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

                                  FORM 10-QSB/A

                               Amendment No. 1 to
                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934



For Quarter Ended                                 Commission File No. 33-76064
December 31, 1996




                         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 ___ .

         As of May 19, 1997, 1,499,008 shares were outstanding.


<PAGE>



                         GUARANTY FINANCIAL CORPORATION

                         QUARTERLY REPORT ON FORM 10-QSB

                                      INDEX

Part I.  Financial Information                                         Page No.

Item 1   Financial Statements

         Consolidated Statements of Financial Condition
         as of December 31, 1996 and June 30, 1996.......................... 3

         Consolidated Statements of Operations for the Three Months and 
         Six Months Ended December 31, 1996 and 1995........................ 4

         Consolidated Statements of Cash Flows for the
         Six Months Ended December 31, 1996 and 1995........................ 5

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

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

Part II.  Other Information

Item 1   Legal Proceedings..................................................13

Item 2   Changes in Securities..............................................13

Item 3   Defaults upon Senior Securities....................................13

Item 4   Submission of Matters to a Vote of Security Holders................13

Item 5   Other Information..................................................13
                          
Item 6   Exhibits and Reports on Form 8-K...................................13
                                       
         Signatures.........................................................14
                   

                                       2
<PAGE>
                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CONDITION
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                     DECEMBER 31,           JUNE 30,
                                                          1996                1996
                                                     ------------        ------------
<S>                                                     <C>                 <C>     
ASSETS                                                           (Unaudited)
Cash and cash equivalents                                 $6,076              $5,431
Investment securities
   Held-to-maturity                                        3,157               3,731
   Available for sale                                          0               9,564
   Trading                                                16,736                   0
Investment in FHLB stock at cost                           1,360               1,360
Loans receivable, net                                     81,270              84,081
Accrued interest receivable                                  671                 712
Real estate owned                                             51                  33
Office properties and equipment, net                       4,946               3,525
Other assets                                               1,753               1,724
                                                     ------------        ------------
          Total assets                                  $116,020            $110,161
                                                     ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   NOW/MMDA accounts                                     $10,300              $9,653
   Savings accounts                                        4,777               4,654
   Certificates of deposit                                66,324              60,380
                                                     ------------        ------------
                                                         $81,401             $74,687
Bonds payable                                              2,706               3,144
Advances from Federal Home Loan Bank                      17,500              17,500
Securities sold under agreement to repurchase              6,681               6,104
Accrued interest payable                                      61                  99
Payments by borrowers for taxes and insurance                106                 146
Other liabilities                                            990               2,131
                                                     ------------        ------------
          Total liabilities                             $109,445            $103,811
                                                     ------------        ------------

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, 924,008 and
   919,168 issued and outstanding                         $1,155              $1,149
Additional paid-in capital                                 1,975               1,982
Net unrealized gain (loss) on securities
    avaiable for sale                                          0                (279)
Retained earnings                                          3,445               3,498
                                                     ------------        ------------
          Total stockholders' equity                      $6,575              $6,350
                                                     ------------        ------------
Total liabilities and stockholders' equity              $116,020            $110,161
                                                     ============        ============

</TABLE>

                                       3
<PAGE>
                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                            Three Months Ended         Six Months Ended
                                                                 December 31,            December 31,
                                                        ------------------------------------------------------
                                                           1996          1995           1996         1995
                                                        -----------   -----------    -----------  ------------
                                                                    (unaudited)                  (unaudited)
<S>                                                       <C>           <C>            <C>           <C>     
Interest income
   Loans                                                  $  1,715      $  1,640       $  3,455      $  3,193
   Mortgage-backed securities                                  276           118            564           237
   Investment securities                                       123           128            254           255
   Trading account assets                                        3             4              3            21
                                                        -----------   -----------    -----------  ------------
Total interest income                                     $  2,117      $  1,890       $  4,276      $  3,706
                                                        -----------   -----------    -----------  ------------

Interest expense
   Deposits                                              $     992     $     728       $  1,960      $  1,413
   Borrowings                                                  506           571            980         1,131
                                                        -----------   -----------    -----------  ------------
Total interest expense                                   $   1,498     $   1,299       $  2,940      $  2,544
                                                        -----------   -----------    -----------  ------------

Net interest income                                      $     619     $     591       $  1,336      $  1,162

Provision (credit) for loan losses                               46           15             92            11
                                                        -----------   -----------    -----------  ------------

Net interest income after provision
      for loan losses                                    $     573     $     576      $   1,244     $   1,151

Other income
   Loan fees and servicing income                        $     119     $     126      $     267     $     263
   Gain (loss) on sale of loans and securities                   4            79             72           156
   Service fees on checking                                     26            22             52            43
   Other                                                        39            27             71            53
                                                        -----------   -----------    -----------  ------------
Total other income                                       $     188     $     254      $     462     $     515
                                                        -----------   -----------    -----------  ------------

Other expenses
   Personnel                                             $     381     $     244      $     748     $     648
   Occupancy                                                    71            74            132           154
   Data processing                                              88            69            165           136
   Deposit insurance premiums                                   47            50            101           101
   BIF/SAIF premium disparity assessment                         -             -            347             -
   Other                                                       133           177            223           173
                                                        -----------   -----------    -----------  ------------
Total other expenses                                     $     720     $     614      $   1,716     $   1,212
                                                        -----------   -----------    -----------  ------------

Income (loss) before income taxes                        $      41     $     216      $     (10)    $     454
                                                        -----------   -----------    -----------  ------------

Provision (benefit) for income taxes                            14            74             (4)          158
                                                        -----------   -----------    -----------  ------------

Net income (loss)                                        $      27     $     142      $      (6)    $     296
                                                        ===========   ===========    ===========  ============

Earnings (loss) per common share                         $    0.03     $    0.15      $   (0.01)    $    0.32
                                                        ===========   ===========    ===========  ============

</TABLE>



                                        4
<PAGE>
                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Six Months Ended December 31, 1996 and 1995
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                             1996            1995
                                                                                          ------------    ------------
<S>                                                                                       <C>              <C>    
Operating Activities
      Net Income (Loss)                                                                   $        (6)     $      296
      Adjustments to reconcile net income to net cash provided
           (absorbed) by operating activities:
           Provision for loan losses                                                               92              11
           Depreciation and amortization                                                           76              45
           Amortization of deferred loan fees                                                      64              13
           Net amortization of premiums and accretion of discounts                                 85              90
           Loss (gain) on sale of loans                                                          (217)            (26)
           Originations of loans held for sale                                                (11,774)         (4,667)
           Proceeds from sale of loans                                                         11,822           4,693
           Originations of loans securitized                                                        -          (4,406)
           Loss (gain) on sale of mortgage-backed securities                                     (111)            (81)
           Loss (gain) on sale of securities available for sale                                     -             (17)
           (Gain) loss on disposal of office properties and equipment                               -               6
           (Gain) loss on sale of trading securities                                              255             (26)
           Purchase of trading securities                                                     (36,331)        (54,356)
           Sales of trading securities                                                         35,306          54,100
           (Gain) loss on sale of real estate owned                                                 -               5
           Changes in:
                Accrued interest receivable                                                        41             (50)
                Other assets                                                                      (29)            (89)
                Accrued interest payable                                                          (38)            (13)
                Prepayments by borrowers for taxes and insurance                                  (40)           (211)
                Other liabilities                                                              (1,141)           (412)
                                                                                          ------------    ------------

Net cash provided (absorbed) by operating activities                                           (1,946)         (5,095)
                                                                                          ------------    ------------


Investing activities
      Net (increase) decrease in loans                                                          2,753          (1,754)
      Mortgage-backed securities principal repayments                                             776             580
      Purchase of mortgage-backed securities                                                  (23,980)        (10,001)
      Proceeds from sale of mortgage-backed securities                                         17,845          10,061
      Purchase of securities available for sale                                                     -          (4,003)
      Proceeds from sales of securities available for sale                                          -           4,011
      Purchases of FHLB stock                                                                       -             (42)
      Proceeds from sale of office equipment                                                        -               4
      Purchases of office properties and equipment                                               (423)           (105)
      Disbursement on construction of office building                                          (1,089)              -
      Improvement of land                                                                          (3)           (938)
                                                                                          ------------    ------------

Net cash provided (absorbed) by investing activities                                           (4,121)         (2,187)
                                                                                          ------------    ------------


                                       5
<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS, continued


Financing activities
      Net increase (decrease) in deposits                                                       6,713           6,903
      Repayment of FHLB advances                                                              (10,000)         (6,000)
      Proceeds from FHLB advances                                                              10,000           7,000
      Increase (decrease) in securities sold under agreement to repurchase                        577            (553)
      Dividends paid                                                                              (54)
      Principal payments on bonds payable, including unapplied payments                          (524)             15
                                                                                          ------------    ------------

Net cash provided (absorbed) by financing activities                                            6,712           7,365
                                                                                          ------------    ------------

Increase (decrease) in cash and cash equivalents                                                  645              83
                                                                                          ------------    ------------

Cash and cash equivalents, beginning of period                                                  5,431           6,519
                                                                                          ------------    ------------

Cash and cash equivalents, end of period                                                  $     6,076     $     6,602
                                                                                          ============    ============
</TABLE>

                                        6
<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               For the Six Months ended December 31, 1996 and 1995



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 Bank ("the Bank"),  GMSC, Inc., which was organized as a
financing  subsidiary,  and Guaranty  Investments  Corp., which was organized to
sell insurance annuities.  All material  intercompany  accounts and transactions
have been eliminated in consolidation.

Note 2  Basis of Presentation

The  accompanying  interim  financial  statements are unaudited;  however,  such
information  reflects all  adjustments  which are, in the opinion of management,
necessary in order to make the consolidated financial statements not misleading.
All adjustments are of a normal recurring nature.

Note 3  New Accounting Pronouncements

On July 1, 1996,  the  Corporation  adopted  Statements of Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long-Lived  Assets to be  Disposed  of" ("SFAS  121").  SFAS 121  requires  that
long-lived  assets and certain  intangibles  to be held and used by an entity be
reviewed for impairment  when events or changes in  circumstances  indicate that
the  carrying  amount may not be  recoverable.  In  addition,  SFAS 121 requires
long-lived  assets and certain  intangibles  to be disposed of to be reported at
the lower of  carrying  amount or fair value  less costs to sell.  The effect of
adopting SFAS 121 was immaterial to the interim financial  statements  presented
herein.

In October 1995, the Financial  Accounting  Standards Board issued SFAS No. 123,
"Accounting  for  Stock-Based  Compensation"  ("SFAS  123").  The  statement  is
effective  for fiscal years  beginning  after  December 15, 1995.  The statement
encourages,  but  does not  require,  companies  to  expense  the fair  value of
employee  stock  options,  based  on the fair  value  on the date of the  grant.
Companies  that  elect to  continue  to follow  existing  accounting  rules must
provide those pro forma  disclosures  of net income and earnings per share which
would have been had the new fair value method been used.  In addition,  SFAS 123
requires all companies to make significantly more disclosures regarding employee
stock options than are currently  required.  The Corporation  plans to adopt the
disclosure  requirements  only of SFAS  123.  Management  does  not  expect  the
application  of this  pronouncement  to have a material  effect on the financial
statements of the Corporation.

In June 1996,  the FASB issued its Statement of Financial  Accounting  Standards
No. 125,  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishments of Liabilities" ("SFAS 125"). This statement provides accounting
and reporting  standards  for  transfers  and servicing of financial  assets and
extinguishments of liabilities.  After a transfer of financial assets, an entity
recognizes  the  financial  and  servicing  assets  that  it  controls  and  the
liabilities that it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. In addition, a
transfer of financial  assets in which the  transferor  surrenders  control over
those assets is accounted for as a sale to the extent that  consideration  other
than  beneficial  interests in the  transferred 

                                       7
<PAGE>


assets  is  received  in  exchange.  SFAS 125 is  effective  for  transfers  and
servicing of financial assets and  extinguishments of liabilities after December
31, 1996,  and is to be applied  prospectively.  Management  does not expect the
application  of this  pronouncement  to have a material  effect on the financial
statements of Corporation.

In February 1997, the Financial  Accounting  Standards Board issued Statement on
Financial  Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS
128  provides a  different  method for  calculating  earnings  per share than is
currently  used in  accordance  with  APB 15,  "Earnings  per  Share."  SFAS 128
provides for the  calculation  of basic and diluted  earnings  per share.  Basic
earnings  per share  includes  no dilution  and is  computed by dividing  income
available to common shareholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution of  securities  that could  share in earnings of an entity,  similar to
fully diluted earnings per share.  Management does not expect the application of
this pronouncement to have a material effect of the financial  statements of the
Corporation.


                                       8

<PAGE>



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


Changes in Financial Condition

Deposit growth during the six months ended December 31, 1996 enabled Guaranty to
increase assets.  Total assets  increased by $5.9 million,  or 5.3%, from $110.2
million at June 30, 1996 to $116.0  million at December 31,  1996.  This deposit
growth - all local funds - was primarily invested in mortgage-backed securities.

Cash and cash  equivalents  increased  $645,000,  or 11.9%,  to $6.1  million at
December 31, 1996. This increase in cash was due to the combination of increased
deposits,  principal payments received on investment securities, and the sale of
loans, offset by purchases of investment securities and loan originations.

Investment  securities,  at December 31, 1996,  increased  by $6.6  million,  or
45.0%, to $21.3 million from $14.7 June 30, 1996. However, during the six months
ended  December 31, 1996,  $11.8 million of loans were sold to decrease the loan
to  deposit  ratio.  The  proceeds  from the sale were used to  purchase  higher
yeilding investment  securities.  Included in the investment  portfolio are $3.2
million of  mortgage-backed  securities,  classified as held to maturity,  which
collateralize the bonds payable, $15.7 million of GNMA and FHLMC mortgage-backed
securities  classified  as trading  securities,  $1.0  million of United  States
Treasury Notes classified as trading securities and $1.4 million of Federal Home
Loan Bank stock, recorded at cost.

The loan portfolio  consists  primarily of mortgage loans, the majority of which
are  residential  first  mortgage  loans.  Of the $82.4  million of gross  loans
outstanding at December 31, 1996, 78.4% represent  residential  first mortgages.
Net loans were $81.3  million at December  31, 1996,  a 3.3%  decrease  from net
loans of $84.1 million at June 30, 1996  primarily due to the sale of fixed rate
loans totaling $11.8 million.

Real estate  owned  increased  by $18  thousand,  or 54.5%,  to $51  thousand at
December 31, 1996 from $33 thousand at June 30, 1996. These assets were acquired
through  foreclosure  and at December 31, 1996  consisted of one  property.  The
property is guaranteed by FHA/VA, and no significant loss is expected.

Office properties and equipment increased $1.4 million, or 40.3%, since June 30,
1996.  This increase is due to the completion of the new  operations  center and
fourth   retail   branch   office,   which  is  located  on  the  east  side  of
Charlottesville on Pantops mountain.  The office and branch opened to the public
on December 9, 1996.

Deposits increased by $6.7 million,  or 9.0%, between June 30, 1996 and December
31,  1996.  The  majority of the growth was in  certificates  of deposit,  which
increased $5.9 million at December 31, 1996.  This growth - all local funds - is
a reflection of continued marketing and the opening of a new branch.

Other borrowed money  increased $577 thousand,  or 9.5%, to $6.7 million dollars
during the six months ended  December 31, 1996.  Federal Home Loan Bank advances
remainded  unchanged  due to a renewal of $10.0  million of advances made during
the six months ended December 31, 1996 to extend short term  borrowings to match
asset maturites.


                                       9
<PAGE>



Results of Operations

Net Income

Guaranty  reported net income of $27  thousand  and $142  thousand for the three
month periods ended December 31, 1996 and 1995, respectively,  and a net loss of
$6 thousand  and net income of $296  thousand  for the six month  periods  ended
December 31, 1996 and 1995, respectively. Income decreased during the six months
ended December 31, 1996, due to a loss of $237 thousand when it restructured its
investment  portfolio  and a one time  special  assessment  of $347  thousand to
recapitalize  the Savings  Association  Insurance  Fund  ("SAIF").  In order for
Guaranty to convert to a commercial bank, securities classified as available for
sale had to be  reclassified as trading  securities.  This resulted in a mark to
market loss of $237 thousand  which was charged  against net income and adjusted
the basis of the securities.  Without these losses, Guaranty would have reported
an after tax net income of $376  thousand for the six months ended  December 31,
1996.


Net Interest Income

Net interest income increased by $28 thousand, or 4.7%, to $619 thousand for the
three months ended  December  31, 1996,  compared to $591  thousand for the same
period in 1995. Net interest  income  increased by $175 thousand,  or 15.1%,  to
$1.34  million for the six months  ended  December  31,  1996  compared to $1.16
million in the same period in 1995.  Average  earning assets  increased by $11.1
million to $106.7 million for the six months ended December 31, 1996 compared to
an increase of $1.3  million to $90.7  million for the same period in 1995.  The
average rate earned also  increased  to 8.01% for the six months ended  December
31, 1996 from 7.97% at June 30, 1996 compared to an increase to 8.17% from 7.59%
for the same period in 1995. Average interest bearing liabilities also increased
by $14.6  million to $105.8  million for the six months ended  December 31, 1996
compared to an increase of $0.1 million to $85.7  million for the same period in
1995. The average interest rate paid on average  liabilities  decreased 13 basis
points to  5.56%,  and 11 basis  points to 5.93%  during  the six  months  ended
December  1996 and 1995  respectively.  Interest  rate  spread and net  interest
margin for December 31, 1996 and 1995 were 2.46% and 2.50%, and 2.24% and 2.56%,
respectively.  The majority of this improvement in net interest income is due to
the  decrease  in the rate paid on borrowed  money and the  decrease in the rate
paid on  certificates  of deposit.  The average  rate paid on FHLB  advances and
other  borrowings  decreased  54 basis  point to 5.54% for the six months  ended
December 31, 1996 from 6.03%.  The average  balance of  certificates  of deposit
rose $14.9 million  dollars,  or 30.7%, to $63.3 million in the six month period
ending December 31, 1996 with the average rate falling 10 basis points.


Provision for Loan Losses

Management analyzes the potential risk of loss on the Guaranty's loan portfolio,
given  the  loan  balances  and the  value  of the  underlying  collateral.  The
allowance  for  loan  losses  is  reviewed  monthly  and is  based  on the  loan
classification system, which classifies problem loans as substandard,  doubtful,
or loss.  Additional  provisions are added when deemed  necessary by management.
Based on this evaluation,  Guaranty recorded a provision of $46 thousand for the
three  months ended  December 31, 1996,  and a provision of $15 thousand for the
same  period in 1995.  For the six months  ended  December  31,  1996,  Guaranty
recorded a provision  of $92  thousand.  For the same six month  period in 1995,
Guaranty recorded a provision of $11 thousand. As of December 31, 1996 the total
allowance for 

                                       10
<PAGE>


loan  losses  amounted  to  $870  thousand,  of  which  $709  thousand  was  not
specifically allocated to identified problem loans.

Non-Interest Income

Non-interest  income decreased $66 thousand,  or 26.0%, to $188 thousand for the
three months ended  December 31, 1996 from $254  thousand for the same period in
1995.  Non-interest  income decreased by $53 thousand,  or 11%, to $462 thousand
for the six month period ended  December 31, 1996 compared to the same period in
1995.  The decrease  during the second  period was due to the  restructuring  of
Guaranty's investment portfolio. Because of this restructuring,  Guaranty took a
one time loss of $237  thousand.  The  increase  in the first  period was due to
gains on the sales of loans and investment securities held for sale.


Non-Interest Expense

Non-interest expense increased $106 thousand, or 17.3%, to $720 thousand for the
three months ended  December  31, 1996,  compared to $614  thousand for the same
period in 1995.  The  increase  in expenses  for these three  months is directly
connected to the opening of the fourth retail  branch office and the  relocation
of the corporate headquarters.  Non-interest expense increased $504 thousand, or
41.6%,  to $1.7 million for the six months ended December 31, 1996,  compared to
$1.212 for the same  period in 1995.  Although  additional  personnel  have been
hired to staff the new retail  branch office that opened in December  1996,  the
majority  of  this  increase  was  due to the  Federal  legislation  enacted  in
September 1996 to recapitalize  the Savings and Loan  Assocation  Insurance Fund
("SAIF"). The one-time special assessment based on deposits as of March 31, 1995
equaled $347 thousand for Guaranty.

Income Tax Expense

Guaranty  recognized  income tax expense of $14  thousand  for the three  months
ended  December 31, 1996,  compared to $74 thousand for the same period in 1995.
Guaranty  recognized  an income tax  benefit of $4  thousand  for the six months
ended December 31, 1996,  compared to an income tax expense of $158 thousand for
the  same  period  in  1995.  Due to the  restructuring  loss in the  investment
portfolio during the quarter ended December 31, 1996,  Guaranty's net income was
significantly lower than the same period in 1995. Because of a loss in the first
quarter  of  fiscal  1997  due  to  the  one-time  "SAIF"  assessment,  Guaranty
recognized a tax benefit in that quarter.


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.  By regulatory definition,  liquid
assets include cash,  interest bearing deposits with banks,  federal funds sold,
and government  agency and high rated  corporate  securities  with maturities of
five years or less. Guaranty is required to maintain liquid assets on an average
monthly  basis equal to at least 5% of its  liquidity  base.  Liquidity  base is
further  defined as total deposits plus all short term  borrowings.  At December
31, 1996, Guaranty's liquidity ratio was 6.3%.

Guaranty's  primary sources of funds are deposits,  borrowings and amortization,
prepayments and maturities of outstanding loans and mortgage-backed  securities.
While


                                       11
<PAGE>

scheduled payments from the amortization of loans and mortgage-backed 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 December
31, 1996,  the total  approved  loan  commitments  outstanding  amounted to $3.0
million. At the same date,  commitments under unused lines of credit amounted to
$6.4 million. Certificates of deposit scheduled to mature in one year or less at
December 31, 1996 totaled $57.3 million.  Management believes that a significant
portion of maturing deposits will remain with Guaranty.

Guaranty is subject to OTS regulations  requiring  savings  institutions to meet
the following  minimum levels of regulatory  capital (1) tangible  capital of at
least 1.5% of total  adjusted  assets,  (2) core capital of 3% of total adjusted
assets  and (3)  risk-based  capital  of 8% of total  risk-weighted  assets.  At
December 31, 1996, Guaranty exceeded all such regulatory capital requirements as
shown in the following table.



                                                               Percent of
(Dollars in thousands)                      Amount          Adjusted Assets
----------------------------------------------------------------------------
Tangible Capital:
Regulatory capital                          $6,575                    4.96%
Minimum capital requirement                  1,743                    1.50%
----------------------------------------------------------------------------
Excess regulatory capital                   $4,832                    3.46%
----------------------------------------------------------------------------

Core Capital:
Regulatory capital                          $6,575                    4.96%
Minimum capital requirement                  3,485                    3.00%
----------------------------------------------------------------------------
Excess regulatory capital                   $3,090                    1.96%
----------------------------------------------------------------------------

Risk-based Capital:
Regulatory capital                          $7,281                   12.89%
Minimum capital requirement                  4,519                    8.00%
----------------------------------------------------------------------------
Excess regulatory capital                   $2,762                    4.89%
----------------------------------------------------------------------------


                                       12
<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
         The Annual Meeting of Shareholders of Guaranty Financial Corporation
was held  December  11, 1996 in  Charlottesville  Virginia  for the  purposes of
electing four  individuals  to the Board of Directors  and ammending  Guaranty's
1991  Incentive  Plan (the  "Plan").  Proxies  for the  meeting  were  solicited
pursuant to  Regulation  14(a) of the  Securities  and Exchange Act of 1934,  as
amended.

There was no solicitation in opposition to management's nominees to the Board of
Directors  as listed  in the  proxy  statement,  and all of such  nominees  were
elected with the following vote:

                              Shares         Shares       Shares
                             voted for      withheld    not voted       Total
                           -------------- ----------- ------------- -----------
For 3 - Year Term
     Thomas P. Baker          468,728       3,180        447,260       919,168
     Charles R. Borchardt     467,928       3,980        447,260       919,168
     Harry N. Lewis           468,828       3,080        447,260       919,168
For 1 - Year Term
     James R. Sipe, Jr.       468,828       3,080        447,260       919,168

There were no abstentions or broker non-votes in the election of directors.

In addition,  Guaranty's shareholders voted on a proposal to amend the Plan. The
Plan  initially  authorized the issuance of up to 50,000 shares of Common Stock.
Options to purchase  36,000  shares have been  granted and 14,000  share  remain
available for grants and awards under the Plan.  The Plan, as amended,  reserves
111,000  shares,  increasing the shares  available for new grants under the Plan
from 14,000 to 75,000 shares.  To date, none of the options have been exercised.
The Plan, as amended, was approved with 295,762 shares voting for, 46,280 shares
voting against,  6,814 shares abstaining,  and 123,052 shares counting as broker
non-votes, and 447,260 shares did not vote.

Item 5            Other Information


Item 6            Exhibits and Reports on 8-K
                  (a)      Exhibits - None

                  (b)      Reports on Form 8-K - None

                                       13
<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:   May 19, 1997                   By: /s/ Thomas P. Baker
                                          -------------------------------------
                                          Thomas P. Baker
                                          President and Chief Executive Officer



Date:   May 19, 1997                    By: /s/ Kathleen M. Focht
                                          -------------------------------------
                                          Kathleen M. Focht
                                          Vice President, Secretary, Treasurer,
                                           and Chief Financial Officer