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

                                   FORM 10-QSB

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934



For Quarter Ended                                   Commission File No. 33-76064
September 30, 1999




                         GUARANTY FINANCIAL CORPORATION




         Virginia                                          54-1786496
(State or other Jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)



                1658 State Farm Blvd., Charlottesville, VA 22911
                     (Address of Principal Executive Office)


                                 (804) 970-1100
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter  period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.  Yes _X_ No ___ (not  subject to filing  requirements  for the
past 90 days).

         As of November 3, 1999,  1,501,727  shares of the  Registrant's  Common
Stock, par value $1.25 per share, were outstanding.


<PAGE>


                         GUARANTY FINANCIAL CORPORATION

                         QUARTERLY REPORT ON FORM 10-QSB

                                      INDEX

Part I.  Financial Information                                          Page No.
                                                                        --------

Item 1   Financial Statements

         Consolidated Balance Sheets
         as of September 30, 1999 (unaudited) and December 31, 1998            3

         Consolidated Statements of Operations for the
         Three and Nine months Ended September 30, 1999 and 1998 (unaudited)   4

         Consolidated Statements of Comprehensive Income
         For the Nine Months Ended September 30, 1999 and 1998 (unaudited)     5

         Consolidated Statements of Cash Flows for the
         Nine months Ended September 30, 1999 and 1998 (unaudited)             6

         Notes to Consolidated Financial Statements                            8

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                   9

Part II.  Other Information

Item 1   Legal Proceedings                                                    15

Item 2   Changes in Securities                                                15

Item 3   Defaults upon Senior Securities                                      15

Item 4   Submission of Matters to a Vote of Security Holders                  15

Item 5   Other Information                                                    15

Item 6   Exhibits and Reports on Form 8-K                                     15

         Signatures                                                           16


                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION


Item 1   Financial Statements


                         GUARANTY FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30,   DECEMBER 31,
                                                                    1999             1998
                                                                 -------------   ------------
<S>                                                               <C>              <C>
ASSETS                                                           (Unaudited)
Cash and cash equivalents                                          $13,949          $10,527
Investment securities
   Held-to-maturity                                                  1,411            2,344
   Available for sale                                               23,506           26,638
   Trading                                                               0            1,000
Investment in FHLB stock, at cost                                    1,150            1,300
Investment in FRB stock, at cost                                       271              271
Loans receivable, net                                              189,293          162,369
Accrued interest receivable                                          1,706            1,651
Real estate owned                                                    1,159              488
Office properties and equipment, net                                 8,773            7,050
Mortgage servicing rights                                              419            1,978
Other assets                                                         4,191            1,404
                                                                 ----------       ----------
          Total assets                                            $245,828         $217,020
                                                                 ==========       ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   NOW/MMDA accounts                                               $57,262          $45,752
   Savings accounts                                                 11,106            9,863
   Certificates of deposit                                         128,451          117,190
                                                                 ----------       ----------
                                                                   196,819          172,805
Bonds payable                                                        1,233            1,786
Advances from Federal Home Loan Bank                                23,000           21,000
Securities sold under agreement to repurchase                        4,800            1,009
Other borrowings                                                         -                -
Accrued interest payable                                               285              125
Income taxes payable                                                     -              243
Payments by borrowers for taxes and insurance                        1,309              128
Other liabilities                                                      899              470
                                                                 ----------       ----------
          Total liabilities                                        228,345          197,566
                                                                 ----------       ----------

COMMITMENTS & CONTINGENCIES

Convertible preferred securities                                     6,900            6,900

STOCKHOLDERS' EQUITY
Preferred stock, par value $1 per share, 500,000
   shares authorized, none issued                                        -                -
Common stock, par value $1.25 per share,
   4,000,000 shares authorized, 1,501,383
   issued and outstanding                                            1,877            1,877
Additional paid-in capital                                           5,725            5,725
Accumulated comprehensive income (loss), net                        (1,251)              89
Retained earnings                                                    4,232            4,863
                                                                 ----------       ----------
          Total stockholders' equity                                10,583           12,554
                                                                 ----------       ----------
Total liabilities and stockholders' equity                         245,828          217,020
                                                                 ==========       ==========

</TABLE>


                                       3
<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In Thousands)
<TABLE>
<CAPTION>

                                               Three Months Ended    Nine Months Ended
                                                September 30,           September 30,
                                            ----------------------  ----------------------
                                              1999        1998        1999        1998
                                            ----------  ----------  ----------  ----------
                                                      (unaudited)             (unaudited)
<S>                                           <C>         <C>        <C>          <C>
Interest income
   Loans                                      $ 3,988     $ 2,927    $ 10,858     $ 7,497
   Mortgage-backed securities                      27          49         101         160
   Investment securities                          637         429       1,892       1,116
                                            ----------  ----------  ----------  ----------
Total interest income                           4,652       3,405      12,851       8,773
                                            ----------  ----------  ----------  ----------

Interest expense
   Deposits                                     2,101       1,569       6,180       4,465
   Borrowings                                     620         496       1,716         857
                                            ----------  ----------  ----------  ----------
Total interest expense                          2,721       2,065       7,896       5,322
                                            ----------  ----------  ----------  ----------

Net interest income                             1,931       1,340       4,955       3,451

Provision for loan losses                         216          49         381         136
                                            ----------  ----------  ----------  ----------

Net interest income after provision
      for loan losses                           1,715       1,291       4,574       3,315

Other income (expense)
   Loan fees and servicing income                 156         187         513         499
   Service fees on checking                       134         102         386         265
   Loss (gain) on sale of loans and securities (1,426)        483        (880)        984
   Loss on sale of originated servicing          (146)          -        (146)          -
   Other                                          143          59         326         158
                                            ----------  ----------  ----------  ----------
Total other income (expense)                   (1,139)        831         199       1,906
                                            ----------  ----------  ----------  ----------

Other expenses
   Personnel                                      971         883       2,877       1,954
   Occupancy                                      277         279         794         765
   Deposit insurance premiums                       5           -          15          11
   Data processing                                196         153         503         379
   Other                                          468         292       1,130         905
                                            ----------  ----------  ----------  ----------
Total other expenses                            1,917       1,607       5,319       4,014
                                            ----------  ----------  ----------  ----------

Income (loss) before income taxes              (1,341)        515        (546)      1,207
                                            ----------  ----------  ----------  ----------

Income tax expense (benefit)                     (456)        201        (186)        462
                                            ----------  ----------  ----------  ----------

Net income (loss)                              $ (885)      $ 314      $ (360)      $ 745
                                            ==========  ==========  ==========  ==========

Basic and diluted earnings (loss)
  per common share                            $ (0.59)     $ 0.21     $ (0.24)     $ 0.50
                                            ==========  ==========  ==========  ==========


</TABLE>


                                       4
<PAGE>

                         GUARANTY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                     Three Months Ended             Nine Months Ended
                                                                        September 30,                 September 30,
                                                                 ----------------------------   ---------------------------
                                                                    1999            1998           1999           1998
                                                                 ------------   -------------   ------------   ------------
                                                                               (unaudited)                   (unaudited)

<S>                                                                 <C>              <C>           <C>             <C>
Net Income                                                          $   (885)        $   314       $   (360)       $   745
                                                                 ------------   -------------   ------------   ------------

Other comprehensive income:
   Unrealized gains (loss) on securities available for sale         $   (538)        $     3       $ (1,956)       $   (56)
   Less: reclassification adjustment for gains (losses)
          included in net income                                      (1,093)              -             75             62
                                                                 ------------   -------------   ------------   ------------

Other comprehensive income (loss), before tax                            555               3         (2,031)          (118)

Income tax (expense) benefit related to items of other
    comprehensive income                                                (189)             (1)           691             40
                                                                 ------------   -------------   ------------   ------------

Other comprehensive income (loss), net of tax                            366               2         (1,340)           (78)
                                                                 ------------   -------------   ------------   ------------

Comprehensive Income (loss)                                         $   (519)        $   316       $ (1,700)       $   667
                                                                 ------------   -------------   ------------   ------------
</TABLE>


                                       5
<PAGE>

                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 1999 and 1998
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                 1999          1998
                                                                               ----------    ----------
                                                                                     (unaudited)
<S>                                                                              <C>           <C>
 Operating Activities
      Net Income                                                                  $ (360)        $ 745
      Adjustments to reconcile net income to net cash provided
          (absorbed) by operating activities:
          Provision for loan losses                                                  381           136
          Depreciation and amortization                                              478           371
          Loss on sale of purchased servicing                                        146             -
          Deferred loan fees                                                         148           139
          Net amortization of premiums and accretion of discounts                    223           (45)
          Loss (gain) on sale of loans                                              (304)       (1,002)
          Originations of loans held for sale                                    (40,040)      (49,952)
          Proceeds from sale of loans                                             40,344        50,037
          Loss (gain) on sale of securities available for sale                     1,298          (313)
          (Gain) loss on trading securities                                          222           323
          Purchase of trading securities                                         (63,397)      (77,440)
          Sales of trading securities                                             64,175        78,149
          (Gain) loss on sale of real estate owned                                     -             -
          Other, net                                                                   -           580
          Changes in:
              Accrued interest receivable                                            (55)         (387)
              Other assets                                                        (3,481)       (1,925)
              Accrued interest payable                                               160            22
              Prepayments by borrowers for taxes and insurance                        95           125
              Other liabilities                                                    1,272           784
                                                                               ----------    ----------

 Net cash provided (absorbed) by operating activities                              1,305           347
                                                                               ----------    ----------

 Investing activities
      Net (increase) decrease in loans                                           (28,124)      (32,599)
      Mortgage-backed securities principal repayments                                929           743
      Proceeds from sale of securities available for sale                         17,562        47,421
      Purchase of securities available for sale                                  (17,145)      (45,284)
      Purchase of servicing rights                                                  (666)            -
      Sale of servicing rights                                                     2,696             -
      Redemption (purchase) of FHLB stock                                            150          (180)
      Purchases of office properties and equipment                                (2,124)       (1,050)
                                                                               ----------    ----------

 Net cash provided (absorbed) by investing activities                            (26,722)      (30,949)
                                                                               ----------    ----------

</TABLE>


                                      6
<PAGE>

                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                 1999          1998
                                                                               ----------    ----------
                                                                                     (unaudited)
<S>                                                                             <C>           <C>
 Financing activities
      Net increase in deposits                                                    24,014        29,288
      Proceeds from FHLB advances                                                 14,000        39,000
      Repayment of FHLB advances                                                 (12,000)      (30,000)
      Increase (decrease) in securities sold under agreement to repurchase         3,791        (2,989)
      Proceeds from the issuance of covertible preferred securities, net               -         6,400
      Dividends paid on common stock                                                (271)          (90)
      Principal payments on bonds payable, including unapplied payments             (695)         (460)
                                                                               ----------    ----------

 Net cash provided by financing activities                                        28,839        41,149
                                                                               ----------    ----------

 Increase in cash and cash equivalents                                             3,422        10,547

 Cash and cash equivalents, beginning of period                                   10,527         5,917
                                                                               ----------    ----------

 Cash and cash equivalents, end of period                                       $ 13,949      $ 16,464
                                                                               ==========    ==========
</TABLE>

                                       7
<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the Nine months ended September 30, 1999 and 1998



Note 1  Principles of Consolidation

The  accompanying  consolidated  financial  statements  include the  accounts of
Guaranty  Financial   Corporation  (the   "Corporation")  and  its  wholly-owned
subsidiaries,  Guaranty Capital Trust I and Guaranty Bank (the "Bank"),  and the
Bank's wholly-owned subsidiaries, GMSC, Inc., which was organized as a financing
subsidiary,  and  Guaranty  Investments  Corp.,  which  was  organized  to  sell
insurance  annuities and other  non-deposit  investment  products.  All material
intercompany accounts and transactions have been eliminated in consolidation.

Note 2  Basis of Presentation

In the opinion of management,  the accompanying  unaudited interim  consolidated
financial  statements  contain  all  adjustments   (consisting  only  of  normal
recurring  accruals)  necessary to present  fairly the financial  position as of
September 30, 1999 and the results of operations  and cash flows for the interim
periods ending September 30, 1999 and 1998. All 1999 interim amounts are subject
to year-end audit,  and the results of operations for the interim periods is not
necessarily indicative of the results of operations to be expected for the year.





                                       8
<PAGE>


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


Expansion of Existing Branch Network

A full service branch was opened in Henrico County in the Wellesley  development
in  mid-September  1999.  This office is our first entry into the west  Richmond
market and is large enough to  accommodate  a regional loan group along with the
retail operation.

A site has been obtained in the Forest Lakes  development in northern  Albemarle
County for a full service branch office.  Regulatory  approval has been granted,
and a spring 2000 opening is anticipated.


Changes in Financial Condition

Total  assets  increased  by $28.8  million,  or 13.3%,  from $217.0  million at
December 31, 1998 to $245.8  million at September 30, 1999.  Deposit  growth and
proceeds  from Federal  Home Loan Bank  ("FHLB")  advances and other  borrowings
funded  this  growth.   These  proceeds  were   primarily   invested  in  loans,
investment-grade   corporate  bonds  and  short-term  interest  earning  deposit
accounts.

Cash and cash equivalents  increased $3.4 million, or 32.5%, to $13.9 million at
September  30, 1999 from $10.5  million at December 31, 1998.  This  increase in
cash was primarily due to the combination of increased  deposits,  proceeds from
FHLB advances and other borrowings, and proceeds from loan sales.

Investment securities,  at September 30, 1999, decreased $5.1 million, or 16.9%,
to $24.9  million  from $30.0  million at  December  31,  1998.  This change was
primarily   a  result  of  a  $3.1   million   net   decrease   in  holdings  of
investment-grade  corporate  bonds and a decrease  of $1.0  million in  treasury
notes  classified  as trading  securities.  Principal  payments were received on
mortgage-backed   securities  of  approximately  $933  thousand.  At  the  dates
indicated, the investment portfolio is comprised of the following:


                                           September 30,    December 31,
                                              1999              1998
                                         ----------------  ----------------
                                                   (in thousands)
       Mortgage-backed securities
         classified as held-to-maturity          $ 1,411           $ 2,344
       Corporate bonds classified
         as available-for-sale                    23,506            26,638
       US Treasury Notes classified
         as trading                                    -             1,000
                                         ----------------  ----------------
                                                $ 24,917          $ 29,982
                                         ================  ================



Net loans were  $189.3  million at  September  30,  1999,  an  increase of $26.9
million,  or 16.6%,  from net loans of $162.4  million at December 31, 1998. The
primary  focus of portfolio  lending  continues to be  prime-based  construction
loans (including  builder lines of credit),  commercial real estate and business
loans and  consumer  loans which are  typically  priced 175 to 250 basis  points
above  fixed-rate  residential  loans.  The increase in the loan  portfolio  was
primarily  related to new  commercial  and consumer  loan  business and a slight
increase in residential  mortgage  loans.  During the third quarter of 1999, the
bank continued to underwrite  substantially all fixed rate residential  mortgage
loans for  immediate  sale in the  secondary  market.

Real estate  owned of $488  thousand  at  December  31, 1998 was sold during the
second  quarter of 1999. No unreserved  losses were  recognized on this sale. At
September 30, 1999, real estate

                                       9
<PAGE>


owned was comprised of one residential  property at approximately  $133 thousand
and  three  secured  lines  of  credit  to one  individual  who  has  filed  for
bankruptcy.  No material  losses are  anticipated  on the ultimate sale of these
properties.

Deposits  were  $196.8  million at  September  30,  1999,  an  increase of $24.0
million,  or 13.9%,  from total deposits of $172.8 million at December 31, 1998.
The majority of this growth was due to an increase in certificates of deposit of
$11.3 million or 9.6%,  an increase in money market  accounts of $6.1 million or
26.8% and an increase in NOW accounts of $5.4 million or 23.5%. Management plans
to continue  its  marketing  efforts  aimed at  corporate  customers  as well as
individual  checking,  savings and money market  accounts to attract  lower cost
funds and reduce  reliance  on  certificates  of  deposit  as a primary  funding
source.  However,  no  assurances  can be given  that these  strategies  will be
successful, or if successful, will reduce the bank's reliance on certificates of
deposit as a primary funding source.

Office properties and equipment  increased $1.7 million since December 31, 1998.
This increase was primarily due to capital expenditures relating to the purchase
and  improvements of the branch sites at Wellesley in Henrico  County,  Virginia
and Forest Lakes in Albemarle County, Virginia.

At September 30, 1999, $23.0 million in advances was borrowed from the FHLB on a
short-term  basis,  an increase of $2.0  million from  December 31, 1998.  These
advances are comprised entirely of daily rate credits which reprice based on the
previous day's Federal Funds rate.

Results of Operations

Net Income

Guaranty  reported a net loss of $360 thousand and a net income of $745 thousand
for the nine months ended September 30, 1999 and 1998, respectively,  and a loss
of $885  thousand  compared to net income of $314  thousand for the three months
ended  September  30, 1999 and 1998,  respectively.  The losses in 1999 resulted
primarily  from the sale of  approximately  $13  million in long term  corporate
bonds and the sale of Guaranty's  mortgage loan servicing  rights,  resulting in
net after tax losses of $857  thousand  and $97  thousand,  respectively.  These
actions  were  taken to  significantly  reduce  market  rate risk in  Guaranty's
balance sheet and improve net interest margin going forward.

Net Interest Income

Net interest  income was $1.9 million for the quarter ended  September 30, 1999,
up 45.5% from the $1.3 million  earned  during the same period in 1998.  For the
first  nine  months of 1999,  net  interest  income  was $5.1  million,  a 51.8%
increase over the first nine months of 1998. For the nine months ended September
30, 1999, the average  balance and average yield on loans was $180.1 million and
8.52%, respectively, compared to $115.5 million and 8.72% for the same period in
1998. Loan growth is primarily related to prime based  residential  construction
loans,  including  builder lines of credit,  and commercial loans located in the
Bank's primary market of Central Virginia.

The average  balance of interest  bearing  deposits  was $179.4  million for the
first nine  months of 1999  compared  to $122.1  million  for the same period in
1998. The corresponding  average rate paid on these deposits  decreased 28 basis
points to 4.61% from 4.89% during the same periods.


Provision for Loan Losses

Guaranty provides valuation  allowances for anticipated losses on loans and real
estate when its management determines that a significant decline in the value of
the  collateral has occurred and if the value of the collateral is less than the
amount of the unpaid  principal of the related  loan,  plus  estimated  costs of
acquisition and sale. In addition,  Guaranty also provides reserves based on the

                                       10
<PAGE>

dollar  amount and type of  collateral  securing its loans,  in order to protect
against  unanticipated  losses. A loss experience  percentage is established for
each loan type and is reviewed  annually.  Each quarter,  the loss percentage is
applied to the  portfolio,  by product type, to determine the minimum  amount of
reserves required.  Guaranty recorded a provision of $216 thousand for the three
months ended  September  30, 1999,  and a provision of $49 thousand for the same
period in 1998.  For the nine-month  periods ended  September 30, 1999 and 1998,
Guaranty recorded a provision of $381 thousand and $136 thousand,  respectively.
As of September  30, 1999 the total  allowance for loan losses was $1.3 million.
Although management believes that it uses the best information available to make
such  determinations,  future adjustments to reserves may be necessary,  and net
income could be  significantly  affected if circumstances  differ  substantially
from assumptions used in making the initial determinations.

Non-Interest Income

Non-interest  income was $(1.1)  million for the third  quarter 1999 compared to
$831 thousand for the same period in 1998. For the nine months ending  September
30, 1999, non-interest income was $199 thousand, down $1.7 million from the $1.9
million  reported  during the same period in 1998. This decrease was primarily a
result of losses from the sale of securities and mortgage serving rights.

Non-Interest Expense

Operating  expenses  during the third quarter of 1999 were $1.9 million,  a $310
thousand  increase over those incurred  during the same quarter of 1998. For the
nine months  ending  September  30, 1999,  operating  expenses were $5.3 million
compared to $4.0 million  during the same period in 1998.  These  increases  are
primarily  attributable  to the increased  size of the bank and expansion of the
residential and commercial lending divisions.

Income Tax Expense


As a result of third quarter losses,  Guaranty  recognized an income tax benefit
of $456 thousand for the quarter ending September 30, 1999 and $186 thousand for
the nine months ending  September  30, 1999.  This is compared to tax expense of
$201  thousand  and $462  thousand for the three and nine month  periods  ending
September 30, 1998,  respectively.  Changes in tax expense  between  periods are
primarily a result of changes in the level of taxable income.



Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either
through the sale of existing  assets or through the  acquisition  of  additional
funds through  asset and liability  management.  Guaranty's  primary  sources of
funds are deposits,  borrowings and amortization,  prepayments and maturities of
outstanding loans and securities. While scheduled payments from the amortization
of loans and  securities are relatively  predictable  sources of funds,  deposit
flows and loan  prepayments  are greatly  influenced by general  interest rates,
economic  conditions  and  competition.  Excess  funds are invested in overnight
deposits to fund cash requirements experienced in the normal course of business.
Guaranty has been able to generate  sufficient cash through its deposits as well
as through its borrowings.


Guaranty  uses its sources of funds  primarily  to meet its  on-going  operating
expenses, to pay deposit withdrawals and to fund loan commitments.  At September
30, 1999 total approved loan commitments  outstanding were  approximately  $10.5
million.  At the same  date,  commitments  under  unused  lines of  credit  were
approximately $52.4 million.  Certificates of deposit scheduled to mature

                                       11
<PAGE>

in one year or less at  September  30,  1999  were  $113.9  million.  Management
believes  that a  significant  portion of  maturing  deposits  will  remain with
Guaranty.


At September 30, 1999,  regulatory  capital was in excess of amounts required by
Federal Reserve  Regulations to be considered  well  capitalized as shown in the
following table:


         Tier 1 risk based                                    7.46%
         Total risk based                                     9.46%
         Tier 1 to average adjusted total assets              6.30%



Year 2000 Project

Many  existing  computer  programs use only two digits to identify a year in the
date field.  These programs were designed and developed without  considering the
impact of the  change in the  century.  If not  corrected,  many  date-sensitive
applications  could  fail or create  erroneous  results  by or in the Year 2000.
Guaranty understands the importance of having systems and equipment  operational
through the Year 2000 and beyond and is committed to addressing these challenges
while continuing to fulfill its obligations to its customers.

Year 2000 readiness is a major undertaking involving the review and modification
of multiple,  interacting  information technology systems,  including Guaranty's
systems, equipment,  facilities, services and products as well as those of third
parties, including vendors, service contractors,  creditors, borrowers and other
financial  service  organizations.  Certain  equipment and  facilities,  such as
telephones,   voicemail   and   elevators,   may  contain   embedded   chips  or
microcontrollers that will need to be replaced.

Guaranty  began its formal Year 2000  compliance  program in 1998 to analyze the
possible application to Guaranty of the Year 2000 issue and the development of a
plan to prevent the problem from adversely  affecting its  operations.  Guaranty
currently has a Year 2000 committee,  a Year 2000 Implementation Plan and a Year
2000 Contingency Plan.  Guaranty's Year 2000 plans are subject to guidelines and
recommendations  promulgated by the Federal Financial  Institutions  Examination
Council ("FFIEC"). The Federal Reserve Bank of Richmond periodically reviews the
status of Guaranty's plans and progress with site visits and teleconferences.

In accordance  with current FFIEC  regulations,  the Year 2000 plans, as adopted
and  refined by Guaranty to handle  Year 2000  issues,  can be divided  into two
principal areas:

1.       Resolution  of the internal  aspects of the Year 2000 issue.  The focus
         of this area  includes the effects of the Year 2000 issue on Guaranty's
         technology,   including   computer   hardware  and  software   systems.
         Guaranty's internal technology plan includes (a) locating,  listing and
         prioritizing the specific technology that is potentially subject to the
         Year 2000 issue (referred to as the "awareness"  phase),  (b) assessing
         the  actual  exposure  of such  technology  to the Year  2000  issue by
         inquiry,  research,  testing and other means (the "assessment"  phase),
         (c) selecting the method necessary to resolve the Year 2000 issues that
         were identified, including replacement,  upgrade, repair or abandonment
         and  implementing  the  selected  resolution  method (the  "renovation"
         phase),  and (d) testing the  remediated  or  converted  technology  to
         determine the efficacy of the resolutions (the "validation" phase).

2.       Determination  and  control  of the  external  aspects of the Year 2000
         issue.  The focus of this area includes (a) assessing the potential for
         credit  and  liquidity  risks  within  Guaranty  as  a  result  of  the
         investments in, loans to and deposits from our significant customers as
         well as the  risk of  possible  business  interruption  by  relying  on
         vendors of goods and services whose

                                       12
<PAGE>

         technology  or business  is  affected  by the Year 2000 issue,  and (b)
         developing contingency plans to address failures by external parties to
         remediate  fully any Year 2000  issues that are  material to  Guaranty.
         Assessment of external  parties is  accomplished  by written and verbal
         inquiry,  and by research to the extent that  reliable  information  is
         available.

The Year 2000  committee has spent  considerable  time testing both the internal
and  external  applications  deemed  as  "mission  critical"  to daily  business
operations. These applications affect Guaranty's customer information files. The
testing  was  completed  before  FFIEC's  June  30,  1999  deadline  to  confirm
compliance with Year 2000 data processing standards deadline.

Guaranty's Year 2000  Contingency  Plan, in accordance  with FFIEC  regulations,
sets forth in detail the procedures  that Guaranty and its employees will follow
in order to handle the most  reasonably  likely  worst case Year 2000  scenario.
These  procedures  cover,  among other  concerns,  how Guaranty will continue to
maintain  customer  records and accept  banking  transactions  in the event of a
systems  or  other  power or  communications  failure  and how it will  likewise
continue its daily banking operations. The contingency plan and all test results
on Guaranty's  internal and external  applications were reviewed by the Virginia
State  Corporation  Commission's  Year 2000  examiner.  The review  yielded  the
highest rating for Year 2000 readiness (satisfactory).

As part of the 1998  strategic  plan,  and in  conjunction  with  the Year  2000
readiness plan, Guaranty upgraded its entire computer system, including hardware
and software.  The changes not only make the institution better prepared for any
potential  Year 2000  problems,  but have also  allowed  Guaranty  to offer more
sophisticated products, lower potential down time and increase customer service.
Total costs are approximately  $325,000, with the majority of the expenses being
incurred in late 1998 and the first  quarter of 1999.  Included in  non-interest
expense  for the first six months of 1999 is $200,000  associated  with the Year
2000  issue.  All of the system  changes are  currently  fully  operational  and
Guaranty continually assesses the systems for full functionality.

Additionally,  Guaranty  monitors  the  readiness  of  its  vendors  and  larger
customers to insure that the risk to Guaranty is minimized.  Currently, Guaranty
requires all credit customers with total exposure of over $1 million to fill out
a Year 2000 readiness  assessment form. The progress reflected in the answers is
reported to the Year 2000 committee on a regular basis.

Guaranty and its Year 2000 committee  feel strongly that customer  education and
awareness  are crucial to the success of the year 2000 plans.  Notifications  of
the test results were sent out to customers in June 1999. In addition,  Guaranty
has trained all customer  contact  employees on responding to customer  concerns
over Y2K issues. Additional training was conducted again in October 1997.

Guaranty  believes that it has identified  all of the business  systems vital to
its operations and that its Year 2000 plans will result in the  continuation  of
Guaranty's operations to and through the Year 2000 and beyond. However, the Year
2000 issue and its resolution are complex and  multifaceted;  Guaranty  believes
that no entity  can  address  the  virtually  unlimited  possible  circumstances
relating to year 2000 issues,  including  risks  outside of  Guaranty's  primary
market area. The success of a response plan cannot be  conclusively  known until
the Year 2000 is reached  (or an earlier  date to the extent  that  systems  and
equipment address Year 2000 date data prior to year 2000). Even with appropriate
and  diligent  pursuit of a  well-conceived  response  plan,  including  testing
procedures,  there  is no  certainty  that any  company  will  achieve  complete
success.  However,  Guaranty is diligently trying to ensure that its significant
systems,  equipment,  facilities,  services and  products  will not be adversely
affected by the Year 2000 problem.

At this  time,  Guaranty  believes  that the most  likely  worst  case Year 2000
scenario would not have a material  effect on Guaranty's  results of operations,
liquidity  and  financial  condition  for the year  ending  December  31,  2000.
Guaranty  does not  foresee  a  material  loss of  revenue  due to the Year 2000
problem. The Year 2000 contingency plan, however, is based on assessments of the
likelihood of a problematic  occurrence.  While considered highly unlikely,  the
failure of Guaranty to  successfully

                                       13
<PAGE>

implement its Year 2000 plans,  including  modifications and conversions,  or to
adequately  assess the  likelihood of various  events  relating to the Year 2000
issue,  could have a material adverse effect on Guaranty's results of operations
and financial condition.

Additionally,  there can be no assurances  that the federal  regulators will not
issue new regulatory  requirements that require additional work by Guaranty, and
if issued, that new regulatory  requirements will not increase the cost or delay
the completion of Guaranty's Year 2000 plan.

The cost of the project  and the date on which  Guaranty  plans to complete  the
Year 2000  modifications  are based on management's  best  estimates,  which are
based  on  numerous  assumptions  of  future  events,  including  the  continued
availability  of certain  resources,  third party  modification  plans and other
factors.  There can be no guarantee  that these  estimates  will be achieved and
actual results could differ materially from Guaranty's  plans.  Specific factors
that might cause such material  differences include, but are not limited to, the
availability  of  personnel  trained in this area,  the  ability of third  party
vendors to correct  their  software  and  hardware,  the ability of  significant
customers to remedy their Year 2000 issues and similar uncertainties.


                                       14
<PAGE>


                           PART II. OTHER INFORMATION


Item 1            Legal Proceedings
                           Not Applicable

Item 2            Changes in Securities
                           Not Applicable

Item 3            Defaults Upon Senior Securities
                           Not Applicable

Item 4            Submission of Matters to a Vote of Security Holders
                           Not Applicable

Item 5            Other Information
                           Not Applicable

Item 6            Exhibits and Reports on 8-K

                  (a) Exhibits

                          27       Financial Data Schedule
                                           (filed electronically only)

                  (b) Reports on Form 8-K - None


                                       15
<PAGE>




                                   SIGNATURES



Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



                                     GUARANTY FINANCIAL CORPORATION







Date:   November 15, 1999            By:      /s/ Thomas P. Baker
                                              ---------------------------------
                                              Thomas P. Baker
                                              President, CEO and Director

                                     By:      /s/ L. Ben Johnson
                                              ---------------------------------
                                              L. Ben Johnson
                                              Vice President & Controller


                                       16