected
life of 10 years; (v) expected volatility of 9.69%; and risk-free interest
rate of 5.15%. Because there is currently no market for Gateway Community
Financial Corp.'s common stock, the assumed expected volatility is based on
the SNL Financial MHC index. If the fair market value per share on the date
of grant is different than $10.00, or if the assumptions used in the option
pricing formula are different from those used in preparing this pro forma
data, the value of the options and the related expense recognized will be
different. There can be no assurance that the actual fair market value per
share on the date of grant, and correspondingly the exercise price of the
options, will be $10.00 per share. The issuance of authorized but unissued
shares of stock instead of open market purchases to fund exercises of
options granted under the stock option plan would dilute the voting
interests of stockholders that purchased shares in the offering by
approximately 4.7%. See Management - Stock Benefit Plans - Stock Option
Plan.

(4) For purposes of calculating earnings per share, only the shares committed
to be released under the Gloucester County Federal Savings Bank Employee
Stock Ownership Plan were considered outstanding. For purposes of
calculating book value per share, all shares under the Gloucester County
Federal Savings Bank Employee Stock Ownership Plan were considered
outstanding. We have also assumed that no options granted under the stock
option plan were exercised during the period and that the trading price of
Gateway Community Financial Corp. common stock at the end of the period was
$10.00 per share. Under this assumption, using the treasury stock method,
no additional shares of stock were considered to be outstanding for
purposes of calculating earnings per share or book value per share.

HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE

The following table presents Gloucester County Federal Savings Bank's
historical and pro forma capital position relative to its regulatory capital
requirements as of December 31, 2006. Pro forma capital levels assume receipt by
the Bank of 50% of the net proceeds at all points of the offering range.
However, such additional amount as may be necessary will be contributed to the
Bank so that the ratio of its tangible capital to its total assets upon
completion of the offering is at least 10%. For a discussion of the assumptions
underlying the pro forma capital calculations presented below, see Use of
Proceeds, Capitalization and Pro Forma Data. For a discussion of the capital
standards applicable to Gloucester County Federal Savings Bank, see Regulation -
Regulation of Gloucester County Federal Savings Bank - Regulatory Capital
Requirements.

Pro Forma at December 31, 2006
---------------------------------------------------------------------------------------
Minimum Midpoint Maximum Maximum, as adjusted
Actual, at 2,295,000 shares sold 2,700,000 shares sold 3,105,000 shares sold 3,570,750 shares sold
December 31, 2006 at $10.00 per share at $10.00 per share at $10.00 per share at $10.00 per share
----------------- --------------------- -------------------- ------------------- ---------------------
Percentage Percentage Percentage Percentage Percentage
Amount of Assets(1) Amount of Assets(1) Amount of Assets(1) Amount of Assets(1) Amount of Assets(1)
------ ------------ ------ ------------ ------ ------------ ------ ------------ ------ ------------
(Dollars in thousands)

GAAP Capital.......... $27,446 7.83% $35,702 9.95% $37,205 10.32% $38,709 10.70% $40,439 11.12%

Tangible Capital(2)... $27,446 7.83% $35,702 9.95% $37,205 10.32% $38,709 10.70% $40,439 11.12%
Tangible Capital
Requirement......... 5,260 1.50 5,384 1.50 5,406 1.50 5,429 1.50 5,455 1.50
------- ---- ------- ---- ------- ----- ------- ----- ------- -----
Excess................ $22,186 6.33% $30,318 8.45% $31,799 8.82% $33,280 9.20% $34,984 9.62%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====

Core Capital.......... $27,446 7.83% $35,702 9.95% $37,205 10.32% $38,709 10.70% $40,439 11.12%
Core Capital
Requirement......... 10,520 3.00 10,768 3.00 10,813 3.00 10,858 3.00 10,910 3.00
------- ---- ------- ---- ------- ----- ------- ----- ------- -----
Excess................ $16,926 4.83% $24,934 6.95% $26,393 7.32% $27,851 7.70% $29,529 8.12%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====

Total Risk-Based
Capital(3)(4)....... $29,070 14.23% $37,325 17.91% $38,829 18.57% $40,333 19.22% $42,062 19.96%
Risk-Based Capital
Requirement......... 16,338 8.00 16,668 8.00 16,728 8.00 16,788 8.00 16,857 8.00
------- ---- ------- ---- ------- ----- ------- ----- ------- -----
Excess................ $12,732 6.23% $20,657 9.91% $22,101 10.57% $23,545 11.22% $25,205 11.96%
======= ==== ======= ==== ======= ===== ======= ===== ======= =====

Reconciliation of pro forma increase
in GAAP and regulatory capital:
Bank's receipt of 50% of the net
proceeds from the offering....... $11,091 $13,095 $15,100 $17,405
Less: funding of employee
stock ownership plan........... (1,836) (2,160) (2,484) (2,857)
Less: funding of future
restricted stock plan.......... (1,000) (1,176) (1,352) (1,555)
------- ------- ------- -------
Total pro forma increase in
GAAP and regulatory capital.. $ 8,255 $ 9,759 $11,263 $12,993
======= ======= ======= =======

(1) Tangible and core capital levels are shown as a percentage of total
adjusted assets. The risk-based capital level is shown as a percentage of
risk-weighted assets.
(2) Generally accepted accounting principles, referred to as "GAAP," capital
includes goodwill, intangible assets and unrealized gain (loss) on
available for sale securities, net, which are not included in regulatory
capital.
(3) Assumes net proceeds are invested in assets that carry a 50%
risk-weighting.
(4) The difference between core capital and risk-based capital is attributable
to the addition of general loan loss reserves of $1.8 million and the
deduction of $128,000 of other assets required to be deducted.

RECENT DEVELOPMENTS

The following financial information and other data is derived from our
unaudited consolidated financial statements at and for the three months ended
March 31, 2007 and 2006. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, that are necessary for a fair
presentation of the interim periods have been reflected. The results of
operations and other data presented for the three month period ended March 31,
2007 do not necessarily indicate the results that may be expected for the year
ending December 31, 2007 or any other period.

BALANCE SHEET DATA: At At
March 31, December 31,
2007 2006
------ -----
(In thousands)

Assets......................................................... $372,289 $351,864
Loans receivable, net.......................................... 211,035 210,492
Investment securities.......................................... 67,067 52,797
Mortgage-backed securities..................................... 64,197 59,185
Cash and cash equivalents...................................... 9,026 10,618
Deposits....................................................... 319,998 315,962
Short-term borrowings.......................................... 21,000 4,400
Total equity................................................... 28,741 28,903

SUMMARY OF OPERATIONS: For the Three Months
Ended March 31,
-----------------------
2007 2006
---- ----
(In thousands)

Interest and dividend income....................................... $4,621 $3,645
Interest expense................................................... 2,958 1,786
------ ------
Net interest income................................................ 1,663 1,859
Provisions for (recovery of provisions for) loan losses............ - (200)
------ ------
Net interest income after provisions for (recovery of provisions
for) loan losses................................................ 1,663 2,058
Noninterest income................................................. 190 202
Noninterest expense................................................ 2,178 1,921
(Loss) income before income tax (benefit) expense.................. (325) 339
Income tax (benefit) expense....................................... (125) 117
------ ------
Net (loss) income.................................................. $ (200) $ 222
====== ======

At or For the
Three Months
Ended March 31,
---------------------
2007 2006
---- ----

PERFORMANCE RATIOS:
Return on average assets (net income divided by
average total assets)..................................... (0.22)% 0.29%

Return on average equity (net income divided by
average equity)........................................... (2.78) 3.11

Net interest rate spread.................................... 1.83 2.39

Net interest margin on average interest-earning assets...... 2.02 2.58

Average interest-earning assets to average
interest-bearing liabilities.............................. 105.44 107.49

105.44
Efficiency ratio (noninterest expense divided by the sum
of net interest income and noninterest income)............ 117.54 93.21

Non-interest expense to average assets...................... 2.42 2.50

ASSET QUALITY RATIOS:
Non-performing loans to total loans, net.................... 0.91 1.51

Non-performing assets to total assets....................... 0.69 1.01

Net loan charge-offs (recoveries of loans charged-off) to
average loans outstanding................................. - 0.02

Allowance for loan losses to total loans................... 0.86 1.32

Allowance for loan losses to non-performing loans........... 93.80 87.18

CAPITAL RATIOS:
Average equity to average assets............................ 8.01 9.30

Equity to assets at period end.............................. 7.72 9.21

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2007 AND DECEMBER 31, 2006

ASSETS. Total assets increased by $20.4 million, or 5.8%, to $372.3 million
at March 31, 2007 from $351.9 million at December 31, 2006. This increase was
primarily due to increases in investment securities available for sale and
mortgage-backed securities.

LOANS. Net loans receivable rose slightly to $211.0 million at March
31, 2007 from $210.5 million at December 31, 2006. Auto loans continued to
decrease during the quarter as we continued to reduce our indirect auto lending;
this portfolio amounted to $18.7 million at March 31, 2007 compared to $21.1
million at December 31, 2006. Moderate growth in other categories offset the
decrease in auto loans. Residential mortgages increased $864,000 during the
quarter, home equity loans and lines of credit increased $732,000 and
manufactured housing loans increased $310,000. Our aircraft lending program
commenced during the quarter and aircraft loans totaled $1.4 million as of March
31, 2007.

DEPOSITS. Deposits increased by 1.3% to $320.0 million at March 31,
2007 from $316.0 million at December 31, 2006. Money market deposits increased
to $49.1 million from $44.6 million. Certificates of deposit decreased to $155.9
million from $162.1 million at December 31, 2006 and accounted for approximately
49% of total deposits at March 31, 2007 as compared to 51% at December 31, 2006.
Jumbo

certificates of deposit (those with a minimum balance of $100,000) comprised
21.6% of all certificates of deposit at March 31, 2007 as compared to 33.9% at
December 31, 2006.

SECURITIES. Securities (including investment securities as well as
mortgage-backed securities) increased $19.3 million, or 17.2%, during the
quarter to $131.3 million at March 31, 2007 from $112.0 million at December 31,
2006. The average balance of investment securities during the quarter was $60.2
million, while the average balance of mortgage-backed securities was $61.6
million. The increase in securities was funded with borrowings.

BORROWINGS. Funds borrowed from the Federal Home Loan Bank of New York
amounted to $21.0 million at March 31, 2007 as compared to $4.4 million at
December 31, 2006. The average balance of borrowings during the quarter was $9.6
million. Management used borrowed funds to fund the purchase of securities
during the quarter as part of a strategy to grow the balance sheet.

EQUITY. Total equity was $28.7 million at March 31, 2007 as compared to
$28.9 million at December 31, 2006. The decrease reflected the net loss incurred
during the quarter. The net loss for the quarter was partially offset by a
$38,000 decrease in accumulated other comprehensive loss.

As of March 31, 2007, the Bank exceeded all applicable regulatory capital
requirements and was well-capitalized.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND
MARCH 31, 2006

GENERAL. For the three months ended March 31, 2007 we reported a net loss
of $200,000 as compared to net income of $222,000 for the three months ended
March 31, 2006. Our results of operations for first quarter 2007 reflect the
compression of our net interest income to a point that our income from normal
operations did not cover our normal operating expenses. For the three months
ended March 31, 2006, our net income of $222,000 included a $200,000 (pre-tax)
credit to income as a result of a recovery of that amount of loan loss
provisions out of the allowance for loan losses during the quarter. Without that
credit, our income for the quarter ended March 31, 2006 would have been $90,000.

For the quarter ended March 31, 2007, our net interest income of $1.7
million and noninterest income of $190,000 did not cover our noninterest expense
of $2.2 million. We expect that we may incur an operating loss for the quarter
ending June 30, 2007 as well. Our income will be aided later this year as we
earn income on the investment of the proceeds of the stock offering. However, we
may incur charges later this year in connection with the closing or
consolidation of one of our existing branches, which has been underperforming.
Management expects to make a determination about the closing or consolidation of
such branch before the end of 2007.

NET INTEREST INCOME. Net interest income decreased by $196,000, or 10.5%,
to $1.7 million for the three months ended March 31, 2007 from $1.9 million for
the same three months in 2006. There was a 56 basis point decrease in our
interest rate spread to 1.83% for the first quarter of 2007 from 2.39% for the
first quarter of 2006.

INTEREST INCOME. Interest income increased $976,000, or 26.8%, to $4.6
million for the first quarter of 2007 from $3.6 million for the first quarter of
2006. The increase resulted from a $48.7 million, or 16.9% increase in average
interest-earning assets and a 47 basis point, or 9.3%, increase in the overall
yield on interest earning assets to 5.54% for the first quarter of 2007, from
5.07% for the first quarter of 2006. Loans increased on average $25.2 million,
or 13.5%, between the two periods, while the average

balance of investment securities increased by $17.3 million, or 40.4%, and the
average balance of mortgage-backed securities increased by $7.5 million, or
13.8%. The average balance of other interest- earning assets decreased by $1.4
million. The average yield on loans improved to 5.76% for the first quarter of
2007, from 5.57% for the first quarter of 2006. The average yield on investment
securities increased to 5.68% from 3.81% and the average yield on mortgage
backed securities increased to 4.73% from 4.41%.

INTEREST EXPENSE. Interest expense increased $1.2 million, or 65.6%, to
$3.0 million for the first quarter of 2007 from $1.8 million for the first
quarter of 2006. The increase resulted from a $51.3 million, or 19.2%, increase
in average interest-bearing liabilities and a 104 basis point increase in the
overall cost of interest-bearing liabilities to 3.71% for the first quarter of
2007 from 2.67% for the first quarter of 2006. Money market accounts increased
by 78.2%, while savings accounts increased by 13.8% and certificates of deposits
increased by 11.3%. The average balance of borrowed funds was $9.6 million
during the first quarter of 2007 as compared to $2.2 million during the first
quarter of 2006. The average cost of borrowed funds increased to 5.36% from
4.67%. The average cost of interest-bearing demand deposits, money market
deposits, savings accounts and certificates of deposit rose by 69 basis points,
97 basis points, 137 basis points and 84 basis points, respectively.

PROVISION FOR LOAN LOSSES. The allowance for loan losses is a valuation
account that reflects our estimation of the losses inherent in our loan
portfolio to the extent they are both probable and reasonable to estimate. The
allowance is established through provisions for loan losses that are charged to
income in the period they are established. We charge losses on loans against the
allowance for loan losses when we believe the collection of loan principal is
unlikely. Recoveries on loans previously charged-off are added back to the
allowance. We may also make recoveries of prior provisions for loan losses when
management deems it appropriate to reduce the size of the allowance to reflect
the current estimate of known and inherent losses in the portfolio.

In the first quarter of 2006, we took a $200,000 recovery of loan loss
provisions out of the allowance for loan losses. We made no provisions for loan
losses or recoveries of loan loss provisions during the first quarter of 2007.
As of March 31, 2007, the allowance represented 0.86% of total loans as compared
to 1.32% at March 31, 2006.

NONINTEREST INCOME. Noninterest income for the first quarter of 2007 was
$190,000 as compared to $202,000 for the first quarter of 2006. An $11,000
decrease in income from service charges and other fees and a $10,000 decrease in
other miscellaneous non-interest income were offset by a $9,000 increase in
earnings on bank-owned life insurance. Income from service charges and fees,
income from bank-owned life insurance and income from other miscellaneous
sources amounted to $99,000, $71,000 and $21,000, respectively, for the quarter
ended March 31, 2007.

NONINTEREST EXPENSE. Non-interest expense was $257,000, or 13.4%, higher
for the first quarter of 2007 as compared to the first quarter of 2006, as a
result of an $88,000 increase in compensation and employee benefits expense, an
$81,000 increase in occupancy and equipment expense, a $21,000 increase in data
processing expense and a $60,000 increase in other miscellaneous noninterest
expenses. Compensation and employee benefits expense totaled $1.2 million for
the quarter ended March 31, 2007, representing 56.8% of noninterest expense for
the quarter.

INCOME TAXES. We recorded a credit to income of $125,000 as an income tax
benefit for the first quarter of 2007 as a result of our net loss for the
quarter. Income tax expense for the first quarter of 2006 was $117,000.

SELECTED FINANCIAL AND OTHER DATA

The following financial information and other data should be read
together with the consolidated financial statements and the notes thereto
beginning on page F-1 of this document.

At December 31,
-------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
(In thousands)

Balance Sheet Data:
Assets ................................ $ 351,864 $ 308,011 $ 315,927 $ 293,414 $ 312,402
Loans receivable, net ................. 210,492 180,916 167,320 163,343 182,660
Investment securities ................. 52,797 41,315 48,451 50,361 58,222
Mortgage-backed securities ............ 59,185 54,032 61,201 40,658 23,235
Cash and cash equivalents ............. 10,618 14,031 19,760 19,448 28,729
Deposits .............................. 315,962 277,544 286,611 266,895 283,732
Short-term borrowings ................. 4,400 - - - -
Total equity .......................... 28,903 28,546 26,934 25,332 27,062

For the Year Ended December 31,
-------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
(In thousands)

Summary of Operations:
Interest and dividend income .......... $ 16,273 $ 14,221 $ 13,913 $ 14,477 $ 17,306
Interest expense ...................... 9,377 5,871 5,204 5,899 9,007
--------- --------- --------- --------- ---------
Net interest income ................... 6,896 8,350 8,709 8,578 8,299
Provisions for (recoveries of provision
for) loan losses..................... (348) (917) (13) 4,342 7,550
--------- --------- --------- --------- ---------
Net interest income after provisions
for (recoveries of provisions for)
loan losses ......................... 7,244 9,267 8,722 4,236 749
Noninterest income .................... 856 883 876 793 712
Noninterest expense ................... 7,631 7,634 7,689 7,384 6,022
--------- --------- --------- --------- ---------
Income (loss) before income tax
expense (benefit) ................... 469 2,516 1,909 (2,355) (4,561)
Income tax expense (benefit) .......... 90 893 259 (673) (1,924)
--------- --------- --------- --------- ---------
Net income (loss) ..................... $ 379 $ 1,623 $ 1,650 $ (1,682) $ (2,637)
========= ========= ========= ========= =========

At or For the Year Ended December 31,
------------------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------

Performance Ratios:
Return on average assets
(net income divided by
average total assets) ................ 0.11% 0.53% 0.54% (0.56%) (0.87%)

Return on average equity
(net income divided by
average equity) ....................... 1.33 6.04 6.43 (6.44) (8.87)

Net interest rate spread ................ 2.06 2.80 2.98 3.38 2.82

Net interest margin on average
interest-earnings assets .............. 2.25 2.94 3.08 3.33 3.02

Average interest-earning
assets to average
interest-bearing liabilities .......... 106.20 106.40 105.64 97.99 106.16

Efficiency ratio (noninterest expense
divided by the sum of net interest
income and noninterest income) ........ 98.44 82.68 80.22 78.80 66.83

Non-interest expense to average assets .. 2.30 2.49 2.52 2.45 1.98

Asset Quality Ratios:
Non-performing loans to total loans, net 1.17 1.75 0.80 1.46 0.84

Non-performing assets to total assets ... 0.80 1.14 0.58 0.99 0.51

Net loan charge-offs (recoveries of loans
charged-off) to average loans
outstanding ......................... 0.44 0.01 (0.07) 5.02 0.35

Allowance for loan losses to
total loans ........................ 0.85 1.65 2.31 2.31 4.36

Allowance for loan losses to
non-performing loans ............... 72.99 94.46 290.76 158.73 522.19

Capital Ratios:
Average equity to average assets ........ 8.71 8.85 8.48 8.65 9.75

Equity to assets at period end .......... 8.21 9.27 8.53 8.63 8.66

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

This discussion and analysis reflects Gateway Community Financial Corp.'s
consolidated financial statements and other relevant statistical data and is
intended to enhance your understanding of our financial condition and results of
operations. You should read the information in this section in conjunction with
Gateway Community Financial Corp.'s consolidated financial statements and
accompanying notes thereto beginning on page F-1 of this document, and the other
statistical data provided in this prospectus.

OVERVIEW

GENERAL. The consolidated financial condition and results of operations of
Gateway Community Financial Corp. include Gloucester County Federal Savings
Bank. Gateway Community Financial Corp. does not at the present time engage in
any activities other than serving as a holding company for Gloucester County
Federal Savings Bank.

Our primary business is attracting retail deposits from the general public
and using those deposits, together with funds generated from operations,
principal repayments on securities and loans, and borrowed funds, for our
lending and investing activities. Our loan portfolio consists of one- to
four-family residential real estate mortgages, home equity loans and lines of
credit, commercial real estate mortgages, construction loans, commercial loans,
and consumer loans, including auto loans and manufactured housing loans. At
December 31, 2006, one- to four-family residential real estate mortgages
comprised 48% of our total loans, home equity loans and lines of credit
comprised 28% of our total loans, commercial real estate mortgages comprised 7%
of our total loans, commercial loans comprised 2% of our total loans, and
consumer loans comprised 15% of our total loans. With the exception of
commercial loans and auto loans, the majority of our loans are long-term loans
with fixed interest rates. We also invest in U.S. government agency securities,
mortgage-backed securities and other investment grade securities.

Our results of operations depend mainly on our net interest income, which
is the difference between the interest income earned on our loan and investment
portfolios and interest expense paid on our deposits and borrowed funds. Net
interest income is a function of the average balances of loans and investments
versus deposits and borrowed funds outstanding in any one period and the yields
earned on those loans and investments and the cost of those deposits and
borrowed funds. During the past several years, the operating environment for
financial institutions has been challenging. Short-term interest rates, which
influence the pricing of our deposits and borrowings, have been rising in
conjunction with the 17 rate increases implemented by the Federal Reserve Board
since June 2004, while longer-term interest rates, which guide the pricing of
our loans, have been relatively constant. This has resulted in a yield curve
environment that has been flat or "inverted"; i.e. short-term interest rates
have been higher than long-term interest rates. This has had a negative effect
on our net interest spread, net interest margin and net interest income. While
the net proceeds of the stock offering will provide increased funds for lending
and investing and increased interest income in the second half of 2007, a
continuation of this flat or inverted yield curve environment will continue to
negatively impact our profitability.

Our results of operations are also significantly affected by non-interest
income and non-interest expense. Non-interest income consists primarily of
income from service fees and charges for normal banking operations. It also
includes income on bank-owned life insurance. Noninterest income is affected

by gains or losses on sales of securities, loans, real estate owned and other
assets. Non-interest expense includes compensation and employee benefits
expense, occupancy and equipment expense and other general and administrative
expenses such as data processing, professional fees and marketing/advertising
costs. The largest component of non-interest expense is compensation and
employee benefits, which at $4.4 million for 2006 represented 58% of total
noninterest expense for the year.

Following the completion of the stock offering, our non-interest expense
will increase as a result of the increased costs associated with managing a
public company, increased compensation expenses associated with the purchase of
shares of common stock by our employee stock ownership plan, and the adoption of
one or more stock-based incentive plans. See Management - Compensation - Future
Stock Benefit Plans at page __.

ASSET QUALITY PROBLEMS AND PROVISIONS FOR LOAN LOSSES. Our results of
operations are also affected by provisions for loan losses. Gloucester County
Federal Savings Bank's allowance for loans losses is established though
provisions for loan losses that are charged against the Bank's income during the
period the provision is made. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and amounts recovered on loans previously
charged against the allowance are credited back to the allowance. We may also
make a recovery of prior provisions for loan losses when management deems it
appropriate to reduce the size of the allowance to reflect the current estimate
of known and inherent losses in the portfolio.

During the latter part of 2002, we first became aware of deficiencies
within our commercial real estate mortgage and commercial loan portfolios, which
in aggregate represented approximately 34% of our total loans at the time.
Management began to internally conduct comprehensive credit reviews of our loan
portfolio, and we hired an outside firm to conduct a review of all commercial
and commercial real estate credits. That review resulted in the designation of
$23.1 million of commercial and commercial real estates loans as classified
assets, which made all classified assets at December 31, 2002 reach a total of
$29.6 million.

The increase in classified assets caused us to make a material provision to
the allowance for loan losses for 2002; the provision that year was $7.5
million, which brought the allowance for loan losses as of December 31, 2002 to
$8.3 million, representing 4.36% of total loans at that date. Charge-offs during
2002 were $701,000. During the year ended December 31, 2003, we took charge-offs
against the allowance for $8.8 million of loans we deemed uncollectible and made
another large provision, amounting to $4.3 million, to the allowance. The
allowance at December 31, 2003 totaled $3.9 million, representing 2.31% of total
loans at that date.

The level of our allowance for loan losses has primarily been driven by the
level of classified assets over the past five years. Most of the classified
assets now consist of long-term workout arrangements with borrowers. Portfolio
risk has also declined as the amount of higher risk loans has decreased over the
past five years and recent loan growth has been centered in residential mortgage
loans. In 2004, 2005 and 2006, we took recoveries of loan loss provisions out of
the allowance for loan losses as our level of classified assets decreased and
the outstanding balance of commercial and commercial real estate loans fell.
Classified assets at year end over the last five years have steadily dropped,
from $29.6 million at December 31, 2002 to $22.1 million at December 31, 2003,
$16.7 million at December 31, 2004, $8.5 million at December 31, 2005 and $6.2
million at December 31, 2006. Commercial and commercial real estate loans

as a percentage of total loans decline from 34% of total loans at December 31,
2002, to 23% at December 31, 2003, 17% at December 31, 2004, 11% at December 31,
2005 and 9% at December 31, 2006. This reduction in classified loans and
improved risk profile of the loan portfolio was the primary reason that we
determined it appropriate to take recoveries of loan loss provisions out of the
allowance for loan losses in the amount of $13,000 in 2004, $917,000 in 2005 and
$348,000 in 2006. The recovery of $917,000 of loan loss provisions from the
allowance in 2005 also reflected the low level of charge-offs for that year.
Charge-offs for 2005 were $77,000. We ended 2005 with an allowance for loan
losses of $3.0 million, representing 1.65% of total loans at that date.
Charge-offs were $988,000, and the allowance for loan losses stood at $1.8
million at December 31, 2006, representing 0.85% of total loans at that date.

The allowance currently reflects management's best estimate of the known
and inherent losses in the portfolio that are both probable and reasonable to
estimate and management does not at this time anticipate further recoveries of
loan loss provisions out of the allowance for loan losses. Of the $23.1 million
of commercial and commercial real estate loans that were designated as
classified assets when the deficiencies in the portfolio were uncovered in 2002,
$12.6 million was subsequently paid off, while $10.5 million was charged off.

When the magnitude of the underwriting and credit administration
deficiencies was fully uncovered , we notified our primary regulator, the Office
of Thrift Supervision, of the problems , and as a result of the serious
deficiencies in the portfolio, the Office of Thrift Supervision barred us at
that time from any new commercial lending until all corrective action items had
been satisfactorily addressed and classified asset levels declined to an
acceptable level. Furthermore, we were required to develop a detailed written
exit strategy for all classified asset balances greater than $250,000. We also
made changes in our lending personnel, with one loan officer leaving the bank in
early 2003 and our current Chief Lending Officer, Bruce Haines, joining the Bank
in January 2003. The restriction on commercial lending was not lifted by the
Office of Thrift Supervision until 2005.

The size of the commercial real estate and commercial loan portfolios as a
percentage of total loans decreased as we worked through problems in those
portfolios. At December 31, 2006, our commercial real estate mortgage and
commercial loan portfolios in aggregate amounted to $19.0 million, representing
approximately 9% of our total loans, as compared to $67.1 million or 34% of our
total loans at December 31, 2002. We intend to significantly increase the size
of these portfolios and have hired two commercial lenders, one in March 2007 and
one in May 2007.

EARNINGS. Our earnings during the past two years have been negatively
impacted by the difficult interest rate environment and positively impacted by
recoveries of loan losses. For 2005, our net income of $1.6 million included a
$917,000 (pre-tax) recovery of loan losses, which more than offset a decrease in
net interest income of $359,000. Net income for 2006 fell sharply by $1.2
million to $379,000 and consisted primarily of a $348,000 (pre-tax) recovery of
loan losses. The lower net income for 2006 was primarily due to a $1.5 million
decline in net interest income from $8.4 million for 2005 to $6.9 million for
2006, a decrease of 17.4%. Interest expense increased by $3.5 million, or 59.7%,
to $9.4 million while interest income increased by $2.1 million, or 14.4%, to
$16.3 million. Noninterest income and noninterest expense did not change
significantly between 2005 and 2006.

We reported a net loss of $200,000 for the quarter ended March 31, 2007 as
our net interest income continued to decline as a result of continued margin
compression, and failed to cover our operating expenses for the quarter. If the
current interest rate environment persists, we expect that we may report a loss
for the second quarter of 2007 as well and we may not be able to achieve
profitability from our core operations in the near term.

Additionally, we could incur a charge later this year if management and the
Board determine to close one of our offices that is underperforming. Since
opening in 2003, it continues to struggle to grow deposits to a point where the
location would be profitable.

CRITICAL ACCOUNTING POLICIES

Our accounting policies are integral to understanding the results reported
and our significant policies are described in Note 1 to our consolidated
financial statements beginning on page F-1 of this document. In preparing the
consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
dates of the consolidated statements of financial condition and revenues and
expenses for the periods then ended. Actual results could differ significantly
from those estimates. A material estimate that is particularly susceptible to
significant change relates to the determination of the allowance for loan
losses.

INCOME TAXES

The Company accounts for income taxes under the asset/liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established against deferred tax assets
when, in the judgment of management, it is more likely than not that such
deferred tax assets will not become available. Because the judgment about the
level of future taxable income is dependent to a great extent on matters that
may, at least in part, be beyond the Company's control, it is at least
reasonably possible that management's judgment about the need for a valuation
allowance for deferred taxes could change in the near term.

OTHER-THAN-TEMPORARY INVESTMENT SECURITY IMPAIRMENT

Securities are evaluated periodically to determine whether a decline in
their value is other-than- temporary. Management utilizes criteria such as the
magnitude and duration of the decline, in addition to the reasons underlying the
decline, to determine whether the loss in value is other-than-temporary. The
term "other than-temporary" is not intended to indicate that the decline is
permanent, but indicates that the prospect for a near-term recovery of value is
not necessarily favorable, or that there is a lack of evidence to support a
realizable value equal to or greater than the carrying value of the investment.
Once a decline in value is determined to be other-than-temporary, the value of
the security is reduced and a corresponding charge to earnings is recognized.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained by management at a level which
represents their evaluation of known and inherent losses in the loan portfolio
at the consolidated balance sheet date that are both probable and reasonable to
estimate. Management's periodic evaluation of the adequacy of the allowance is
based on the Bank's past loan loss experience, known and inherent losses in the
portfolio, adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates that may
be susceptible to significant change, including the amounts and timing of future
cash flows expected to be received on impaired loans.

The allowance consists of specific and general components. The specific
component relates to loans that are classified as either doubtful, substandard,
or special mention. For such loans that are also

classified as impaired, an allowance is established when the discounted cash
flows (or collateral value or observable market price) of the impaired loan is
lower than the carrying value of that loan. The general component covers
nonclassified loans and is based on historical loss experience adjusted for
qualitative factors.

Although specific and general loan loss allowances are established in
accordance with management's best estimate, actual losses are dependent upon
future events and, as such, further provisions for loan losses may be necessary
in order to increase the level of the allowance for loan losses. For example,
our evaluation of the allowance includes consideration of current economic
conditions, and a change in economic conditions could reduce the ability of our
borrowers to make timely repayments of their loans. This could result in
increased delinquencies and increased non-performing loans, and thus a need to
make increased provisions to the allowance for loan losses, which would be a
charge to income during the period the provision is made, resulting in a
reduction to our earnings. A change in economic conditions could also adversely
affect the value of the properties collateralizing our real estate loans,
resulting in increased charge-offs against the allowance and reduced recoveries
of loans previously charged-off, and thus a need to make increased provisions to
the allowance for loan losses. Furthermore, a change in the composition of our
loan portfolio or growth of our loan portfolio could result in the need for
additional provisions.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2006 AND DECEMBER 31, 2005

ASSETS. Total assets increased by $43.9 million, or 14.2%, to $351.9
million at December 31, 2006 from $308.0 million at December 31, 2005. This
increase was primarily due to increases in investment securities available for
sale and loans receivable.

LOANS. Net loans receivable increased $29.6 million, or 16.4%, to $210.5
million at December 31, 2006 from $180.9 million at December 31, 2005. Loan
growth in residential mortgages and home equity loans and lines of credit
resulted from growth in our market area and our increased marketing efforts. The
increases in those loan categories offset a decrease in auto loans, which have
decreased over the last several years following our decision to significantly
reduce indirect auto lending.

One- to four-family residential mortgages increased by 38.6% to $102.8
million at December 31, 2006 from $74.1 million at December 31, 2005. Home
equity loans and lines of credit increased by 19.5% to $59.3 million from $49.7
million. Commercial real estate loans and commercial loans totaled $14.3 million
and $4.6 million, respectively, at December 31, 2006, representing 6.8% and 2.1%
of our total loans at that date. Commercial real estate loans and commercial
loans as a percentage of total loans have decreased in recent years as we worked
through problem loans and charged off a significant amount of such loans. We
anticipate that this segment of our loan portfolio will, however, rebound as we
seek to increase commercial real estate loans and commercial loans. We have
recently hired two commercial lenders as part of our plan to diversify our loan
portfolio and improve our interest rate spread and margins. We also anticipate
growing the consumer loan portfolio by focusing on manufactured housing loans
and aircraft loans.

DEPOSITS. Deposits increased by $38.4 million, or 13.8% to $316.0 million
at December 31, 2006, from $277.5 million at December 31, 2005. Certificates of
deposit increased by $18.5 million or 12.9% to $162.1 million during the year
and accounted for approximately 51% of our total deposits at both year- ends.
Jumbo certificates of deposit (those with a minimum balance of $100,000)
comprised 33.9% of all certificates of deposit as of December 31, 2006.
Certificates of deposit as of December 31, 2006 that were scheduled to mature
during 2007 amounted to $113.5 million. Deposits increased as a result of the
offering

of competitive rates and advertising. The increased deposits were used to fund
loan growth and the purchase of securities during the year. The Bank does not
currently utilize brokered deposits.

SECURITIES. Securities (including investment securities as well as
mortgage- backed securities) increased $16.6 million, or 17.4% to $112.0 million
at December 31, 2006, from $95.3 million at December 31, 2005. This increase was
due primarily to our investment of funds from new deposits and borrowings in
U.S. government agency securities and mortgage-backed securities.

BANK-OWNED LIFE INSURANCE. We have purchased insurance on the lives of a
group of our key employees. The policies were purchased to help offset the
increase in the costs of various retirement benefits. The cash surrender value
of these policies is included as an asset on our balance sheet, and any increase
in the cash surrender value is recorded as noninterest income. In the event of
the death of an insured individual under these policies, we would receive a
death benefit, which would be recorded as noninterest income. Bank-owned life
insurance increased from $7.2 million at December 31, 2005 to $7.5 million at
December 31, 2006, reflecting an increase in the cash surrender value of the
policies.

BORROWINGS. Funds borrowed from the Federal Home Loan Bank of New York
totaled $4.4 million at December 31, 2006, compared to no borrowings outstanding
at December 31, 2005. The increase in borrowed funds, combined with the increase
in deposits, was used to fund growth of the loan portfolio and the purchase of
investment securities. Loan growth in residential mortgages and home equity
loans and lines of credit resulted from growth in our market area and our
increased marketing efforts.

EQUITY. Total equity was $28.9 million at December 31, 2006 and $28.5
million at December 31, 2005. The increase reflected net income of $379,000 for
the year, offset by a $22,000 increase in accumulated other comprehensive losses
resulting from higher unrealized losses on investment securities available for
sale at December 31, 2006.

COMPARISON OF OPERATING RESULTS FOR 2006, 2005 AND 2004

GENERAL. Net income for 2006 decreased by $1.2 million, or 76%, to $379,000
for 2006 compared to $1.6 million for 2005. Net income was significantly lower
for 2006 versus 2005 primarily due to a 17.4% decline in net interest income and
a smaller recovery of loan losses, which decreased from $917,000 in 2005 to
$348,000 in 2006. Net income for 2005 was slightly lower than 2004 net income of
$1.7 million, as an increase in recoveries of loan losses of $904,000 in 2005
partially offset a decrease in net interest income of $359,000 and an increase
in income taxes of $634,000.

NET INTEREST INCOME. Net interest income decreased to $6.9 million for 2006
from $8.4 million for 2005 and $8.7 million for 2004. The decrease was primarily
attributable to a decrease in our interest rate spread to 2.06% for 2006 from
2.80% for 2005 and 2.98% for 2004. Our interest rate spread continues to trend
downward. Our interest rate spread for the first quarter of 2007 was 1.83%. The
decrease in the net interest spread was due to average yields on
interest-earning assets increasing at a slower pace than the cost of
interest-bearing liabilities. During 2005 and 2006, the Federal Reserve Board of
Governors continued to increase its target for the federal funds rate, resulting
in increases in short-term interest rates while longer-term rates remained
relatively stable.

The tables on pages _____ set forth the components of our net interest
income, yields on interest-earning assets and costs of interest-bearing
liabilities, and the effect on net interest income attributable to changes in
volumes and rates.

INTEREST INCOME. Interest income increased $2.1 million, or 14.4%, to $16.3
million for 2006 from $14.2 million for 2005. The increase resulted from a $25.1
million increase in average interest-earning assets which had the effect of
increasing interest income by $1.8 million. In addition, there was a 28 basis
point increase in the overall yield on interest earning assets to 5.27% for 2006
from 4.99% for 2005, which increased interest income by $243,000. Loans
increased on average $28.6 million from 2005 to 2006, along with an increase in
the average balance of investment securities of $7.5 million and a decrease in
mortgage-backed securities of $6.0 million. Other interest earning assets
decreased by $5.1 million. The average yield on loans decreased to 5.74% for
2006 from 5.81% for 2005. The average yields on investment securities increased
to 4.54% from 3.79% and the average yield on mortgage-backed securities
increased to 4.34% from 3.93% for 2006 and 2005, respectively.

Interest income for 2005 was $308,000 higher than 2004 interest income of
$13.9 million. The increase was primarily attributable to a $1.9 million
increase in average interest-earning assets, which increased interest income by
$320,000. Although the average yield on total interest-earning assets increased
from 4.92% to 4.99%, decreases in the average yields on loans and investment
securities resulted in a decrease in interest income of $13,000.

INTEREST EXPENSE. Interest expense increased $3.5 million, or 59.7%, to
$9.4 million for 2006 from $5.9 million for 2005. The increase resulted from a
$24.1 million increase in average interest-bearing liabilities, which increased
interest expense by $1.3 million, and a 102 basis point increase in the overall
cost of interest-bearing liabilities to 3.21% for 2006 from 2.19% for 2005,
which increased interest expense by $2.2 million. The average balances of demand
and savings accounts decreased in the aggregate by $13.8 million, while money
market accounts increased by $12.1 million and certificates of deposit increased
by $13.1 million from 2005 to 2006, as depositors moved funds into
higher-yielding accounts in the higher interest rate environment. The cost of
certificates of deposit increased to 4.17% for 2006 from 3.24% for 2005 and the
average rate paid on money market accounts increased from 1.83% to 3.83%. The
average balance of borrowed funds increased $12.7 million from 2005 to 2006. The
cost of borrowed funds increased to 5.36% from 4.06%. The additional deposits
and borrowings were used to fund increases in loans and to purchase investment
securities.

Interest expense for 2005 was $667,000 higher than 2004 interest expense of
$5.2 million. The increase was primarily attributable to an increase in the
average cost of total interest- bearing liabilities from 1.94% to 2.19%, which
increased interest expense by $507,000. Average rates paid on all deposit
categories other than savings accounts increased during 2005, reflecting the
increasing interest rate environment. As depositors shifted funds into
higher-yielding accounts, the average balances of money market and savings
accounts decreased in the aggregate by $8.2 million and the average balance of
certificates of deposit increased by $7.8 million, which increased interest
expense by $161,000.

PROVISION FOR LOAN LOSSES. The allowance for loan losses is a valuation
account that reflects our estimation of the losses known and inherent in our
loan portfolio to the extent they are both probable and reasonable to estimate.
The allowance is established through provisions for loan losses that are charged
to income in the period they are established. We charge losses on loans against
the allowance for loan losses when we believe the collection of loan principal
is unlikely. Recoveries on loans previously charged-off are added back to the
allowance. We may also make recoveries of prior provisions charged against
income when management deems it appropriate to reduce the size of the allowance
to reflect the current estimate of future losses.

In each of the last three years, we took recoveries from the allowance for
loan losses after having made provisions to the allowance of $4.3 million in
2003 and $7.6 million in 2002. As of December 31, 2006, our classified loans
amounted to $6.2 million as compared to $16.7 million at December 31, 2004. This
reduction in classified loans was the primary reason that we determined it
appropriate to take recoveries of $13,000, $917,000 and $348,000 in 2004, 2005,
and 2006, respectively. The amount recovered from the allowance each year is
reflected in the net income for that year. The allowance currently reflects
management's best estimate of the known and inherent losses in the portfolio
that are both probable and reasonable to estimate and management does not at
this time anticipate further recoveries of loan loss provisions out of the
allowance for loan losses.

NONINTEREST INCOME. Noninterest income decreased by $27,000, or 3.1%, to
$856,000 for 2006 from $883,000 for 2005. Service charges and other fees
increased by $71,000, resulting from increased volume, and earnings on
bank-owned life insurance increased $11,000. These increases were partially
offset by losses on the sale of securities of $30,000 and a decrease in other
miscellaneous non-interest income of $79,000.

Noninterest income for 2005 was $7,000 higher than noninterest income for
2004. Increases in income for 2005 from bank-owned life insurance and other
miscellaneous non-interest income of $35,000 and $11,000, respectively, were
offset by a $15,000 decrease in income from service charges and other fees and a
gain of $23,000 on the sale of securities in 2004 that was not present in 2005.

Income on bank-owned life insurance increased in each of the last three
years represented approximately 24%, 28% and 30% of total noninterest income in
2004, 2005 and 2006, respectively. Our investment in bank-owned life insurance
totaled $7.5 million at December 31, 2006 versus $7.2 million a year earlier.

NONINTEREST EXPENSE. The primary components of noninterest expense are
advertising, pring and office supplies, insurance premiums, postage and various
loan expenses. Noninterest expense was $7.6 million in both 2006 and 2005. An
increase in compensation and employee benefits expense of $91,000 and an
increase in data processing expense of $22,000 were offset by a decrease in
occupancy and equipment expense of $46,000 and a decrease in federal deposit
insurance premiums of $46,000. Noninterest expense for 2004 was $7.7 million.
Compensation and benefits expense for 2004 was $71,000 lower than in 2005 but
professional fees were $83,000 higher and other miscellaneous noninterest
expenses were $67,000 higher. Professional fees and other expenses were higher
in 2004 than in 2005 mainly as a result of the high level of problem loans we
had in 2004 as compared to 2005.

The largest component of non-interest expense is compensation and employee
benefits, which at $4.4 million for 2006 represented 58% of total noninterest
expense for the year. After the stock offering, additional annual employee
compensation and benefit expenses stemming from the shares granted to employees,
officers and directors under new benefit plans will increase this category of
expense. We will recognize expense for our employee stock ownership plan when
shares are committed to be released to

participants' accounts and will recognize expenses for restricted stock awards
over the vesting period of awards made to recipients. In addition, we will be
required to recognize compensation expense related to stock options outstanding
based upon the fair value of such awards at the date of grant over the period
that such awards are earned. Additions to our lending staff are also expected to
result in increases in compensation expense.

We also expect that noninterest expense will be higher going forward as
a result of the accounting, legal and various other additional noninterest
expenses associated with operating as a public company, particularly as a result
of the requirements of the Sarbanes-Oxley Act of 2002.

INCOME TAXES. Income tax expense for 2006 was $90,000 as compared to
$893,000 for 2005 and $259,000 for 2004. The reduction for 2006 reflects the
much lower pre-tax income for that year as well as a reduction in the effective
tax rate. The decrease in the effective tax rate was due to an increase in
income from tax-exempt securities. The increase in income tax expense for 2005
as compared to 2004 reflects higher pre-tax income for 2005 compared to 2004 as
well as a $273,000 valuation allowance in 2004 that had the effect of reducing
taxes for that year.

AVERAGE BALANCE SHEET. The following table sets forth certain information
relating to Gateway Community Financial Corp. at and for the periods indicated.
The average yields and costs are derived by dividing income or expense by the
average daily balance of assets or liabilities, respectively, for the periods
presented.

At December 31, For the Year Ended December 31,
------------------ -------------------------------------------------------------------------------
2006 2006 2005 2004
------------------ -------------------------------------------------------------------------------
Average Average Average Average
Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ----

Interest-earning assets: (Dollars in thousands)
Loans receivable(1).......... $212,305 5.81% $199,752 $11,474 5.74% $171,130 $ 9,940 5.81% $165,622 $ 9,800 5.92%
Mortgage-backed securities... 59,185 4.85% 55,642 2,416 4.34% 61,596 2,423 3.93% 56,933 2,108 3.70%
Investment securities........ 52,797 4.88% 51,845 2,285 4.54% 44,323 1,660 3.79% 48,024 1,862 3.90%
Other interest-earning
assets..................... 1,407 5.78% 3,007 98 3.26% 8,098 197 2.43% 12,662 143 1.13%
-------- -------- ------- -------- -------- -------- -------
Total interest-earning
assets.................... 326,067 4.60% 310,246 16,273 5.27% 285,147 14,220 4.99% 283,241 13,913 4.92%
------- -------- -------
Noninterest-earning assets.... 25,797 23,643 25,039 26,202
Allowance for loan losses..... (1,813) (2,442) (3,713) (3,947)
-------- -------- -------- --------
Total assets................ $351,864 $331,447 $306,473 $305,496
======== ======== ======== ========
Interest-bearing liabilities:
Interest bearing demand...... $ 35,926 1.49% $ 35,901 373 1.04% $ 36,610 221 0.60% $ 36,491 194 0.53%
Money market deposits........ 44,637 4.00% 34,959 1,339 3.83% 22,877 419 1.83% 25,837 297 1.15%
Savings accounts............. 63,470 2.10% 55,250 590 1.07% 68,301 683 1.00% 73,552 737 1.00%
Certificates of deposit...... 162,107 4.60% 153,155 6,386 4.17% 140,021 4,540 3.24% 132,238 3,975 3.01%
Federal Home Loan Bank
advances.................. 4,400 5.33% 12,859 689 5.36% 197 8 4.06% - - -%
-------- ------- ------- -------- -------- --------- --------
Total interest-bearing
liabilities............... 310,830 3.65% 292,124 9,377 3.21% 268,006 5,871 2.19% 268,118 5,203 1.94%
------- -------- --------
Noninterest-bearing
liabilities................. 12,131 10,721 11,612 11,730
-------- -------- -------- --------
Total liabilities............ 322,961 302,845 279,618 279,848
Retained earnings............. 28,903 28,602 26,855 25,648
-------- -------- -------- --------
Total liabilities and
retained earnings.......... $351,864 $331,447 $306,473 $305,496
======== ======== ======== ========
Net interest income........... $6,896 $8,349 $8,710
====== ====== ======
Interest rate spread(2)....... 2.06% 2.80% 2.98%
====== ====== ======
Net yield on interest-
earning assets(3)........... 2.25% 2.94% 3.08%
====== ====== ======
Ratio of average
interest-earning assets
to average interest-
bearing liabilities......... 106.20% 106.40% 105.64%
====== ====== ======

- -----------------
(1) Non-accruing loans have been included in loans receivable, and the effect
of such inclusion was not material.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.

Rate/Volume Analysis. The following table reflects the sensitivity of
Gateway Community Financial Corp.'s interest income and interest expense to
changes in volume and in interest rates during the periods indicated. Each
category reflects the: (1) changes in volume (changes in volume multiplied by
old rate); (2) changes in rate (changes in rate multiplied by old volume); and
(3) net change. The net change attributable to the combined impact of volume and
rate has been allocated proportionally to the absolute dollar amounts of change
in each.

Year Ended December 31, Year Ended December 31,
--------------------------- ---------------------------
2006 vs. 2005 2005 vs. 2004
--------------------------- ---------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to

Volume Rate Net Volume Rate Net
------ ------ ----- ------ ------ ----

Interest and dividend income:
Loans receivable ................... $ 1,643 $ (109) $ 1,534 $ 313 $ (173) $ 140
Mortgage-backed securities ......... 95 (102) (7) 179 136 315
Investment securities .............. 288 337 625 (147) (55) (202)
Other interest-earning assets ...... (216) 117 (99) (25) 79 54
------- ------- ------- ------- ------- -------
Total interest-earning assets ..... $ 1,810 $ 243 $ 2,053 $ 320 $ (13) $ 307
======= ======= ======= ======= ======= =======

Interest expense:
Interest-bearing demands ........... $ (4) $ 156 $ 152 $ 1 $ 26 $ 27
Money market deposits .............. 300 620 920 (29) 151 122
Savings accounts ................... (144) 51 (93) (53) (1) (54)
Certificates of deposit ............ 456 1,390 1,846 242 323 565
Advances from Federal Home Loan Bank 678 3 681 -- 8 8
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities $ 1,286 $ 2,220 $ 3,506 $ 161 $ 507 $ 668
======= ======= ======= ======= ======= =======

Change in net interest income ....... $ 524 $(1,977) $(1,453) $ 159 $ (520) $ (361)
======= ======= ======= ======= ======= =======

MANAGEMENT OF INTEREST RATE RISK AND MARKET RISK

QUALITATIVE ANALYSIS. Because the majority of our assets and
liabilities are sensitive to changes in interest rates, a significant form of
market risk for us is interest rate risk, or changes in interest rates.

Several years ago market interest rates were at historically low
levels. However, beginning in June 2004, the U.S. Federal Reserve steadily
increased its target federal funds rate, raising it significantly. While the
federal funds rate and other short-term market interest rates, which we use as a
guide to our deposit pricing, have increased, intermediate- and long-term market
interest rates, which we use as a guide to our loan pricing, have not increased
proportionately. This has led to a "flattening" of the market yield curve, which
has even "inverted" recently as short-term rates have exceeded long-term rates
over an

intermediate maturity horizon. The relatively flat yield curve has hurt our net
interest rate spread and net interest margin because the interest rates we pay
on our deposits have repriced upwards faster than the interest rates that we
earn on our loans and investments.

QUANTITATIVE ANALYSIS. The following tables present Gloucester County
Federal Savings Bank's net portfolio value as of December 31, 2006. The net
portfolio values shown in these tables were calculated by the Office of Thrift
Supervision, based on information provided by Gloucester County Federal Savings
Bank.

At December 31, 2006
-------------------------------------------------------------------------
Net Portfolio Value
Net Portfolio Value as % of Present Value of Assets
------------------------- --------------------------------------------
Changes in Net Portfolio Basis Point
Rates(1) $ Amount $ Change % Change Value Ratio Change
-------- -------- -------- -------- ----------- ------
(Dollars in thousands)

+300 bp 17,802 -16,958 -49% 5.31% -442 bp
+200 bp 23,938 -10,822 -31% 6.98% -275 bp
+100 bp 29,586 -5,174 -15% 8.45% -128 bp
0 bp 34,760 9.73%
- -100 bp 37,421 2,661 +8% 10.34% +61 bp
- -200 bp 37,542 2,782 +8% 10.31% +58 bp

- ----------
(1) The -300bp scenario is not shown due to the relatively low prevailing
interest rate environment.

Future interest rates or their effect on net portfolio value or net
interest income are not predictable. Computations of prospective effects of
hypothetical interest rate changes are based on numerous assumptions, including
relative levels of market interest rates, prepayments, and deposit run-offs, and
should not be relied upon as indicative of actual results. Certain shortcomings
are inherent in this type of computation. Although certain assets and
liabilities may have similar maturity or periods of repricing, they may react at
different times and in different degrees to changes in the market interest
rates. The interest rate on certain types of assets and liabilities, such as
demand deposits and savings accounts, may fluctuate in advance of changes in
market interest rates, while rates on other types of assets and liabilities may
lag behind changes in market interest rates. Certain assets, such as adjustable
rate mortgages, generally have features which limit changes in interest rates on
a short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in making the calculations set forth above.
Additionally, an increased credit risk may result as the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.

Notwithstanding the discussion above, the quantitative interest rate
analysis presented above indicates that a rapid increase in interest rates would
adversely affect our net portfolio value and earnings.

LIQUIDITY, COMMITMENTS AND CAPITAL RESOURCES

The Bank must be capable of meeting its customer obligations at all times.
Potential liquidity demands include funding loan commitments, cash withdrawals
from deposit accounts and other funding needs as they present themselves.
Accordingly, liquidity is measured by our ability to have sufficient cash
reserves on hand, at a reasonable cost and/or with minimum losses.

The Asset and Liability Management Committee of the Board of Directors sets
limits and controls to guide senior management's managing of our overall
liquidity position and risk. This Committee, along with senior management, is
responsible for ensuring that our liquidity needs are being met on both a daily
and long term basis.

Our approach to managing day-to-day liquidity is measured through our daily
calculation of investable funds and/or borrowing needs to ensure adequate
liquidity. In addition, we constantly evaluate our short-term and long-term
liquidity risk and strategy based on current market conditions, outside
investment and/or borrowing opportunities, short and long-term economic trends,
and anticipated short and long-term liquidity requirements. The Bank's loan and
deposit rates may be adjusted as another means of managing short and long-term
liquidity needs. We do not at present participate in derivatives or other types
of hedging instruments to meet liquidity demands .

The following table discloses our contractual obligations as of December
31, 2006. Payment amounts represent the principal amounts for certificates of
deposit and short-term borrowings. The Bank presently conducts business from
five offices plus an administrative building, all of which are owned by the
Bank. Thus, no lease obligations are shown in the following table.

Less Than After
Total 1 Year 1-3 Years 4-5 Years 5 Years
------- -------- --------- --------- --------
(In thousands)

Certificates of deposit.......... $162,107 $113,516 $23,033 $18,128 $7,430
Short-term borrowings............ 4,400 4,400 - - -
Director retirement plan(1)...... 410 54 108 108 140
-------- -------- ------- ------- ------
Total........................ $166,917 $117,970 $23,141 $18,236 $7,570
======== ======== ======= ======= ======

-------------------
(1) The Bank maintains a retirement plan for its directors (the
Director Fee Continuation Agreement) under which each eligible director
will receive benefits following retirement. This plan also has a
pre-retirement death benefit. More information about this plan can be
found under Director Compensation in the Management section of this
prospectus.

The following table discloses our commitments as of December 31, 2006,
all of which represent amounts committed to customers.

Total
Amounts Less Than Over
Committed 1 Year 1-3 Years 4-5 Years 5 Years
--------- -------- --------- --------- --------
(In thousands)

Lines of credit......................... $4,030 $ 134 $1,278 $2,618 $ -
Construction loans in process........... 223 223 - - -
Other commitments to extend credit...... 2,758 2,758 - - -
Standby letters of credit............... 1,206 1,206 - - -
------ ------ ------ ------ -------
Total............................... $8,217 $4,322 $1,278 $2,618 $ -
====== ====== ====== ====== =======

FIXED ASSETS. At December 31, 2006, our fixed assets included two
projects within in the fixed asset suspense account: expansion of our Pitman
branch office and new software. The total cost of the Pitman expansion is
anticipated to be between $250,000 and $300,000. As of December 31, 2006, the
total outstanding for this project was approximately $27,000. The software
installation project is expected to be completed in May 2007 and will total
$37,000. As of December 31, 2006, the total outstanding for this project was
approximately$36,400. These fixed asset items will not have a significant impact
on our business operations.

REGULATORY CAPITAL COMPLIANCE. Consistent with its goals to operate a sound
and profitable financial organization, the Bank actively seeks to maintain its
status as a well-capitalized institution in accordance with regulatory
standards. As of December 31, 2006, the Bank exceeded all applicable regulatory
capital requirements and was well-capitalized. See Note 15 to our consolidated
financial statements beginning at page F-1 for more information about the Bank's
regulatory capital compliance.

OFF-BALANCE SHEET ARRANGEMENTS

We are a party to financial instruments with off-balance-sheet risk in
the normal course of our business of investing in loans and securities as well
as in the normal course of maintaining and improving Gloucester County Federal
Savings Bank's facilities. These financial instruments include significant
purchase commitments, such as commitments related to capital expenditure plans
and commitments to purchase investment securities or mortgage-backed securities,
and commitments to extend credit to meet the financing needs of our customers.
At December 31, 2006, we had no significant off-balance sheet commitments other
than commitments to extend credit totaling $8.2 million, as shown in the table
above.

Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Our exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit is represented by the contractual amount of those instruments. We
use the same credit policies in making commitments and conditional obligations
as we do for on-balance-sheet instruments. Since a number of commitments
typically expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. For additional information
regarding our outstanding lending commitments at December 31, 2006, see Note 14
our consolidated financial statements beginning on page F-1.

IMPACT OF INFLATION

The financial statements included in this document have been prepared
in accordance with accounting principles generally accepted in the United States
of America. These principles require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the
effects of general levels of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services, since such prices are affected by inflation. In a period
of rapidly rising interest rates, the liquidity and maturities of our assets and
liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation on earnings, as distinct from levels
of interest rates, is in the area of noninterest expense. Expense items such as
employee compensation, employee benefits and occupancy and equipment costs may
be subject to increases as a result of inflation. An additional effect of
inflation is the possible increase in the dollar value of the collateral
securing loans that we have made. We are unable to determine the extent, if any,
to which properties securing our loans have appreciated in dollar value due to
inflation.

RECENT ACCOUNTING PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("FAS") No. 123R, Share-Based
Payment, which replaces FAS No. 123, Accounting for Stock-Based Compensation and
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. This
statement requires that all share-based payments to employees, including grants
of employee stock options, be recognized as compensation costs in the financial
statements based on their fair values. The impact of the adoption of this
standard will be dependent on the nature and extent of stock- based compensation
granted in future periods. See Pro Forma Data on page __ for an illustration of
the application of this standard.

In February 2006, the FASB issued FAS No. 155, Accounting for Certain
Hybrid Instruments, an amendment of FASB Statements No. 133 and 140. FAS No. 155
allows financial instruments that have embedded derivatives to be accounted for
as a whole (eliminating the need to bifurcate the derivative from its host) if
the holder elects to account for the whole instrument on a fair value basis.
This statement is effective for all financial instruments acquired or issued
after the beginning of an entity's first fiscal year that begins after September
15, 2006. The adoption of this standard is not expected to have a material
effect on our results of operations or financial position.

In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of
Financial Assets. This statement, which is an amendment to FAS No. 140, will
simplify the accounting for servicing assets and liabilities, such as those
common with mortgage securitization activities. Specifically, FAS No. 156
addresses the recognition and measurement of separately recognized servicing
assets and liabilities and provides an approach to simplify efforts to obtain
hedge-like (offset) accounting. FAS No. 156 also clarifies when an obligation to
service financial assets should be separately recognized as a servicing asset or
a servicing liability; requires that a separately recognized servicing asset or
servicing liability be initially measured at fair value, if practicable; and
permits an entity with a separately recognized servicing asset or servicing
liability to choose either of the amortization or fair value methods for
subsequent measurement. The provisions of FAS No. 156 are effective as of the
beginning of the first fiscal year that begins after September 15, 2006. The
adoption of this standard did not have a material effect on our results of
operations or financial position.

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements,
which provides enhanced guidance for using fair value to measure assets and
liabilities. The standard applies whenever other standards require or permit
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair value in any new circumstances. FAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Early adoption is permitted. The
adoption of this standard is not expected to have a material effect on our
results of operations or financial position.

In September 2006, the FASB issued FAS No. 158, Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132(R). FAS No. 158 requires that a company
recognize the overfunded or underfunded status of its defined benefit post
retirement plans (other than multiemployer plans) as an asset or liability in
its statement of financial position and that it recognize changes in the funded
status in the year in which the changes occur through other comprehensive
income. FAS No. 158 also requires the measurement of defined benefit plan assets
and obligations as of the fiscal year-end, in addition to footnote disclosures.
On December 31, 2006, we adopted FAS No. 158, except for the measurement
provisions, which are effective

for fiscal years ending after December 15, 2008. The adoption of this standard
is not expected to have a material effect on our results of operations or
financial position.

In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"),
Accounting for Uncertainty in Income Taxes. FIN 48 is an interpretation of FAS
No. 109, Accounting for Income Taxes, and it seeks to reduce the diversity in
practice associated with certain aspects of measurement and recognition in
accounting for income taxes. This interpretation clarifies that management is
expected to evaluate an income tax position taken or expected to be taken for
likelihood of realization before recording any amounts for such position in the
financial statement. FIN 48 also requires expanded disclosure with respect to
income tax positions taken that are not certain to be realized. This
interpretation is effective for fiscal years beginning after December 15, 2006,
and will require management to evaluate every open tax position that exists in
every jurisdiction on the date of initial adoption. We are currently evaluating
the impact the adoption of the standard will have on our results of operations.

In September 2006, the FASB reached consensus on the guidance provided by
Emerging Issues Task Force Issue 06-4 ("EITF 06-4"), Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements. The guidance is applicable to endorsement split-dollar
life insurance arrangements, whereby the employer owns and controls the
insurance policy, that are associated with a postretirement benefit. EITF 06-4
requires that for a split-dollar life insurance arrangement within the scope of
the issue, an employer should recognize a liability for future benefits in
accordance with FAS No. 106 (if, in substance, a postretirement benefit plan
exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in
substance, an individual deferred compensation contract) based on the
substantive agreement with the employee. EITF 06-4 is effective for fiscal years
beginning after December 15, 2007. We are currently evaluating the impact the
adoption of the standard will have on our results of operations and financial
condition.

In September 2006, the FASB reached consensus on the guidance provided by
Emerging Issues Task Force Issue 06-5 ("EITF 06-5"), Accounting for Purchases of
Life Insurance-Determining the Amount That Could Be Realized in Accordance with
FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.
EITF 06-5 states that a policyholder should consider any additional amounts
included in the contractual terms of the insurance policy other than the cash
surrender value in determining the amount that could be realized under the
insurance contract. EITF 06-5 also states that a policyholder should determine
the amount that could be realized under the life insurance contract assuming the
surrender of an individual-life by individual-life policy (or certificate by
certificate in a group policy). EITF 06-5 is effective for fiscal years
beginning after December 15, 2006. We are currently evaluating the impact the
adoption of the standard will have on our results of operations and financial
condition.

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities-Including an amendment of FASB
Statement No. 115. FAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. FAS No. 159 is
effective for the Company as of January 1, 2008. We are currently evaluating the
impact the adoption of the standard will have on our results of operations and
financial condition.

BUSINESS OF GATEWAY COMMUNITY FINANCIAL, MHC

Gateway Community Financial, MHC is a federal mutual holding company and is
subject to regulation by the Office of Thrift Supervision. Gateway Community
Financial, MHC currently owns 100%

of the outstanding common stock of Gateway Community Financial Corp. Upon
completion of the offering, it will own 55%. So long as Gateway Community
Financial, MHC is in existence, it will own a majority of the outstanding common
stock of Gateway Community Financial Corp. If Gateway Community Financial, MHC
converted to a full stock company in what is referred to as a "second-step
conversion," it would cease to exist. The Board of Directors has no current
plans to undertake a second- step transaction.

The primary business activity of Gateway Community Financial, MHC going
forward will continue to be owning a majority of Gateway Community Financial
Corp.'s common stock. Gateway Community Financial, MHC, however, is authorized
to engage in any other business activities that are permissible for mutual
holding companies under federal law, including investing in loans and
securities. Gateway Community Financial, MHC does not maintain offices separate
from those of Gloucester County Federal Savings Bank or employ any persons other
than certain Gloucester County Federal Savings Bank officers. Officers of
Gateway Community Financial, MHC are not separately compensated for their
service.

BUSINESS OF GATEWAY COMMUNITY FINANCIAL CORP.

Gateway Community Financial Corp. is a federal mutual holding company
subsidiary and is subject to regulation by the Office of Thrift Supervision. It
was organized for the purpose of being a holding company for Gloucester County
Federal Savings Bank.

Gateway Community Financial Corp.'s primary activity is and will continue
to be holding all of the stock of Gloucester County Federal Savings Bank.
Gateway Community Financial Corp. intends to use the proceeds of the offering as
discussed under Use of Proceeds. Gateway Community Financial Corp. does not
maintain offices separate from those of Gloucester County Federal Savings Bank
or employ any persons other than certain Gloucester County Federal Savings Bank
officers. Officers of Gateway Community Financial Corp. are not separately
compensated for their service.

BUSINESS OF GLOUCESTER COUNTY FEDERAL SAVINGS BANK

GENERAL

Gloucester County Federal Savings Bank is a federal stock savings bank. Its
deposits are insured by the Federal Deposit Insurance Corporation and it is
regulated by the Office of Thrift Supervision and the Federal Deposit Insurance
Corporation.

At December 31, 2006, we operated from five office locations plus an
administrative center and our total number of employees (counted on a full-time
equivalent basis) was 68.

MARKET AREA. Our business of attracting deposits and making loans is
primarily conducted within our market area. A downturn in the local economy
could reduce the amount of funds available for deposit and the ability of
borrowers to repay their loans. As a result, our profitability could decrease.

We generally define the core market area for each of our offices by a
number of factors, including political boundaries, natural geographic and
man-made barriers, traffic patterns and the competitive situation. We currently
have four offices in Gloucester County, New Jersey and one office in Camden
County, New Jersey.

The demographics for this area reflect an average sized market which is
projected to experience growth in both population and households through 2011,
growth that is projected to be slightly above the national average, but more
than double the population growth of the state of New Jersey for the same time
period. Population and household growth measures are projected to follow a
similar trend through 2011.

Our market has higher levels of education and white-collar jobs than
the national average coupled with median household income that is above the
national average. However, the per capita income of both Gloucester and Camden
Counties, as well as the median household income levels are below the comparable
figures for New Jersey.

Within Gloucester County, the cities in which we have located our
branch offices in general tend to be located in the more densely populated
portions of the county. Moreover, these markets have a higher number of
businesses per square mile when compared to the Gloucester County average.
Nevertheless, this remains an average-sized market in terms of potential for
retail deposits and loans with below average propensities for most deposit and
loan products.

COMPETITION. We operate in a market area with a high concentration of
banking and financial institutions, and we face substantial competition in
attracting deposits and in originating loans. A number of our competitors are
significantly larger institutions with greater financial and managerial
resources and lending limits. Our ability to compete successfully is a
significant factor affecting our growth potential and profitability.

Our competition for deposits and loans historically has come from other
insured financial institutions such as local and regional commercial banks,
savings institutions, and credit unions located in our primary market area. We
also compete with mortgage banking and finance companies for real estate loans ,
and we face competition for funds from investment products such as mutual funds,
short-term money funds and corporate and government securities. There are large
competitors operating throughout our market area, and we also face strong
competition from other community-based financial institutions.

Within the market areas for each of our five present locations (Erial,
Glassboro, Monroe Township, Pitman and Washington Township), our deposit share
as of June 30, 2006 was 1.2%, 14.1%, 9.6%, 42.8% and 9.4%, respectively.

LENDING ACTIVITIES

In recent years, commercial real estate and commercial loans as a
percentage of total loans have decreased as we worked through problem loans and
charged off a significant amount of such loans. We had begun originating a large
amount of commercial real estate and commercial loans in the late 1990s, but
experienced problems with those loans. We anticipate that this segment of our
loan portfolio will, however, rebound as we seek to increase commercial real
estate loans and commercial loans. We have recently hired two commercial lenders
as part of our plan to diversify our loan portfolio and improve our interest
rate spread and margins.

LOAN PORTFOLIO COMPOSITION. The following table analyzes the composition of
our loan portfolio by loan category at the dates indicated.

At December 31,
----------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
-------------------- -------------------- ------------------ ----------------- -------------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)

Type of Loans:
- --------------
Real estate loans:
One-to-four family....... $102,755 48.08% $ 74,115 39.71% $ 56,736 32.44% $ 46,638 27.20% $ 50,489 25.78%
Home equity.............. 59,327 27.76 49,657 26.60 41,112 23.51 40,920 23.86 32,158 16.42
Commercial............... 14,472 6.77 13,889 7.45 18,116 10.36 22,578 13.17 34,668 17.70
Construction............. 711 0.33 1,667 0.89 776 0.44 815 0.48 2,278 1.16

Commercial.................. 4,561 2.14 6,022 3.23 11,533 6.59 16,870 9.84 32,405 16.55

Consumer and other loans:
Auto..................... 21,136 9.89 33,591 18.00 40,890 23.38 41,832 24.39 41,677 21.28
Manufactured housing..... 7,512 3.51 5,422 2.90 3,392 1.94 - - - -
Savings account.......... 1,093 0.51 1,080 0.58 1,106 0.63 948 0.55 1,183 0.60
Other.................... 2,155 1.01 1,203 0.64 1,248 0.71 878 0.51 1,001 0.51
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total loans............ $213,722 100.00% $186,646 100.00% $174,909 100.00% $171,479 100.00% $195,859 100.00%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======

Deferred loan fees (costs).. (164) (156) (8) 200 347
Less: unearned income....... 1,581 2,850 3,634 4,074 4,523
Less: allowance for
possible loan losses..... 1,813 3,036 3,963 3,862 8,329
-------- -------- -------- -------- --------
Total loans, net....... $210,865 $180,916 $167,320 $163,343 $182,660
======== ======== ======== ======== ========

Loan Maturity Schedule. The following tables set forth the maturity of
our loan portfolio at December 31, 2006. Demand loans, loans having no stated
maturity, and overdrafts are shown as due in one year or less. Loans are stated
in the following tables at contractual maturity and actual maturities could
differ due to prepayments.

At December 31, 2006
----------------------------------------------------------------------------------------------------------------
Real estate
1-to-4 Home Real estate Manufactured Savings
family equity commercial Construction Commercial Auto Housing Account Other Total
------ ------ ---------- ------------ ---------- ---- ------- ------- ----- -----
(In thousands)

Amounts Due:
Within 1 Year ..... $ 96 $ 120 $ 1,558 $ - $ 2,058 $ 708 $ - $ 27 $ 23 $ 4,590
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

After 1 year:
1 to 3 years .... 885 2,080 269 - 617 8,557 - 87 23 12,518
3 to 5 years .... 215 4,223 3,402 - 1,123 11,123 - 50 67 20,203
5 to 10 years ... 5,253 18,846 3,497 - 468 708 140 791 299 30,003
10 to 15 years .. 17,750 33,958 2,662 - 295 40 989 138 1,743 57,574
Over 15 years ... 78,556 100 3,084 711 - - 6,383 - - 88,834
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Total due after
one year......... 102,659 59,207 12,914 711 2,503 20,428 7,512 1,066 2,132 209,132
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total amount due .. $102,755 $ 59,327 $ 14,472 $ 711 $ 4,561 $ 21,136 $ 7,512 $ 1,093 $ 2,155 $213,722
======== ======== ======== ======== ======== ======== ======== ======== ======== ========

The following table sets forth the dollar amount of all loans at
December 31, 2006 that are due after December 31, 2007.

Floating or
Adjustable
Fixed Rates Rates Total
----------- ----- -----
(In thousands)
Real estate loans:
One-to-four family............ $100,931 $1,728 $102,659
Home equity................... 59,207 - 59,207
Commercial.................... 11,844 1,070 12,914
Construction.................. 711 - 711

Commercial........................ 1,838 665 2,503

Consumer:
Auto........................... 20,428 - 20,428
Manufactured housing........... 7,512 - 7,512
Savings account................ 1,066 - 1,066
Other.......................... 556 1,576 2,132
-------- ------ --------
Total...................... $204,093 $5,039 $209,132
======== ====== ========

RESIDENTIAL LENDING. Currently, our main lending activity consists of the
origination of residential real estate loans, including single family homes and
residences housing up to four families. Our primary lending territory is
Gloucester County and surrounding areas in southern New Jersey, however, to a
lesser degree, we do originate loans throughout the entire state. We are
currently exploring expanding lending into eastern Pennsylvania and northern
Delaware. Although we underwrite most loans to conform to secondary market
standards, we generally retain the loans we originate in our portfolio. We
purchase loans to supplement our own originations and will continue to purchase
loans if the rates are attractive. In 2006 and 2005 we purchased $13.7 million
and $7.1 million of one-to-four family first mortgage loans in our market area
from a national lender. The seller retains servicing on these loans.

Our underwriting policies permit the origination of single family first
mortgage loans, for primary residence, with a loan-to-value of up to 95%. We
also offer an affordable housing/first time home buyer program, which uses the
95% loan-to-value limit but permits the borrower to have equity in the real
estate of only 3%. Loans in excess of 90% loan-to-value must have private
mortgage insurance. Our loan-to- value limit for non-single family first
mortgage loans (on one-to-four family properties) for primary residence is 80%.
We offer mortgage loans on non-owner occupied, investment properties with a 75%
loan-to-value limit.

Our fixed rate mortgage loans have terms of 10 to 30 years. Our adjustable
rate mortgages have 30 year terms.

We originate adjustable rate mortgages, or ARMs, at rates based upon the
U.S. Treasury One Year Constant Maturity as an index. We currently offer either
a 3/1 ARM or a 5/1 ARM. The rates on these loans reset on an annual basis,
beginning either the third or the fifth year, and have a two percent annual
adjustment cap, a five percent lifetime adjustment cap and a 3% floor.

Property appraisals on real estate securing one-to-four family residential
loans are made by state certified or licensed independent appraisers.

HOME EQUITY LENDING. We offer home equity loans and home equity lines of
credit with loan-to- value amounts up to 90% of the appraised value less the
outstanding balance of the first mortgage, if the property securing the loan is
the borrower's primary or secondary residence. A 70% loan-to-value limit applies
otherwise.

Our home equity loans are generally originated for terms of up to 30 years.
Our home equity line of credit has a five year draw period during which the
borrower may obtain advances on the line of credit, followed by a ten year
repayment period. The minimum periodic payment on the home equity line of credit
during the draw period is 0.56% of the outstanding principal balance plus
accrued interest. A variable rate with a 5% lifetime adjustment cap but no
annual adjustment cap applies to all home equity lines of credit.

Automated Valuation Models (AVM) are used for home equity loans and lines
of credit in amounts of $250,000 or less. Should the AVM not provide sufficient
value to support the request, a full appraisal may be requested by the borrower
at the borrower's expense.

We have recently introduced a CyberLoan home equity product, marketed on a
third party loan referral website. We pay a fee to advertise on this website.
These loans will be primarily located in New Jersey, but may also be originated
in eastern Pennsylvania and in northern Delaware. This program commenced in the
second quarter of 2007. These loans will be originated using the services of
remote closing agents.

COMMERCIAL LENDING. Our primary commercial lending area is Gloucester,
Camden, Cumberland, Salem, Atlantic, Ocean, Cape May and Burlington Counties.
Loans outside of these counties are permitted (i) in order to allow the Bank to
follow existing customers when they may have borrowing needs outside of this
defined market area, or (ii) if we believe the loan to be a high quality credit.
We also will participate in loan originations with other financial institutions
on loans outside of our primary commercial lending area.

Our commercial underwriting standards require that borrowers have an
established history of legal and ethical financial dealings and that careful
consideration is given to the borrower's history, general background, management
experience and future plans, external environment, financial condition and
proposed collateral. We obtain as much specific information as possible about
the borrower's business and ability to manage its business in order to be
satisfied that the individuals have the capability to properly operate the
business. We generally require that borrowers who are not existing customers
should demonstrate at least two methods of repayment, one of which will be from
cash flow (or asset conversion) and the other will be from collateral of
determinable value or from a clear ability to liquidate other non-collateral
assets. We attempt to structure our commercial loans to meet the needs of our
customers with repayment over a period which shows a direct relationship to (i)
the purpose, (ii) the cash flow capabilities of the customer, and (iii) the
economic life of the collateral.

Our commercial real estate lending consists primarily of mortgage loans for
the acquisition or refinance of service/retail and mixed-use properties,
churches and non-profit properties, professional facilities and other commercial
real estate. The maximum loan-to-value ratio on most commercial real estate
loans we originate is 75%. The maximum term is normally no more than ten years,
with payments

based on a twenty-five year amortization. We offer fixed and adjustable rate
commercial real estate mortgages but generally will not offer a fixed rate
period of more than seven years.

We will provide financing for the owner-occupied commercial building as
well as for real estate investment. We will underwrite non-recourse loans if we
believe they are sufficiently supported by long- term leases with strong
tenants. We offer bridge or swing loans to provide temporary financing which
transfers equity from one or more parcels of real estate (present) to another
(future). The maximum loan amount for a bridge or swing loan will be 90% of the
appraised value of the property to be sold less all prior liens. Additional
collateral may be obtained to meet this loan-to-value requirement.

We offer non-real estate commercial loans consisting of regular lines of
credit and revolving lines of credit to businesses to finance short-term working
capital needs like accounts receivable and inventory. In general, lines of
credit allow for intermittent borrowings and repayments, and are not usually
accompanied by extensive loan agreements. They are generally priced on a
floating rate basis. Our policy is for all lines of credit to be secured and, if
possible, supported also by junior liens on real estate. Business assets such as
accounts receivable, inventory, equipment, furniture and fixtures may be used to
secure lines of credit. We generally provide regular lines of credit with a
maximum term of 18 months. Revolving lines of credit generally have a maximum
term of two years, but may be up to seven years if then converted to an
amortizing term loan.

We originate commercial term loans with maturities generally no longer than
18 months. We also originate commercial term loans with a monthly or quarterly
amortization schedule to fund longer-term borrowing needs such as purchasing
equipment, property improvements or other fixed asset needs. We fix the maturity
of a term loan to correspond to the useful life of any equipment purchased, if
appropriate, and generally do not exceed a ten-year term, except for certain
real estate transactions. Term loans can be secured with a variety of
collateral, including business assets such as accounts receivable and inventory
or long-term assets such as equipment, furniture, fixtures or real estate. When
the purpose of a term loan is the purchase of new equipment that will be pledged
as collateral for the loan, the maximum advance is typically no more than 90% of
the purchase price. Used equipment may also be used as collateral. The primary
source of repayment for term loans is the global cash flow of the borrowing
entity.

Where a commercial loan is secured by "liquid collateral" (cash, marketable
securities, or cash surrender value of life insurance), we will offer
considerable flexibility with the repayment schedule or will underwrite these
loans with no maturity, on a demand basis. The loan to value limits for loans
secured by liquid collateral are:

o Cash - 100%
o United States Treasury Issues - 90%
o Common stocks actively traded on the New York and American stock
exchanges or listed on NASDAQ - 80%
o Municipal Bonds - 80%
o Mutual Funds - 70%
o Corporate Bonds - 75%
o Cash Surrender Value of Life Insurance - 90% o Margin Stock - 50%.

Our commercial loan offerings also include overdrafts of demand deposit
accounts divided into four categories:

o Pure overdrafts
o Overdrafts that can be covered by available funds in other deposit
accounts (other than certificates of deposit) at the Bank in the name
of that depositor
o Overdrafts that can be covered by availability under pre-established
credit facilities of that depositor
o Overdrafts of a technical nature, caused internally.

We will also provide interim financing to commercial borrowers in
anticipation of a sale of an asset or closing of a long-term refinancing.

Unlike single-family residential mortgage loans, which generally are made
on the basis of the borrower's ability to make repayment from his or her
employment and other income, and which are secured by real property whose value
tends to be more easily ascertainable, commercial loans (including real estate
as well as non-real estate loans) typically are made on the basis of the
borrower's ability to make repayment from the cash flow of the borrower's
business or rental income produced by the property. As a result, the
availability of funds for the repayment of commercial loans may be substantially
dependent on the success of the business or rental property itself and the
general economic environment. Commercial loans, therefore, have greater credit
risk than one-to-four family residential mortgages or consumer loans. In
addition, commercial loans generally result in larger balances to single
borrowers, or related groups of borrowers, and also generally require
substantially greater evaluation and oversight efforts.

CONSTRUCTION LENDING. We originate construction and land acquisition loans
for owner-occupied residences, and we also provide financing to builders and
real estate developers for land acquisition and development and residential or
commercial construction.

Construction funds are disbursed periodically upon inspections made by our
inspectors on the completion of each phase, usually in three draws. Additional
draws may be made at the borrower's request, however we generally limit the
funds disbursed to 80% of the appraised loan-to-value of the land and
improvements at any time during construction. Commercial construction loans are
limited to 75% of appraised value. Land acquisition and development loans are
limited to the lower of 90% of cost or 80% of the appraised value. Land
acquisition and development loans on properties with approved takeout financing
may be originated at up to 90% of the appraised value. Land loans are limited to
65% of the cost or appraised value.

Construction lending is generally considered to involve a higher degree
of credit risk than residential mortgage lending. If the estimate of
construction cost proves to be inaccurate, we may be compelled to advance
additional funds to complete the construction with repayment dependent, in part,
on the success of the ultimate project rather than the ability of a borrower or
guarantor to repay the loan. If we are forced to foreclose on a project prior to
completion, there is no assurance that we will be able to recover all of the
unpaid portion of the loan. In addition, we may be required to fund additional
amounts to complete a project and may have to hold the property for an
indeterminate period of time.

CONSUMER LENDING. Our consumer lending products include loans for new and
used autos, boats, recreational vehicles (RVs) and aircraft and loans for
manufactured housing as well as secured and unsecured personal loans, account
loans and overdraft lines of credit.

The majority of the auto loans currently in our portfolio are indirect auto
loans the Bank purchased from one auto leasing company with which the Bank
maintained a relationship for over 20 years. Several

years ago, we determined to terminate the arrangement with that company because
the average rate on these loans due to the pass-through pricing resulted in a
below market yield. We will continue to originate direct auto loans to customers
of the Bank and a limited amount of indirect auto lending, but the overall size
of the auto loan portfolio is expected to decrease significantly as the indirect
loans from that particular relationship mature. We may resume a larger amount of
indirect auto lending through dealers if we find more profitable arrangements.

In 2004 we began originating loans for the purchase and refinance of
manufactured housing. The majority of these loans are indirect loans generated
by an independent outside source and purchased by the Bank with limited
recourse. The maximum loan amount is $200,000 and the loan-to-value limit is 80%
for homes on leased land (with a minimum cash deposit of 20%) and up to 90% for
loans that include the land the home occupies. We require a first lien on the
home and we record a first mortgage if it is a land/home loan. We currently
intend to limit this portfolio to approximately $30 million.

In 2007 we began providing financing for non-commercial use, personal
airplanes. As of march 31, 2007, the outstanding balance of aircraft loans
totaled $1.4 million. We anticipate growing this part of the consumer portfolio
significantly as a niche lending area, with the goal of growing the portfolio to
as much as $15 million in the first year. Our underwriting of these loans is
done with a 90% loan-to-value and the maximum loan amount is $1 million.

We also offer secured and unsecured personal loans with terms of up to four
years with a minimum and maximum balance of $1,000 and $15,000, respectively.

Consumer lending is generally considered to involve a higher degree of
credit risk than residential mortgage lending. Consumer loan repayment is
dependent on the borrower's continuing financial stability and can be adversely
affected by job loss, divorce, illness or personal bankruptcy. The application
of various federal laws, including federal and state bankruptcy and insolvency
laws, may limit the amount which can be recovered on consumer loans in the event
of a default.

LOANS TO ONE BORROWER. Under federal law, savings institutions have,
subject to certain exemptions, lending limits to one borrower in an amount equal
to the greater of $500,000 or 15% of the institution's unimpaired capital and
surplus. Accordingly, as of December 31, 2006, our loans to one borrower legal
limit was approximately $4.4 million. Our largest borrower at that date had one
loan outstanding with a balance at that date of $1.7 million, representing a
mortgage on a vacation home on the New Jersey shore. The Bank's loans to one
borrower legal lending limit will be higher following the stock offering because
the stock offering proceeds will increase the Bank's capital.

LOAN APPROVAL PROCEDURES AND AUTHORITY. Lending policies and loan approval
limits are approved and adopted by the Board of Directors. Lending authority is
vested primarily in a loan committee comprised of senior officers. This
committee may approve loans up to $750,000. Prior Board approval is required for
loans in excess of $750,000. Certain other Bank employees also have limited
lending authority and may authorize first mortgage loans up to $417,000 (the
current conforming limit for sale in the secondary market as a non-jumbo loan)
and home equity and other secured loans up to $400,000. All loans require the
approval of at least two authorized employees.

ASSET QUALITY

LOAN DELINQUENCIES AND COLLECTION PROCEDURES. When a loan is 90 days
delinquent, the Board may determine to refer it to an attorney for repossession
or foreclosure. All reasonable attempts are made to collect from borrowers prior
to referral to an attorney for collection. In certain instances, we may modify
the loan or grant a limited moratorium on loan payments to enable the borrower
to reorganize his or her financial affairs, and we attempt to work with the
borrower to establish a repayment schedule to cure the delinquency.

With respect to mortgage loans, if a foreclosure action is taken and the
loan is not reinstated, paid in full or refinanced, the property is sold at
judicial sale at which we may be the buyer if there are no adequate offers to
satisfy the debt. Any property acquired as the result of foreclosure or by deed
in lieu of foreclosure is classified as real estate owned until it is sold or
otherwise disposed of. When real estate owned is acquired, it is recorded at the
lower of the unpaid principal balance of the related loan or its fair market
value less estimated selling costs. The initial writedown of the property is
charged to the allowance for loan losses. Adjustments to the carrying value of
the property that result from subsequent declines in value are charged to
operations in the period in which the declines occur.

Loans are generally placed on non-accrual status when they are more than 90
days delinquent, however loans may be placed on a non-accrual status at any time
if, in the opinion of management, the collection of additional interest is
doubtful. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.

NON-PERFORMING ASSETS. The following table provides information regarding
our non-performing loans and other non-performing assets.

At December 31,
--------------------------------------------------
2006 2005 2004 2003 2002
------ ------ ------ ------ ------
(Dollars in thousands)

Loans accounted for on a non-accrual basis:
- -------------------------------------------
Real Estate:
One-to-four family ............................. $ 103 $ 106 $ 452 $ 421 $ 349
Home equity .................................... 16 16 16 125 88
Commercial ..................................... 1,570 1,818 829 384 557
Construction ................................... - - - 600 -

Commercial ......................................... 663 1,087 27 641 497

Consumer:
Auto ........................................... 42 24 39 231 62
Other .......................................... 55 26 - 10 12
------ ------ ------ ------ ------
Total non-accrual loans .......................... 2,449 3,076 1,363 2,411 1,564
------ ------ ------ ------ ------

Accruing loans contractually past due 90 days or more:
- ------------------------------------------------------
Real Estate:
One-to-four family ............................. 32 122 - - -
Consumer:
Auto ........................................... - - - 8 -
Other consumer ................................. 2 16 - 14 31
------ ------ ------ ------ ------
Total accruing loans past due 90 days or more .... 34 138 0 22 31
------ ------ ------ ------ ------
Total non-performing loans ........................... $2,484 $3,214 $1,363 $2,433 $1,595
====== ====== ====== ====== ======
Real estate owned .................................... $ 288 $ 288 $ 461 $ 448 $ --
====== ====== ====== ====== ======
Other non-performing assets .......................... $ 49 $ 11 $ -- $ 14 $ --
====== ====== ====== ====== ======
Total non-performing assets .......................... $2,820 $3,513 $1,823 $2,895 $1,595
====== ====== ====== ====== ======
Total non-performing loans to total loans ............ 1.17% 1.75% 0.80% 1.46% 0.84%
====== ====== ====== ====== ======
Total non-performing loans to total assets ........... 0.71% 1.04% 0.43% 0.83% 0.51%
====== ====== ====== ====== ======
Total non-performing assets to total assets .......... 0.80% 1.14% 0.58% 0.99% 0.51%
====== ====== ====== ====== ======

CLASSIFIED ASSETS. Management, in compliance with federal guidelines, has
instituted an internal loan review program, whereby loans are classified as
special mention, substandard, doubtful or loss. It is our policy to review the
loan portfolio, in accordance with regulatory classification procedures, on at
least a quarterly basis. When a loan is classified as substandard or doubtful,
management is required to evaluate the loan for impairment. When management
classifies a portion of a loan as loss, a reserve equal to 100% of the loss
amount is required to be established or the loan is to be charged-off.

An asset that does not currently expose the Bank to a sufficient degree of
risk to warrant an adverse classification, but which possesses credit
deficiencies or potential weaknesses that deserve management's close attention
is classified as "special mention."

An asset classified as "substandard" is inadequately protected by the
current net worth and paying capacity of the obligor or the collateral pledged,
if any. Assets so classified have well-defined weaknesses and are characterized
by the distinct possibility that the Bank will sustain some loss if the
deficiencies are not corrected.

An asset classified as "doubtful" has all the weaknesses inherent in a
"substandard" asset with the added characteristic that the weaknesses make
collection or liquidation in full, on the basis of currently existing facts,
conditions, and values, highly questionable and improbable. The possibility of a
loss on a doubtful asset is high.

That portion of an asset classified as "loss" is considered uncollectible
and of such little value that its continuance as an asset, without establishment
of a specific valuation or charge-off, is not warranted. This classification
does not necessarily mean that an asset has absolutely no recovery or salvage
value; but rather, it is not practical or desirable to defer writing off a
basically worthless asset even though partial recovery may be effected in the
future.

At December 31, 2006, all of the assets we had designated as special
mention , substandard, doubtful and loss were loans. At December 31, 2006, none
of the loans classified as "special mention," $1.5 million of loans classified
as "substandard" and $745,000 of the loans classified as "doubtful" are included
in the table of non-performing assets shown above.

The following table discloses our designation of loans as special mention,
substandard, doubtful and loss as of December 31, 2006.

At December 31,
-----------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
(In thousands)

Special Mention... $ 1,954 $ 1,162 $ 3,412 $ 9,321 $15,979
Substandard ...... 3,414 6,124 12,334 11,503 6,228
Doubtful ......... 796 1,246 924 1,039 1,253
Loss ............. - - - 251 6,158
------- ------- ------- ------- -------
Total .......... $ 6,164 $ 8,532 $16,670 $22,114 $29,618
======= ======= ======= ======= =======

ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through provisions for loan losses charged against income. Loans deemed to be
uncollectible are charged against the allowance for loan losses, and subsequent
recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level by management which
represents the evaluation of known and inherent losses in the loan portfolio at
the consolidated balance sheet date that are both probable and reasonable to
estimate. Management's periodic evaluation of the adequacy of the allowance is
based on the Bank's past loan loss experience, known and inherent losses in the
portfolio, adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates that may
be susceptible to significant change, including the amounts and timing of future
cash flows expected to be received on impaired loans.

The allowance consists of specific and general components. The specific
component related to loans that are classified as either doubtful, substandard,
or special mention. For such loans that are also classified as impaired, an
allowance is established when the discounted cash flows (or collateral value or
observable market price) of the impaired loan is lower than the carrying value
of that loan. The general component covers nonclassified loans and is based on
historical loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and
events, it is probable that the Bank will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement. Factors considered by management in determining impairment
include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not classified
as impaired. Management determines the significance of payment delays and
payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay, the borrower's prior payment record, and the
amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a loan-by-loan basis for commercial and construction
loans by the present value of expected future cash flows discounted at the
loan's effective interest rate, the loan's obtainable market price, or the fair
value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Bank does not separately identify
individual consumer and residential mortgage loans for impairment disclosures.

Although specific and general loan loss allowances are established in
accordance with management's best estimate, actual losses are dependent upon
future events and, as such, further provisions for loan losses may be necessary
in order to increase the level of the allowance for loan losses. For example,
our evaluation of the allowance includes consideration of current economic
conditions, and a change in economic conditions could reduce the ability of our
borrowers to make timely repayments of their loans. This could result in
increased delinquencies and increased non-performing loans, and thus a need to
make increased provisions to the allowance for loan losses, which would be a
charge to income during the period the provision is made, resulting in a
reduction to our earnings. A change in economic conditions could also adversely
affect the value of the properties collateralizing our real estate loans,
resulting in increased charge-offs against the allowance and reduced recoveries,
and thus a need to make increased provisions to the allowance for loan losses.
Furthermore, a change in the composition of our loan portfolio or growth of our
loan portfolio could result in the need for additional provisions.

In addition, as an integral part of its regulatory examination process, the
Office of Thrift Supervision periodically reviews our loan and foreclosed real
estate portfolios and the related allowance for loan losses and valuation
allowance for foreclosed real estate. The Office of Thrift Supervision may
require the allowance for loan losses or the valuation allowance for foreclosed
real estate to be increased based on their review of information available at
the time of the examination, which would negatively affect our earnings.

The following table sets forth information with respect to our
allowance for loan losses at the dates indicated.

For the Year Ended December 31,
-----------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------

Allowance balance at beginning of period ...... $ 3,036 $ 3,963 $ 3,862 $ 8,329 $ 1,468
(Recovery of) provision for loan losses ....... (348) (917) (13) 4,342 7,550

Loan Charge-offs:
- ----------------
Real estate:
One-to-four family ........................ - (17) - (19) -
Commercial ................................ (531) (23) - (1,329) -

Commercial .................................. (373) (37) (337) (7,313) (544)

Consumer .................................... (84) - (82) (165) (157)
--------- --------- --------- --------- ---------
Total charge-offs ....................... (988) (77) (419) (8,826) (701)
--------- --------- --------- --------- ---------
Recoveries of loans charged-off:
- --------------------------------
Real estate:
One-to-four family ........................ 4 - 17 - -
Commercial ................................ 33 - 85 - -

Commercial .................................. 74 52 402 4 -

Consumer .................................... 2 15 29 13 12
--------- --------- --------- --------- ---------
Total recoveries of loans charged-off.... 113 67 533 17 12
--------- --------- --------- --------- ---------
Net (loan charge-offs) recoveries of loans
charged-off.................................. (875) (10) 114 (8,809) (689)
--------- --------- --------- --------- ---------
Allowance balance at end of period ............ $ 1,813 $ 3,036 $ 3,963 $ 3,862 $ 8,329
========= ========= ========= ========= =========

Total loans outstanding ....................... $ 212,305 $ 183,952 $ 171,283 $ 167,205 $ 190,989
========= ========= ========= ========= =========
Average loans outstanding ..................... $ 199,752 $ 171,130 $ 165,622 $ 175,412 $ 196,541
========= ========= ========= ========= =========
Allowance for loan losses as a percentage of
total loans outstanding .................... 0.85% 1.65% 2.31% 2.31% 4.36%
========= ========= ========= ========= =========
Net loans charge-offs (recoveries of loans
charged-off) as a percentage of average
loans outstanding .......................... 0.44% 0.01% (0.07)% 5.02% 0.35%
========= ========= ========= ========= =========

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES. The following table sets forth
the allocation of our allowance for loan losses by loan category and the percent
of loans in each category to total loans receivable, net, at the dates
indicated. The portion of the loan loss allowance allocated to each loan
category does not represent the total available for losses which may occur
within the loan category since the total loan loss allowance is a valuation
reserve applicable to the entire loan portfolio.

At December 31,
--------------------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
--------------------- ---------------------- -------------------- --------------------- --------------------
Loan Loan Loan Loan Loan
Amount of Category Amount of Category Amount of Category Amount of Category Amount of Category
Allowance as a Allowance as a Allowance as a Allowance as a Allowance as a
Allocated Percentage Allocated Percentage Allocated Percentage Allocated Percentage Allocated Percentage
to Loan of Total to Loan of Total to Loan of Total to Loan of Total to Loan of Total
Category Loans Category Loans Category Loans Category Loans Category Loans
-------- ------- -------- ------- -------- ------- -------- ------- -------- ------
(Dollars in thousands)

Real estate:
One-to-four
family........... $ 419 48.08% $ 460 39.71% $ 287 32.44% $ 170 27.20% $ 182 25.78%
Home equity........ 297 27.76 248 26.60 206 23.51 205 23.86 161 16.42
Commercial........ 484 6.77 465 7.45 948 10.36 897 13.17 1,397 17.70
Construction...... 4 0.33 7 1.89 40 0.44 4 0.48 7 1.16

Commercial............ 355 2.14 1,195 3.23 1,824 6.59 2,050 9.84 6,250 16.55

Consumer:
Auto.............. 132 9.89 440 18.00 248 23.38 243 24.39 309 21.28
Manufactured
housing......... 39 3.51 143 2.90 9 1.94 - - - -
Savings account... - 0.51 - 0.58 - 0.63 - 0.55 - 0.60
Other............. 1 1.01 7 0.64 2 0.71 2 0.51 2 0.51
Unallocated 82 71 399 291 21
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total............ $1,813 100.00% $3,036 100.00% $3,963 100.00% $3,862 100.00% $8,329 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======

SECURITIES PORTFOLIO

Our investment policy is designed to foster earnings and manage cash flows
within prudent interest rate risk and credit risk guidelines. Generally, our
investment policy is to invest funds in various categories of securities and
maturities based upon our liquidity needs, asset/liability management policies,
pledging requirements, investment quality, marketability and performance
objectives.

All of our securities carry market risk insofar as increases in market
rates of interest may cause a decrease in their market value. Prior to
investing, consideration is given to the interest rate environment, tax
considerations, market volatility, yield, settlement date and maturity of the
security, our liquidity position, and anticipated cash needs and sources. The
effect that the proposed security would have on our credit and interest rate
risk and risk-based capital is also considered.

Federally chartered savings banks have the authority to invest in various
types of liquid assets. The investments authorized under the Bank's investment
policy include U.S. government and government agency securities, municipal
securities (consisting of bond obligations of state and local governments),
mortgage-backed securities, collateralized mortgage obligations and corporate
bonds. On a short-term basis, our investment policy authorizes investment in
federal funds, certificates of deposit and money market investments with insured
institutions and with brokerage firms.

Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities, requires that securities be
categorized as "held to maturity," "trading securities" or "available-for-sale,"
based on management's intent as to the ultimate disposition of each security.
Statement No. 115 allows debt securities to be classified as "held to maturity"
and reported in financial statements at amortized cost only if the reporting
entity has the positive intent and ability to hold these securities to maturity.
Securities that might be sold in response to changes in market interest rates,
changes in the security's prepayment risk, increases in loan demand, or other
similar factors cannot be classified as "held to maturity."

We do not currently use or maintain a trading account. Securities not
classified as "held to maturity" are classified as "available-for-sale." These
securities are reported at fair value, and unrealized gains and losses on the
securities are excluded from earnings and reported, net of deferred taxes, as a
separate component of stockholders' equity.

We do not currently participate in hedging programs, interest rate caps,
floors or swaps, or other activities involving the use of off-balance sheet
derivative financial instruments, however, we may in the future utilize such
instruments if we believe it would be beneficial for managing our interest rate
risk. Further, we do not purchase securities which are not rated investment
grade.

Actual maturities of the securities held by us may differ from contractual
maturities because issuers may have the right to call or prepay obligations with
or without prepayment penalties. Callable securities pose reinvestment risk
because we may not be able to reinvest the proceeds from called securities at an
equivalent or higher interest rate.

MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
Mortgage-related securities represent a participation interest in a pool of one-
to four-family or multi-family mortgages. We primarily invest in mortgage-backed
securities secured by one- to four-family mortgages. Our mortgage-related
securities portfolio includes mortgage-backed securities issued by U.S.
government

agencies or government-sponsored entities, such as Freddie Mac, Ginnie Mae, and
Fannie Mae, and collateralized mortgage obligations issued by private,
non-government, corporate issuers.

The mortgage originators use intermediaries (generally government agencies
and government-sponsored enterprises, but also a variety of private corporate
issuers) to pool and repackage the participation interests in the form of
securities, with investors such as us receiving the principal and interest
payments on the mortgages. Securities issued or sponsored by U.S. government
agencies and government-sponsored entities are guaranteed as to the payment of
principal and interest to investors. Privately issued non-government, corporate
issuers' securities typically offer rates above those paid on government agency
issued or sponsored securities, but present higher risk than government agency
issued or sponsored securities because they lack the guaranty of those agencies
and are generally less liquid investments.

Mortgage-backed securities are pass-through securities typically issued
with stated principal amounts, and the securities are backed by pools of
mortgages that have loans with interest rates that are within a specific range
and have varying maturities. The life of a mortgage-backed security thus
approximates the life of the underlying mortgages. Mortgage-backed securities
generally yield less than the mortgage loans underlying the securities. The
characteristics of the underlying pool of mortgages, i.e., fixed-rate or
adjustable-rate, as well as prepayment risk, are passed on to the certificate
holder. Mortgage-backed securities are generally referred to as mortgage
participation certificates or pass-through certificates.

Collateralized mortgage obligations are mortgage-derivative products that
aggregate pools of mortgages and mortgage-backed securities and create different
classes of securities with varying maturities and amortization schedules as well
as a residual interest with each class having different risk characteristics.
The cash flows from the underlying collateral are usually divided into
"tranches" or classes whereby tranches have descending priorities with respect
to the distribution of principal and interest repayment of the underlying
mortgages and mortgage-backed securities as opposed to pass through
mortgage-backed securities where cash flows are distributed pro rata to all
security holders. Unlike mortgage-backed securities from which cash flow is
received and risk is shared pro rata by all securities holders, cash flows from
the mortgages and mortgage-backed securities underlying collateralized mortgage
obligations are paid in accordance with a predetermined priority to investors
holding various tranches of the securities or obligations.

The following table sets forth certain information regarding the
amortized cost, weighted average yields and maturities of our securities
portfolio at December 31, 2006. This table shows contractual maturities and does
not reflect repricing or the effect of prepayments. Actual maturities may
differ.

As of December 31, 2006
-----------------------------------------------------------------------------------------------------
Maturing Maturing Maturing Maturing
Within 2007 2008-2011 2012-2016 after 2016 Total
(One Year) (One to Five Years) (Five to Ten Years) (More than Ten Years) Investment Securities
---------- ------------------- ------------------ ---------------------- -----------------------
Amortized Avg. Amortized Avg. Amortized Avg. Amortized Avg. Amortized Avg Fair
Cost Yield Cost Yield Cost Yield Cost Yield Cost Yield Value
----- ------- ------ ------- ------ ------- ------ ------- ------ ------- -----
(Dollars in thousands)

Corporate securities....... $ - -% $ 1,028 5.65% $ - -% $ - -% $ 1,028 5.65% $ 1,001
U.S. government agency
securities.............. - - 17,807 3.86 11,479 5.88 15,185 6.14 44,471 5.16 44,277
Obligations of state and
political subdivisions.. 4,519 3.81 406 4.27 - - 625 4.00 5,550 3.42 5,560
Government National
Mortgage Association.... - - - - 26 5.38 4,661 5.34 4,687 5.31 4,681
Federal Home Loan
Mortgage Corporation.... - - 1,594 4.50 - - 1,757 4.39 3,351 4.44 3,314
Federal National Mortgage
Association............. - - 5,255 4.29 4,608 4.54 6,930 5.05 16,793 4.67 16,409
Collateralized mortgage
obligations............. - - - - - - 34,353 4.92 34,353 4.92 33,799
------ ---- ------- ---- ------- ---- ------- ---- -------- ---- --------

Total.................... $4,519 3.81% $26,090 3.84% $16,113 5.49% $63,511 5.19% $110,233 4.87% $109,041
====== ==== ======= ==== ======= ==== ======= ==== ======== ==== ========

The following table sets forth the carrying value of our securities
portfolio at the dates indicated.

At December 31,
----------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
(In thousands)

Investment Securities Available for Sale:
- ----------------------------------------------
Equity securities ............................ $ 1,718 $ 1,729 $ 1,689 $ 1,144 $ 1,149
U.S. government agency securities ............ 12,434 - - - -
Corporate securities ......................... - - - 3,208 3,303
-------- -------- -------- -------- --------
Total investment securities
available for sale ................ 14,152 1,729 1,689 4,351 4,452
-------- -------- -------- -------- --------
Mortgage-Backed Securities Available for Sale:
Government National Mortgage
Association ............................... 200 324 514 719 1,002
-------- -------- -------- -------- --------
Investment Securities Held to Maturity:
- ---------------------------------------
U.S. government agency securities ............ 32,067 35,351 33,364 16,998 13,910
Corporate securities ......................... 1,028 3,059 12,846 28,460 38,959
Obligations of states and political
subdivisions ............................. 5,550 1,176 552 552 903
-------- -------- -------- -------- --------
Total investment securities
held to maturity .................. 38,645 39,586 46,762 46,010 53,771
-------- -------- -------- -------- --------
Mortgage-Backed Securities Held to Maturity:
- --------------------------------------------
Government National Mortgage Association ..... 4,489 7,266 11,494 15,682 12,659
Federal Home Loan Mortgage Corporation ....... 3,351 2,983 3,991 3,271 3,085
Federal National Mortgage Association ........ 16,793 18,810 21,493 19,777 6,489
Collateralized mortgage obligations .......... 34,353 24,649 23,710 1,208 -
-------- -------- -------- -------- --------
Total mortgage-backed securities
held to maturity ................... 58,985 53,708 60,688 39,939 22,233
-------- -------- -------- -------- --------
Total ....................................... $111,982 $ 95,348 $109,652 $ 91,019 $ 81,457
======== ======== ======== ======== ========

SOURCES OF FUNDS

GENERAL. Deposits are our major source of funds for lending and other
investment purposes. We also have the ability to borrow funds from the Federal
Home Loan Bank to supplement deposits as a source of funds.

In addition, we derive funds from loan and mortgage-backed securities
principal repayments, and proceeds from the maturity and call of investment
securities. Loan and securities payments are a relatively stable source of
funds, while deposit inflows and outflows are significantly influenced by
pricing strategies and money market conditions.

DEPOSITS. Our current deposit products include checking and savings
accounts, certificates of deposit and fixed or variable rate individual
retirement accounts (IRAs). Deposit account terms vary, primarily as to the
required minimum balance amount, the amount of time, if any, that the funds must
remain on deposit and the applicable interest rate. The determination of deposit
and certificate interest rates is based upon a number of factors, including: (1)
need for funds based on loan demand, current maturities of deposits and other
cash flow needs; (2) a current survey of a selected group of competitors' rates
for similar products; (3) economic conditions; and (4) business plan
projections.

We traditionally have obtained deposits primarily from within New Jersey.
We recently introduced a new product, our CyberSavings account, which has
brought deposits into the Bank from throughout the

United States. This product is a high-yield, multi-tiered savings account that
is accessible only via the internet and is not marketed through our branches or
locally. To grow these deposits, we pay a fee to a third party referral website
which advertises financial products. We are currently promoting this product by
offering the highest tier rate for the first 90 days, regardless of the account
balance. We launched this product in December 2006 and CyberSavings accounts
grew quickly, totaling approximately $17 million by the end of the first quarter
of 2007. We have also recently created a CyberSaver Supreme account, which
requires a minimum balance of $100,000. Unlike regular CyberSavings, the Supreme
account is a money market product, as opposed to a savings account.

We do not at this time utilize the services of deposit brokers. Premiums or
incentives for opening accounts are offered. We periodically select particular
certificate of deposit maturities for promotion in connection with
asset/liability management and interest rate risk concerns.

The following table sets forth the distribution of deposits by account type
as of the dates indicated. The increase in money market accounts from 2005 to
2006 is attributable to our introduction in 2005 of a multi-tiered money market
account we call the "Money Maker."

At December 31,
--------------------------------------
2006 2005 2004
-------- -------- --------
(In thousands)

Non-interest-bearing deposits.. $ 9,532 $ 12,123 $ 8,634
Savings ....................... 63,761 62,551 72,074
NOW checking .................. 35,926 34,560 38,641
Money market .................. 44,637 24,662 24,349
Certificates of deposit ....... 162,107 143,648 142,913
-------- -------- --------
Total ....................... $315,962 $277,544 $286,611
======== ======== ========

At December 31, 2006, $162.1 million of our deposits, representing 51.3% of
total deposits, were certificates of deposit. The inflow of certificates of
deposit and the retention of such deposits upon maturity are significantly
influenced by general interest rates and money market conditions, making
certificates of deposit traditionally a more volatile source of funding than
core deposits. Our liquidity could be reduced if a significant amount of
certificates of deposit maturing within a short period of time were not renewed.
To the extent that such deposits do not remain with us, they may need to be
replaced with borrowings, which could increase our cost of funds and negatively
impact our net interest rate spread and our financial condition.

The following table sets forth certificates of deposit classified by
interest rate as of the dates indicated.

At December 31,
--------------------------------------
2006 2005 2004
-------- -------- --------
(In thousands)

Interest Rate
2.00% or less....... $ - $ 3,328 $ 41,278
2.01-4.00% ......... 29,261 83,200 74,964
4.01-6.00% ......... 131,207 55,560 14,693
6.01-8.00% ......... 1,638 1,559 11,978
-------- -------- --------
Total ............ $162,107 $143,648 $142,913
======== ======== ========

The following table sets forth the amount and maturities of
certificates of deposit as of December 31, 2006.

Amount Due
---------------------------------------------------------------------------------------------
Within After
Interest Rate 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
- ------------- ------ --------- --------- --------- --------- ------- -----
(In thousands)

2.00% or less....... $ - $ - $ - $ - $ - $ - $ -
2.01-4.00%.......... 18,753 4,374 2,988 1,971 1,174 - 29,261
4.01-6.00%.......... 93,220 11,603 3,971 9,618 5,364 7,430 131,207
6.01-8.00%.......... 1,543 95 - - - - 1,638
-------- ------- ------ ------- ------ ------ --------
Total............. $113,516 $16,089 $6,943 $11,589 $6,538 $7,430 $162,107
======== ======= ====== ======= ====== ====== ========

The following tables show the amount of certificates of deposit of
$100,000 or more by time remaining until maturity as of December 31, 2006.

Certificates of Deposits
------------------------
Maturity Period (In thousands)
- ---------------
Within three months................ $18,344
Three through six months........... 14,715
Six through twelve months.......... 10,330
Over twelve months................. 11,621
-------
$55,010
=======

Borrowings. We borrow funds from the Federal Home Loan Bank to
supplement deposits as a source of funds. Short-term Federal Home Loan Bank
advances generally have original maturities of less than one year. The details
of these short-term advances are presented below for the dates and periods
indicated. At December 31, 2006, our borrowings consisted of $4.4 million of
FHLB overnight repurchase agreements.

At or For the
Year Ended December 31,
------------------------------------
2006 2005 2004
---- ---- ----
(Dollars in thousands)

Federal Home Loan Bank Advances:
Balance outstanding at end of period........... $ 4,400 $ - $ -
Average balance outstanding.................... 12,859 197 -
Maximum amount outstanding
at any month-end during the period.......... 24,100 - -
Average interest rate during the year.......... 5.36% 4.03% -
Weighted average rate at end of year........... 5.33% - -

Additional information regarding our borrowings is included under Note 10
to our consolidated financial statements beginning on page F-1.

PROPERTIES AND EQUIPMENT

At December 31, 2006, our investment in property and equipment, net of
depreciation and amortization, totaled $6.5 million. We operated from five
offices at that date, plus an administrative center, and own each of those
locations.

LEGAL PROCEEDINGS

Gloucester County Federal Savings Bank, from time to time, is a party to
routine litigation which arises in the normal course of business, such as claims
to enforce liens, condemnation proceedings on properties in which it holds
security interests, claims involving the making and servicing of real property
loans, and other issues incident to its business. There were no lawsuits pending
or known to be contemplated against Gateway Community Financial Corp. or
Gloucester County Federal Savings Bank at December 31, 2006 that were expected
to have a material effect on operations or income.

REGULATION

Gloucester County Federal Savings Bank and Gateway Community Financial
Corp. operate in a highly regulated industry. This regulation establishes a
comprehensive framework of activities in which a savings and loan holding
company and federal savings bank may engage and is intended primarily for the
protection of the deposit insurance fund and depositors. Set forth below is a
brief description of certain laws that relate to the regulation of Gloucester
County Federal Savings Bank and Gateway Community Financial Corp. The
description does not purport to be complete and is qualified in its entirety by
reference to applicable laws and regulations.

Regulatory authorities have extensive discretion in connection with their
supervisory and enforcement activities, including the imposition of restrictions
on the operation of an institution and its holding company, the classification
of assets by the institution and the adequacy of an institution's allowance for
loan losses. Any change in such regulation and oversight, whether in the form of
regulatory policy, regulations, or legislation, including changes in the
regulations governing mutual holding companies, could have a material adverse
impact on Gateway Community Financial Corp., Gloucester County Federal Savings
Bank, and their operations. The adoption of regulations or the enactment of laws
that restrict the operations of Gloucester County Federal Savings Bank and/or
Gateway Community Financial Corp. or impose burdensome requirements upon one or
both of them could reduce their profitability and could impair the value of
Gloucester County Federal Savings Bank's franchise, resulting in negative
effects on the trading price of Gateway Community Financial Corp. common stock.

REGULATION OF GLOUCESTER COUNTY FEDERAL SAVINGS BANK

GENERAL. As a federally chartered, Federal Deposit Insurance
Corporation-insured savings bank, Gloucester County Federal Savings Bank is
subject to extensive regulation by the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation. This regulatory structure gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies
regarding the classification of assets and the level of the allowance for loan
losses. The activities of federal savings banks are subject to extensive
regulation, including restrictions or requirements with respect to loans to one
borrower, the percentage of non-mortgage loans or investments to total assets,
capital distributions, permissible investments and lending activities,
liquidity, transactions with affiliates and community reinvestment. Federal
savings banks are also subject to reserve requirements imposed by the Federal
Reserve System. A federal savings bank's relationship with its

depositors and borrowers is regulated by both state and federal law, especially
in such matters as the ownership of savings accounts and the form and content of
the bank's mortgage documents.

Gloucester County Federal Savings Bank must file reports with the Office of
Thrift Supervision concerning its activities and financial condition, and must
obtain regulatory approvals prior to entering into certain transactions, such as
mergers with or acquisitions of other financial institutions. The Office of
Thrift Supervision regularly examines Gloucester County Federal Savings Bank and
prepares reports to the Bank's Board of Directors on deficiencies, if any, found
in its operations. The Office of Thrift Supervision has substantial discretion
to impose enforcement action on an institution that fails to comply with
applicable regulatory requirements, particularly with respect to its capital
requirements. In addition, the Federal Deposit Insurance Corporation has the
authority to recommend to the Director of the Office of Thrift Supervision that
enforcement action be taken with respect to a particular federal savings bank
and, if action is not taken by the Director, the Federal Deposit Insurance
Corporation has authority to take such action under certain circumstances.

INSURANCE OF DEPOSIT ACCOUNTS. The Bank's deposits are insured to
applicable limits by the Federal Deposit Insurance Corporation ("FDIC").
Although the FDIC is authorized to assess premiums under a risk-based system for
such deposit insurance, most insured depository institutions have not been
required to pay premiums for the last ten years. The Federal Deposit Insurance
Reform Act of 2005 (the "Reform Act") resulted in significant changes to the
federal deposit insurance program: (i) effective March 31, 2006, the Bank
Insurance Fund and the Savings Association Insurance Fund were merged into a new
combined fund, called the Deposit Insurance Fund; (ii) the current $100,000
deposit insurance coverage will be indexed for inflation (with adjustments every
five years, commencing January 1, 2011); and (iii) deposit insurance coverage
for retirement accounts was increased to $250,000 per participant subject to
adjustment for inflation. In addition, the Reform Act gave the FDIC greater
latitude in setting the assessment rates for insured depository institutions,
which could be used to impose minimum assessments.

The FDIC is authorized to set the reserve ratio for the Deposit Insurance
Fund annually at between 1.15% and 1.5% of estimated insured deposits. If the
Deposit Insurance Fund's reserves exceed the designated reserve ratio, the FDIC
is required to pay out all or, if the reserve ratio is less than 1.5%, a portion
of the excess as a dividend to insured depository institutions based on the
percentage of insured deposits held on December 31, 1996 adjusted for
subsequently paid premiums. Insured depository institutions that were in
existence on December 31, 1996 and paid assessments prior to that date (or their
successors) are entitled to a one-time credit against future assessments based
on the amount of their assessable deposits on that date. The Bank anticipates
that it will be able to offset its deposit insurance premium for 2007 with the
$245,000 special one-time assessment credit it will receive during 2007.

Pursuant to the Reform Act, the FDIC has determined to maintain the
designated reserve ratio at 1.25%. The FDIC has also adopted a new risk-based
premium system that provides for quarterly assessments based on an insured
institution's ranking in one of four risk categories based on their examination
ratings and capital ratios. Beginning in 2007, well-capitalized institutions
with the CAMELS ratings of 1 or 2 will be grouped in Risk Category I and will be
assessed for deposit insurance at an annual rate of between five and seven basis
points, with the assessment rate for an individual institution to be determined
according to a formula based on a weighted average of the institution's
individual CAMEL component ratings plus either five financial ratios or the
average ratings of its long-term debt. Institutions in Risk Categories II, III
and IV will be assessed at annual rates of 10, 28 and 43 basis points,
respectively.

In addition, all FDIC-insured institutions are required to pay assessments
to the FDIC to fund interest payments on bonds issued by the Financing
Corporation ("FICO"), an agency of the Federal

government established to recapitalize the predecessor to the SAIF. The FICO
assessment rates, which are determined quarterly, averaged 0.013% of insured
deposits in fiscal 2006. These assessments will continue until the FICO bonds
mature in 2017.

REGULATORY CAPITAL REQUIREMENTS. Office of Thrift Supervision capital
regulations require savings institutions to meet three minimum capital
standards: (1) tangible capital equal to 1.5% of total adjusted assets, (2)
"Tier 1" or "core" capital equal to at least 4% (3% if the institution has
received the highest possible rating on its most recent examination) of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk-weighted
assets. At December 31, 2006, Gloucester County Federal Savings Bank was in
compliance with the minimum capital standards and qualified as "well
capitalized." For Gloucester County Federal Savings Bank's compliance with these
regulatory capital standards, see Historical and Pro Forma Capital Compliance as
well as Note 15 to the consolidated financial statements. In assessing an
institution's capital adequacy, the Office of Thrift Supervision takes into
consideration not only these numeric factors but also qualitative factors, and
has the authority to establish higher capital requirements for individual
institutions where necessary.

The Office of Thrift Supervision may require any savings institution that
has a risk-based capital ratio of less than 8%, a ratio of Tier 1 capital to
risk-weighted assets of less than 4% or a ratio of Tier 1 capital to total
adjusted assets of less than 4% (3% if the institution has received the highest
rating on its most recent examination) to take certain action to increase its
capital ratios. If the savings institution's capital is significantly below the
minimum required levels of capital or if it is unsuccessful in increasing its
capital ratios, the institution's activities may be restricted.

For purposes of the capital regulations, tangible capital is defined as
core capital less all intangible assets except for certain mortgage servicing
rights. Tier 1 or core capital is defined as common stockholders' equity,
non-cumulative perpetual preferred stock and related surplus, minority interests
in the equity accounts of consolidated subsidiaries, and certain
non-withdrawable accounts and pledged deposits of mutual savings banks.
Gloucester County Federal Savings Bank does not have any non-withdrawable
accounts or pledged deposits. Tier 1 and core capital are reduced by an
institution's intangible assets, with limited exceptions for certain mortgage
and non-mortgage servicing rights and purchased credit card relationships. Both
core and tangible capital are further reduced by an amount equal to the savings
institution's debt and equity investments in "non-includable" subsidiaries
engaged in activities not permissible for national banks other than subsidiaries
engaged in activities undertaken as agent for customers or in mortgage banking
activities and subsidiary depository institutions or their holding companies.

The risk-based capital standard for savings institutions requires the
maintenance of total capital of 8% of risk-weighted assets. Total capital equals
the sum of core and supplementary capital. The components of supplementary
capital include, among other items, cumulative perpetual preferred stock,
perpetual subordinated debt, mandatory convertible subordinated debt,
intermediate-term preferred stock, the portion of the allowance for loan losses
not designated for specific loan losses and up to _____% of unrealized gains on
equity securities. The portion of the allowance for loan and lease losses
includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets. Overall, supplementary capital is limited to 100% of core
capital. For purposes of determining total capital, a savings institution's
assets are reduced by the amount of capital instruments held by other depository
institutions pursuant to reciprocal arrangements and by the amount of the
institution's equity investments (other than those deducted from core and
tangible capital) and its high loan-to-value ratio land loans and
non-residential construction loans.

A savings institution's risk-based capital requirement is measured against
risk-weighted assets, which equal the sum of each on-balance-sheet asset and the
credit-equivalent amount of each off-balance-sheet item after being multiplied
by an assigned risk weight. These risk weights range from 0% for cash to 100%
for delinquent loans, property acquired through foreclosure, commercial loans,
and certain other assets.

DIVIDEND AND OTHER CAPITAL DISTRIBUTION LIMITATIONS. A savings institution,
like Gloucester County Federal Savings Bank, that is a subsidiary of a savings
and loan holding company must file an application or a notice with the Office of
Thrift Supervision at least thirty days before making a capital distribution,
such as paying a dividend to Gateway Community Financial Corp. The Office of
Thrift Supervision imposes various restrictions or requirements on the ability
of savings institutions to make capital distributions, including cash dividends.
A savings institution must file an application for prior approval of a capital
distribution if: (i) it is not eligible for expedited treatment under the
applications processing rules of the Office of Thrift Supervision; (ii) the
total amount of all capital distributions, including the proposed capital
distribution, for the applicable calendar year would exceed an amount equal to
the savings institution's net income for that year to date plus the
institution's retained net income for the preceding two years; (iii) it would
not adequately be capitalized after the capital distribution; or (iv) the
distribution would violate an agreement with the Office of Thrift Supervision or
applicable regulations. The Office of Thrift Supervision may disapprove a notice
or deny an application for a capital distribution if: (i) the savings
institution would be undercapitalized following the capital distribution; (ii)
the proposed capital distribution raises safety and soundness concerns; or (iii)
the capital distribution would violate a prohibition contained in any statute,
regulation or agreement.

Capital distributions by Gateway Community Financial Corp., as a savings
and loan holding company, are not subject to the Office of Thrift Supervision
capital distribution rules. Because Gateway Community Financial Corp. will
retain 50% of the net proceeds of the stock offering, the possibility that
Gloucester County Federal Savings Bank would need to file an application rather
than a notice for capital distributions is not expected to affect the payment of
cash dividends by Gateway Community Financial Corp. to its stockholders or the
amount of such dividends.

SAFETY AND SOUNDNESS STANDARDS. As required by statute, the federal banking
agencies have adopted guidelines establishing general standards relating to
internal controls, information and internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, asset quality,
earnings and compensation, fees and benefits. The guidelines require, among
other things, the implementation of appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. If it
is determined that a savings institution has failed to meet any standard
prescribed by the guidelines, the institution may be required to submit an
acceptable plan to achieve compliance with the standard.

QUALIFIED THRIFT LENDER TEST. Savings institutions must meet a qualified
thrift lender test or they become subject to the business activity restrictions
and branching rules applicable to national banks. To qualify as a qualified
thrift lender, a savings institution must either (i) be deemed a "domestic
building and loan association" under the Internal Revenue Code by maintaining at
least 60% of its total assets in specified types of assets, including cash,
certain government securities, loans secured by and other assets related to
residential real property, educational loans and investments in premises of the
institution or (ii) satisfy the statutory qualified thrift lender test set forth
in the Home Owners' Loan Act by maintaining at least 65% of its portfolio assets
in qualified thrift investments (defined to include residential mortgages and
related equity investments, certain mortgage-related securities, small business
loans, student loans and credit card loans). For purposes of the statutory
qualified thrift lender test, portfolio assets are defined as

total assets minus goodwill and other intangible assets, the value of property
used by the institution in conducting its business, and specified liquid assets
up to 20% of total assets. A savings institution must maintain its status as a
qualified thrift lender on a monthly basis in at least nine out of every twelve
months. Gloucester County Federal Savings Bank met the qualified thrift lender
test as of December 31, 2006 and in each of the last twelve months and,
therefore, qualifies as a qualified thrift lender.

A savings bank that fails the qualified thrift lender test and does not
convert to a bank charter generally will be prohibited from: (1) engaging in any
new activity not permissible for a national bank, (2) paying dividends not
permissible under national bank regulations, and (3) establishing any new branch
office in a location not permissible for a national bank in the institution's
home state. In addition, if the institution does not requalify under the
qualified thrift lender test within three years after failing the test, the
institution would be prohibited from engaging in any activity not permissible
for a national bank and would have to repay any outstanding advances from the
Federal Home Loan Bank as promptly as possible.

COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act, every
insured depository institution, including Gloucester County Federal Savings
Bank, has a continuing and affirmative obligation consistent with its safe and
sound operation to help meet the credit needs of its entire community, including
low and moderate income neighborhoods. The Community Reinvestment Act does not
establish specific lending requirements or programs for financial institutions
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community. The
Community Reinvestment Act requires the depository institution's record of
meeting the credit needs of its community to be assessed and taken into account
in the evaluation of certain applications by such institution, such as a merger
or the establishment of a branch office by Gloucester County Federal Savings
Bank. An unsatisfactory Community Reinvestment Act examination rating may be
used as the basis for the denial of an application. Gloucester County Federal
Savings Bank received a "satisfactory" rating in its most recent Community
Reinvestment Act examination.

FEDERAL HOME LOAN BANK SYSTEM. Gloucester County Federal Savings Bank is a
member of the Federal Home Loan Bank of New York, which is one of twelve
regional federal home loan banks. Each federal home loan bank serves as a
reserve or central bank for its members within its assigned region. It is funded
primarily from funds deposited by financial institutions and proceeds derived
from the sale of consolidated obligations of the Federal Home Loan Bank System.
It makes loans to members pursuant to policies and procedures established by its
board of directors.

As a member, Gloucester County Federal Savings Bank is required to purchase
and maintain stock in the Federal Home Loan Bank of New York in an amount equal
to the greater of 1% of our aggregate unpaid residential mortgage loans, home
purchase contracts or similar obligations at the beginning of each year or 5% of
our outstanding Federal Home Loan Bank advances.

The Federal Home Loan Banks are required to provide funds for the
resolution of troubled savings institutions and to contribute to affordable
housing programs through direct loans or interest subsidies on advances targeted
for community investment and low- and moderate-income housing projects. These
contributions have adversely affected the level of Federal Home Loan Bank
dividends paid and could continue to do so in the future. In addition, these
requirements could result in the Federal Home Loan Banks imposing a higher rate
of interest on advances to their members.

THE USA PATRIOT ACT. Gloucester County Federal Savings Bank is subject to
regulations implementing the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or
the USA Patriot Act. The USA Patriot Act gives the federal

government powers to address terrorist threats through enhanced domestic
security measures, expanded surveillance powers, increased information sharing
and broadened anti-money laundering requirements. By way of amendments to the
Bank Secrecy Act, Title III of the USA Patriot Act takes measures intended to
encourage information sharing among bank regulatory agencies and law enforcement
bodies. Further, certain provisions of Title III impose affirmative obligations
on a broad range of financial institutions, including banks, thrifts, brokers,
dealers, credit unions, money transfer agents and parties registered under the
Commodity Exchange Act.

Among other requirements, Title III of the USA Patriot Act and the related
regulations impose the following requirements with respect to financial
institutions:

o Establishment of anti-money laundering programs that include, at
minimum: (i) internal policies, procedures, and controls; (ii)
specific designation of an anti-money laundering compliance officer;
(iii) ongoing employee training programs; and (iv) an independent
audit function to test the anti-money laundering program.

o Establishment of a program specifying procedures for obtaining
identifying information from customers seeking to open new accounts,
including verifying the identity of customers within a reasonable
period of time.

o Establishment of appropriate, specific, and, where necessary, enhanced
due diligence policies, procedures, and controls designed to detect
and report money laundering.

o Prohibitions on establishing, maintaining, administering or managing
correspondent accounts for foreign shell banks (foreign banks that do
not have a physical presence in any country), and compliance with
certain record keeping obligations with respect to correspondent
accounts of foreign banks.

Bank regulators are directed to consider a holding company's effectiveness
in combating money laundering when ruling on applications under the Federal
Reserve Act and the Bank Merger Act.

REGULATION OF GATEWAY COMMUNITY FINANCIAL CORP.

GENERAL. Gateway Community Financial Corp. is a savings and loan holding
company within the meaning of Section 10 of the Home Owners' Loan Act. It is
required to file reports with the Office of Thrift Supervision and is subject to
regulation and examination by the Office of Thrift Supervision. Gateway
Community Financial Corp. must also obtain regulatory approval from the Office
of Thrift Supervision before engaging in certain transactions, such as mergers
with or acquisitions of other financial institutions. In addition, the Office of
Thrift Supervision has enforcement authority over Gateway Community Financial
Corp. and any non-savings institution subsidiaries. This permits the Office of
Thrift Supervision to restrict or prohibit activities that it determines to be a
serious risk to Gloucester County Federal Savings Bank. This regulation is
intended primarily for the protection of the depositors and not for the benefit
of stockholders of Gateway Community Financial Corp.

ACTIVITIES RESTRICTIONS. As a savings and loan holding company and as a
subsidiary holding company of a mutual holding company, Gateway Community
Financial Corp. is subject to statutory and regulatory restrictions on its
business activities. The non-banking activities of Gateway Community Financial
Corp. and its non-savings institution subsidiaries are restricted to certain
activities specified by Office of Thrift Supervision regulation, which include
performing services and holding properties used by

a savings institution subsidiary, activities authorized for savings and loan
holding companies as of March 5, 1987, and non-banking activities permissible
for bank holding companies pursuant to the Bank Holding Company Act of 1956 or
authorized for financial holding companies pursuant to the Gramm-Leach-Bliley
Act. Before engaging in any non-banking activity or acquiring a company engaged
in any such activities, Gateway Community Financial Corp. must obtain prior
Office of Thrift Supervision approval of such planned activity or acquisition.

MERGERS AND ACQUISITIONS. Gateway Community Financial Corp. must obtain
approval from the Office of Thrift Supervision before acquiring, directly or
indirectly, more than 5% of the voting stock of another savings institution or
savings and loan holding company or acquiring such an institution or holding
company by merger, consolidation or purchase of its assets. Federal law also
prohibits a savings and loan holding company from acquiring more than 5% of a
company engaged in activities other than those authorized for savings and loan
holding companies by federal law or acquiring or retaining control of a
depository institution that is not insured by the Federal Deposit Insurance
Corporation. In evaluating an application for Gateway Community Financial Corp.
to acquire control of a savings institution, the Office of Thrift Supervision
would consider the financial and managerial resources and future prospects of
Gateway Community Financial Corp. and the target institution, the effect of the
acquisition on the risk to the insurance funds, the convenience and the needs of
the community and competitive factors.

WAIVERS OF DIVIDENDS BY GATEWAY COMMUNITY FINANCIAL, MHC. Office of Thrift
Supervision regulations require Gateway Community Financial, MHC to provide
prior notice to the Office of Thrift Supervision of any proposed waiver of its
receipt of dividends from Gateway Community Financial Corp. The Office of Thrift
Supervision reviews dividend waiver notices on a case-by-case basis, and, in
general, does not object to any such waiver if: (i) the waiver would not be
detrimental to the safe and sound operations of the subsidiary savings
association and (ii) the mutual holding company's board of directors determines
that such waiver is consistent with such directors' fiduciary duties to the
mutual holding company's members. Subject to the non-objection of the Office of
Thrift Supervision, we anticipate that Gateway Community Financial, MHC will
waive the receipt of any dividends paid by Gateway Community Financial Corp.

CONVERSION OF GATEWAY COMMUNITY FINANCIAL, MHC TO STOCK FORM. Office of
Thrift Supervision regulations permit Gateway Community Financial, MHC to
convert from the mutual form of organization to the capital stock form of
organization, commonly referred to as a second step conversion. In a second step
conversion, a new holding company would be formed as the successor to Gateway
Community Financial Corp., Gateway Community Financial, MHC's corporate
existence would end, and certain depositors of Gloucester County Federal Savings
Bank would receive the right to subscribe for shares of the new holding company.
In a second step conversion, each share of common stock held by stockholders
other than Gateway Community Financial, MHC would be automatically converted
into shares of common stock of the new holding company.

ACQUISITION OF CONTROL. Under the federal Change in Bank Control Act, a
notice must be submitted to the Office of Thrift Supervision if any person
(including a company), or group acting in concert, seeks to acquire "control" of
a savings and loan holding company or savings association. An acquisition of
"control" can occur upon the acquisition of 10% or more of the voting stock of a
savings and loan holding company or savings institution or as otherwise defined
by the Office of Thrift Supervision. Under the Change in Bank Control Act, the
Office of Thrift Supervision has 60 days from the filing of a complete notice to
act, taking into consideration certain factors, including the financial and
managerial resources of the acquirer and the anti-trust effects of the
acquisition. Any company that so acquires control would then be subject to
regulation as a savings and loan holding company.

FEDERAL SECURITIES LAWS

GENERAL. Gateway Community Financial Corp. has filed with the Securities
and Exchange Commission a registration statement under the Securities Act of
1933 for the registration of the common stock to be issued pursuant to the
offering. Upon completion of the offering, Gateway Community Financial Corp.
common stock will continue to be registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. Gateway Community
Financial Corp. will be subject to the information, proxy solicitation, insider
trading restrictions and other requirements under the Securities Exchange Act of
1934.

SARBANES-OXLEY ACT OF 2002. The Sarbanes-Oxley Act of 2002 implemented
various legislative reforms addressing, among other matters, corporate
governance, auditing and accounting, executive compensation, and enhanced and
timely disclosure of corporate information. As directed by Section 302(a) of
Sarbanes-Oxley Act and the implementing rules of the Securities and Exchange
Commission, Gateway Community Financial Corp.'s Chief Executive Officer and
Chief Financial Officer each will be required to certify that its quarterly and
annual reports do not contain any untrue statement of a material fact. The rules
have several requirements, including having these officers certify that: they
are responsible for establishing, maintaining and regularly evaluating the
effectiveness of our internal controls; they have made certain disclosures to
our auditors and the audit committee of the Board of Directors about our
internal controls; and they have included information in our quarterly and
annual reports about their evaluation and whether there have been significant
changes in our internal controls or in other factors that could significantly
affect internal controls.

TAXATION

FEDERAL TAXATION

Savings institutions are subject to the Internal Revenue Code of 1986, as
amended, in the same general manner as other corporations.

All thrift institutions are now subject to the same provisions as banks
with respect to deductions for bad debts. Thrift institutions that are treated
as "small banks" (the average adjusted bases for all assets of such institution
equals $500 million or less) under the Internal Revenue Code may account for bad
debts by using the experience method for determining additions to their bad debt
reserve. Thrift institutions that are not treated as small banks must now use
the specific charge-off method.

Gateway Community Financial Corp. may exclude from its income 100% of
dividends received from Gloucester County Federal Savings Bank as a member of
the same affiliated group of corporations. A 70% dividends received deduction
generally applies with respect to dividends received from corporations that are
not members of such affiliated group.

Gateway Community Financial, MHC, Gateway Community Financial Corp. and
Gloucester County Federal Savings Bank file separate federal tax returns. The
Bank's income tax return was audited by the IRS in 2002.

STATE TAXATION

Gateway Community Financial, MHC, Gateway Community Financial Corp. and
Gloucester County Federal Savings Bank file New Jersey income tax returns and
are subject to a 9% state income tax that is calculated based on federal taxable
income, subject to certain adjustments.

The state income tax returns of Gateway Community Financial, MHC, Gateway
Community Financial Corp. and Gloucester County Federal Savings Bank have not
been audited during the past five years. For additional information, see Note 11
to the consolidated financial statements beginning on page F-1.

MANAGEMENT

GENERAL

Gateway Community Financial Corp.'s Board of Directors is currently
composed of seven members, with each director serving for a term of three years
in accordance with the requirement in Gateway Community Financial Corp.'s bylaws
that directors be divided into three classes, as nearly equal in number as
possible, with one class elected annually. Each director of Gateway Community
Financial Corp. also serves as a director of Gateway Community Financial, MHC
and Gloucester County Federal Savings Bank. Gateway Community Financial Corp.'s
and Gloucester County Federal Savings Bank's officers are appointed annually by
the Board of Directors and serve at the Board's discretion.

Current
Director Term
Age Position Since(1) Expires
--- -------- -------- -------
Directors:

John S. Gligor, Sr. 66 Chairman of the Board 1996 2007
Walter N. Friedrich 57 Vice Chairman of the Board 1993 2008
Robert C. Ahrens 56 President, Chief Executive Officer and Director 1998 2009
Scott P. Newman 39 Director 2004 2009
Dennis L. King 60 Director 1988 2007
Frank D. Wilson 59 Director 2004 2007
Robert A. Jones 84 Director 1963 2009

Senior Management:
Timothy P. Hand 42 Executive Vice President and Chief Operating Officer
Bruce E. Haines 55 Senior Vice President and Chief Lending Officer
Francis J. Walsh 64 Vice President and Chief Financial Officer
Kristin T. McIlvaine 43 Vice President of Finance

- ----------------------
(1) Indicates the year the individual first became a director of Gloucester
County Federal Savings Bank. Upon the formation of Gateway Community
Financial Corp. in 2001, each person serving at that time as a director
of Gloucester County Federal Savings Bank became a director of Gateway
Community Financial Corp.

BIOGRAPHICAL INFORMATION

JOHN S. GLIGOR, SR. is Vice President and Partner of Concord Truss Company
in Woodbury Heights, New Jersey.

WALTER N. FRIEDRICH joined Friedrich Heating & Air Conditioning Inc. in
1972 and became president of the company in 1982.

ROBERT C. AHRENS joined Gloucester County Federal Savings Bank in June
1973. In March 1997, Mr. Ahrens was appointed president of the Bank and, in
January 1998, Mr. Ahrens also became a director of the Bank. Prior to becoming
president, Mr. Ahrens held numerous positions with the Bank, including Assistant
Treasurer, Treasurer, Chief Lending Officer, Senior Vice President and Executive
Vice President.

SCOTT P. NEWMAN is Vice President of American Title Abstract Corp in
Turnersville, New Jersey.

DENNIS L. KING is currently an adjunct professor at Camden County College.
He was previously employed by the Bank as vice president and chief financial
officer from 1996 to 1999 and as senior vice president and chief financial
officer from 1999 to 2002. Prior to his employment with the Bank, Mr. King was
the owner and president of Far Horizons Travel in Blackwood, New Jersey and an
adjunct professor a Camden County College.

FRANK D. WILSON is owner and president of S.J. Graphics (t/a Kiwa Printing
& Graphics), a small commercial printer on the cutting edge of modern digital
technology, located in Westville, New Jersey.

ROBERT A. JONES is retired from Campbell Soup Company where he was employed
from 1947 through 1986 in various positions, including fieldman, purchasing
agent and Director of Agricultural Purchasing.

TIMOTHY P. HAND joined Gloucester County Federal Savings Bank in 1990. Mr.
Hand was appointed Assistant Vice President/Compliance Officer in 1998 and
Senior Vice President/Chief Lending Officer in 2002. In 2004, Mr. Hand was
appointed to his current position of Executive Vice President/Chief Operating
Officer. Prior to joining the Bank, Mr. Hand worked for Dun and Bradstreet.

BRUCE E. HAINES joined Gloucester County Federal Savings Bank in January
2003 as Manager of Commercial Lending. In January 2004, he was promoted to Vice
President and Chief Lending Officer. In January 2006, he was promoted to Senior
Vice President and Chief Lending Officer. Prior to joining the Bank, Mr. Haines
served as Executive Vice President of Equity Bank in Marlton, New Jersey.

FRANCIS J. WALSH joined Gloucester County Federal Savings Bank as
Comptroller in 1990. In 2004 he was promoted to Chief Financial Officer. Prior
to joining the Bank, Mr. Walsh was employed as the chief financial officer of
the Burlington County Bridge Commission in Palmyra, New Jersey.

KRISTIN T. MCILVAINE joined Gloucester County Federal Savings Bank as a
member of the Board of Directors in 2004. In April 2007, she resigned her seat
as a director in order to join the Bank as an employee at that time. This
transition from a director to an employee is to allow for a transition period
while the Bank prepares for the anticipated third quarter 2007 retirement of its
current Chief Financial Officer, Francis Walsh. Ms. McIlvaine is a certified
public accountant. Prior to joining the Bank as an employee, Ms. McIlvaine was a
partner in the firm of Fitzpatrick & McIlvaine, CPA's, PC in Sewell, New Jersey.
She specialized in tax and financial planning for businesses and individuals.

COMPENSATION DISCUSSION AND ANALYSIS

The following section is intended to provide an understanding of our
overall compensation program for our senior management. Specific information
about the compensation paid to the executives for 2006 follows this section.

Our compensation program is designed to reward our executive
officers'contributions and the teamwork they instill throughout our employee
divisions. It is our core philosophy that the compensation of our executive
officers should reflect their success as a management team in attaining key
operating objectives. Our desire is to attract and retain highly qualified
executives, motivating them to achieve performance that is consistent with our
corporate goals and objectives and rewarding them for superior performance. Our
goal is for executive compensation to be competitive with those of our peers,
with additional compensation opportunities to reward attainment of higher levels
of performance results.

We do not intend, after the stock offering, to make our stock price a
significant factor in determining annual compensation because the price of our
stock is subject to a number of factors outside the control of our management.
Over time, we believe that good operational results will be reflected in our
stock price, but we do not wish to encourage or reward a short-term focus on our
stock price to the potential detriment of achieving longer-term corporate goals
and objectives, including enhancing long-term shareholder value.

A committee of independent directors, comprised of our Human Resources
Committee, oversees the establishment of the components and amount of
compensation paid to our senior management. This committee utilizes available
market surveys for determining the competitiveness of our compensation programs.
The committee also utilizes the services of compensation consultants in
analyzing the competitiveness of our compensation programs. The committee looks
at various factors in evaluating senior management compensation, including:

o How much experience does the executive have?

o How has the executive's performance been for both the current year and
prior years?
o What is the executive's potential for future development?
o What is the executive's immediate level of responsibility?
o How does the executive contribute to the effectiveness of the
management team?

The committee reviews the market competitiveness of our overall
compensation program and makes changes as it determines are appropriate from
time to time. The current elements of our compensation program are not
specifically tied to corporate performance, except for the awards under the
Executive Incentive Retirement Plan. The compensation programs for our executive
officers currently consists of the following material elements:

1. BASE SALARY

Base salaries are established by the committee by comparing our executives'
qualifications, experience and responsibilities with similar positions at
similarly sized financial companies and industrial companies in the market areas
from which we attract our senior management personnel. We review available
market survey information and seek to establish and maintain our base salaries
at market competitive levels. Internal equity is also a consideration. Annual
increases in base salary reflect the committee's overall assessment of the
competitive labor market conditions as well as the committee's

assessment of the individual's job performance and the individual's contribution
to overall corporate performance.

2. RETIREMENT PLAN

We sponsor a trusteed, defined benefit pension plan covering substantially
all employees and officers. The plan calls for benefits to be paid to eligible
employees at retirement based primarily upon the number of years of service and
compensation rates near retirement. This pension plans currently serves as the
primary form of retirement income for our longer service employees.

3. 401(K) MATCH

We offer a 401K plan which encourages employees to supplement their
retirement income with tax- deferred savings. We offer an employer match of
$0.50 for each $1 of employee savings to a maximum matching contribution of 3%
of employee salary to encourage individual savings for retirement.

4. EXECUTIVE INCENTIVE RETIREMENT PLAN

We also provide long term savings and retirement benefits to executive
officers under the Executive Incentive Retirement Plan. The annual awards made
to the executives under this plan are based upon a deferred bonus award. The
amount of such annual deferred bonus award is determined each year by the
committee as a percentage of base salary for senior management based upon
attainment of year-end net income targets. The higher the actual net income
amount for the year, the higher the deferred bonus award as a percentage of base
salary. The committee determines the target bonus percentages at the beginning
of each year based upon net income targets, and such deferred bonus awards are
made at the end of the year based upon actual net income results. The committee
retains the authority to modify the bonus awards at the end of the period within
its discretion based upon its evaluation of unanticipated events or occurrences
impacting overall corporate performance during the year or unique individual job
performance or contribution during the year. Such deferred bonus awards are held
under the Executive Incentive Retirement Plan until the retirement or
termination of the executive.

We have recently implemented Employment Agreements for Robert C. Ahrens,
President and CEO, Timothy P. Hand, EVP and COO, and Bruce E. Haines, SVP and
CLO. The purpose of such agreements is to encourage the long term retention of
members of our senior management team by giving them assurances that their long
term retention is desired by the Board, and to insure that these senior
executives will receive appropriate severance payments in the event of job
elimination, including any such job elimination following a future change of
control transaction.

We do not currently have stock-based compensation available to us as a
component of our compensation program, and officers and directors do not
currently have an equity ownership interest in us. Upon completion of the stock
offering, our compensation program will include an employee stock ownership
plan, which serves as a means of increasing ownership of Gateway Community
Financial Corp.'s common stock by our employees, including our senior
management. This employee stock ownership plan will supplement our existing
retirement program comprised of the pension plan and the 401(k) plan with an
employer matching contribution. Implementation of the employee stock ownership
plan will increase the long-term retirement benefits for all employees. We also
anticipate implementing a stock option plan and a restricted stock bonus plan in
the future (not sooner than six months from the closing of the stock offering
and subject to an approval vote by our stockholders) which will help us maintain
the market competitiveness of our compensation programs. Providing compensation
programs that will increase the stock ownership

of our senior management will supplement the stock purchased by our directors
and some of our officers in this offering and will further align the interests
of our senior management with the stockholders' interests, motivating our
executives to continue building long-term stockholder value by guiding corporate
performance to achieve our annual and long term strategic planning goals.

The compensation actions by the committee include input from Robert C.
Ahrens, President and CEO, however, Mr. Ahrens is not a member of the committee.
The committee also has access to the annual performance reviews conducted by Mr.
Ahrens with the other senior managers. We do not set compensation for positions
specifically based upon benchmarking and do not have a fixed list of component
companies. We do not currently have any guidelines or policies regarding stock
ownership by executive officers or directors. We anticipate that all of our
current compensation is deductible for tax purposes when actually paid, but we
may determine at a future time that non-deductible compensation may be
appropriate based upon the circumstances.

COMPENSATION OF EXECUTIVE OFFICERS

The following table summarizes all compensation during 2006 for our
principal executive officer, Robert C. Ahrens, our principal financial officer,
Francis J. Walsh, and certain other senior executive officers.

Compensation for the Year Ended December 31, 2006
-------------------------------------------------
Change
Non-Equity in All
Incentive Plan Pension Other
Salary Compensation(1) Value(2) Compensation(3) Total
------ --------------- -------- --------------- -----

Robert C. Ahrens $200,000 $7,071 $75,000 $6,998 $289,069
President and CEO

Timothy P. Hand $125,000 $4,365 $20,000 $4,510 $153,875
EVP and COO

Bruce E. Haines $105,000 $3,680 $18,000 $3,788 $130,468
SVP and CLO

Francis J. Walsh $100,000 $3,570 $82,000 $3,610 $189,180
VP and CFO

- ------------------
(1) Represents the award made to the individual for 2006 under the Bank's
Executive Incentive Retirement Plan as well as the interest earned during
2006 on the individual's account balance under the plan.
(2) Represents the increase in the present value of the individual's
accumulated benefit between December 31, 2005 and December 31, 2006.
(3) Represents the Bank's matching contributions to the 401(k) Plan and life
insurance premiums paid on behalf of the individuals.

EXECUTIVE INCENTIVE RETIREMENT PLAN. The Bank's Executive Incentive
Retirement Plan provides for either a lump sum payment or equal annual
installments for a period of 15 years commencing on the first day of the
calendar month following the termination of employment due to retirement,
resignation, disability or death. All payments under the plan are in accordance
with Code Section 409A. The amount payable is based on the vested balance of the
executive's accumulated awards plus interest at the prime rate published in The
Wall Street Journal, credited annually. The annual awards are based upon a
deferred bonus award as a percentage of base salary calculated based upon
attainment of targeted annual Bank net income amounts.

Such deferred bonus awards vest at the rate of 20% per full year of employment
from the date of each award. The participant becomes fully vested in plan awards
at age 65 or upon a change in control. Upon the death of the participant, the
beneficiary shall receive the remaining balance paid in a lump sum.

Interest Earned Account
2006 on Account Balance Balance at
Awards During 2006 December 31, 2006
------ ----------- -----------------

Robert C. Ahrens $4,000 $3,071 $45,748
Timothy P. Hand $2,500 $1,865 $27,849
Bruce E. Haines $2,100 $1,580 $23,585
Francis J. Walsh $2,000 $1,570 $23,339

401(K) SAVINGS AND PROFIT SHARING PLAN. The Gloucester County Federal
Savings Bank 401(k) Savings and Profit Sharing Plan is a tax-qualified defined
contribution savings plan with a profit sharing component for the benefit of all
eligible employees. In addition, employees may also voluntarily elect to defer
between 1% and 50% of their compensation as 401(k) savings under the plan, not
to exceed applicable limits under federal tax laws. In calendar year 2007, an
employee could defer up to the lower of $15,500 or 50% of his salary. Employees
age 50 and over may make catch-up contributions ($5,000 in 2007). The plan also
provides for matching contributions up to a maximum of 50% of the first 6% of a
person's salary for each participant. Employee contributions are immediately
fully vested. Matching contributions are immediately vested.

The Bank's employees may use their account balances in the 401(k) Savings
and Profit Sharing Plan to pay for shares of stock in the stock offering.
Employees do not have special rights, however, to subscribe for stock in the
offering. Their orders will be allocated under the normal order of subscription
rights priority in the same manner as all other eligible depositors. Following
the stock offering, Bank employees may purchase additional shares of Gateway
Community Financial Corp. common stock through the plan using funds in their
Gloucester County Federal Savings Bank 401(k) Savings and Profit Sharing Plan
accounts. The plan trustee will purchase such shares in regular open market
stock transactions at market prices.

PENSION PLAN. The Bank maintains a qualified noncontributory defined
benefit plan ("Retirement Plan") for employees. All employees who have worked
for a period of six month of service and attainment of age 21 are eligible to
accrue benefits under the Retirement Plan. Annual contributions to the
Retirement Plan are made in order to satisfy the actuarially determined minimum
funding requirements in accordance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").

At the normal retirement age of 65, the plan is designed to provide a
single life annuity with no ancillary benefits. For a married participant, the
normal form of benefit is an actuarially reduced joint and survivor annuity
where, upon the participant's death, the participant's spouse is entitled to
receive a benefit equal to 50% of the amount paid during the participant's
lifetime. The joint and survivor annuity will be actuarially equivalent to the
single life annuity. If a member dies in active service, after having become
fully or partially vested, his beneficiary would be entitled to a lump sum death
benefit equal to the commuted value of 84 monthly retirement allowance
installments, which would have been payable had his allowance commenced as of
the first day of the month in which he died. The regular form of all retirement
benefits (normal, early or disability) is guaranteed for the life of the retiree
but not less than 84 monthly installments. If a retiree dies before 84 monthly
installments have been paid, his beneficiary would be entitled to the

commuted value of such unpaid installments paid in a lump sum. Either the member
or beneficiary may elect to have this benefit paid in the form of installments.

The annual retirement benefit provided is an amount equal to the sum of
2.75% times years of benefit service (not to exceed 25) times the average annual
salary for five consecutive years of highest salary. Retirement benefits are
also payable upon retirement due to early and late retirement, disability or
death. An early retirement benefit is available beginning at age 55 for a
benefit of 2.75% times years of benefit service (not to exceed 25) times the
average annual salary for five consecutive years of highest salary. This early
retirement benefit is reduced if payments begin before age 65. A reduced benefit
is payable upon early retirement at or after age 55. Benefits are payable in
various annuity forms.

The following table provides information with respect payments or other
benefits at, following, or in connection with retirement under the Pension Plan.

Number of Present value of Payments During
Years Credited Accumulated Last Fiscal
Service Benefit(1) Year
------- ------- ----

Robert C. Ahrens 33 $539,000 $0
Timothy P. Hand 16 $87,000 $0

Bruce E. Haines 3 $49,000 $0

Francis J. Walsh 16 $403,000 $0

--------------
(1) Assumptions used: half of the qualified benefits valued at 7.75%
and the other half valued at 5.00%, discounted to current age at 7.75%,
no pre-retirement decrements.

EMPLOYMENT AGREEMENTS AND POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN
CONTROL. The Bank has entered into employment agreements with Messrs. Ahrens,
Hand and Haines. Mr. Ahrens', Mr Hand's and Mr. Haines' current base salaries
are $225,000, $145,000 and $120,000, respectively. Mr. Ahrens' employment
agreements has a term of three years while Mr. Hand's and Mr. Haines' agreements
have terms of one year. Each of the agreements provides for an annual one-year
extension of the term of the agreement upon determination of the Board of
Directors that the executive's performance has met the requirements and
standards of the Board, so that the remaining term of the agreement continues to
be three years, in the case of Mr. Ahrens, and one year, in the case of Messrs.
Hand and Haines. If the Bank terminates Messrs. Ahrens, Hand or Haines without
"just cause" as defined in the agreement, they will be entitled to a
continuation of their salary from the date of termination through the remaining
term of their agreement, but in no event for a period of less than 12 months and
during the same period, the cost of obtaining all health, life, disability, and
other benefits at levels substantially equal to those being provided on the date
of termination of employment. Messrs. Ahrens', Hand's and Haines' employment
agreements provide that if their employment is terminated without just cause
within one year of a change in control, they will be paid an amount equal to
approximately three times their base salary for Mr. Ahrens and one year in the
case of Messrs. Hand and Haines.

COMPENSATION OF DIRECTORS

The following table summarizes compensation to our directors during
2006. Currently each director of the Bank also serves on the Boards of Gateway
Community Financial Corp. or Gateway Community Financial, MHC. At this time, no
additional compensation is paid for service on those Boards; the directors are
compensated only by the Bank. Mr. Ahrens, who is the only director at this time
who is also an employee, is not compensated for serving as a director.

Total Director Compensation
for the Year Ended December 31, 2006
------------------------------------

Cash Fees for
Board and
Committee Change in
Meeting Pension
Attendance Value(1) Total
---------- ----- -----

John S. Gligor, Sr. $37,350 $15,624 $52,974
Walter N. Friedrich $29,950 $4,468 $34,418
Robert A. Jones $23,750 $7,736 $31,486
Dennis L. King $25,050 $4,752 $29,802
Scott P. Newman $23,350 $783 $24,133
Frank D. Wilson $23,850 $1,623 $25,473
Kristin T. McIlvaine(2) $25,900 $930 $26,830
- ----------------
(1) Represents increase in the aggregate present value of the accrued
benefit under the Director Fee Continuation Plan for between December
31, 2005 and December 31, 2006.
(2) Ms. McIlvaine served as a director during 2006. In April 2007, she
resigned from the Board and became an employee of the Bank.

As shown in the above table, there was no compensation to the directors
during 2006 other than (i) the cash fees paid for board meeting and committee
meeting attendance and (ii) accruals under our Director Fee Continuation Plan.
Directors currently are paid a fee of $1,200 per board meeting attended. The
higher amount of 2006 cash fees for Board and committee meeting attendance shown
in the above table for Messrs. Gligor and Friedrich is because they served as
Chairman and Vice Chairman, respectively, of the Board of Directors during 2006
and the Chairman and Vice Chairman currently are paid a fee of $2,100 and
$1,600, respectively, per board meeting attended, as compared to $1,200 paid to
the other directors. The aggregate amount of cash fees for Board and committee
meeting attendance varies from year to year and varies among the individual
directors because fees are only paid for meetings attended and some directors
may attend more meetings than others. Also, the directors generally rotate
committee assignments and the committees do not all meet the same number of
times each year. Committee chairman and directors are currently paid $300 and
$250, respectively, per committee meeting attended.

DIRECTOR FEE CONTINUATION PLAN. Gloucester County Federal Savings Bank's
Director Fee Continuation Plan provides retirement benefits to the directors of
Gloucester County Federal Savings Bank. The retirement benefit is calculated as
50% of the average of the three years highest years of the director's total
compensation. The benefit is payable upon normal retirement age of 80 or upon
attainment of age 65 and ten years of service as a director. Such benefit is
payable annually for 10 years. If the director dies prior to receiving the 10
annual payments, the remaining payments may be made in a lump sum or annual

installments to his beneficiary. If the director dies prior to normal retirement
age, the benefit is payable in either a lump sum or 10 annual installments to
his beneficiary.

Vesting in this plan is 10% for each full year of service. If the director
terminates service prior to normal retirement date, the director will receive
the accrued balance of the account multiplied by the vested percentage. This
severance compensation shall be paid in 10 equal annual payments.

Upon a change in control, if the director suffers a termination of service,
then the director shall receive the normal retirement benefits, as if the
director had been serving the Bank until the normal retirement age.

FUTURE STOCK BENEFIT PLANS

EMPLOYEE STOCK OWNERSHIP PLAN. The Bank intends to establish the Gloucester
County Federal Savings Bank Employee Stock Ownership Plan for the exclusive
benefit of participating employees of Gloucester County Federal Savings Bank, to
be implemented prior to the completion of the offering. Participating employees
are salaried, full-time employees who have completed at least one year of
service and have attained the age of 21. An application for a letter of
determination as to the tax-qualified status of the Gloucester County Federal
Savings Bank Employee Stock Ownership Plan will be submitted to the IRS.
Although no assurances can be given, we expect that a favorable letter of
determination will be received from the IRS.

The Gloucester County Federal Savings Bank Employee Stock Ownership Plan is
to be funded by contributions made by Gloucester County Federal Savings Bank in
cash or common stock. Benefits may be paid either in shares of the common stock
or in cash. The Gloucester County Federal Savings Bank Employee Stock Ownership
Plan will borrow funds with which to acquire up to 8% of the shares sold in the
offering.

The Gloucester County Federal Savings Bank Employee Stock Ownership Plan
may elect, in whole or in part, to fill its order through open market purchases
subsequent to the closing of the offering, subject to any required regulatory
approval. It intends to borrow funds from Gateway Community Financial Corp. The
loan is expected to be for a term of ten years at an annual interest rate equal
to the prime rate published in The Wall Street Journal. Presently it is
anticipated that the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan will purchase up to 8% of the shares sold in the offering. The
loan will be secured by the shares purchased and earnings of employee stock
ownership plan assets. Shares purchased with loan proceeds will be held in a
suspense account for allocation among participants as the loan is repaid. It is
anticipated that all contributions will be tax-deductible.

Contributions to the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan and shares released from the suspense account will be allocated
annually among participants on the basis of total taxable cash compensation. All
participants must have completed a year of service during the plan year, or have
terminated employment following death, disability or retirement, in order to
receive an allocation. Employment service before the adoption of the Gloucester
County Federal Savings Bank Employee Stock Ownership Plan shall be credited for
the purposes of vesting. Contributions to the Gloucester County Federal Savings
Bank Employee Stock Ownership Plan by Gloucester County Federal Savings Bank are
discretionary and as a result benefits payable under the Gloucester County
Federal Savings Bank Employee Stock Ownership Plan cannot be estimated.

The Board of Directors has appointed the non-employee directors to a
committee that will administer the Gloucester County Federal Savings Bank
Employee Stock Ownership Plan and serve as its trustees. The trustees must vote
all allocated shares as directed by plan participants. Unallocated shares and
allocated shares for which no timely direction is received will be voted as
directed by the Board of Directors or the Gloucester County Federal Savings Bank
Employee Stock Ownership Plan's committee, subject to the trustees' fiduciary
duties.

STOCK OPTION PLAN. We intend to adopt a stock option plan for the
benefit of directors and officers after the passage of at least six months
following the completion of the offering. Up to 4.9% of the total number of
shares of common stock outstanding after the offering, including shares held by
Gateway Community Financial, MHC, will be reserved for issuance under the stock
option plan. No determinations have been made as to any specific grants to be
made under the stock option plan or the terms thereof.

The purpose of the stock option plan will be to attract and retain
qualified personnel in key positions, provide officers and directors with a
proprietary interest in Gateway Community Financial Corp. as an incentive to
contribute to our success and reward directors and officers for outstanding
performance. Although the terms of the stock option plan have not yet been
determined, it is expected that the stock option plan will provide for the grant
of: (1) options to purchase the common stock intended to qualify as incentive
stock options under the Internal Revenue Code (incentive stock options); and (2)
options that do not so qualify (non-incentive stock options). The exercise price
of any options will be not less than the fair market value of the common stock
on the date of grant. Any stock option plan would be in effect for up to 10
years following the earlier of adoption by the Board of Directors or approval by
the stockholders. Options would expire no later than 10 years following the date
granted and would expire earlier if the option committee so determines or in the
event of termination of employment. Options would be granted based upon several
factors, including seniority, job duties and responsibilities and job
performance.

RESTRICTED STOCK PLAN. We also intend to establish a restricted stock plan
to provide our officers and directors with a proprietary interest in Gateway
Community Financial Corp. after the passage of at least six months following the
completion of the offering. The restricted stock plan is expected to provide for
the award of common stock, subject to vesting restrictions, to eligible officers
and directors.

We expect to contribute funds to the restricted stock plan to acquire, in
the aggregate, up to 1.96% of the total number of shares of common stock
outstanding after the offering, including shares held by Gateway Community
Financial, MHC. Shares used to fund the restricted stock plan may be acquired
through open market purchases or provided from authorized but unissued shares.
No determinations have been made as to the specific terms of the restricted
stock plan.

If we implement the restricted stock plan within one year of the offering
and Gloucester Count Federal Savings Bank's tangible capital following the stock
offering is less than 10%, then the number of shares that may be awarded under
the restricted stock plan will be reduced and may not exceed 1.47% of the total
shares outstanding rather than 1.96%. If, at our discretion, we further reduce
the restricted stock plan to 1.3%, we may keep the number of shares in the
employee stock ownership plan at 3.6%. If we reduce the restricted stock plan to
only 1.47% of the outstanding shares, however, then the employee stock ownership
plan would also be reduced, to 3.4%.

DILUTION. While our intention is to fund the stock option plan and
restricted stock plan through open market purchases, stockholders will
experience a reduction or dilution in ownership interest if the plans are
instead funded with newly-issued shares.

The issuance of authorized but unissued shares of stock to the restricted
stock plan instead of open market purchases would dilute the voting interests of
existing stockholders by approximately 1.9%.

The issuance of authorized but unissued shares of stock to the stock option
plan instead of open market purchases would dilute the voting interests of
existing stockholders by approximately 4.7%.

STOCKHOLDER APPROVAL OF STOCK OPTIONS AND RESTRICTED STOCK. The stock
option plan and restricted stock plan will comply with all applicable Office of
Thrift Supervision regulations in effect at the time the plans are adopted.
Those regulations are subject to change. We will submit the stock options plan
and restricted stock plan to stockholders for their approval, at which time we
will provide stockholders with detailed information about the plans and the
required approval. Under current Office of Thrift Supervision Regulations, the
plans must be approved by a majority of the total votes eligible to be cast by
our stockholders, other than Gateway Community Financial, MHC. The Office of
Thrift Supervision has proposed changes to its regulations regarding equity
incentive plans that would eliminate the requirement to obtain the separate vote
of minority stockholders for the plans if they are implemented more than one
year after completion of a minority stock offering. In the event that the
proposed Office of Thrift Supervision regulations are adopted in final form,
Gateway Community Financial, MHC, as the holder of a majority of the shares of
Gateway Community Financial Corp. would control the outcome of any vote to
approve an equity incentive plan that occurs more than one year after the
completion of the offering.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

No directors, executive officers or their immediate family members were
engaged, directly or indirectly, in transactions with Gateway Community
Financial Corp. or Gloucester County Federal Savings Bank during the three years
ended December 31, 2006 that exceeded $120,000 (excluding loans with the Bank).

Gloucester County Federal Savings Bank makes loans to its officers,
directors and employees in the ordinary course of business. Such loans do not
include more than the normal risk of collectibility or present other unfavorable
features. Such loans are made on substantially the same terms, including
interest rate and collateral, as those prevailing at the time for comparable
loans with persons not related to Gloucester County Federal Savings Bank.

DIRECTOR INDEPENDENCE

Other than Mr. Robert C. Ahrens, who is our President and Chief Executive
Officer, each member of our Board of Directors is an outside director
independent of management, Gateway Community Financial Corp. and Gloucester
County Federal Savings Bank. Each is free of any relationship that would
interfere with the exercise of independent judgment in carrying out their duties
as directors. The Board of Directors carefully monitors any situation that could
cause a member to cease to be independent under the requirements of the NASDAQ
Stock Market. Each director, other than Mr. Ahrens, currently qualifies as
independent under the rules of the NASDAQ Stock Market.

PROPOSED STOCK PURCHASES BY MANAGEMENT

Preliminary indications from our directors and executive officers and their
associates are that they will subscribe for an aggregate of approximately
235,000 shares in the stock offering. If 2,700,000 shares are sold (the midpoint
of the offering range), their anticipated purchases would represent 8.7% of the
shares sold in the offering and 3.9% of the 6,000,000 total shares outstanding
after the offering, including shares

issued to Gateway Community Financial, MHC. At the maximum of the offering
range, these percentages decrease to 7.6% and 3.4%.

The following table sets forth the amount of stock that our directors
and executive officers have indicated that they intend to purchase in the
offering. The intended purchases of each director's or officer's associates are
included in that director's or officer's total. Employees of Gloucester County
Federal Savings Bank will be able to use their account balances in the Bank's
401(k) Savings and Profit Sharing Plan to pay for shares of stock purchased in
the offering, and shares that the executive officers intend to purchase through
this plan are included in the amounts shown below. Directors do not participate
in the Bank's 401(k) plan.

Number of
Name Shares
---- ------
John S. Gligor, Sr....................... 25,000
Walter N. Friedrich...................... 20,000
Robert C. Ahrens......................... 25,000
Scott P. Newman.......................... 25,000
Dennis L. King........................... 25,000
Frank D. Wilson.......................... 25,000
Robert A. Jones.......................... 10,000
Timothy P. Hand.......................... 20,000
Bruce E. Haines.......................... 20,000
Francis J. Walsh......................... 20,000
Kristin T. McIlvaine..................... 20,000
-------
Total............................... 235,000
=======

The purchases by the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan and any stock benefit plans to be adopted following the stock
offering will increase the insiders' ownership of shares.

Purchases of common stock in the offering by directors and executive
officers and their associates will be counted toward the minimum of 2,295,000
shares required to be sold to public stockholders to complete the offering.
Management may, but is not required to, purchase additional shares in the
offering to satisfy this minimum, subject to the limitation on the individual
maximum share purchase limitations and the requirement that directors, executive
officers and their associates may not purchase, in the aggregate, more than 30%
of the shares sold in the offering.

THE OFFERING

The Board of Directors adopted the plan authorizing the stock offering on
January 29, 2007, subject to the approval of the Office of Thrift Supervision.
We received authorization from the Office of Thrift Supervision to conduct the
stock offering on May 14, 2007. Office of Thrift Supervision authorization does
not constitute a recommendation or endorsement of an investment in our stock by
the Office of Thrift Supervision.

GENERAL

Gateway Community Financial Corp. will sell its common stock to eligible
depositors of Gloucester County Federal Savings Bank in a subscription offering
and, if shares are available, to the general public in a community offering
and/or a syndicated community offering. The stock offering will be accomplished
in accordance with the procedures set forth in the plan, the requirements of
applicable laws and regulations, and the policies of the Office of Thrift
Supervision.

We are offering for sale between 2,295,000 shares at the minimum and
3,105,000 shares at the maximum of the offering range (3,570,750 shares at the
adjusted maximum. The minimum purchase is 25 shares of common stock (minimum
investment of $250). Our common stock is being offered at a fixed price of
$10.00 per share in the offering. Interest will be paid on subscription funds
from the date the payment is received until the offering is either completed or
terminated.

We may cancel the offering at any time prior to completion. If we do,
orders for common stock already submitted will be canceled and subscribers'
funds will be returned with interest.

In accordance with Rule 15c2-4 of the Securities Exchange Act of 1934,
pending completion or termination of the offering, subscription funds received
by us will be invested only in investments permissible under Rule 15c2-4.

PURPOSES OF THE STOCK OFFERING

The proceeds from the sale of common stock of Gateway Community Financial
Corp. will provide Gloucester County Federal Savings Bank with new equity
capital, which will support future growth and expanded operations. While
Gloucester County Federal Savings Bank currently exceeds all regulatory capital
requirements to be considered well capitalized, the sale of stock, coupled with
the accumulation of earnings, less dividends or other reductions in capital,
from year to year, provides a means for the orderly preservation and expansion
of Gloucester County Federal Savings Bank's capital base.

The offering will afford our directors, officers and employees the
opportunity to become stockholders, which we believe to be an effective
performance incentive and an effective means of attracting and retaining
qualified personnel. The offering also will provide our customers and local
community members with an opportunity to acquire our stock.

CONDUCT OF THE OFFERING

Subject to the limitations of the plan of stock issuance adopted by our
Board of Directors, shares of common stock are being offered in descending order
of priority in the subscription offering to:

o Eligible Account Holders (depositors at the close of business on December
31, 2005 with deposits of at least $50.00);

o the Gloucester County Federal Savings Bank Employee Stock Ownership Plan;

o Supplemental Eligible Account Holders (depositors at the close of business
on March 31, 2007 with deposits of at least $50.00) ; and =====

o Other Eligible Account Holders (depositors at the close of business on
April 30, 2007 with deposits of at least $50.00).

To the extent that shares remain available and depending on market
conditions at or near the completion of the subscription offering, we may
conduct a community offering and possibly a syndicated community offering. The
community offering, if any, may commence at any time during or subsequent to the
completion of the subscription offering. A syndicated community offering, if we
conduct one, would commence just prior to, or as soon as practicable after, the
termination of the subscription offering. In any community offering or
syndicated community offering, we will fill orders for our common stock in an
equitable manner as determined by the Board of Directors in order to achieve a
wide distribution of the stock.

Any shares sold above the maximum of the offering range may be sold to the
Gloucester County Federal Savings Bank Employee Stock Ownership Plan before
satisfying remaining unfilled orders of Eligible Account Holders to fill the
plan's subscription, or the plan may purchase some or all of the shares covered
by its subscription after the offering in the open market, subject to any
required regulatory approval.

SUBSCRIPTION OFFERING

SUBSCRIPTION RIGHTS. Non-transferable subscription rights to subscribe for
the purchase of common stock have been granted under the plan of stock issuance
to the following persons in the following order of priority:

PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder shall be
given the opportunity to purchase, subject to the overall limitations described
under Limitations on Purchases of Common Stock, up to the greater of (i) the
maximum purchase limitation in the community offering (i.e., 15,000 shares),
(ii) one-tenth of 1% of the total shares of common stock offered in the
subscription and community offering, and (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of common stock offered in the subscription and community offering by a
fraction, of which the numerator is the total amount of the qualifying deposits
of the Eligible Account Holder and the denominator is the total amount of all
qualifying deposits of all Eligible Account Holders. If there are insufficient
shares available to satisfy all subscriptions of Eligible Account Holders,
shares will be allocated to Eligible Account Holders so as to permit each
subscribing Eligible Account Holder to purchase a number of shares sufficient to
make his total allocation equal to the lesser of 100 shares or the number of
shares ordered. Thereafter, unallocated shares will be allocated to remaining
subscribing Eligible Account Holders whose subscriptions remain unfilled in the
same proportion that each subscriber's qualifying deposit bears to the total
amount of qualifying deposits of all subscribing Eligible Account Holders, in
each case measured as of December 31, 2005, whose subscriptions remain unfilled.
Subscription rights received by officers and directors of Gateway Community
Financial Corp. or Gloucester County Federal Savings Bank, and such persons'
associates, based on their increased deposits in Gloucester County Federal
Savings Bank in the one year preceding December 31, 2005 will be subordinated to
the subscription rights of the Eligible Account Holders. To ensure proper
allocation of stock, each Eligible Account Holder must list on his order form
all accounts in which he had an ownership interest as

of the Eligibility Record Date. Failure to list an account, or providing
incorrect information, could result in the loss of all or a part of the
subscriber's allocation.

PRIORITY 2: THE EMPLOYEE STOCK OWNERSHIP PLAN. If there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, the Gloucester County Federal Savings Bank Employee Stock Ownership
Plan may be given the opportunity to purchase in the aggregate up to but less
than 5% of the total number of shares of common stock issued in the offering to
public stockholders and to Gateway Community Financial, MHC. It is expected that
the Gloucester County Federal Savings Bank Employee Stock Ownership Plan will
purchase up to 8% of the shares sold in the offering. To the extent that it does
not purchase shares in the offering, it intends to purchase shares in the open
market purchases subsequent to the closing of the offering, subject to any
required regulatory approval.

PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. If there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account Holders
and the employee stock ownership plan, each Supplemental Eligible Account Holder
shall be given the opportunity to purchase, subject to the overall limitations
described under Limitations on Purchases of Common Stock, up to the greater of
(i) the maximum purchase limitation in the community offering (i.e., 15,000
shares), (ii) one-tenth of 1% of the total shares of common stock offered in the
subscription and community offering, and (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of common stock offered in the subscription and community offering by a
fraction, of which the numerator is the amount of the qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
all qualifying deposits of all Supplemental Eligible Account Holders. If
Supplemental Eligible Account Holders subscribe for a number of shares which,
when added to the shares subscribed for by Eligible Account Holders and the
employee stock ownership plan, is in excess of the total number of shares
offered in the offering, the shares of common stock will be allocated among
subscribing Supplemental Eligible Account Holders first so as to permit each
subscribing Supplemental Eligible Account Holder to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100 shares or the
number of shares ordered. Thereafter, unallocated shares will be allocated to
each subscribing Supplemental Eligible Account Holder whose subscription remains
unfilled in the same proportion that each subscriber's qualifying deposit bear
to the total amount of qualifying deposits of all subscribing Supplemental
Eligible Account Holders, in each case measured as of March 31, 2007, whose
subscriptions remain unfilled. To ensure proper allocation of stock, each
Supplemental Eligible Account Holder must list on his order form all accounts in
which he had an ownership interest as of the Supplemental Eligibility Record
Date. Failure to list an account, or providing incorrect information, could
result in the loss of all or a part of the subscriber's allocation.

PRIORITY 4: OTHER ELIGIBLE ACCOUNT HOLDERS. If there are sufficient shares
remaining after satisfaction of subscriptions by Eligible Account Holders, the
employee stock ownership plan and Supplemental Eligible Account Holders, each
Other Eligible Account Holder shall be given the opportunity to purchase,
subject to the overall limitations described under Limitations on Purchases of
Common Stock, up to the greater of (i) the maximum purchase limitation in the
community offering (i.e., 15,000 shares), (ii) one-tenth of 1% of the total
shares of common stock offered in the subscription and community offering, and
(iii) 15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of common stock offered in the
subscription and community offering by a fraction, of which the numerator is the
amount of the qualifying deposits of the Other Eligible Account Holder and the
denominator is the total amount of all qualifying deposits of all Other Eligible
Account Holders. If Other Eligible Account Holders subscribe for a number of
shares which, when added to the shares subscribed for by Eligible Account
Holders, the employee stock ownership plan and Supplemental Eligible Account
Holders, is in excess of the total number of shares offered in the offering, the
shares of common stock will

be allocated among subscribing Other Eligible Account Holders first so as to
permit each subscribing Other Eligible Account Holder to purchase a number of
shares sufficient to make his total allocation equal to the lesser of 100 shares
or the number of shares ordered. Thereafter, unallocated shares will be
allocated to each subscribing Other Eligible Account Holder whose subscription
remains unfilled in the same proportion that each subscriber's qualifying
deposit bear to the total amount of qualifying deposits of all subscribing Other
Eligible Account Holders, in each case measured as of April 30, 2007, whose
subscriptions remain unfilled. To ensure proper allocation of stock, each Other
Eligible Account Holder must list on his order form all accounts in which he had
an ownership interest as of April 30, 2007. Failure to list an account, or
providing incorrect information, could result in the loss of all or a part of
the subscriber's allocation.

JOINT ACCOUNTS. Subscription rights in connection with a joint account
must be shared with the other persons on the joint account; a joint account
entitles the holders thereof to submit orders for up to an aggregate of 15,000
shares if that is the only account under which they have subscription rights.
Joint account holders are not entitled to place multiple orders that would in
the aggregate exceed 15,000 shares. If, however, persons with a joint account
have one or more other accounts at Gloucester County Federal Savings Bank
(including a second joint account that is identical to the first joint account),
they may place orders using those accounts in order to exceed the 15,000
individual purchase limit, subject to the overall limitations described under
Limitations on Purchases of Common Stock.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES. Applicable
regulations and the plan of stock issuance prohibits any person with
subscription rights, including Eligible Account Holders, Supplemental Eligible
Account Holders and Other Eligible Account Holders, from transferring or
entering into any agreement or understanding to transfer the legal or beneficial
ownership of the subscription rights or the shares of common stock to be issued
when subscription rights are exercised. Subscription rights may be exercised
only by the person to whom they are granted. Each person subscribing for shares
will be required to certify that such person is purchasing shares solely for his
own account and that he has no agreement or understanding regarding the sale or
transfer of the shares. The regulations also prohibit any person from offering
or making an announcement of an offer or intent to make an offer to purchase
subscription rights or shares of common stock before the completion of the
offering.

WE WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT WE
BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS
WHICH WE DETERMINE INVOLVE THE TRANSFER OF SUBSCRIPTION RIGHTS.

DEADLINES FOR PURCHASING STOCK

The subscription offering will terminate at __:__ _.m., Eastern time,
on ____________, 2007. We may extend this expiration date without notice to you
for up to 45 days, until ____________, 2007. Once submitted, your order is
irrevocable unless the offering is extended beyond ____________, 2007. We may
request permission from the Office of Thrift Supervision to extend the offering
beyond ____________, 2007, and the Office of Thrift Supervision may grant one or
more extensions of the offering of up to 90 days per extension, but in no event
may the offering be extended beyond ____________, 2009. If the offering is
extended beyond ____________, 2007, we will notify each subscriber and
subscribers will have the right to confirm, modify or rescind their
subscriptions. If an affirmative response is not received prior to the
expiration of the resolicitation period, a subscriber's subscription will be
canceled and funds will be returned with interest.

A community offering and a syndicated community offering, if such
offerings are conducted, may terminate at any time without notice but no later
than ____________, 2007.

COMMUNITY OFFERING

If less than the total number of shares of common stock to be
subscribed for in the offering are sold in the subscription offering then shares
remaining unsubscribed may be made available for purchase in the community
offering to certain members of the general public. The maximum amount of common
stock that any one person may purchase in the community offering is 15,000
shares, or $150,000.

Preference in the community shall be given first to natural persons and
trusts of natural persons residing in Gloucester and Camden Counties, New Jersey
and second to other natural persons and trusts of natural persons residing in
New Jersey. If shares are available for these "preferred purchasers" in the
community offering but there are insufficient shares to satisfy all orders, the
available shares will be allocated first to each preferred purchasers whose
order we accept in an amount equal to the lesser of 100 shares or the number of
shares ordered by each such subscriber, if possible. After that, unallocated
shares will be allocated among the remaining preferred purchasers whose orders
remain unsatisfied in the same proportion that the unfilled order of each such
subscriber bears to the total unfilled orders of all such subscribers. If, after
filling the orders of the first group of preferred purchasers (natural persons
and trusts of natural persons residing in Gloucester and Camden Counties, New
Jersey) and then the orders of the second group of preferred purchasers (natural
persons and trusts of natural persons residing in New Jersey), shares are
available for other subscribers in the community offering but there are
insufficient shares to satisfy all orders, shares will be allocated in the same
manner as for preferred purchasers.

We will consider persons residing in one of the specified counties if
they occupy a dwelling in the county and establish an ongoing physical presence
in the county that is not merely transitory in nature. We may utilize depositor
or loan records or other evidence provided to us to make a determination as to
whether a person is a resident in one of the specified counties. In all cases,
the determination of residence status will be made by us in our sole discretion.

The community offering, if any, may commence at any time during or
subsequent to the completion of the subscription offering. The community
offering, if any, must be completed within 45 days after the completion of the
subscription offering unless otherwise extended by the Office of Thrift
Supervision.

If we receive regulatory approval for an extension, all subscribers
will be notified of the extension and of the duration of any extension that has
been granted, and will have the right to confirm, increase, decrease or rescind
their orders. If we do not receive an affirmative response from a subscriber to
any resolicitation, the subscriber's order will be rescinded and all funds
received will be promptly returned with interest.

THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE
COMMUNITY OFFERING IS SUBJECT TO OUR RIGHT TO REJECT ORDERS, IN WHOLE OR PART,
EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING
THE EXPIRATION DATE OF THE OFFERING. IF YOUR ORDER IS REJECTED IN PART, YOU WILL
NOT HAVE THE RIGHT TO CANCEL THE REMAINDER OF YOUR ORDER.

SYNDICATED COMMUNITY OFFERING

will have any obligation to take or purchase any shares of the common stock in
the syndicated community offering; however, Sandler O'Neill has agreed to use
its best efforts in the sale of shares in any syndicated community offering. The
syndicated community offering would terminate no later than 45 days after the
expiration of the subscription offering, unless extended by us, with approval of
the Office of Thrift Supervision. See - Community Offering above for a
discussion of rights of subscribers in the event an extension is granted.

THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE SYNDICATED
COMMUNITY OFFERING IS SUBJECT TO OUR RIGHT TO REJECT ORDERS, IN WHOLE OR PART,
EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING
THE EXPIRATION DATE OF THE OFFERING. IF YOUR ORDER IS REJECTED IN PART, YOU WILL
NOT HAVE THE RIGHT TO CANCEL THE REMAINDER OF YOUR ORDER.

The maximum amount of common stock that any one person may purchase in the
syndicated community offering is 15,000 shares, or $150,000. We may begin the
syndicated community offering or underwritten public offering at any time
following the commencement of the subscription offering.

If we are unable to find purchasers from the general public for all
unsubscribed shares, we will make other purchase arrangements, if feasible.
Other purchase arrangements must be approved by the Office of Thrift Supervision
and may provide for purchases by directors, officers, their associates and other
persons in excess of the limitations provided in the plan of stock issuance and
in excess of the proposed director purchases discussed earlier, although no
purchases are currently intended. If other purchase arrangements cannot be made,
we may do any of the following: terminate the stock offering and promptly return
all funds; return all funds, then set a new offering range and notify all
subscribers to give them the opportunity to confirm, cancel or change their
orders; or take such other actions as may be permitted by the Office of Thrift
Supervision.

LIMITATIONS ON PURCHASES OF COMMON STOCK

The following additional limitations have been imposed on purchases of
shares of common stock:

1. The maximum purchase of common stock by an individual is $150,000.
This limit applies to stock purchases in total in the subscription,
community and/or syndicated community offerings. A joint account
entitles the holders thereof to submit orders for up to an aggregate
of 15,000 shares; they may not exceed 15,000 shares if that is the
only account under which they have subscription rights. Persons with a
joint account must have one or more other accounts at Gloucester
County Federal Savings Bank (including a second joint account that is
identical to the first joint account) in order to exceed the 15,000
share individual purchase limit.

2. The purchases of individuals who are considered to be associates of
each other or who are deemed to be acting in concert with each other
will be limited so that no more than 25,000 shares in aggregate are
purchased by such individuals. Persons with joint account
relationships are presumed to be acting in concert with each other.
Persons or entities having the same address on any account or stock
order form will be considered to be acting in concert. This limit
applies to stock purchases in total in the subscription, community and
syndicated community offerings. This limit does not apply to the
Gloucester County Federal Savings Bank Employee Stock Ownership Plan
which may subscribe for up to but less than 5% of the total number of
shares of common stock issued in the offering to public stockholders
and to Gateway Community Financial, MHC.

3. The maximum number of shares which may be purchased in all categories
in the offering by our officers and directors and their associates in
the aggregate shall not exceed 30% of the total number of shares sold
in the offering.

4. The minimum order is 25 shares, or $250.

5. If the number of shares otherwise allocable to any person or that
person's associates would be in excess of the maximum number of shares
permitted as set forth above, the number of shares allocated to that
person shall be reduced to the lowest limitation applicable to that
person, and then the number of shares allocated to each group
consisting of a person and that person's associates shall be reduced
so that the aggregate allocation to that person and his associates
complies with the above maximums, and the maximum number of shares
shall be reallocated among that person and his associates in
proportion to the shares subscribed by each (after first applying the
maximums applicable to each person, separately).

6. Depending upon market or financial conditions, with the approval of
the Office of Thrift Supervision and without notice to subscribers, we
may decrease or increase the purchase and ownership limitations. If a
purchase limitation is increased, subscribers in the subscription
offering who ordered the maximum amount will be given the opportunity
to increase their subscriptions up to the then applicable limit. We
also may, in our sole discretion, contact other large subscribers to
give them the same opportunity. The effect of this type of
resolicitation will be an increase in the number of shares owned by
subscribers who increase their subscriptions.

7. If the total number of shares offered increases in the offering due to
an increase in the maximum of the estimated valuation range of up to
15% (the adjusted maximum) the additional shares will generally be
issued in the following order of priority: (a) to fill the employee
stock ownership plan's subscription; (b) if there is an
oversubscription at the Eligible Account Holder level, to fill
unfilled subscriptions of Eligible Account Holders; (c) if there is an
oversubscription at the Supplemental Eligible Account Holder level, to
fill unfilled subscriptions of Supplemental Eligible Account Holders;
(d) if there is an oversubscription at the Other Eligible Account
Holder level, to fill unfilled subscriptions of Other Eligible Account
Holders; (e) to fill orders received in a community offering , with
preference given to persons who live in the local community; and ( f)
to fill orders received = in the syndicated community offering. The
Gloucester County Federal Savings Bank Employee Stock Ownership Plan
may, however, elect to fill part or all of its stock order in the open
market, after completion of the stock offering.

8. No person will be allowed to purchase any stock if that purchase would
be illegal under any federal or state law or regulation or would
violate regulations or policies of the National Association of
Securities Dealers. We and/or our representatives may ask for an
acceptable legal opinion from any purchaser regarding the legality of
the purchase and may refuse to honor any purchase order if that
opinion is not timely furnished.

9. We have the right to reject any order submitted by a person whose
representations we believe are untrue or who we believe is violating,
circumventing or intends to violate, evade or circumvent the terms and
conditions of the plan of stock issuance, either alone or acting in
concert with others.

10. The above restrictions also apply to purchases by persons acting in
concert under applicable regulations of the Office of Thrift
Supervision. Under regulations of the Office of Thrift Supervision,
our directors are not considered to be affiliates or a group acting in
concert with other directors solely as a result of membership on our
Board of Directors.

11. In addition, in any community offering or syndicated community
offering, we must first fill orders for our common stock up to a
maximum of 2% of the total shares issued in the offering in a manner
that will achieve a wide distribution of the stock, and thereafter any
remaining shares will be allocated on an equal number of shares per
order basis, until all orders have been filled or the shares have been
exhausted.

The term "associate" of a person is defined in the plan of stock issuance
pursuant to the regulations of the Office of Thrift Supervision to mean:

(1) any corporation or organization of which that person is a senior
officer or partner or is, directly or indirectly, the beneficial owner
of 10% or more of any class of equity securities;

(2) any trust or other estate in which that person has a substantial
beneficial interest or as to which that person serves as trustee or in
a similar fiduciary capacity; or

(3) an individual who is related by blood or marriage to that person if
they live in the same home as that person.

For example, a corporation for which a person serves as an officer would be
an associate of that person and all shares purchased by that corporation would
be included with the number of shares which that person individually could
purchase under the above limitations.

In addition, pursuant to the regulations of the Office of Thrift
Supervision, directors or senior officers of Gloucester County Federal Savings
Bank and Gateway Community Financial Corp. who are related by blood or marriage
will be considered associates of each other.

The term "acting in concert" means:

(1) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an
express agreement; or

(2) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether
written or otherwise.

A person or company which acts in concert with another person or company
("other party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with that other party. We will presume
that certain persons are acting in concert based upon various facts, including
the fact that persons have joint account relationships or the fact that such
persons have filed joint Schedules 13D with the Securities and Exchange
Commission with respect to other companies. We reserve the right to make an
independent investigation of any facts or circumstances brought to our attention
that indicate that one or more persons acting independently or as a group acting
in concert may be attempting to violate or circumvent the regulatory prohibition
on the transferability of subscription rights.

We have the right, in our sole discretion, to determine whether prospective
purchasers are "associates" or "acting in concert." These determinations are in
our sole discretion and may be based on whatever evidence we believe to be
relevant, including joint account relationships or shared addresses on the
records of Gloucester County Federal Savings Bank.

Each person purchasing shares of the common stock in the offering will be
considered to have confirmed that his purchase does not conflict with the
maximum purchase limitation. If the purchase limitation is violated by any
person or any associate or group of persons affiliated or otherwise acting in
concert with that person, we will have the right to purchase from that person at
the $10.00 purchase price per share all shares acquired by that person in excess
of that purchase limitation or, if the excess shares have been sold by that
person, to receive the difference between the purchase price per share paid for
the excess shares and the price at which the excess shares were sold by that
person. Our right to purchase the excess shares will be assignable.

Common stock purchased pursuant to the offering will be freely
transferable, except for shares purchased by our directors and executive
officers. For certain restrictions on the common stock purchased by our
directors and executive officers, see The Offering - Restrictions on
Transferability by Directors and Executive Officers.

ORDERING AND RECEIVING COMMON STOCK

USE OF ORDER FORMS. Rights to subscribe may only be exercised by completion
of an order form. Any person receiving an order form who desires to subscribe
for shares of common stock must do so prior to the applicable expiration date by
delivering by mail or in person a properly executed and completed order form,
together with full payment of the purchase price for all shares for which
subscription is made or include appropriate authorization in the space provided
on the order form for withdrawal of full payment from a deposit account at
Gloucester County Federal Savings Bank; provided, however, that if the
Gloucester County Federal Savings Bank Employee Stock Ownership Plan subscribes
for shares during the subscription offering, it will not be required to pay for
the shares at the time it subscribes but rather may pay for the shares upon
completion of the offering. All subscription rights will expire on the
expiration date, whether or not we have been able to locate each person entitled
to subscription rights. To place an order in the community offering, an investor
must complete an order form and return it prior to the applicable expiration
date. ONCE SUBMITTED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT OUR CONSENT.

We may, in our sole discretion, permit institutional investors to submit
irrevocable orders together with the legally binding commitment for payment and
to thereafter pay for such shares of common stock for which they subscribe in
the community offering at any time before the 48 hours prior to the completion
of the offering. This payment may be made by wire transfer. Our interpretation
of the terms and conditions of the plan of stock issuance and of the
acceptability of the order forms will be final.

To ensure that your stock purchase eligibility and priority are properly
identified, you must list all accounts on the order form, giving all names in
each account and the account number as of the appropriate eligibility date. We
will strive to identify your ownership in all accounts, but cannot guarantee we
will identify all accounts in which you have an ownership interest.

If a stock order form:

o is not delivered to a subscriber and is returned to us by the United States
Postal Service or we are unable to locate the addressee;

o is not received by us or is received after the applicable expiration date;

o is not completed correctly or executed; or

o is not accompanied by the full required payment for the shares subscribed
for, including instances where a savings account or certificate balance
from which withdrawal is authorized is unavailable, uncollected or
insufficient to fund the required payment, but excluding subscriptions by
the employee stock ownership plan;

then the subscription rights for that person will lapse as though that person
failed to return the completed order form within the time period specified.

However, we may, but will not be required to, waive any irregularity on any
order form or require the submission of corrected order forms or the remittance
of full payment for subscribed shares by a date that we may specify. The waiver
of an irregularity on an order form in no way obligates us to waive any other
irregularity on any other order form. Waivers will be considered on a case by
case basis. We are not required to accept orders received on photocopies or
facsimile order forms, or for which payment is to be made by wire transfer or
payment from private third parties. Our interpretation of the terms and
conditions of the plan of stock issuance and of the acceptability of the order
forms will be final, subject to the authority of the Office of Thrift
Supervision.

The reverse side of the order form contains a certification form mandated
by regulation. We will not accept order forms where the certification form is
not executed. By executing and returning the certification form, you will be
certifying that you received this prospectus and acknowledging that the common
stock is not a deposit account and is not insured or guaranteed by the federal
government. You also will be acknowledging that you received disclosure
concerning the risks involved in this offering. The certification form could be
used as support to show that you understand the nature of this investment.

To ensure that each purchaser receives a prospectus at least 48 hours
before the applicable expiration date, in accordance with Rule 15c2-8 of the
Securities Exchange Act of 1934, no prospectus will be mailed any later than
five days prior to the expiration date or hand delivered any later than two days
prior to the expiration date. Execution of the order form will confirm receipt
or delivery in accordance with Rule 15c2- 8. Order forms will only be
distributed with a prospectus.

PAYMENT FOR SHARES. For subscriptions to be valid, payment for all
subscribed shares will be required to accompany all properly completed order
forms, on or prior to the expiration date specified on the order form unless we
extend the date. The Gloucester County Federal Savings Bank Employee Stock
Ownership Plan may pay for the shares it subscribes for upon completion of the
offering. Payment for shares of common stock may be made:

o in cash, if delivered in person;

o by check or money order made payable to GATEWAY COMMUNITY FINANCIAL CORP.;
or

o for shares subscribed for in the subscription offering, by authorization of
withdrawal from deposit accounts maintained with Gloucester County Federal
Savings Bank.

100

If you choose to pay by cash, you must deliver the stock order and
certification form and payment in person to any branch office of Gloucester
County Federal Savings Bank and it will be exchanged for a bank check or money
order. Please do not send cash in the mail.

In accordance with Rule 15c2-4 of the Securities Exchange Act of 1934,
subscribers' checks must be made payable to Gateway Community Financial Corp.,
and checks received by the stock information center will be deposited directly
to the segregated deposit account at Gloucester County Federal Savings Bank
established to hold funds received as payment for shares. Interest will be paid
on payments made by cash, check or money order at Gloucester County Federal
Savings Bank's regular passbook savings rate of interest from the date payment
is received until the offering is completed or terminated. We may decide during
the offering also to hold funds received with orders in a deposit account at
another insured depository institution. In either case, we will pay interest on
all funds received at a rate equal to Gloucester County Federal Savings Bank's
regular passbook savings rate.

The Gloucester County Federal Savings Bank Employee Stock Ownership Plan
will not be required to pay for the shares subscribed for at the time it
subscribes, but rather may pay for shares of common stock subscribed for upon
the completion of the offering; provided that there is in force from the time of
its subscription until the completion of the offering a loan commitment from an
unrelated financial institution or from us to lend to the employee stock
ownership plan, at that time, the aggregate purchase price of the shares for
which it subscribed.

Appropriate means by which account withdrawals may be authorized are
provided on the order form. If a subscriber authorizes us to withdraw the amount
of the purchase price from his or her deposit account, we will do so as of the
completion of the offering, though the account must contain the full amount
necessary for payment at the time the subscription is received. Once a
withdrawal has been authorized, none of the designated withdrawal amount may be
used by a subscriber for any purpose other than to purchase the common stock for
which a subscription has been made until the offering has been completed or
terminated. In the case of payments authorized to be made through withdrawal
from savings accounts, all sums authorized for withdrawal will continue to earn
interest at the applicable account rate until the offering has been completed or
terminated. Sums authorized for withdrawal from a certificate of deposit will
continue to earn interest at the contract rate on the certificate until the
offering has been completed or terminated. Interest penalties for early
withdrawal applicable to certificate accounts will not apply to withdrawals
authorized for the purchase of shares. However, if a partial withdrawal results
in a certificate account with a balance less than the applicable minimum balance
requirement, the certificate shall be canceled at the time of withdrawal,
without penalty, and the remaining balance will be converted into a savings
account and will earn interest at the regular passbook savings rate subsequent
to the withdrawal. In the case of payments made in cash or by check or money
order, funds will be placed in a segregated account and interest will be paid by
Gloucester County Federal Savings Bank at the regular passbook savings rate from
the date payment is received until the offering is completed or terminated. An
executed order form, once we receive it, may not be modified, amended, or
rescinded without our consent, unless the offering is not completed within 45
days after the conclusion of the subscription offering, in which event
subscribers may be given the opportunity to increase, decrease, or rescind their
subscription for a specified period of time. If the offering is not completed
for any reason, all funds submitted pursuant to the offerings will be promptly
refunded with interest as described above.

A subscriber interested in using funds in an individual retirement account
to purchase common stock must do so through a self-directed IRA account.
Gloucester County Federal Savings Bank IRA accounts are not self-directed
accounts. To use funds in an IRA account at Gloucester County Federal Savings
Bank, a subscriber must make a trustee-to-trustee transfer of the IRA funds held
at Gloucester County Federal

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Savings Bank to a trustee offering a self-directed IRA program with the
agreement that the funds will be used to purchase shares in the offering. There
will be no early withdrawal or Internal Revenue Service interest penalties for
transfers. The new trustee would hold the common stock in a self-directed
account in the same manner as we now hold the depositor's IRA funds. An annual
administrative fee may be payable to the new trustee. Subscribers interested in
using funds in a Gloucester County Federal Savings Bank IRA account to purchase
common stock should contact the stock information center as soon as possible so
that the necessary forms may be forwarded for execution and returned before the
subscription offering ends. In addition, federal laws and regulations require
that officers, directors and 10% stockholders who use self-directed IRA funds to
purchase shares of common stock in the subscription offering, make purchases for
the exclusive benefit of IRA accounts.

FEDERAL REGULATIONS PROHIBIT GLOUCESTER COUNTY FEDERAL SAVINGS BANK FROM
LENDING FUNDS OR EXTENDING CREDIT TO ANY PERSON TO PURCHASE THE COMMON STOCK IN
THE OFFERING.

STOCK INFORMATION CENTER. Our stock information center is located at
___________________, New Jersey. The phone number is (___) ___-____. The stock
information center's hours of operation are __:__ a.m. to __:__ p.m., Eastern
time, Monday through Friday.

DELIVERY OF STOCK CERTIFICATES. Certificates representing common stock
issued in the offering will be mailed by our transfer agent to the persons
entitled thereto at the address noted on the order form, as soon as practicable
following completion of the offering. Any certificates returned as undeliverable
will be held until claimed by persons legally entitled thereto or otherwise
disposed of in accordance with applicable law. Until certificates for the common
stock are available and delivered to subscribers, subscribers may not be able to
sell the shares of stock for which they subscribed, even though trading of our
common stock may have commenced.

RESTRICTIONS ON REPURCHASE OF SHARES

Under Office of Thrift Supervision regulations, we may not, for a period of
one year from the date of the completion of the offering, repurchase any of our
common stock from any person, except (1) in an offer made to all stockholders to
repurchase the common stock on a pro rata basis, approved by the Office of
Thrift Supervision, (2) the repurchase of qualifying shares of a director, or
(3) repurchases to fund restricted stock plans or tax-qualified employee stock
benefit plans, including the employee stock ownership plan. Where extraordinary
circumstances exist, the Office of Thrift Supervision may approve the open
market repurchase of up to 5% of our common stock during the first year
following the offering. To receive such approval, we must establish compelling
and valid business purposes for the repurchase to the satisfaction of the Office
of Thrift Supervision. Furthermore, repurchases of any common stock are
prohibited if they would cause Gloucester County Federal Savings Bank's
regulatory capital to be reduced below the amount required under the regulatory
capital requirements imposed by the Office of Thrift Supervision. If, in the
future, the rules and regulations regarding the repurchase of stock are
liberalized, we may utilize the rules and regulations then in effect.

HOW WE DETERMINED THE $10.00 PER SHARE PRICE AND THE NUMBER OF SHARES TO BE
ISSUED IN THE STOCK OFFERING

The plan of stock issuance requires that the purchase price of the common
stock must be based on the appraised pro forma market value of Gateway Community
Financial Corp. and Gloucester County Federal Savings Bank, as determined on the
basis of an independent valuation. For its services in making this appraisal,
Feldman Financial Advisors' fees and out-of-pocket expenses are estimated to
total

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approximately $47,500. We have agreed to indemnify Feldman Financial Advisors
and any employees of Feldman Financial Advisors who act for or on behalf of
Feldman Financial Advisors in connection with the appraisal against any and all
loss, cost, damage, claim, liability or expense of any kind, including claims
under federal and state securities laws, arising out of any misstatement, untrue
statement of a material fact or omission to state a material fact in the
information supplied by us to Feldman Financial Advisors, unless Feldman
Financial Advisors is determined to be negligent or otherwise at fault.

Feldman Financial Advisors made its appraisal in reliance upon the
information contained in this prospectus, including the financial statements.
Feldman Financial Advisors also considered the following factors, among others:

o the present and projected operating results and financial condition of
Gateway Community Financial Corp. and Gloucester County Federal Savings
Bank, which were prepared by Gloucester County Federal Savings Bank and
then adjusted by Feldman Financial Advisors to reflect the estimated net
proceeds of this offering and the estimated expense of our stock benefit
plans, and the economic and demographic conditions in Gloucester County
Federal Savings Bank's existing market area as prepared by Feldman
Financial Advisors;

o certain historical and financial information relating to Gloucester County
Federal Savings Bank prepared by Gloucester County Federal Savings Bank;
and

o the impact of the stock offering on our net worth and earnings potential as
calculated by Feldman Financial Advisors.

Feldman Financial Advisors relied primarily on the comparative market value
methodology in determining the pro forma market value. In applying this
methodology, Feldman Financial Advisors analyzed financial and operational
comparisons of Gloucester County Federal Savings Bank with a selected peer group
of publicly traded mutual holding companies. The pro forma market value of the
common stock was determined based on the market pricing ratios of the peer
group, subject to certain valuation adjustments based on the fundamental
differences with the peer group. Specifically, Feldman Financial Advisors
considered the lower profitability of Gloucester County Federal Savings Bank in
analyzing its fundamentals versus those of the comparative group. Additionally,
Feldman Financial Advisors took into account the favorable growth prospects for
the market area in which Gloucester County Federal Savings operates and the
after-market trading performance of recent stock offerings by mutual holding
companies based in New Jersey. Feldman Financial Advisors utilized the results
of this overall analysis to establish the appropriate pricing ratios that
resulted in the range of pro forma market value.

The appraisal also incorporated an analysis of a peer group of
publicly-traded mutual holding companies that Feldman Financial Advisors
considered to be comparable to Gloucester County Federal Savings Bank. The peer
group analysis conducted by Feldman Financial Advisors included a total of 10
publicly-traded mutual holding companies with total assets of more than $266
million and less than $562 million. The analysis of comparable publicly-traded
institutions included an evaluation of the average and median price-to-earnings
and price-to-book value ratios indicated by the market prices of the peer
companies. Feldman Financial Advisors applied the peer group's pricing ratios,
as adjusted to allow for differences between Gateway Community Financial Corp.
and the peer group, to Gateway Community Financial Corp.'s pro forma earnings
and book value to derive the estimated pro forma market value of Gateway
Community Financial Corp.

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Consistent with Office of Thrift Supervision appraisal guidelines, Feldman
Financial Advisors' analysis utilized the comparative market value methodology
and relied primarily on the price to earnings and price to book value ratios for
comparative valuation purposes, all of which are described in its report.
Feldman Financial Advisors' appraisal report is filed as an exhibit to the
registration statement that we have filed with the Securities and Exchange
Commission. See Where You Can Find Additional Information. Feldman Financial
Advisors compared the pro forma price to earnings and price to book value ratios
for Gateway Community Financial Corp. to the same ratios for the selected peer
group. The pro forma valuation ratios for Gateway Community Financial Corp.
reflected the estimated net offering proceeds and the estimated expense of the
stock benefit plans.

The peer group selection criteria focused mainly on publicly traded mutual
holding companies operating in the Northeast and Mid-Atlantic regions with asset
sizes between $250 million and $750 million. The following are various averages
for the peer group companies:

o average assets of $390.5 million;
o average non-performing assets of 0.29% of total assets;
o average loans of 64.91% of total assets;
o average equity of 11.09% of total assets; and o average net income of
0.36% of average assets.

Additional information concerning the peer group companies is presented in
the table below. The market value data for the peer group companies is based on
market prices as of March 13, 2007.

Total
Headquarters Total Market
Company (Market/Symbol) Location Assets Value
- ----------------------- -------- ------ -----
(In millions)

AJS Bancorp, Inc. (OTCBB: AJSB) Midlothian, IL $266.5 $52.1
Colonial Bankshares, Inc. (Nasdaq: COBK) Bridgeton, NJ $383.6 $63.1
FedFirst Financial Corp. (Nasdaq: FFCO) Monessen, PA $283.5 $61.2
Lake Shore Bancorp, Inc. (Nasdaq: LSBK) Dunkirk, NY $354.2 $80.5
Magyar Bancorp, Inc. (Nasdaq: MGYR) New Brunswick, NJ $342.3 $83.8
Naugatuck Valley Financial (Nasdaq: NVSL) Naugatuck, CT $413.7 $92.1
Ocean Shore Holding Co. (Nasdaq: OSHC) Ocean City, NJ $562.3 $114.1
Pathfinder Bancorp, Inc. (Nasdaq: PBHC) Oswego, NY $301.4 $31.8
PSB Holdings, Inc. (Nasdaq: PSBH) Putnam, CT $479.5 $72.2
Service Bancorp, Inc. (OTCBB: SERC) Medway, MA $411.1 $50.5

Average - peer group $390.5 $70.1
Median - peer group $397.4 $67.6

On the basis of the foregoing, Feldman Financial Advisors advised in its
opinion, dated March 13, 2007, that the estimated pro forma market value of
Gateway Community Financial Corp. on a fully- converted basis ranged from a
minimum of $51 million to a maximum of $69 million with a midpoint of $60
million. The Board of Directors determined that 45% of the total shares of
common stock to be outstanding upon completion of the offering should be sold.
Based on the estimated valuation and the $10.00 per share price, the total
number of shares of common stock that Gateway Community Financial Corp. will
issue, including shares issued to Gateway Community Financial, MHC, will range
from a minimum of 2,295,000 shares to a maximum of 3,105,000 shares, with a
midpoint of 2,700,000 shares. The shares of Gateway Community Financial Corp.
stock that are not offered for sale in the offering will be issued to Gateway

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Community Financial, MHC, which will own 55% of the total outstanding common
stock upon completion of the offering.

The estimated valuation range may be amended with the approval of the
Office of Thrift Supervision or if necessitated by subsequent developments in
the consolidated financial condition of Gateway Community Financial Corp. or
market conditions generally. In the event the estimated valuation range is
updated to amend the value of Gateway Community Financial Corp. on a
fully-converted basis below $51 million, which is the minimum of the estimated
valuation range, or above $79.4 million, which is the adjusted maximum of the
estimated valuation range, a new appraisal will be filed with the Office of
Thrift Supervision.

The following table presents a summary of selected pricing ratios for the
peer group companies on a fully-converted basis and the resulting
fully-converted pricing ratios for Gateway Community Financial Corp. reflecting
the pro forma impact of the stock offering. Compared to the average pricing
ratios of the peer group, Gateway Community Financial Corp.'s pro forma
valuation ratios at the maximum of the range indicated a discount of 15% on a
price to book value basis and a premium of 96% on a price to earnings basis.
Feldman Financial Advisors' calculations of the fully-converted pricing ratios
for the peer group companies assume the pro forma impact of selling the mutual
holding company shares of each of the peer group companies at their respective
trading prices as of March 13, 2007. Feldman Financial Advisors' calculation of
our fully-converted valuation ratios assumed the pro forma impact of selling
100% of the share to be outstanding at $10.00 per share.

PRICE-TO-EARNINGS PRICE-TO-BOOK
MULTIPLE VALUE RATIO
-------- -----------

PRICING RATIOS FOR PEER GROUP ON A FULLY-CONVERTED BASIS:
Average........................................................ 34.1x 91.4%
Median......................................................... 28.2x 95.4%
High............................................................ 63.8x 97.6%
Low............................................................ 23.2x 82.1%
PRO FORMA PRICING RATIOS FOR GATEWAY COMMUNITY
FINANCIAL CORP. ON A FULLY-CONVERTED BASIS:
Minimum...................................................... 58.8x 70.1%
Midpoint....................................................... 62.5x 74.5%
Maximum..................................................... 66.7x 78.1%
Maximum, as adjusted...................................... 66.7x 81.5%

In determining the estimated pro forma market value, Feldman Financial
Advisors concluded that Gateway Community Financial Corp.'s valuation should be
discounted relative to the peer group companies due to its recent earnings
performance. The resulting pro forma valuation range for Gateway Community
Financial Corp. reflected a discount to the peer group on a price to book value
basis. However, because of Gloucester County Federal Savings Bank's lower
historical earnings performance relative to the peer group comparables, the pro
forma price to earnings ratio for Gateway Community Financial Corp. is skewed
upward by the computed ratio effect.

Feldman Financial Advisors' valuation is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
Gateway Community Financial Corp.'s shares. Feldman Financial Advisors did not
independently verify the consolidated financial statements and other information
provided by us, nor did Feldman Financial Advisors value independently our
assets or

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liabilities. The valuation considers us as a going concern and should not be
considered as an indication of our liquidation value. Moreover, because this
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance can
be given that persons purchasing common stock in the offerings will thereafter
be able to sell such shares at prices at or above the purchase price or in the
range of the valuation described above.

No sale of shares of common stock in the stock offering may be completed
unless Feldman Financial Advisors confirms that nothing of a material nature has
occurred which would cause it to conclude that the aggregate value of the common
stock to be issued is materially incompatible with the estimate of the aggregate
consolidated pro forma market value of Gateway Community Financial Corp. and
Gloucester County Federal Savings Bank. If this confirmation is not received, we
may cancel the stock offering, extend the offering period and establish a new
estimated valuation and offering range and/or estimated price range, extend,
reopen or hold a new offering or take any other action the Office of Thrift
Supervision may permit.

Depending upon market or financial conditions following the start of the
subscription offering, the total number of shares of common stock to be issued
may be increased or decreased without a resolicitation of subscribers, provided
that the product of the total number of shares issued times the purchase price
is not below the minimum or more than 15% above the maximum of the estimated
valuation range. If market or financial conditions change so as to cause the
aggregate value of the common stock to be issued to be below the minimum of the
estimated valuation range or more than 15% above the maximum of this range,
purchasers will be resolicited and be permitted to continue their orders, in
which case they will need to reconfirm their subscriptions prior to the
expiration of the resolicitation offering or their subscription funds will be
promptly refunded with interest, or be permitted to modify or rescind their
subscriptions. Any change in the estimated valuation range must be approved by
the Office of Thrift Supervision.

An increase in the number of shares of common stock to be issued as a
result of an increase in the estimated pro forma market value would decrease
both a subscriber's ownership interest and Gateway Community Financial Corp.'s
pro forma net income and stockholders' equity on a per share basis while
increasing pro forma net income and stockholders' equity on an aggregate basis.
A decrease in the number of shares of common stock to be issued would increase
both a subscriber's ownership interest and Gateway Community Financial Corp.'s
pro forma net income and stockholders' equity on a per share basis while
decreasing pro forma net income and stockholders' equity on an aggregate basis.

Copies of the appraisal report of Feldman Financial Advisors, including any
amendments, and the detailed report of the appraiser setting forth the method
and assumptions for the appraisal are available for inspection at the Bank's
main office and the other locations specified under Where You Can Find More
Information. The appraisal report is an exhibit to the registration statement
filed with the Securities and Exchange Commission.

PLAN OF DISTRIBUTION AND MARKETING ARRANGEMENTS

We have engaged Sandler O'Neill & Partners, L.P., a broker-dealer
registered with the National Association of Securities Dealers, as a financial
and marketing advisor in connection with the offering of our common stock. In
its role as financial and marketing advisor, Sandler O'Neill will assist us in
the offering as follows:

o consulting as to the securities marketing implications of any aspect of the
plan of stock issuance;

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o reviewing with our Board of Directors the financial impact of the offering
based upon the independent appraiser's appraisal of the common stock;

o reviewing all offering documents, including the prospectus, stock order
forms and related offering materials (we are responsible for the
preparation and filing of such documents);

o assisting in the design and implementation of a marketing strategy for the
offering;

o assisting us in scheduling and preparing for meetings with potential
investors and broker-dealers; and

o providing such other general advice and assistance we may request to
promote the successful completion of the offering.

For these services, Sandler O'Neill will receive a fee of 1.0% of the
aggregate dollar amount of the common stock sold in the subscription and
community offerings if the stock issuance is consummated, excluding in each case
shares purchased by the Gloucester County Federal Savings Bank Employee Stock
Ownership Plan and shares purchased by our directors, officers and employees and
their immediate families. We have made an advance payment of $25,000 to Sandler
O'Neill for expenses. Any unused portion of this advance will be refunded if the
offering is not consummated.

The plan of stock issuance provides that, if necessary, all shares of
common stock not purchased in the subscription offering and community offering
may be offered for sale to the general public in a syndicated community offering
to be managed by Sandler O'Neill. In such capacity, Sandler O'Neill may form a
syndicate of other broker-dealers. Neither Sandler O'Neill nor any registered
broker-dealer will have any obligation to take or purchase any shares of the
common stock in the syndicated community offering; however, Sandler O'Neill has
agreed to use its best efforts in the sale of shares in any syndicated community
offering. If there is a syndicated community offering, Sandler O'Neill will
receive a management fee of 1.0% of the aggregate dollar amount of the common
stock sold in the syndicated community offering. The total fees payable to
Sandler O'Neill and other National Association of Securities Dealers member
firms in the syndicated community offering shall not exceed 6.5% of the
aggregate dollar amount of the common stock sold in the syndicated community
offering.

We also will reimburse Sandler O'Neill for its reasonable out-of-pocket
expenses (including legal fees and expenses) associated with its marketing
effort, up to a maximum of $60,000. If the plan of stock issuance is terminated
or if Sandler O'Neill terminates its agreement with us in accordance with the
provisions of the agreement, Sandler O'Neill will only receive reimbursement of
its reasonable out-of-pocket expenses. We will indemnify Sandler O'Neill against
liabilities and expenses (including legal fees) incurred in connection with
certain claims or litigation arising out of or based upon untrue statements or
omissions contained in the offering material for the common stock, including
liabilities under the Securities Act of 1933.

We have also engaged Sandler O'Neill to act as our records management agent
in connection with the offering. In its role as records management agent,
Sandler O'Neill will assist us in the offering as follows: (1) consolidation of
accounts and development of a central file; (2) preparation of order forms; (3)
organization and supervision of the stock information center; and (4)
subscription services. For these services, Sandler O'Neill will receive a fee of
$24,000 and reimbursement for its reasonable out-of-pocket expenses, up to a
maximum of $26,000. We have made an advance payment of $5,000 to Sandler O'Neill
for these services.

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Sandler O'Neill has not prepared any report or opinion constituting a
recommendation or advice to us or to persons who subscribe for our common stock,
nor has it prepared an opinion as to the fairness to us of the purchase price or
the terms of the common stock offered for sale. Sandler O'Neill expresses no
opinion as to the prices at which the common stock, once issued, may trade.

Our directors and executive officers may participate in the solicitation of
offers to purchase common stock. Other trained employees may participate in the
offering in ministerial capacities, providing clerical work in effecting a sales
transaction or answering questions of a ministerial nature. Other questions of
prospective purchasers will be directed to executive officers or registered
representatives of Sandler O'Neill. We will rely on Rule 3a4-1 of the Securities
Exchange Act of 1934 so as to permit officers, directors and employees to
participate in the sale of our common stock. No officer, director or employee
will be compensated for his or her participation by the payment of commissions
or other remuneration based either directly or indirectly on the transactions in
the common stock.

RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND EXECUTIVE OFFICERS

Shares of the common stock purchased by our directors or executive officers
cannot be sold for a period of one year following completion of the offering,
except for a disposition of shares after death. To ensure this restriction is
upheld, shares of the common stock issued to directors and executive officers
will bear a legend restricting their sale. Appropriate instructions will be
issued to the transfer agent with respect to applicable restrictions on transfer
of such stock. Any shares issued to directors and executive officers as a stock
dividend, stock split or otherwise with respect to restricted stock will be
subject to the same restriction.

For a period of three years following the offering, our directors and
executive officers and their associates may not, without the prior approval of
the Office of Thrift Supervision, purchase our common stock except from a broker
or dealer registered with the SEC. This prohibition does not apply to negotiated
transactions including more than 1% of our common stock or purchases made by tax
qualified or non-tax qualified employee stock benefit plans which may be
attributable to individual directors or executive officers.

We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 for the registration of the common
stock to be issued in the offering. This registration does not cover the resale
of the shares. Shares of common stock purchased by persons who are not
affiliates of us may be resold without registration. Shares purchased by an
affiliate of us will have resale restrictions under Rule 144 of the Securities
Act. If we meet the current public information requirements of Rule 144, each
affiliate of ours who complies with the other conditions of Rule 144, including
those that require the affiliate's sale to be aggregated with those of certain
other persons, would be able to sell in the public market, without registration,
a number of shares not to exceed, in any three-month period, the greater of 1%
of our outstanding shares or the average weekly volume of trading in the shares
during the preceding four calendar weeks. We may make future provisions to
permit affiliates to have their shares registered for sale under the Securities
Act under certain circumstances.

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RESTRICTIONS ON AGREEMENTS OR UNDERSTANDINGS REGARDING TRANSFER OF COMMON STOCK
TO BE PURCHASED IN THE OFFERING

Before the completion of the offering, no depositor may transfer or enter
into an agreement or understanding to transfer any subscription rights or the
legal or beneficial ownership of the shares of common stock to be purchased in
the offering. Depositors who submit an order form will be required to certify
that their purchase of common stock is solely for their own account and there is
no agreement or understanding regarding the sale or transfer of their shares. We
intend to pursue any and all legal and equitable remedies after we become aware
of any agreement or understanding, and will not honor orders we reasonably
believe to involve an agreement or understanding regarding the sale or transfer
of shares.

EFFECTS OF THE STOCK OFFERING

GENERAL. The stock offering will not have any effect on Gloucester County
Federal Savings Bank's present business of accepting deposits and investing its
funds in loans and other investments permitted by law. The stock offering will
not result in any change in the existing services provided to depositors and
borrowers, or in existing offices, management, and staff. After the stock
offering, Gloucester County Federal Savings Bank will continue to be subject to
regulation, supervision, and examination by the Office of Thrift Supervision and
the Federal Deposit Insurance Corporation.

DEPOSITS AND LOANS. Each holder of a deposit account in Gloucester County
Federal Savings Bank at the time of the stock offering will continue as an
account holder in Gloucester County Federal Savings Bank after the stock
offering, and the stock offering will not affect the deposit balance, interest
rate or other terms. Each deposit account will be insured by the Federal Deposit
Insurance Corporation to the same extent as before the stock offering.
Depositors will continue to hold their existing certificates, savings records,
checkbooks and other evidence of their accounts. The stock offering will not
affect the loans of any borrower from Gloucester County Federal Savings Bank.
The amount, interest rate, maturity, security for, and obligations under each
loan will remain contractually fixed as they existed prior to the stock
offering.

VOTING RIGHTS. As a stock savings bank, all voting rights of Gloucester
County Federal Savings Bank are held solely by its sole stockholder, Gateway
Community Financial Corp. All voting rights of Gateway Community Financial Corp.
are held solely by its sole stockholder, Gateway Community Financial, MHC. All
voting rights of Gateway Community Financial, MHC are held by the Board of
Directors of Gateway Community Financial, MHC. After the stock offering, the
voting rights of Gateway Community Financial Corp. will be held by its
stockholders. Gateway Community Financial, MHC will own a majority of the
outstanding common stock of Gateway Community Financial Corp., and thus the
Board of Directors of Gateway Community Financial, MHC, which is comprised of
the same individuals who are directors of Gateway Community Financial Corp.,
will control the affairs of Gateway Community Financial Corp., including the
election of directors of Gateway Community Financial Corp.

MATERIAL FEDERAL AND STATE TAX CONSEQUENCES OF THE OFFERING. We have
received an opinion from Malizia Spidi & Fisch, PC on the material federal tax
consequences of the stock offering to Gateway Community Financial Corp., the
purchasers of its common stock and the recipients of subscription rights to
purchase such common stock. The opinion has been filed as an exhibit to the
registration statement of which this prospectus is a part and covers those
federal tax matters that are material to the transaction. Such opinion is made
in reliance upon various statements, representations and declarations as to
matters of fact made by us, as detailed in the opinion. The opinion provides
that:

109

o we will recognize no gain or loss upon the receipt of money in exchange for
shares of common stock; and

o no gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Eligible Account Holders
upon the distribution to them of the nontransferable subscription rights to
purchase shares of common stock.

The opinion in the second bullet above is predicated on representations
from Gloucester County Federal Savings Bank, Gateway Community Financial Corp.
and Gateway Community Financial, MHC that no person shall receive any payment,
whether in money or property, in lieu of the issuance of subscription rights.
The opinion in the second bullet above is also based on the position that the
subscription rights to purchase shares of common stock received by Eligible
Account Holders, Supplemental Eligible Account Holders and Other Eligible
Account Holders have a fair market value of zero. In reaching their opinion
stated in the second bullet above, Malizia Spidi & Fisch, PC has noted that the
subscription rights will be granted at no cost to the recipients, will be
legally non-transferable and of short duration, and will provide the recipients
with the right only to purchase shares of common stock at the same price to be
paid by members of the general public in any community offering. Malizia Spidi &
Fisch, PC believes that it is more likely than not that the fair market value of
the subscription rights to purchase common stock is zero. Malizia Spidi & Fisch,
PC has noted in its opinion that they are not aware of the Internal Revenue
Service claiming in any similar transaction that subscription rights have any
market value. In that there are no judicial opinions or official Internal
Revenue Service positions on this issue, however, such position related to
subscription rights comes to a reasoned conclusion instead of an absolute
conclusion on these issues. Such conclusion of counsel is supported by a letter
from Feldman Financial Advisors furnished to us which states that the
subscription rights do not have any value when they are distributed or
exercised. If the Internal Revenue Service disagrees with this valuation of
subscription rights and determines that such subscription rights have value,
income may be recognized by recipients of these rights, in certain cases whether
or not the rights are exercised. This income may be capital gain or ordinary
income, and Gateway Community Financial Corp. could recognize gain on the
distribution of these rights. Based on the foregoing, Malizia Spidi & Fisch, PC
believes that it is more likely than not that the nontransferable subscription
rights to purchase our common stock have no value.

We are also subject to New Jersey income taxes and have received an opinion
from S.R. Snodgrass, A.C. that the stock offering will be treated for New Jersey
state tax purposes similar to the treatment of the stock offering for federal
tax purposes.

Unlike a private letter ruling from the IRS, the federal and state tax
opinions have no binding effect or official status, and no assurance can be
given that the conclusions reached in any of those opinions would be sustained
by a court if contested by the IRS or the New Jersey tax authorities. ELIGIBLE
ACCOUNT HOLDERS , Supplemental Eligible Account Holders and Other Eligible
Account Holders are encouraged to consult with their own tax advisers as to the
tax consequences in the event the subscription rights are determined to have any
market value.

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INTERPRETATION, AMENDMENT OR TERMINATION OF THE PLAN OF STOCK OFFERING

If determined to be necessary or desirable by the Board of Directors, the
plan may be amended by a two-thirds vote of the full Board, with the concurrence
of the Office of Thrift Supervision. To the extent permitted by law, all
interpretations by us of the plan of stock issuance will be final; however, such
interpretations have no binding effect on the Office of Thrift Supervision. The
plan of stock issuance provides that, if deemed necessary or desirable, we may
substantively amend the plan of stock issuance as a result of comments from
regulatory authorities or otherwise.

Completion of the offering requires the sale of all shares of the common
stock within ninety days following approval of the plan of stock issuance by the
Office of Thrift Supervision, unless an extension is granted by the Office of
Thrift Supervision. If this condition is not satisfied, the plan of stock
issuance will be terminated and we will continue our business. We may terminate
the plan of stock issuance at any time.

CONDITIONS TO THE OFFERING

Completion of the offering is subject to several factors, including:

1. the receipt of all the required approvals of the Office of Thrift
Supervision for the issuance of common stock in the offering, and

2. the sale of 2,295,000 shares of common stock.

If such conditions are not met before we complete the offering, all funds
received will be promptly returned with interest and all withdrawal
authorizations will be canceled. The stock purchases of our officers and
directors will be counted for purposes of meeting the minimum number of shares.

RESTRICTIONS ON ACQUISITION OF GATEWAY COMMUNITY FINANCIAL CORP.

GENERAL

The principal federal regulatory restrictions which affect the ability of
any person, firm or entity to acquire Gateway Community Financial Corp.,
Gloucester County Federal Savings Bank or their respective capital stock are
described below. Also discussed are certain provisions in Gateway Community
Financial Corp.'s charter and bylaws which may be deemed to affect the ability
of a person, firm or entity to acquire Gateway Community Financial Corp.

STATUTORY AND REGULATORY RESTRICTIONS ON ACQUISITION

The Change in Bank Control Act provides that no person, acting directly or
indirectly or through or in concert with one or more other persons, may acquire
control of a savings institution unless the Office of Thrift Supervision has
been given 60 days prior written notice. The Home Owners' Loan Act provides that
no company may acquire "control" of a savings institution without the prior
approval of the Office of Thrift Supervision. Any company that acquires such
control becomes a savings and loan holding company subject to registration,
examination and regulation by the Office of Thrift Supervision. Pursuant to
federal regulations, control of a savings institution is conclusively deemed to
have been acquired by, among other things, the acquisition of more than 25% of
any class of voting stock of the institution or the ability to control the
election of a majority of the directors of an institution. Moreover, control is
presumed to have been acquired, subject to rebuttal, upon the acquisition of
more than 10% of any class of voting stock, or of more than 25% of any class of
stock of a savings institution, where certain enumerated "control factors" are
also present in the acquisition.

111

The Office of Thrift Supervision may prohibit an acquisition of control if:

o it would result in a monopoly or substantially lessen competition;

o the financial condition of the acquiring person might jeopardize the
financial stability of the institution; or

o the competence, experience or integrity of the acquiring person indicates
that it would not be in the interest of the depositors or of the public to
permit the acquisition of control by such person.

These restrictions do not apply to the acquisition of a savings
institution's capital stock by one or more tax-qualified employee stock benefit
plans, provided that the plans do not have beneficial ownership of more than 25%
of any class of equity security of the savings institution.

For a period of three years following completion of the stock issuance,
Office of Thrift Supervision regulations generally prohibit any person from
acquiring or making an offer to acquire beneficial ownership of more than 10% of
the stock of Gateway Community Financial Corp. or Gloucester County Federal
Savings Bank without Office of Thrift Supervision approval.

Current Office of Thrift Supervision regulations permit a mutual holding
company to be acquired by a mutual institution or in a remutualization
transaction. However, the Office of Thrift Supervision has issued a policy
statement indicating that it views remutualization transactions as raising
significant issues concerning disparate treatment of minority stockholders and
mutual members of the target entity and raising issues concerning the effect on
the mutual members of the acquiring entity. Under certain circumstances, the
Office of Thrift Supervision intends to give these issues special scrutiny and
reject applications providing for the remutualization of a mutual holding
company unless the applicant can clearly demonstrate that the Office of Thrift
Supervision's concerns are not warranted.

CHARTER AND BYLAWS OF GATEWAY COMMUNITY FINANCIAL CORP.

The following discussion is a summary of certain provisions of the charter
and bylaws of Gateway Community Financial Corp. that relate to corporate
governance. The description is necessarily general and qualified by reference to
the charter and bylaws.

CLASSIFIED BOARD OF DIRECTORS. The Board of Directors of Gateway Community
Financial Corp. is required by the bylaws to be divided into three staggered
classes as equal in size as is possible, with one class elected annually by
stockholders for three-year terms. A classified Board promotes continuity and
stability of management of Gateway Community Financial Corp., but makes it more
difficult for stockholders to change a majority of the directors because it
generally takes at least two annual elections of directors for this to occur.
Directors are elected by a plurality of votes cast, and because Gateway
Community Financial, MHC will own a majority of the common stock, it will
control the election of directors.

LIMITATION OF BENEFICIAL OWNERSHIP AND VOTING. For a period of three years
following the offering, Office of Thrift Supervision regulations generally
prohibit any person from acquiring or making an offer to acquire beneficial
ownership of more than 10% of the then-outstanding shares of Gateway Community
Financial Corp. common stock without Office of Thrift Supervision prior
approval.

112

Additionally, our charter includes a provision that limits the voting
rights of a single stockholder to no more than 10% of the then-outstanding
shares, including shares held by Gateway Community Financial, MHC, for a period
of five years from the date this stock offering is completed.

AUTHORIZED BUT UNISSUED SHARES OF CAPITAL STOCK. Following the stock
offering, Gateway Community Financial Corp. will have authorized but unissued
shares of preferred stock and common stock. See Description of Capital Stock.
Although these shares could be used by the Board of Directors of Gateway
Community Financial Corp. to make it more difficult or to discourage an attempt
to obtain control of Gateway Community Financial Corp. through a merger, tender
offer, proxy contest or otherwise, it is unlikely that we would use or need to
use shares for these purposes because Gateway Community Financial, MHC will own
a majority of the common stock.

SPECIAL MEETINGS OF STOCKHOLDERS. Gateway Community Financial Corp.'s
bylaws provide that special meetings of stockholders may be called only by the
chairman of the Board, the president, or a majority of the Board of Directors,
or upon the written request of the holders of not less than one-tenth of all of
the outstanding stock of Gateway Community Financial Corp.

HOW SHARES ARE VOTED. Gateway Community Financial Corp.'s bylaws provide
that there will not be cumulative voting by stockholders for the election of
Gateway Community Financial Corp.'s directors. No cumulative voting rights means
that Gateway Community Financial, MHC, as the holder of a majority of the shares
eligible to be voted at a meeting of stockholders, may elect all directors of
Gateway Community Financial Corp. to be elected at that meeting. This could
prevent minority stockholder representation on Gateway Community Financial
Corp.'s Board of Directors.

PROCEDURES FOR STOCKHOLDER NOMINATIONS. Gateway Community Financial Corp.'s
bylaws provide that any stockholder wanting to make a nomination for the
election of directors or a proposal for new business at a meeting of
stockholders must send written notice to the Secretary of Gateway Community
Financial Corp. at least five days before the date of the annual meeting. The
bylaws further provide that if a stockholder wanting to make a nomination or a
proposal for new business does not follow the prescribed procedures, the
proposal will not be considered until an adjourned, special, or annual meeting
of the stockholders taking place thirty days or more thereafter. Management
believes that it is in the best interests of Gateway Community Financial Corp.
and its stockholders to provide enough time for management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations if management
thinks it is in the best interest of stockholders generally. Similarly, adequate
advance notice of stockholder proposals will give management time to study such
proposals and to determine whether to recommend to the stockholders that such
proposals be adopted.

INDEMNIFICATION. Gateway Community Financial Corp.'s bylaws provide for
indemnification of its officers, directors and employees to the fullest extent
authorized by the regulations of the Office of Thrift Supervision.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Gateway Community Financial Corp. is authorized to issue 25,000,000 shares
of common stock, par value $0.10 per share and 5,000,000 shares of serial
preferred stock, no par value. Upon completion of the stock offering, we will
have between 2,295,000 shares of common stock at the minimum and

113

3,105,000 shares of common stock at the maximum of the offering range
outstanding (3,570,750 shares at the adjusted maximum), including shares that
will be held by Gateway Community Financial, MHC. Upon payment of the purchase
price shares of common stock issued in the offering will be fully paid and non-
assessable. Each share of common stock will have the same relative rights as,
and will be identical in all respects with, each other share of common stock.
The common stock will represent non-withdrawable capital, will not be an account
of insurable type and will not be insured by the Federal Deposit Insurance
Corporation or any other governmental agency. The Board of Directors can,
without stockholder approval, issue additional shares of common stock, although
Gateway Community Financial, MHC, so long as it is in existence, must own a
majority of Gateway Community Financial Corp.'s outstanding shares of common
stock.

COMMON STOCK

DISTRIBUTIONS. Gateway Community Financial Corp. can pay dividends if, as
and when declared by its Board of Directors, subject to compliance with
limitations which are imposed by law. See Our Policy Regarding Dividends. The
holders of common stock of Gateway Community Financial Corp. will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors of Gateway Community Financial Corp. out of funds legally available
therefor. If Gateway Community Financial Corp. issues preferred stock, the
holders thereof may have a priority over the holders of the common stock with
respect to dividends.

VOTING RIGHTS. The holders of common stock will possess exclusive voting
rights in Gateway Community Financial Corp. The holder of shares of common stock
will be entitled to one vote for each share held on all matters subject to
stockholder vote and will not have any right to cumulate votes in the election
of directors.

LIQUIDATION RIGHTS. In the event of any liquidation, dissolution, or
winding-up of Gateway Community Financial Corp., the holders of the common stock
generally would be entitled to receive, after payment of all debts and
liabilities of Gateway Community Financial Corp. (including all debts and
liabilities of Gloucester County Federal Savings Bank), all assets of Gateway
Community Financial Corp. available for distribution. If preferred stock is
issued, the holders thereof may have a priority over the holders of the common
stock in the event of liquidation or dissolution.

PREEMPTIVE RIGHTS; REDEMPTION. Because the holders of the common stock do
not have any preemptive rights with respect to any shares Gateway Community
Financial Corp. may issue, the Board of Directors may sell shares of capital
stock of Gateway Community Financial Corp. without first offering such shares to
existing stockholders. The common stock will not be subject to any redemption
provisions.

114

PREFERRED STOCK

We are authorized to issue up to 5,000,000 shares of serial preferred stock
and to fix and state voting powers, designations, preferences, or other special
rights of preferred stock and the qualifications, limitations and restrictions
of those shares as the Board of Directors may determine in its discretion.
Preferred stock may be issued in distinctly designated series, may be
convertible into common stock and may rank prior to the common stock as to
dividends rights, liquidation preferences, or both, and may have full or limited
voting rights. The issuance of preferred stock could adversely affect the voting
and other rights of holders of common stock.

The authorized but unissued shares of preferred stock and the authorized
but unissued and unreserved shares of common stock will be available for
issuance in future mergers or acquisitions, in future public offerings or
private placements. Except as otherwise required to approve the transaction in
which the additional authorized shares of preferred stock would be issued, no
stockholder approval generally would be required for the issuance of these
shares.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for Gateway Community Financial Corp.'s
common stock will be Registrar and Transfer Company, Cranford, New Jersey.

LEGAL AND TAX OPINIONS

The legality of the issuance of the common stock being offered and certain
matters relating to the stock offering and federal taxation will be passed upon
for us by Malizia Spidi & Fisch, PC, Washington, D.C. Matters relating to state
taxation will be passed upon for us by S.R. Snodgrass, A.C., Wexford,
Pennsylvania. Certain legal matters will be passed upon for Sandler O'Neill &
Partners, L.P. by Muldoon Murphy & Aguggia LLP, Washington, D.C.

EXPERTS

The consolidated financial statements of Gateway Community Financial Corp.
at December 31, 2006 and 2005 and for each of the years in the three year period
ended December 31, 2006 have been included in this prospectus in reliance upon
the report of S.R. Snodgrass, A.C., appearing elsewhere in this prospectus, and
upon the authority of said firm as experts in accounting and auditing.

Feldman Financial Advisors, Inc. has consented to the publication in this
document of a summary of its letter to Gateway Community Financial Corp. setting
forth its conclusion as to the estimated pro forma market value of the common
stock and has also consented to the use of its name and statements with respect
to it appearing in this document.

REGISTRATION REQUIREMENTS

Prior to completion of the offering, we will register our common stock with
the SEC pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended. We will be subject to the information, proxy solicitation, insider
trading restrictions, tender offer rules, periodic reporting and other
requirements of the SEC under the Securities Exchange Act of 1934. We will not
deregister the common stock under the Securities Exchange Act of 1934 for a
period of at least three years following the stock offering.

115

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933, as amended, with respect to the common stock offered in
this document. As permitted by the rules and regulations of the SEC, this
document does not contain all the information set forth in the registration
statement. The statements contained in this document as to the contents of any
contract or other document filed as an exhibit to the Form S-1 are, of
necessity, brief descriptions. The registration statement and exhibits can be
examined without charge at the public reference facilities of the SEC located at
100 F Street, N.E., Washington, D.C. You may obtain information on the operation
of the Public Reference Room by calling 1-800-SEC-0330. The SEC also maintains a
web site that contains reports, proxy and information statements and other
information regarding registrants, including Gateway Community Financial Corp.,
that file electronically with the SEC. The address for this web site is
http://www.sec.gov.

We have filed an application for approval of the stock issuance with the
Office of Thrift Supervision. This prospectus omits certain information
contained in that application. That information can be examined without charge
at the public reference facilities of the Office of Thrift Supervision located
at 1700 G Street, N.W., Washington, D.C. 20552.

A copy of our charter and bylaws, filed as exhibits to the registration
statement as well as those of Gloucester County Federal Savings Bank and Gateway
Community Financial, MHC, are available without charge from Gateway Community
Financial Corp. Copies of the plan of stock issuance are also available without
charge.

116

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm......................F-1

Consolidated Balance Sheet
as of December 31, 2006 and 2005 .................................. F-2

Consolidated Statement of Income
for the Years Ended December 31, 2006, 2005 and 2004................F-3

Consolidated Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 2006, 2005 and 2004................F-4

Consolidated Statement of Cash Flows
for the Years Ended December 31, 2006, 2005 and 2004............... F-5

Notes to Consolidated Financial Statements.................................. F-7

All schedules are omitted as the required information either is not
applicable or is included in the consolidated financial statements or related
notes.

110

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Gateway Community Financial Corp.

We have audited the consolidated balance sheet of Gateway Community Financial
Corp. and subsidiary as of December 31, 2006 and 2005, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2006. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Gateway Community
Financial Corp. and subsidiary as of December 31, 2006 and 2005, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2006, in conformity with U.S. generally accepted
accounting principles.

/s/S.R. Snodgrass, A.C.

Wexford, PA
March 20, 2007

F-1

GATEWAY COMMUNITY FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET

December 31,
2006 2005
------------- -------------

ASSETS
Cash and due from banks $ 9,792,977 $ 7,094,534
Interest-bearing deposits in other banks 825,203 1,636,118
Federal funds sold - 5,300,000
------------- -------------
Cash and cash equivalents 10,618,180 14,030,652

Investment securities available for sale 14,151,943 1,729,053
Investment securities held to maturity
(fair value $38,404,079 and $38,955,768) 38,645,234 39,586,162
Mortgage-backed securities available for sale 200,059 324,314
Mortgage-backed securities held to maturity
(fair value $58,002,971 and $52,771,675) 58,984,533 53,708,105
Loans receivable 212,305,275 183,951,358
Less allowance for loan losses 1,813,469 3,035,676
------------- -------------
Net loans 210,491,806 180,915,682
Accrued interest receivable 1,733,571 1,106,854
Real estate owned 287,592 287,592
Premises and equipment 6,468,933 6,549,886
Federal Home Loan Bank stock 581,600 355,000
Bank-owned life insurance 7,462,020 7,205,131
Other assets 2,238,354 2,212,379
------------- -------------

TOTAL ASSETS $ 351,863,825 $ 308,010,810
============= =============

LIABILITIES
Deposits $ 315,962,427 $ 277,544,217
Short-term borrowings 4,400,000 -
Advances by borrowers for taxes and insurance 514,511 474,957
Accrued interest payable and other liabilities 2,083,690 1,445,686
------------- -------------

TOTAL LIABILITIES 322,960,628 279,464,860
------------- -------------
Commitments and Contingencies (Note 14)

STOCKHOLDERS' EQUITY
Preferred stock, par value $.10; 5,000,000 shares authorized
no shares issued and outstanding - -
Common stock, par value $.10; 25,000,000 shares authorized;
10,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 249,000 249,000
Retained earnings 28,685,843 28,306,369
Accumulated other comprehensive loss
(32,646) (10,419)
------------- -------------

TOTAL STOCKHOLDERS' EQUITY 28,903,197 28,545,950
------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 351,863,825 $ 308,010,810
============= =============

See accompanying notes to the consolidated financial statements.

F-2

GATEWAY COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31,
2006 2005 2004
------------ ------------ ------------

INTEREST AND DIVIDEND INCOME
Loans receivable $ 11,474,291 $ 9,940,497 $ 9,800,017
Interest-bearing deposits in other banks and federal funds sold 97,856 196,997 142,910
Investment securities
Taxable 2,149,634 1,621,073 1,837,680
Exempt from federal income tax 135,502 38,799 24,388
Mortgage-backed securities 2,416,192 2,423,423 2,108,277
------------ ------------ ------------
Total interest and dividend income 16,273,475 14,220,789 13,913,272
------------ ------------ ------------
INTEREST EXPENSE
Deposits 8,688,512 5,863,428 5,203,667
Short-term borrowings 688,692 7,937 -
------------ ------------ ------------
Total interest expense 9,377,204 5,871,365 5,203,667
------------ ------------ ------------

NET INTEREST INCOME 6,896,271 8,349,424 8,709,605

Recovery of loan losses (348,444) (916,695) (12,766)
------------ ------------ ------------

NET INTEREST INCOME AFTER RECOVERY
OF LOAN LOSSES 7,244,715 9,266,119 8,722,371
------------ ------------ ------------
NONINTEREST INCOME
Service charges and other fees 445,954 375,439 390,570
Investment securities (losses) gains, net (30,145) - 22,788
Earnings on bank-owned life insurance 256,889 245,689 211,060
Other 182,953 262,031 251,155
------------ ------------ ------------
Total noninterest income 855,651 883,159 875,573
------------ ------------ ------------

NONINTEREST EXPENSE
Compensation and employee benefits 4,427,176 4,336,167 4,265,410
Occupancy and equipment 1,247,148 1,292,666 1,253,504
Data processing 608,416 586,478 560,825
Federal insurance premiums 35,228 80,828 121,071
Professional fees 235,151 238,834 321,988
Other 1,077,773 1,099,110 1,166,343
------------ ------------ ------------
Total noninterest expense 7,630,892 7,634,083 7,689,141
------------ ------------ ------------

Income before income taxes 469,474 2,515,195 1,908,803

Income taxes 90,000 892,597 258,570
------------ ------------ ------------
NET INCOME $ 379,474 $ 1,622,598 $ 1,650,233
============ ============ ============

See accompanying notes to the consolidated financial statements.

F-3

GATEWAY COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholders' Comprehensive
Stock Capital Earnings Income (Loss) Equity Income
----- ------- -------- ------------- ------ ------

Balance, December 31, 2003 $1,000 $249,000 $25,033,538 $ 48,018 $25,331,556

Net income 1,650,233 1,650,233 $1,650,233
Other comprehensive loss:
Unrealized loss on available-
for-sale securities, net of
reclassification adjustment,
net of tax benefit of $24,427 (47,418) (47,418) (47,418)
----------
Comprehensive income $1,602,815
------ -------- ----------- -------- ----------- ==========

Balance, December 31, 2004 1,000 249,000 26,683,771 26,934,371
600

Net income 1,622,598 1,622,598 $1,622,598
Other comprehensive loss:
Unrealized loss on available-
for-sale securities, net of
reclassification adjustment,
net of tax benefit of $5,676 (11,019) (11,019) (11,019)
----------
Comprehensive income $1,611,579
------ -------- ----------- -------- ----------- ==========

Balance, December 31, 2005 1,000 249,000 28,306,369 (10,419) 28,545,950

Net income 379,474 379,474 $ 379,474
Other comprehensive loss:
Unrealized loss on available-
for-sale securities, net of
reclassification adjustment,
net of tax benefit of $11,450 (22,227) (22,227) (22,227)
----------
Comprehensive income $ 357,247
------ -------- ----------- -------- ----------- ==========

Balance, December 31, 2006 $1,000 $249,000 $28,685,843 $(32,646) $28,903,197
====== ======== =========== ======== ===========

Components of other comprehensive loss: 2006 2005 2004
--------- --------- ---------
Changes in net unrealized loss on
investment securities available for sale $(42,123) $(11,019) $(32,378)
Realized losses (gains) included in net income,
net of tax (expense) benefit of $10,249,
$0, and $(7,748) 19,896 - (15,040)
-------- -------- --------

Total $(22,227) $(11,019) $(47,418)
======== ======== ========

See accompanying notes to the consolidated financial statements.

F-4

GATEWAY COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended December 31,
2006 2005 2004
------------ ------------ ------------

OPERATING ACTIVITIES
Net income $ 379,474 $ 1,622,598 $ 1,650,233
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 457,255 508,915 502,102
Recovery of loan losses (348,444) (916,695) (12,766)
Amortization of discounts, premiums,
and loan origination fees 42,925 303,788 85,503
Deferred income taxes 329,257 341,072 (236,453)
Earnings on bank-owned life insurance (256,889) (245,689) (211,060)
Gain on sale of premises and equipment (6,000) (88,086) -
Gain on sale of other assets, net (74,994) - -
Loss (gain) on sales of real estate owned - 10,233 (91,344)
Investment securities losses (gains), net 30,145 - (22,788)
(Increase) decrease in accrued interest receivable (626,717) 87,851 157,014
Increase in accrued interest payable 453,063 48,381 42,221
(Increase) decrease in prepaid income taxes (53,871) (589,922) 1,294,808
Other, net (123,054) 399,366 358,847
------------ ------------ ------------
Net cash provided by operating activities 202,150 1,481,812 3,516,317
------------ ------------ ------------
INVESTING ACTIVITIES
Investment securities available for sale:
Purchases (13,391,659) - (571,271)
Maturities and repayments 992,332 - 3,168,374
Investment securities held to maturity:
Purchases (16,602,852) (5,604,188) (25,430,000)
Maturities and repayments 13,527,685 12,603,000 24,451,993
Proceeds from sales 3,969,812 - -
Mortgage-backed securities available for sale:
Maturities and repayments 123,083 188,325 198,147
Mortgage-backed securities held to maturity:
Purchases (18,482,000) (15,121,550) (39,634,113)
Maturities and repayments 13,104,583 21,881,669 19,008,580
Net increase in loans receivable (15,517,336) (5,542,077) (4,431,856)
Purchase of loans (13,741,460) (7,100,406) -
Purchase of premises and equipment (383,302) (452,670) (234,674)
Proceeds from sale of premises and equipment 13,000 184,478 -
Purchase of Federal Home Loan Bank stock (4,897,600) (304,100) (210,500)
Redemption of Federal Home Loan Bank stock 4,671,000 1,227,700 -
Proceeds from sales of real estate owned 142,328 163,011 606,137
------------ ------------ ------------
Net cash (used for) provided by investing activities (46,472,386) 2,123,192 (23,079,183)
------------ ------------ ------------

FINANCING ACTIVITIES
Net increase (decrease) in deposits 38,418,210 (9,310,154) 19,776,004
Net increase in short-term borrowings 4,400,000 - -
Net increase (decrease) in advances by borrowers for taxes
and insurance 39,554 (24,379) 99,308
------------ ------------ ------------
Net cash provided by (used for) financing activities 42,857,764 (9,334,533) 19,875,312
------------ ------------ ------------

(Decrease) increase in cash and cash equivalents (3,412,472) (5,729,529) 312,446

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,030,652 19,760,181 19,447,735
------------ ------------ ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 10,618,180 $ 14,030,652 $ 19,760,181
============ ============ ============

See accompanying notes to the consolidated financial statements.

F-5

GATEWAY COMMUNITY FINANCIAL CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting and reporting policies applied in the
presentation of the accompanying consolidated financial statements follows:

Nature of Operations and Basis of Presentation
- ----------------------------------------------

Gateway Community Financial Corp. (the "Company"), a federally chartered
corporation who's principal activity is the ownership and management of its
wholly owned subsidiary, Gloucester County Federal Savings Bank (the "Bank").
The Bank generates commercial, residential, and consumer loans and receives
deposits from customers located primarily in Gloucester County, New Jersey, and
surrounding areas. The Bank operates under a federal bank charter and provides
full banking services. The Company and the Bank are subject to regulations by
the Office of Thrift Supervision.

The consolidated financial statements of the Company include the accounts of the
Bank. All intercompany transactions have been eliminated in consolidation.

The accounting principles followed by the Company and the methods of applying
these principles conform to U.S. generally accepted accounting principles and to
general practice within the banking industry. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the balance
sheet date and related revenues and expenses for the period. Actual results
could differ significantly from those estimates.

Investment and Mortgage-Backed Securities
- -----------------------------------------

Investment and mortgage-backed securities are classified at the time of
purchase, based on management's intention and ability, as securities held to
maturity or securities available for sale. Debt securities, acquired with the
intent and ability to hold to maturity are stated at cost and adjusted for
amortization of premium and accretion of discount, which are computed using a
level yield method and are recognized as adjustments of interest income over the
period to maturity. Certain other debt and equity securities have been
classified as available for sale to serve principally as a source of liquidity.
Unrealized holding gains and losses for available-for-sale securities are
reported as a separate component of retained earnings, net of tax, until
realized. Realized securities gains and losses are computed using the specific
identification method. Interest and dividends on investment securities are
recognized as income when earned.

Common stock of the Federal Home Loan Bank of New York ("FHLB") represents
ownership in an institution which is wholly owned by other financial
institutions. This equity security is accounted for at cost and classified
separately on the accompanying Consolidated Balance Sheet.

F-6

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans Receivable
- ----------------

Loans receivable are stated at their unpaid principal amounts net of any
unearned income, deferred loan fees, and the allowance for loan losses. Interest
on consumer loans is credited to operations over the term of each loan using the
interest method. Interest on all other loans is recognized as income when earned
on the accrual method. Interest accrued on loans more than 90 days delinquent is
generally offset by a reserve for uncollected interest and is not recognized as
income.

The accrual of interest is generally discontinued when management has serious
doubts about further collectibility of principal or interest, even though the
loan may be currently performing. A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well secured. When a
loan is placed on nonaccrual status, unpaid interest is charged against income.
Interest received on nonaccrual loans is either applied to principal or reported
as interest income, according to management's judgment as to the collectibility
of principal.

Loan origination fees and certain direct loan origination costs are being
deferred and the net amount amortized as an adjustment of the related loan's
yield. The Company is amortizing these amounts over the contractual life of the
related loans using the interest method.

Allowance for Loan Losses
- -------------------------

The allowance for loan losses is established through provisions for loan losses
charged against income. Loans deemed to be uncollectible are charged against the
allowance for loan losses, and subsequent recoveries, if any, are credited to
the allowance.

The allowance for loan losses is maintained at a level by management which
represents the evaluation of known and inherent losses in the loan portfolio at
the consolidated balance sheet date. Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent losses in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, composition of the loan portfolio, current economic conditions, and
other relevant factors. This evaluation is inherently subjective as it requires
material estimates that may be susceptible to significant change, including the
amounts and timing of future cash flows expected to be received on impaired
loans.

F-7

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Loan Losses (Continued)
- -------------------------

A loan is considered impaired when, based on current information and events, it
is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment record, and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan-by-loan basis for commercial and construction loans by the
present value of expected future cash flows discounted at the loan's effective
interest rate, the loan's obtainable market price, or the fair value of the
collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for
impairment. Accordingly, the Bank does not separately identify individual
consumer and residential mortgage loans for impairment disclosures.

Premises and Equipment
- ----------------------

Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is principally computed on the straight-line method over the
estimated useful lives of the related assets, which range from 3 to 10 years for
furniture and equipment and 25 to 50 years for building premises. Expenditures
for maintenance and repairs are charged against income as incurred. Costs of
major additions and improvements are capitalized.

Real Estate Owned
- -----------------

Real estate owned acquired in settlement of foreclosed loans is carried at the
lower of cost or fair value minus estimated cost to sell. Valuation allowances
for estimated losses are provided when the carrying value exceeds the fair
value. Direct costs incurred on such properties are recorded as expenses of
current operations.

Income Taxes
- ------------

The Company and the Bank file separate federal income tax returns. Deferred tax
assets or liabilities are computed based on the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rates. Deferred income tax expenses or benefits are based on the
changes in the deferred tax asset or liability from period to period.

Bank-Owned Life Insurance
- -------------------------

The Company owns insurance on the lives of a certain group of key employees. The
policies were purchased to help offset the increase in the costs of various
fringe benefit plans including healthcare. The cash surrender value of these
policies is included as an asset on the Consolidated Balance Sheet, and any
increases in the cash surrender value is recorded as noninterest income on the
Consolidated Statement of Income. In the event of the death of an insured
individual under these policies, the Company would receive a death benefit,
which would be recorded as noninterest income.

Defined Benefit Plan
- --------------------

The Bank sponsors a trusteed, defined benefit pension plan covering all eligible
employees. The Bank's funding policy is to make annual contributions, as needed,
based upon the funding formula developed by the plan's actuary.

F-8

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income (Loss)
- ---------------------------

The Company is required to present comprehensive income (loss) and its
components in a full set of general-purpose financial statements for all periods
presented. Other comprehensive income (loss) is composed exclusively of
unrealized holding gains and losses on the available-for-sale securities
portfolio. The Company has elected to report the effects of other comprehensive
income (loss) as part of the Consolidated Statement of Changes in Stockholders'
Equity.

Cash Flow Information
- ---------------------

Management has defined cash and cash equivalents as "Cash and due from banks,"
"Interest-bearing deposits in other banks," and "Federal funds sold." Cash
payments for interest in 2006, 2005, and 2004 were $8,924,141, $5,822,984, and
$5,161,446, respectively. Cash payments for income taxes in 2006 and 2005 were
$40,000 and $1,327,577, respectively. There were no cash payments for income
taxes in 2004.

Reclassification of Comparative Amounts
- ---------------------------------------

Certain comparative account balances for the prior periods have been
reclassified to conform to the current period's classifications. Such
reclassifications did not affect retained earnings or net income.

Recent Accounting Pronouncements
- --------------------------------

On December 16, 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 123R, Share-Based
Payment, which replaces FAS No. 123, Accounting for Stock-Based Compensation,
and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.
This statement requires that all share-based payments to employees, including
grants of employee stock options, be recognized as compensation costs in the
financial statements based on their fair values. The impact of the adoption of
this standard will be dependent on the nature and extent of stock-based
compensation granted in future periods.

In February 2006, the FASB issued FAS No. 155, Accounting for Certain Hybrid
Instruments, an amendment of FASB Statements No. 133 and 140. FAS No. 155 allows
financial instruments that have embedded derivatives to be accounted for as a
whole (eliminating the need to bifurcate the derivative from its host) if the
holder elects to account for the whole instrument on a fair value basis. This
statement is effective for all financial instruments acquired or issued after
the beginning of an entity's first fiscal year that begins after September 15,
2006. The adoption of this standard is not expected to have a material effect on
the Company's results of operations or financial position.

In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of
Financial Assets. This statement, which is an amendment to FAS No. 140, will
simplify the accounting for servicing assets and liabilities, such as those
common with mortgage securitization activities. Specifically, FAS No. 156
addresses the recognition and measurement of separately recognized servicing
assets and liabilities and provides an approach to simplify efforts to obtain
hedge-like (offset) accounting. FAS No. 156 also clarifies when an obligation to
service financial assets should be separately recognized as a servicing asset or
a servicing liability; requires that a separately recognized servicing asset or
servicing liability be initially measured at fair value, if practicable; and
permits an entity with a separately recognized servicing asset or servicing
liability to choose either of the amortization or fair value methods for
subsequent measurement. The provisions of FAS No. 156 are effective as of the
beginning of the first fiscal year that begins after September 15, 2006. The
adoption of this standard is not expected to have a material effect on the
Company's results of operations or financial position.

F-9

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements, which
provides enhanced guidance for using fair value to measure assets and
liabilities. The standard applies whenever other standards require or permit
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair value in any new circumstances. FAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Early adoption is permitted. The
adoption of this standard is not expected to have a material effect on the
Company's results of operations or financial position.

In September 2006, the FASB issued FAS No. 158, Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132(R). FAS No. 158 requires that a company
recognize the overfunded or underfunded status of its defined benefit post
retirement plans (other than multiemployer plans) as an asset or liability in
its statement of financial position and that it recognize changes in the funded
status in the year in which the changes occur through other comprehensive
income. FAS No. 158 also requires the measurement of defined benefit plan assets
and obligations as of the fiscal year-end, in addition to footnote disclosures.
On December 31, 2006, the Company adopted FAS No. 158, except for the
measurement provisions, which are effective for fiscal years ending after
December 15, 2008. The adoption of this standard is not expected to have a
material effect on the Company's results of operations or financial position.

In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), Accounting
for Uncertainty in Income Taxes. FIN 48 is an interpretation of FAS No. 109,
Accounting for Income Taxes, and it seeks to reduce the diversity in practice
associated with certain aspects of measurement and recognition in accounting for
income taxes. This interpretation clarifies that management is expected to
evaluate an income tax position taken or expected to be taken for likelihood of
realization before recording any amounts for such position in the financial
statement. FIN 48 also requires expanded disclosure with respect to income tax
positions taken that are not certain to be realized. This interpretation is
effective for fiscal years beginning after December 15, 2006, and will require
management to evaluate every open tax position that exists in every jurisdiction
on the date of initial adoption. The Company is currently evaluating the impact
the adoption of the standard will have on the Company's results of operations.

In September 2006, the FASB reached consensus on the guidance provided by
Emerging Issues Task Force Issue 06-4 ("EITF 06-4"), Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements. The guidance is applicable to endorsement split-dollar
life insurance arrangements, whereby the employer owns and controls the
insurance policy, that are associated with a postretirement benefit. EITF 06-4
requires that for a split-dollar life insurance arrangement within the scope of
the issue, an employer should recognize a liability for future benefits in
accordance with FAS No. 106 (if, in substance, a postretirement benefit plan
exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in
substance, an individual deferred compensation contract) based on the
substantive agreement with the employee. EITF 06-4 is effective for fiscal years
beginning after December 15, 2007. The Company is currently evaluating the
impact the adoption of the standard will have on the Company's results of
operations or financial condition.

In September 2006, the FASB reached consensus on the guidance provided by
Emerging Issues Task Force Issue 06-5 ("EITF 06-5"), Accounting for Purchases of
Life Insurance--Determining the Amount That Could Be Realized in Accordance with
FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.
EITF 06-5 states that a policyholder should consider any additional amounts
included in the contractual terms of the insurance policy other than the cash
surrender value in determining the amount that could be realized under the
insurance contract. EITF 06-5 also states that a policyholder should determine
the amount that could be realized under the life insurance contract assuming the
surrender of an individual-life by individual-life policy (or certificate by
certificate in a group policy). EITF 06-5 is effective for fiscal years
beginning after December 15, 2006. The Company is currently evaluating the
impact the adoption of the standard will have on the Company's results of
operations or financial condition.

F-10

2. INVESTMENT SECURITIES

The amortized cost and fair values of investment securities available for sale
and held to maturity are summarized as follows:

2006
---------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- --------------- -------------- ---------------

Available for Sale
U.S. government agency securities $ 12,404,579 $ 63,466 $ (33,860) $ 12,434,185
Equity securities 1,798,599 - (80,841) 1,717,758
--------------- --------------- -------------- ---------------
Total $ 14,203,178 $ 63,466 $ (114,701) $ 14,151,943
=============== =============== ============== ===============
Held to Maturity
U.S. government agency securities $ 32,066,989 $ 5,672 $ (229,778) $ 31,842,883
Corporate securities 1,028,378 - (26,896) 1,001,482
Obligations of state and
political subdivisions 5,549,867 9,847 - 5,559,714
--------------- --------------- -------------- ---------------

Total $ 38,645,234 $ 15,519 $ (256,674) $ 38,404,079
=============== =============== ============== ===============

2005
---------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- --------------- -------------- ---------------

Available for Sale
Equity securities $ 1,746,053 $ - $ (17,000) $ 1,729,053
=============== ============== ============== ===============
Held to Maturity
U.S. government agency securities $ 35,350,766 $ 776 $ (607,118) $ 34,744,424
Corporate securities 3,059,088 4,841 (35,141) 3,028,788
Obligations of state and
political subdivisions 1,176,308 6,248 - 1,182,556
--------------- --------------- -------------- ---------------

Total $ 39,586,162 $ 11,865 $ (642,259) $ 38,955,768
=============== =============== ============== ===============

F-11

2. INVESTMENT SECURITIES (Continued)

As of December 31, 2006, the amortized cost and fair value of investments in
debt securities, by contractual maturity, are shown below.

Available for Sale Held to Maturity
----------------------------------- ----------------------------------

Amortized Fair Amortized Fair
Cost Value Cost Value
--------------- --------------- --------------- ---------------

Due within one year $ - $ - $ 4,519,094 $ 4,519,317
Due after one year through five years - - 19,241,392 19,075,194
Due after five years through ten years 3,500,000 3,503,768 7,978,651 7,952,188
Due after ten years 8,904,579 8,930,417 6,906,097 6,857,380
--------------- --------------- --------------- ---------------

Total $ 12,404,579 $ 12,434,185 $ 38,645,234 $ 38,404,079
=============== =============== =============== ===============

At December 31, 2006 and 2005, the carrying value of securities pledged to
secure public funds totaled $1,682,677 and $2,160,459, respectively.

As of December 31, 2006, proceeds from the sale of investment securities of
$3,969,812 resulted in the recognition of a loss of $30,145. These securities
were sold within three months of maturity. There were no investment sales during
2005. As of December 31, 2004, proceeds from a called investment security of
$1,291,763 resulted in the recognition of a gain of $22,788.

3. MORTGAGE-BACKED SECURITIES

The amortized cost and fair value of mortgage-backed securities available for
sale and held to maturity are summarized as follows:

Available for Sale
Government National
Mortgage Association $ 198,288 $ 1,771 $ - $ 200,059
============== =============== ============== ===============
Held to Maturity
Government National
Mortgage Association $ 4,488,561 $ 15,594 $ (22,913) $ 4,481,242
Freddie Mac 3,350,639 5,425 (42,324) 3,313,740
Fannie Mae 16,792,592 33,732 (417,578) 16,408,746
Collateralized mortgage obligations 34,352,741 25,635 (579,133) 33,799,243
-------------- --------------- -------------- ------------------

Total $ 58,984,533 $ 80,386 $ (1,061,948) $ 58,002,971
============== =============== ============== ===============

F-12

3. MORTGAGE-BACKED SECURITIES (Continued)

Available for Sale
Government National
Mortgage Association $ 323,101 $ 1,213 $ - $ 324,314
============== =============== ============== ===============

Held to Maturity
Government National
Mortgage Association $ 7,266,072 $ 14,598 $ (59,612) $ 7,221,058
Freddie Mac 2,982,953 2,609 (67,470) 2,918,092
Fannie Mae 18,809,993 20,897 (398,665) 18,432,225
Collateralized mortgage obligations 24,649,087 31,133 (479,920) 24,200,300
-------------- --------------- -------------- ---------------

Total $ 53,708,105 $ 69,237 $ (1,005,667) $ 52,771,675
============== =============== ============== ===============

The collateralized mortgage obligations contain both fixed and adjustable-rate
classes of securities which are repaid in accordance with a predetermined
priority. These mortgage-related securities relate primarily to securities
issued by Fannie Mae, Freddie Mac, and private institutions.

As of December 31, 2006, the amortized cost and fair value of mortgage-backed
securities, by contractual maturity, are shown below. Mortgage-backed securities
provide for periodic payments of principal and interest and have contractual
lives ranging from 2 to 30 years. Due to expected repayment terms being
significantly less than the underlying mortgage loan pool contractual
maturities, the estimated lives of these securities could be significantly
shorter.

Available for Sale Held to Maturity
----------------------------------- ----------------------------------

Amortized Fair Amortized Fair
Cost Value Cost Value
--------------- --------------- --------------- ---------------

Due after one year through
five years $ - $ - $ 6,848,554 $ 6,579,264
Due after five years through
ten years - - 4,634,845 4,528,314
Due after ten years 198,288 200,059 47,501,134 46,895,393
--------------- ------------ --------------- --------------

Total $ 198,288 $ 200,059 $ 58,984,533 $ 58,002,971
=============== ============ =============== ==============

F-13

4. UNREALIZED LOSSES ON SECURITIES

The following table shows the Company's fair value and gross unrealized losses,
aggregated by investment category and length of time that the individual
securities have been in a continuous unrealized loss position, at December 31.

2006
------------------------------------------------------------------------------------------------
Less than Twelve Months Twelve Months or Greater Total
----------------------------- ------------------------------ -----------------------------
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
-------------- ----------- -------------- ------------ -------------- ------------

U.S. government agency
securities $ 15,702,902 $ (82,162) $ 18,617,933 $ (181,476) $ 34,320,835 $ (263,638)
Corporate securities 1,001,483 (26,896) 1,001,483 (26,896)
Government National
Mortgage Association 373,717 (1,486) 2,153,967 (21,427) 2,527,684 (22,913)
Freddie Mac - - 1,593,564 (42,324) 1,593,564 (42,324)
Fannie Mae 276,353 (2,127) 12,679,336 (415,451) 12,955,689 (417,578)
Collateralized mortgage
obligations 10,042,798 (29,669) 18,512,258 (549,464) 28,555,056 (579,133)
------------- ----------- -------------- ------------ -------------- -------------
Total debt securities 26,395,770 (115,444) 54,558,541 (1,237,038) 80,954,311 (1,352,482)

Equity securities - - 1,717,758 (80,841) 1,717,758 (80,841)
------------- ----------- ------------- ------------ ------------- ------------
$ 26,395,770 $ (115,444) $ 56,276,299 $ (1,317,879) $ 82,672,069 $ (1,433,323)
============= =========== ============= ============ ============= ============

2005
------------------------------------------------------------------------------------------------
Less than Twelve Months Twelve Months or Greater Total
----------------------------- ------------------------------ -----------------------------
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
------------- ----------- ---------------- ------------ ------------- ------------

U.S. government agency
securities $ 24,013,919 $ (351,499) $ 9,730,349 $ (255,619) $ 33,744,268 $ (607,118)
Corporate securities 1,000,666 (29) 1,008,121 (35,112) 2,008,787 (35,141)
Government National
Mortgage Association 1,150,717 (1,462) 3,491,265 (58,150) 4,641,982 (59,612)
Freddie Mac 717,024 (6,238) 2,015,443 (61,232) 2,732,467 (67,470)
Fannie Mae 10,741,656 (242,500) 5,245,759 (156,165) 15,987,415 (398,665)
Collateralized mortgage
obligations 10,941,672 (180,309) 12,160,252 (299,611) 23,101,924 (479,920)
------------- ----------- ------------- ------------ ------------- ------------
Total debt securities 48,565,654 (782,037) 33,651,189 (865,889) 82,216,843 (1,647,926)

Equity securities - - 483,000 (17,000) 483,000 (17,000)
------------- ----------- ------------- ------------ ------------- ------------
$ 48,565,654 $ (782,037) $ 34,134,189 $ (882,889) $ 82,699,843 $ (1,664,926)
============= =========== ============= ============ ============= ============

The policy of the Company is to recognize an other-than-temporary impairment of
equity securities where the fair value has been significantly below cost for
three consecutive quarters. For fixed maturity investments with unrealized
losses due to interest rates where the Company has the positive intent and
ability to hold the investment for a period of time sufficient to allow a market
recovery, declines in value below cost are not assumed to be other than
temporary. There are 100 positions that are temporarily impaired at December 31,
2006. The Company reviews its position quarterly and has asserted that at
December 31, 2006, the declines outlined in the above table represent temporary
declines and the Company does have the intent and ability either to hold those
securities to maturity or to allow a market recovery.

The Company has concluded that any impairment of its investment securities
portfolio is not other than temporary but is the result of interest rate changes
that are not expected to result in the noncollection of principal and interest
during the period.

F-14

5. LOANS RECEIVABLE

Loans receivable consist of the following:

2006 2005
------------- -------------

Real estate loans:
1 - 4 family $ 102,754,981 $ 74,115,053
Home equity 59,327,434 49,656,695
Commercial 14,472,039 13,889,193
Construction 710,700 1,666,900
------------- -------------
177,265,154 139,327,841

Commercial 4,561,481 6,022,416

Consumer and other loans
Auto loans 21,135,672 33,591,356
Manufactured housing loans 7,512,182 5,422,063
Savings account loans 1,093,176 1,079,574
Other 2,154,123 1,203,032
------------- -------------
31,895,153 41,296,025
------------- -------------
Less:
Deferred loan costs (164,153) (154,968)
Unearned income 1,580,666 2,849,892
Allowance for loan losses 1,813,469 3,035,676
------------- -------------
3,229,982 5,730,600
------------- -------------

Total $ 210,491,806 $ 180,915,682
============= =============

The Company's primary activity is with customers located within Gloucester
County and surrounding areas. Commercial, residential, and personal loans are
granted. Although the Company has a diversified loan portfolio at December 31,
2006 and 2005, repayment of these loans is dependent upon the local economic
conditions in its immediate trade area.

Activity in the allowance for loan losses for the years ended December 31 is as
follows:

2006 2005 2004
----------- ----------- -----------

Balance, January 1 $ 3,035,676 $ 3,962,656 $ 3,861,946

Loans charged off (988,259) (76,832) (418,797)
Recoveries 114,496 66,547 532,273
----------- ----------- -----------

Net loans charged off (873,763) (10,285) 113,476
Recovery of loan losses (348,444) (916,695) (12,766)
----------- ----------- -----------

Balance, December 31 $ 1,813,469 $ 3,035,676 $ 3,962,656
=========== =========== ===========

The Company had nonaccrual loans, inclusive of impaired loans, of $2,313,789,
$3,370,443, and $1,487,893 at December 31, 2006, 2005, and 2004, respectively.
Interest income on loans would have increased by $116,810, $140,779, and
$125,218 during 2006, 2005, and 2004, respectively, if these loans had performed
in accordance with their original terms.

F-15

5. LOANS RECEIVABLE

Information with respect to impaired loans as of and for the years ended
December 31 is as follows:

2006 2005 2004
---------- ---------- ----------

Impaired loans with a related
allowance for loan losses $2,125,398 $3,148,515 $ 855,687
Impaired loans without a related
allowance for loan losses - - -
Related allowance for loan losses 561,767 1,138,231 125,673
Average recorded balance of impaired loans 2,449,032 1,852,937 1,301,632
Interest income recognized on impaired loans 62,397 3,277 19,389

In the normal course of business, loans are extended to directors, executive
officers, and their associates. A summary of loan activity for those directors,
executive officers, and their associates with aggregate balances of $120,000 or
more for the year ended December 31 is as follows:

2005 Additions Repayments 2006
---------- ----------- ---------- -----------

$ 581,539 $ 146,526 $ 77,632 $ 650,435

6. ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consists of the following:

2006 2005
------------ ------------

Investment securities $ 714,889 $ 343,283
Mortgage-backed securities 234,134 204,432
Loans receivable 784,548 559,139
------------ ------------

Total $ 1,733,571 $ 1,106,854
============ ============

7. PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

2006 2005
------------ ------------

Land and improvements $ 762,703 $ 770,627
Buildings and improvements 6,897,076 6,871,116
Furniture and equipment 2,891,096 2,842,409
Construction in progress 134,354 30,036
Automobiles 46,395 35,000
------------ ------------
10,731,624 10,549,188
Less accumulated depreciation (4,262,691) (3,999,302)
------------ ------------

Total $ 6,468,933 $ 6,549,886
============ ============

Depreciation expense for the years ended December 31, 2006, 2005, and 2004, was
$457,255, $508,915, and $502,102, respectively.

F-16

8. FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the FHLB system. As a member, the Bank maintains an
investment in the capital stock of the FHLB, at cost, in an amount not less than
the greater of 1 percent of its outstanding home loans or 5 percent of its
outstanding notes payable to the FHLB as calculated at December 31 of each year.

9. DEPOSITS

Comparative details of deposits are as follows:

2006 2005
---------------------------------- -----------------------------------
Amount % Amount %
---------------- -------------- --------------- ----------------

Non-interest-bearing $ 9,532,029 3.0 % $ 12,123,517 4.4 %
--------------- ------------- -------------- ---------------
Interest-bearing:
Savings 63,761,165 20.2 62,551,038 22.5
NOW checking 35,926,129 11.4 34,560,371 12.5
Money market 44,636,577 14.1 24,661,590 8.9
--------------- ------------- -------------- ---------------
144,323,871 45.7 121,772,999 43.9
--------------- ------------- -------------- ---------------
Time certificates of deposit:
2.00% or less - - 3,327,749 1.2
2.01 - 4.00% 29,261,168 9.3 83,200,209 30.0
4.01 - 6.00% 131,207,362 41.5 55,560,420 20.0
6.01 - 8.00% 1,637,997 0.5 1,559,323 0.5
--------------- ------------- -------------- ---------------
162,106,527 51.3 143,647,701 51.7
--------------- ------------- -------------- ---------------
Total $ 315,962,427 100.0 % $ 277,544,217 100.0 %
=============== ============= ============== ===============

The scheduled maturities of time certificates of deposits at December 31, 2006,
are as follows:

Year Ending
December 31,
--------------------------------

2007 $ 113,516,368
2008 16,089,264
2009 6,943,370
2010 11,588,833
2011 6,538,663
Thereafter 7,430,029
------------

Total $ 162,106,527
============

The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was $55,010,327 and $47,379,397 at December 31, 2006 and 2005,
respectively. Deposits in excess of $100,000 are not federally insured.

F-17

9. DEPOSITS (Continued)

Maturities on time deposits of $100,000 or more at December 31, 2006 are as
follows:

Within three months $ 18,344,635
Beyond three but within six months 14,714,662
Beyond six but within twelve months 10,329,691
Beyond one year 11,621,339
---------------

$ 55,010,327
===============

Interest expense by deposit category for the years ended December 31 is as
follows:

2006 2005 2004
---------------- ---------------- ----------------

Savings $ 587,347 $ 680,234 $ 733,973
NOW and money market 1,714,798 642,697 494,708
Time certificates of deposit 6,386,367 4,540,497 3,974,986
--------------- -------------- ---------------

$ 8,688,512 $ 5,863,428 $ 5,203,667
=============== ============== ===============

10. SHORT-TERM BORROWINGS

Short-term borrowings include overnight repurchase agreements through the FHLB.
The outstanding balances and related information for short-term borrowings are
summarized as follows:

2006 2005 2004
---------------- ---------------- ----------------

Balance at year-end $ 4,400,000 $ - $ -
Average balance outstanding 12,859,178 196,986 -
Maximum month-end balance 24,100,000 - -
Weighted-average rate at year-end 5.33% - -
Weighted-average rate during the year 5.36% 4.03% -

The Bank has a credit arrangement with the FHLB with a total available borrowing
limit of approximately $101.5 million at December 31, 2006. This credit
arrangement is subject to annual renewal, incurs no service charges, and is
secured by the Bank's FHLB stock, mortgage-backed securities, and qualifying
first-mortgage loans.

11. INCOME TAXES

The components of the income tax expense for the years ended December 31 are
summarized as follows:

2006 2005 2004
--------------- --------------- ---------------

Current:
Federal $ (239,257) $ 381,976 $ 481,230
State - 169,549 13,793
-------------- --------------- ---------------
(239,257) 551,525 495,023
Deferred 271,784 417,152 99,981
Valuation allowance 57,473 (76,080) (336,434)
-------------- --------------- ---------------

Total $ 90,000 $ 892,597 $ 258,570
============== =============== ===============

F-18

11. INCOME TAXES (Continued)

The following temporary differences gave rise to the net deferred tax assets:

2006 2005
---------------- ----------------

Deferred tax assets:
Allowance for loan losses $ 873,255 $ 1,170,062
Net operating loss carryforward 310,586 253,113
Net unrealized loss on securities 16,818 5,367
Other 351,855 403,905
---------------- ----------------
Total gross deferred tax assets 1,552,514 1,832,447
Less valuation allowance 310,586 253,113
---------------- ----------------
Deferred tax assets after valuation allowance 1,241,928 1,579,334
---------------- ----------------
Deferred tax liabilities:
Premises and equipment 40,839 60,439
---------------- ----------------
Total gross deferred tax liabilities 40,839 60,439
---------------- ----------------

Net deferred tax assets $ 1,201,089 $ 1,518,895
================ ================

At December 31, 2006, the Company has an available net operating loss
carryforward of $3,450,951 for state tax purposes that will expire in 2013. For
the periods ended, a valuation allowance has been established for 100 percent of
the state net operating loss carryforwards that management believes may not be
realizable.

The reconciliation of the federal statutory rate and the Company's effective
income tax rate is as follows:

2006 2005 2004
------------------------ ---------------------- ------------------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
----------- --------- ---------- -------- ----------- ---------

Tax expense at statutory rate $ 159,621 34.0 % $ 855,166 34.0 % $ 648,993 34.0 %
State income, net of
federal tax 46,200 9.8 111,902 4.4 9,103 0.5

Effect of tax free income (126,909) (27.0) (95,621) (3.8) (79,412) (4.2)
Valuation allowance - - - - (273,118) (14.3)
Other, net 11,088 2.4 21,150 0.9 (46,996) (2.5)
---------- -------- --------- ------- ----------- --------
Actual tax expense
and effective rate $ 90,000 19.2 % $ 892,597 35.5 % $ 258,570 13.5 %
========== ======== ========= ======= =========== ========

F-19

12. REGULATORY MATTERS

Cash and Due from Banks
- -----------------------

The Bank is required to maintain reserve funds in cash or on deposit with the
Federal Reserve Bank. As of December 31, 2006 and 2005, the Bank had required
reserves of $1,129,000 and $994,000, respectively, composed principally of vault
cash and a depository amount held with the Federal Reserve Bank.

13. EMPLOYEE BENEFITS

Defined Benefit Plan
- --------------------

The Bank sponsors a trusteed, defined benefit pension plan covering
substantially all employees and officers. The plan calls for benefits to be paid
to eligible employees at retirement based primarily upon years of service with
the Bank and compensation rates near retirement. The Bank's funding policy is to
make annual contributions as needed based upon the funding formula developed by
the plan's actuary. This plan is considered a multi-employer plan for which the
Company makes contributions, when necessary, to provide benefits to eligible
employees upon their retirement. Pension contributions to this plan amounted to
$787,517, $836,355, and $381,678 for the years ended December 31, 2006, 2005,
and 2004, respectively.

Defined Contribution Plan
- -------------------------

The Company sponsors a thrift plan with a 401(k) option. The Company matches up
to 6 percent of each eligible employee's contribution to the plan. Employees are
eligible after one year of service. Employer contributions to this plan amounted
to $50,121, $44,334, and $41,808 for the years ended December 31, 2006, 2005,
and 2004, respectively.

Supplemental Retirement Plans
- -----------------------------

The Bank maintains a Director Fee Continuation Agreement `(Director Plan") to
provide benefits to eligible directors. The Director Plan provides benefits to
eligible directors upon their retirement from the Board and a preretirement
death benefit. Each eligible director will receive an annual benefit equal to
fifty percent of the average of the three highest Director's total compensation
prior to the Director's retirement for a period of ten years.

F-20

13. EMPLOYEE BENEFITS (Continued)

The following table sets forth the change in plan assets and benefit obligation
at December 31:

Director Plan
-------------------------------------
2006 2005
---------------- ----------------

Change in benefit obligation:
Benefit obligation at beginning of year $ 700,146 $ 659,734
Service cost 35,916 43,086
Interest cost 58,739 52,722
Benefits paid (121,240) (55,396)
-------------- --------------
Benefit obligation at end of year 673,561 700,146

Fair value of plan assets at end of year - -
-------------- --------------

Funded status $ (673,561) $ (700,146)
============== ==============

Components of Net Periodic Benefit Cost
- ---------------------------------------

Director Plan
----------------------------------------
2006 2005 2004
---------- ----------- -----------

Net periodic benefit cost:
Service cost $ 35,916 $ 43,086 $ 102,886
Interest cost 58,739 52,722 38,775
--------- ---------- ----------

Net periodic benefit cost $ 94,655 $ 95,808 $ 141,661
========= ========== ==========

The discount rate used to determine benefit obligations for the Director Plan at
the measurement dates was 7.50 percent for each of the periods ended December
31, 2006, 2005, and 2004.

At December 31, 2006, the projected benefit payments for the Plans are as
follows:

Director
Plan
----------------
2007 $ 54,017
2008 54,017
2009 54,017
2010 54,017
2011 54,017
2012 - 2016 139,879
---------------

$ 409,964
===============

The Bank also maintains an Executive Incentive Retirement Plan Agreement
("Executive Plan") with executives of the Bank. The Executive Plan provides the
executives with supplemental retirement benefits based upon current salary and
percentage award and a preretirement death benefit. The award covered under the
agreement shall be paid to the executive for the executive's services as
determined at the sole discretion of the Board of Directors, based upon net
income. The executives shall be vested in each award individually at a rate of
twenty percent per full year of employment with the Bank from the date of each
such award. The executives are 100 percent vested after obtaining age 65.
Payments to the executives will be in either equal annual installments for
fifteen years or in a lump sum. The costs recognized by the Bank were $32,764,
$43,551, and $14,220, for the years ended December 31, 2006, 2005, and 2004,
respectively.

The Bank is the beneficiary of life insurance policies with a cash surrender
value at December 31, 2006, of $7,462,020 that have been purchased as a method
of financing benefits under these Plans.

F-21

14. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments
- -----------

In the normal course of business, the Company makes various commitments which
are not reflected in the accompanying consolidated financial statements. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the Consolidated Balance Sheet. The
Company's exposure to credit loss in the event of nonperformance by the other
parties to the financial instruments is represented by the contractual amounts
as disclosed. The Company minimizes its exposure to credit loss under these
commitments by subjecting them to credit approval and review procedures and
collateral requirements as deemed necessary. Commitments generally have fixed
expiration dates within one year of their origination.

Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Performance letters of
credit represent conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. These instruments are issued
primarily to support bid or performance-related contracts. The coverage period
for these instruments is typically a one-year period with an annual renewal
option subject to prior approval by management. Fees earned from the issuance of
these letters are recognized over the coverage period. For secured letters of
credit, the collateral is typically Bank deposit instruments or customer
business assets.

The off-balance sheet commitments consisted of the following:

2006 2005
--------------- ----------------

Commitments to extend credit $ 7,011,038 $ 9,284,878
Standby letters of credit 1,205,909 401,325

Commitments to extend credit consist of fixed-rate commitments with interest
rates ranging from 5.375 percent to 6.75 percent. The commitments outstanding at
December 31, 2006, contractually mature in less than one year.

Contingent Liabilities
- ----------------------

In 2003, three lawsuits were filed by the Bank against a land developer for
damages resulting from unpaid commercial loans and two foreclosure actions. The
contractor has filed counterclaims in all instances. In addition, one lawsuit
includes as defendants all contract purchasers of lots in a development who may
claim vendees' liens for deposits given to the developer. Numerous contract
purchasers have or will file answers to the foreclosure action, including
counterclaims against the Bank for compensatory damages representing monies paid
by the contract purchasers to the land developer. The counterclaims are premised
upon alleged improper allocation of loan payments by the Bank and the alleged
failure of the Bank to maintain deposits in escrow accounts. The contractor is
seeking compensatory and punitive damages in an unspecified amount, as well as
to invalidate the Bank's liens on the subject property. All pending Law Division
matters in New Jersey State Court have been stayed due to the land developer's
filing in bankruptcy court. At this time, outside counsel for the Bank cannot
offer an opinion as to the probable outcome. The Bank believes the suit is
without merit and is vigorously defending its position.

In the normal course of business, the Company and its subsidiaries are involved
in various legal proceedings primarily involving the collection of outstanding
loans. None of these proceedings are expected to have a material effect on the
financial position or results of operations of the Company.

F-22

15. REGULATORY CAPITAL REQUIREMENTS

Federal regulations require the Bank to maintain certain minimum amounts of
capital. Specifically, the Bank is required to maintain certain minimum dollar
amounts and ratios of Total and Tier I capital to risk-weighted assets and of
Tier I capital to average total assets.

In addition to the capital requirements, the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") established five capital categories
ranging from "well capitalized" to "critically undercapitalized." Should any
institution fail to meet the requirements to be considered "adequately
capitalized," it would become subject to a series of increasingly restrictive
regulatory actions. Management believes as of December 31, 2006, the Bank met
all capital adequacy requirements to which they are subject.

As of December 31, 2006 and 2005, the OTS categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. To be
classified as a well capitalized financial institution, Total risk-based, Tier 1
risk-based, core capital, and tangible equity capital ratios must be at least 10
percent, 6 percent, 5 percent, and 1.5 percent, respectively. There have been no
conditions or events since the notification that management believes have
changed the Bank's category.

The following table reconciles capital under U.S. generally accepted accounting
principles.

2006 2005
-------------- ----------------

Total stockholders' equity $ 28,635,072 $ 28,280,488
Other disallowed assets (1,167,044) (918,679)
Nonqualifying equity instruments (1,000) (1,000)
Accumulated other comprehensive (income) loss (20,709) 10,419
-------------- ---------------

Tier I, core, and tangible capital 27,446,319 27,371,228

Allowance for loan losses 1,750,068 2,311,533
Other assets required to be deducted (126,717) (188,326)
-------------- --------------

Total risk-based capital $ 29,069,670 $ 29,494,435
============= ==============

F-23

15. REGULATORY CAPITAL REQUIREMENTS (Continued)

The following table reflects the Bank's capital ratios and minimum requirements
at December 31.

2006 2005
----------------------------------- -----------------------------------
Amount Ratio Amount Ratio
----------------- --------------- --------------- ----------------

Total Capital
(to Risk-Weighted Assets)
-------------------------

Actual $ 29,069,670 14.2 % $ 29,494,435 16.1 %
For Capital Adequacy Purposes 16,337,680 8.0 14,735,882 8.0
To Be Well Capitalized 20,422,110 10.0 18,419,853 10.0

Tier I Capital
(to Risk-Weighted Assets)
-------------------------

Actual $ 27,446,319 13.4 % $ 27,371,228 14.9 %
For Capital Adequacy Purposes 8,168,840 4.0 7,367,941 4.0
To Be Well Capitalized 12,253,260 6.0 11,051,912 6.0

Core Capital
(to Adjusted Assets)
-------------------------

Actual $ 27,446,319 7.8 % $ 27,371,228 8.9 %
For Capital Adequacy Purposes 10,520,036 3.0 9,215,572 3.0
To Be Well Capitalized 17,533,393 5.0 15,359,287 5.0

Tangible Capital
(to Adjusted Assets)
-------------------------

Actual $ 27,446,319 7.8 % $ 27,371,228 8.9 %
For Capital Adequacy Purposes 5,260,018 1.5 4,607,786 1.5
To Be Well Capitalized N/A N/A

Prior to the enactment of the Small Business Job Protection Act, the Bank
accumulated approximately $2,855,000 of retained earnings, which represents
allocations of income to bad debt deductions for tax purposes only. Since this
amount represents the accumulated bad debt reserves prior to 1988, no provision
for federal income tax has been made for such amount. If any portion of this
amount is used other than to absorb loan losses (which is not anticipated), the
amount will be subject to federal income tax at the current corporate rate.

F-24

16. FAIR VALUE DISCLOSURE

The estimated fair values of the Company's financial instruments at December 31
are as follows:

2006 2005
------------------------------------ ------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------------- ---------------- ---------------- ----------------

Financial assets:
Cash and cash
equivalents $ 10,618,180 $ 10,618,180 $ 14,030,652 $ 14,030,652
Investment securities:
Available for sale 14,151,943 14,151,943 1,729,053 1,729,053
Held to maturity 38,645,234 38,404,079 39,586,162 38,955,768
Mortgage-backed securities:
Available for sale 200,059 200,059 324,314 324,314
Held to maturity 58,984,533 58,002,971 53,708,105 52,771,675
Loans receivable, net 210,491,806 205,707,806 180,915,682 178,929,682
Accrued interest receivable 1,733,571 1,733,571 1,106,854 1,106,854
FHLB stock 581,600 581,600 355,000 355,000
Bank-owned life insurance 7,462,020 7,462,020 7,205,131 7,205,131

Financial liabilities:
Deposits $ 315,962,427 $ 314,266,427 $ 277,544,217 $ 275,398,061
Short-term borrowings 4,400,000 4,400,000 - -
Advances by borrowers
for taxes and insurance 514,511 514,511 474,957 474,957
Accrued interest payable 573,526 573,526 120,463 120,463

Financial instruments are defined as cash, evidence of an ownership interest in
an entity, or a contract which creates an obligation or right to receive or
deliver cash or another financial instrument from/to a second entity on
potentially favorable or unfavorable terms.

Fair value is defined as the amount at which a financial instrument could be
exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a
financial instrument, the estimated fair value would be calculated based upon
the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial
instruments are based upon manage-ment's judgment regarding current economic
conditions, interest rate risk, expected cash flows, future estimated losses,
and other factors as determined through various option pricing formulas or
simulation modeling. As many of these assumptions result from judgments made by
management based upon estimates which are inherently uncertain, the resulting
estimated fair values may not be indicative of the amount realizable in the sale
of a particular financial instrument. In addition, changes in the assumptions on
which the estimated fair values are based may have a significant impact on the
resulting estimated fair values.

As certain assets, such as deferred tax assets and premises and equipment, are
not considered financial instruments, the estimated fair value of financial
instruments would not represent the full value of the Company.

The Company employed simulation modeling in determining the estimated fair value
of financial instruments for which quoted market prices were not available based
upon the following assumptions:

Cash and Cash Equivalents, Accrued Interest Receivable, FHLB Stock, Short-Term
- --------------------------------------------------------------------------------
Borrowings, Advances by Borrowers for Taxes and Insurance, and Accrued Interest
- --------------------------------------------------------------------------------
Payable
- -------

The fair value is equal to the current carrying value.

F-25

16. FAIR VALUE DISCLOSURE (Continued)

Investment and Mortgage-Backed Securities
- -----------------------------------------

The fair value of these securities is equal to the available quoted market
price. If no quoted market price is available, fair value is estimated using the
quoted market price for similar securities.

Loans Receivable, net and Deposits
- ----------------------------------

The fair value of loans is estimated by discounting the future cash flows using
a simulation model which estimates future cash flows based upon current market
rates adjusted for prepayment risk and credit quality. Savings, checking, and
money market deposit accounts are valued at the amount payable on demand as of
year-end. Fair values for time deposits are estimated using a discounted cash
flow calculation that applies contractual costs currently being offered in the
existing portfolio to current market rates being offered for deposits of similar
remaining maturities.

Bank-Owned Life Insurance
- -------------------------

The fair value is equal to the cash surrender value of the life insurance
policies.

Commitments to Extend Credit
- ----------------------------

These financial instruments are generally not subject to sale, and estimated
fair values are not readily available. The carrying value, represented by the
net deferred fee arising from the unrecognized commitment, and the fair value,
determined by discounting the remaining contractual fee over the term of the
commitment using fees currently charged to enter into similar agreements with
similar credit risk, are not considered material for disclosure. The contractual
amounts of unfunded commitments are presented in Note 14.

17. STOCK OFFERING

On January 29, 2007, the Board of Directors of the Company and the Bank
unanimously adopted a Plan of Stock Issuance (the "Plan") pursuant to which
Company will offer shares of its common stock of up to but less than 50 percent
of its total outstanding common stock to eligible depositors of the Bank in a
subscription offering and, if necessary, to the general public of the community
and/or in a syndicated offering. The majority of the common stock will continue
to be owned by the Company. The Plan is subject to the approval of the Office of
Thrift Supervision ("OTS").

The regulations of the OTS prohibit the Bank from declaring or paying a cash
dividend if the effect thereof would cause the Bank's regulatory capital to be
reduced below the federal regulatory capital requirement in section 567.2 of the
Rules and Regulations of the OTS.

Costs associated with the conversion will be deferred and deducted from the
proceeds of the stock offering. If, for any reason, the offering is not
successful, the deferred costs will be charged to operations. As of December 31,
2006, there was approximately $48,000 of costs incurred with the conversion.

F-26

18. PARENT COMPANY

Condensed financial information of Gateway Community Financial Corp. is as
follows:

CONDENSED BALANCE SHEET

December 31,
2006 2005
--------------- ----------------

ASSETS
Cash and due from banks $ 268,125 $ 265,460
Investment in subsidiary, the Bank 28,635,072 28,280,490
--------------- ----------------

TOTAL ASSETS $ 28,903,197 $ 28,545,950
=============== ================

STOCKHOLDERS' EQUITY $ 28,903,197 $ 28,545,950
=============== ================

CONDENSED STATEMENT OF INCOME

Year Ended December 31,
2006 2005 2004
----------- ------------ ------------

Interest income $ 2,665 $ 2,638 $ 2,619

Equity in undistributed earnings of subsidiary 376,809 1,619,960 1,647,614
----------- ------------ ------------

NET INCOME $ 379,474 $ 1,622,598 $ 1,650,233
=========== ============ ============

CONDENSED STATEMENT OF CASH FLOWS

Year Ended December 31,
2006 2005 2004
----------- ------------- ------------

OPERATING ACTIVITIES
Net income $ 379,474 $ 1,622,598 $ 1,650,233
Equity in undistributed earnings
of subsidiary (376,809) (1,619,960) (1,647,614)
----------- ------------- ------------

Net cash provided by operating activities 2,665 2,638 2,619
----------- ------------- ------------

Increase in cash and cash equivalents 2,665 2,638 2,619

CASH AT BEGINNING OF YEAR 265,460 262,822 260,203
----------- ------------- ------------

CASH AT END OF YEAR $ 268,125 $ 265,460 $ 262,822
=========== ============= ============

F-27

You should rely only on the information contained in this document. We have not
authorized anyone to provide you with information that is different. This
document does not constitute an offer to sell, or the solicitation of an offer
to buy, any of the securities offered hereby to any person in any jurisdiction
in which the offer or solicitation would be unlawful. The affairs of Gateway
Community Financial Corp. and its subsidiaries may change after the date of this
prospectus. Delivery of this document and the sales of shares made hereunder
does not mean otherwise.

Gateway Community Financial Corp.
Holding Company for Gloucester County Federal Savings Bank

Up to 3,105,000 Shares of Common Stock
(Subject to Increase to Up to 3,570,750 Shares)

----------

PROSPECTUS

----------

Sandler O'Neill + Partners, L.P.

____________, 2007

Until the later of ______________ __, 2007, or 25 days after commencement of the
syndicated community offering, if any, whichever is later, all dealers effecting
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 16. Exhibits and Financial Statement Schedules.

The exhibits and financial statement schedules filed as part of this
Registration Statement are as follows:

(a) Exhibits:

1 Form of Sales Agency Agreement with Sandler O'Neill & Partners, L.P.*
2 Plan of Stock Issuance, as amended*
3.1 Charter of Gateway Community Financial Corp.*
3.2 Bylaws of Gateway Community Financial Corp.*
4 Specimen Stock Certificate of Gateway Community Financial Corp.*
5 Opinion of Malizia Spidi & Fisch, PC regarding legality of securities registered *
8.1 Federal Tax Opinion of Malizia Spidi & Fisch, PC*
8.2 State Tax Opinion of S.R. Snodgrass, A.C. *
10.1 Employment Agreement with Robert C. Ahrens *
10.2 Employment Agreement with Bruce E. Haines *
10.3 Employment Agreement with Timothy P. Hand *
10.4 Executive Incentive Retirement Plan Agreement *
10.5 Director Fee Continuation Agreement *
10.4 Executive Incentive Retirement Plan Agreement *
10.5 Director Fee Continuation Agreement *
23.1 Consent of S.R. Snodgrass, A.C.
23.2 Consent of Feldman Financial Advisors, Inc.*
23.3 Consent of Malizia Spidi & Fisch, PC (contained in its opinions filed as Exhibits 5 and
8.1)
24 Power of Attorney (set forth on the signature page) *
99.1 Letter of Feldman Financial Advisors, Inc. as to the value of subscription rights *
99.2 Conversion Valuation Appraisal Report prepared by Feldman Financial Advisors, Inc. *
99.3 Marketing Materials and Stock Order Form *
- --------------
* Previously filed.

(b) Financial Statement Schedules:

No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or the notes thereto.

II-1

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this aamended registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Sewell, New Jersey
on May 10, 2007.

GATEWAY COMMUNITY FINANCIAL CORP.

By: /s/Robert C. Ahrens
---------------------------------------
Robert C. Ahrens
President and Chief Executive Officer
(Duly Authorized Representative)

Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed below by the following persons in the
capacities indicated on May 10, 2007.

/s/Robert C. Ahrens /s/ John S. Gligor, Sr. *
- ----------------------------------------------------- -----------------------------------------------------
Robert C. Ahrens John S. Gligor, Sr.
President, Chief Executive Officer and Director Chairman of the Board
(Principal Executive Officer)

/s/ Walter N. Friedrich * /s/ Robert A. Jones *
- ----------------------------------------------------- -----------------------------------------------------
Walter N. Friedrich Robert A. Jones
Vice Chairman of the Board Director

/s/ Dennis L. King * s/ Scott P. Newman*
- ----------------------------------------------------- -----------------------------------------------------
Dennis L. King Scott P. Newman
Director Director

/s/ Frank D. Wilson * /s/ Francis J. Walsh*
- ----------------------------------------------------- -----------------------------------------------------
Frank D. Wilson Francis J. Walsh
Director Chief Financial Officer
(Principal Financial and Accounting Officer)

* By: /s/Robert C. Ahrens
----------------------------------------------------
Robert C. Ahrens
Attorney-in-Fact