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. 0-25905
September 30, 2002




                         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 Offices)


                                 (434) 970-1100
                (Issuer's Telephone Number, Including Area Code)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ No___

         As of November 1, 2002, 1,962,777 shares of 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, 2002
              (unaudited) and December 31, 2001                            3

              Consolidated Statements of Operations for the
              Three and Nine Months Ended September 30, 2002 and
              2001 (unaudited)                                             4

              Consolidated Statements of Comprehensive Income
              for the Three and Nine Months Ended September 30, 2002
              and 2001 (unaudited)                                         5

              Consolidated Statements of Cash Flows for the
              Nine Months Ended September 30, 2002 and 2001 (unaudited)    6

              Notes to Consolidated Financial Statements (unaudited)       7

Item 2        Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          10

Item 3        Controls and Procedures                                      16

Part II.  Other Information
---------------------------

Item 1        Legal Proceedings                                            17

Item 2        Changes in Securities                                        17

Item 3        Defaults upon Senior Securities                              17

Item 4        Submission of Matters to a Vote of Security Holders          17

Item 5        Other Information                                            17

Item 6        Exhibits and Reports on Form 8-K                             17

Signatures                                                                 18

Certifications                                                             19


                                       2
<PAGE>


Part I.  Financial Information
------------------------------

Item 1   Financial Statements

                         GUARANTY FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
<TABLE>
<CAPTION>


                                                                    September 30,      December 31,
                                                                        2002               2001
                                                                    --------------     ------------
ASSETS                                                               (Unaudited)
<S>                                                                <C>               <C>
Cash and cash equivalents                                                $ 14,485          $ 12,437
Investment securities
   Held-to-maturity                                                           870               970
   Available for sale                                                       7,199            20,567
Investment in FHLB and other stocks                                         1,972             1,972
Loans receivable, net                                                     165,351           177,579
Accrued interest receivable                                                 1,027             1,245
Real estate owned                                                             441               764
Office properties and equipment, net                                        8,066             8,110
Other assets                                                                4,323             1,522
                                                                    --------------    --------------
          Total assets                                                  $ 203,734         $ 225,166
                                                                    ==============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   Interest bearing demand                                               $ 29,188          $ 25,460
   Non-interest bearing demand                                             25,996            22,110
   Money market accounts                                                   27,698            22,394
   Savings accounts                                                        12,766            12,992
   Certificates of deposit                                                 76,766           117,676
                                                                    --------------    --------------
                                                                          172,414           200,632
Bonds payable                                                                 365               595
Advances from Federal Home Loan Bank                                        6,000             1,000
Accrued interest payable                                                       51               137
Payments by borrowers for taxes and insurance                                 309               165
Other liabilities                                                             536               546
                                                                    --------------    --------------
          Total liabilities                                               179,675           203,075
                                                                    --------------    --------------

Convertible preferred securities                                            6,012             6,012
                                                                    --------------    --------------
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, 1,962,777
   issued and outstanding (1,961,727 in 2001)                               2,453             2,452
Additional paid-in capital                                                  8,960             8,953
Accumulated other comprehensive loss                                          (32)             (695)
Retained earnings                                                           6,666             5,369
                                                                    --------------    --------------
          Total stockholders' equity                                       18,047            16,079
                                                                    --------------    --------------
Total liabilities and stockholders' equity                              $ 203,734         $ 225,166
                                                                    ==============    ==============
</TABLE>




           See accompanying notes to consolidated financial statements

                                       3
<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>

                                                            Three Months Ended          Nine Months Ended
                                                               September 30,               September 30,
                                                         --------------------------  --------------------------
                                                            2002          2001          2002          2001
                                                         ------------  ------------  ------------  ------------
                                                                 (unaudited)                 (unaudited)
<S>                                                     <C>           <C>           <C>           <C>
Interest income
   Loans                                                     $ 2,891       $ 3,629       $ 8,866      $ 12,184
   Investment securities                                         260           575         1,070         1,694
                                                         ------------  ------------  ------------  ------------
Total interest income                                          3,151         4,204         9,936        13,878
                                                         ------------  ------------  ------------  ------------

Interest expense
   Deposits                                                      727         2,167         2,858         7,342
   Borrowings                                                    174           161           552           668
                                                          ------------  ------------  ------------  ------------
Total interest expense                                           901         2,328         3,410         8,010
                                                          ------------  ------------  ------------  ------------

Net interest income                                            2,250         1,876         6,526         5,868

Provision for loan losses                                         25            75            75           300
                                                         ------------  ------------  ------------  ------------

Net interest income after provision
      for loan losses                                          2,225         1,801         6,451         5,568

Non-interest income
   Deposit account fees                                          181           184           553           565
   Mortgage banking income                                       259           330           726           800
   Investment sales commissions                                   40            53           104           206
   Gain on sale of Investments                                     4             3            20             3
   Other                                                         154            43           418           201
                                                         ------------  ------------  ------------  ------------
Total noninterest income                                         638           613         1,821         1,775
                                                         ------------  ------------  ------------  ------------

Non-interest expense
   Personnel                                                   1,158         1,226         3,444         3,637
   Occupancy                                                     282           336           853         1,098
   Information services                                          275           302           853           870
   Marketing                                                      59            49           102           166
   Deposit insurance premiums                                      8            27            56            79
   Other                                                         406           415         1,065         1,169
                                                         ------------  ------------  ------------  ------------
Total noninterest expense                                      2,188         2,355         6,373         7,019
                                                         ------------  ------------  ------------  ------------

Income before income taxes                                       675            59         1,899           324
                                                         ------------  ------------  ------------  ------------

Provision for income taxes                                       212            20           602           110
                                                         ------------  ------------  ------------  ------------

Net income                                                     $ 463          $ 39       $ 1,297         $ 214
                                                         ============  ============  ============  ============

Earnings per common share:
  Basic                                                       $ 0.24        $ 0.02        $ 0.66        $ 0.11
                                                         ============  ============  ============  ============

  Diluted                                                     $ 0.23        $ 0.02        $ 0.65        $ 0.11
                                                         ============  ============  ============  ============
 </TABLE>


          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                      Three Months Ended               Nine Months Ended
                                                                         September 30,                   September 30,
                                                                  ----------------------------    ----------------------------
                                                                     2002            2001            2002            2001
                                                                  ------------    ------------    ------------   -------------
                                                                           (unaudited)                     (unaudited)
<S>                                                              <C>             <C>             <C>            <C>
Net income                                                              $ 463            $ 39         $ 1,297           $ 214
                                                                  ------------    ------------    ------------   -------------
Other comprehensive income:
   Unrealized gain on securities available for sale                       389             232           1,006             953
                                                                  ------------    ------------    ------------   -------------
Other comprehensive income, before tax                                    389             232           1,006             953

Income tax expense related to items of other
    comprehensive income                                                 (132)            (79)           (343)           (324)
                                                                  ------------    ------------    ------------   -------------

Other comprehensive income, net of tax                                    257             153             663             629
                                                                  ------------    ------------    ------------   -------------

Comprehensive income                                                    $ 720           $ 192         $ 1,960           $ 843
                                                                  ============    ============    ============   =============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                         Nine Months Ended
                                                                                           September 30,
                                                                                        2002          2001
                                                                                        ----          ----
                                                                                            (unaudited)
<S>                                                                                 <C>              <C>
Operating Activities
      Net Income                                                                        $ 1,297          $ 214
      Adjustments to reconcile net income to net cash provided
           (absorbed) by operating activities:
           Provision for loan losses                                                         75            300
           Provision for loss on sale of other real estate owned                             40              -
           Depreciation and amortization                                                    437          1,105
           Deferred loan fees                                                               (45)           (91)
           Net amortization of premiums and accretion of discounts                          361            131
           Gain on sale of loans                                                           (726)          (916)
           Gain on sale of securities available for sale                                    (20)            (3)
           Originations of loans held for sale                                          (32,566)       (48,905)
           Proceeds from sale of loans                                                   43,416         49,821
           Gain on sale of other real estate owned                                          (18)             -
           Gain on Branch                                                                     -            (79)
           Changes in:
               Accrued interest receivable                                                  218            622
               Other assets                                                                 (30)          (961)
               Accrued interest payable                                                     (86)          (285)
               Prepayments by borrowers for taxes and insurance                             144            319
               Other liabilities                                                            (10)          (370)
                                                                                       --------       --------
Net cash provided by operating activities                                                12,487            902
                                                                                       --------       --------
Investing activities
      Net decrease in loans                                                               1,821         23,074
      Mortgage-backed securities principal repayments                                       250            196
      Purchase of securities held to maturity                                              (406)             -
      Proceeds from maturity of securities held to maturity                                 250              -
      Purchase of securities available for sale                                               -        (18,000)
      Proceeds from sale of securities available for sale                                14,162         15,682
      Proceeds from sale of real estate owned                                               500            757
      Net increase  (decrease) in cash from sale of branch:
           Proceeds from sale of loans                                                        -          4,359
           Sale of Deposits                                                                   -         (7,144)
           Proceeds from sale of office properties, equipment, and land                       -          1,058
      Purchase of bank-owned life insurance                                              (3,000)             -
      Increase in bank-owned life insurance                                                (106)             -
      Origination of servicing rights                                                         -           (331)
      Proceeds from sale of servicing rights                                                  -            826
      Proceeds from sale of office properties and equipment                                  22             33
      Purchase of office properties and equipment                                          (423)          (353)
                                                                                       --------       --------
Net cash provided by investing activities                                                13,070         20,157
                                                                                       --------       --------
Financing activities
      Net increase (decrease) in deposits                                               (28,218)         1,336
      Proceeds from FHLB advances                                                        48,000         36,000
      Repayment of FHLB advances                                                        (43,000)       (50,000)
      Proceeds from issuance of common stock                                                  8              -
      Principal payments on bonds payable, including unapplied payments                    (299)           (87)
                                                                                       --------       --------
Net cash absorbed by financing activities                                               (23,509)       (12,751)
                                                                                       --------       --------
Increase in cash and cash equivalents                                                     2,048          8,308

Cash and cash equivalents, beginning of period                                           12,437         15,550
                                                                                       --------       --------

Cash and cash equivalents, end of period                                               $ 14,485       $ 23,858
                                                                                       ========       ========

          See accompanying notes to consolidated financial statements.

</TABLE>
                                       6
<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         For the Three and Nine Months Ended September 30, 2002 and 2001
                                   (unaudited)


Note 1  Principles of Presentation

The  accompanying   consolidated  financial  statements  of  Guaranty  Financial
Corporation  ("Guaranty")  have not been  audited  by  independent  accountants,
except for the balance sheet at December 31, 2001.  These  financial  statements
have been prepared in accordance  with the  regulations  of the  Securities  and
Exchange Commission in regard to quarterly (interim) reporting.  In management's
opinion, the financial information presented reflects all adjustments, comprised
only of normal recurring  accruals that are necessary for a fair presentation of
the  results  for the  interim  periods.  Significant  accounting  policies  and
accounting  principles  have been  consistently  applied in both the interim and
annual  consolidated  financial  statements.   Certain  notes  and  the  related
information have been condensed or omitted from the interim financial statements
presented in this Quarterly  Report on Form 10-QSB.  Therefore,  these financial
statements  should be read in conjunction with Guaranty's  Annual Report on Form
10-KSB for the year ended  December 31, 2001. The results for the three and nine
months  ended  September  30, 2002,  are not  necessarily  indicative  of future
financial results.

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

Amounts in the year 2001 financial  statements have been reclassified to conform
to  the  year  2002  presentation.  These  reclassifications  had no  effect  on
previously reported net income.

Note 2  Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Note 3  Earnings Per Share

Basic earnings per share is based on net income divided by the weighted  average
number of common  shares  outstanding  during the period.  Diluted  earnings per
share shows the dilutive effect of additional common shares issuable under stock
option  plans.  The basic and diluted  earnings per share for the three and nine
months ended  September 30, 2002 and 2001,  have been determined by dividing net
income by the  weighted  average  number of shares of common  stock  outstanding
during these periods.  The following table indicates the weighted average shares
outstanding for each period.

<TABLE>
<CAPTION>
                                    Three Months Ended                            Nine Months Ended
                            -----------------------------------         ------------------------------------
                            September 30,          September 30,         September 30,         September 30,
                                2002                  2001                   2002                 2001
                            -------------          -------------         -------------         -------------
<S>                            <C>                    <C>                   <C>                   <C>
Basic shares                    1,962,777              1,961,727             1,962,777             1,961,727
Diluted shares                  1,985,501              1,961,727             1,984,254             1,961,727

</TABLE>

                                       7
<PAGE>

Note 4  Loans

The loan portfolio is comprised of the following:


                                          September 30,       December 31,
                                               2002               2001
                                          -------------       ------------
                                                    (In thousands)
Mortgage loans:
  Residential                                    $ 24,086           $ 39,864
  Commercial                                        9,474             16,277
  Construction and land loans                      37,447             36,307
                                                ---------          ---------
  Total real estate loans                          71,007             92,448
Commercial business loans                          72,927             66,603
Consumer loans                                     23,872             20,973
                                                ---------          ---------
  Total loans receivable                          167,806            180,024
Adjustments:
  Allowance for losses                             (2,533)            (2,512)
  Deferred costs                                       78                 67
                                                ---------          ---------
Total loans receivable, net                     $ 165,351          $ 177,579
                                                =========          =========


Note 5  Allowance for Loan Loss

The following is a summary of transactions in the allowance for loan loss:


                                        September 30,          December 31,
                                           2002                   2001
                                        -------------          ------------
                                                  (In thousands)

Balance at January 1                       $ 2,512                $ 2,396
Provision charged to operating expense          75                    333
Recoveries added to the reserve                  3                      9
Loans charged off                              (57)                  (226)
                                           -------                -------
Balance at the end of the period           $ 2,533                $ 2,512
                                           =======                =======


                                       8
<PAGE>

Note 6  Investments

The investment portfolio was comprised of the following:

<TABLE>
<CAPTION>

                                                    September 30,         December 31,
                                                         2002                 2001
                                                   -----------------    -----------------
                                                                (In thousands)
<S>                                                    <C>                    <C>
Held to maturity:
     Mortgage-backed securities                         $       470            $     720
     U.S. Government obligations                                400                  250

Available for sale:
     Corporate Bonds                                          3,191               12,597
     U.S. Government obligations                              4,008                7,970

Other:
     Federal Home Loan Bank stock                             1,550                1,550
     Federal Reserve Bank & other stocks                        422                  422
                                                        ------------            ---------
                                                        $    10,041            $  23,509
                                                        ============            ==========
</TABLE>

                                       9
<PAGE>
ITEM 2                MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Guaranty  Financial  Corporation  ("Guaranty")  is a single bank holding company
organized  under  Virginia  law that  provides  financial  services  through its
primary  operating  subsidiary,  Guaranty Bank (the "Bank").  The Bank is a full
service  commercial bank offering a wide range of banking and related  financial
services, including time and demand deposits, as well as commercial, industrial,
residential  construction,  residential  and  commercial  mortgage  and consumer
loans.  Guaranty Investments  Corporation,  a subsidiary of the Bank, provides a
full range of investment services and, through a contractual  arrangement with a
third party, sells mutual funds, stocks, bonds and annuities.

Management's  discussion  and  analysis  is  presented  to  aid  the  reader  in
understanding  and evaluating the financial  condition and results of operations
of Guaranty. The analysis focuses on the consolidated financial statements,  the
footnotes  thereto,  and the other  financial  data herein.  Highlighted  in the
discussion  are  material   changes  from  prior   reporting   periods  and  any
identifiable  trends  affecting  Guaranty.  Amounts are rounded for presentation
purposes,  while the  percentages  presented  are  computed  based on  unrounded
amounts.

Analysis of Financial Condition

Total assets decreased 9.5% to $203.7 million at September 30, 2002, from $225.2
million at December 31,  2001. Cash and cash equivalents  increased $2.1 million
or 16.5%, to $14.5 million at September 30, 2002, from $12.4 million at December
31, 2001.  Net loans were $165.4  million at  September  30, 2002, a decrease of
$12.2 million,  or 6.9%, from net loans of $177.6 million at December 31,  2001.
Total  deposits at September 30, 2002,  were $172.4  million  compared to $200.6
million at December 31, 2001. FHLB borrowings were $6.0 million at September 30,
2002, compared to $1.0 million at December 31, 2001. Total stockholders'  equity
at  September  30, 2002,  increased by $1.9 million to $18.0  million from $16.1
million at December 31, 2001.

The factors causing the  fluctuations in the major balance sheet  categories are
further discussed in the following sections.

Loans

During  the first  nine  months of 2002,  Guaranty  continued  to  strategically
reposition its loan portfolio.  Net loans receivable decreased by 6.9% to $165.4
million at September 30, 2002,  from $177.6  million at December 31, 2001.  This
change was primarily  attributable  to a $15.8 million  reduction in residential
mortgage loans and a $6.8 million  reduction in commercial  mortgage loans which
offset a $6.3 million  increase in commercial  business  loans.  During the nine
months  ended  September  30,  2002,   Guaranty   originated  $32.6  million  in
residential  mortgage loans and sold $42.7 million in residential mortgage loans
in the  secondary  market.  Residential  mortgage  loans held for sale were $1.7
million at  September  30, 2002,  down from $14.3  million at December 31, 2001.
Other segments of the loan portfolio were  relatively  constant during the first
nine months of 2002.


Investments

Total  investments  declined by 57.3% to $10.0  million at  September  30, 2002,
compared to $23.5 million at December 31, 2001.  The majority of this change was
due to the  sale of long  term  corporate  bonds  which  reduced  the  Company's
interest rate and credit risk.

                                       10
<PAGE>

Real Estate Owned

Real estate owned  decreased to $441,000 at September 30, 2002, from $764,000 at
December 31, 2001.  The decline was  primarily  due to the sale of a residential
property  during the period.  The remainder of real estate owned consists of one
residential  house and developed  lots listed for sale.  No material  losses are
anticipated on the ultimate sale of these properties.

Office Properties and Equipment

Guaranty's  investment in office  properties and equipment  remained constant at
$8.1 million for September 30, 2002, and December 31, 2001.

Other Assets

Other assets  increased to $4.3 million at September 30, 2002,  primarily due to
the purchase of $3.0 million of bank owned life insurance.

Deposits

The Company's  continued  emphasis on attracting low cost deposits and providing
full  service  banking  relationships  to its customer  base  resulted in demand
accounts increasing by 16.0% to $55.2 million from $47.6 million at December 31,
2001.  For the same time periods,  money market  accounts  increased by 23.7% to
$27.7 million from $22.4 million.  Deposits were $172.4 million at September 30,
2002,  a decrease  of $28.2  million,  or 14.1%,  from total  deposits of $200.6
million at December 31, 2001.  Certificates  of deposit  comprise 44.5% of total
deposits at September 30, 2002, compared to 58.7% at December 31, 2001.

FHLB Borrowings

Guaranty's  borrowings from the Federal Home Loan Bank ("FHLB") at September 30,
2002 increased to $6.0 million from $1.0 million at December 31, 2001.  Guaranty
was able to reduce its overall cost of funds by increasing its  borrowings  from
the FHLB. At September 30, 2002, Guaranty's available but unused borrowings with
the FHLB were approximately $14.7 million.

Stockholders' Equity

Stockholders'  equity at September 30, 2002, increased by 12.2% to $18.0 million
from $16.1  million at December 31, 2001.  The primary  factors for the increase
were the year to date net  income of $1.3  million  and  $8,000  related  to the
issuance of 1,050 shares for the 2002 annual retainer for outside directors, and
an increase in the market value of Guaranty's  available for sale investments by
approximately $663,000.

                                       11
<PAGE>

Results of Operations

Net Income

Guaranty  reported net income of $463,000 ($.23 per diluted share) for the three
months ended September 30, 2002, compared with a net income of $39,000 ($.02 per
diluted  share) for the three months ended  September 30, 2001.  The increase in
the net income was  primarily due to the  combination  of increased net interest
income,  reduced  operating  expenses and a lower  provision for loan loss.  Net
Income of $1.3  million  for the nine  months  ended  September  30, 2002 was an
improvement over the $214,000 reported for the same period a year ago.

Net Interest Income

Net  interest  income  increased  to $2.3  million  for the three  months  ended
September  30, 2002,  from the $1.8 million  reported  during the same period in
2001. The primary cause for the increase in net interest income was a decline in
the  average  cost of  interest  bearing  liabilities  which more than  offset a
decline in the average balance and average yield of interest  earning assets for
the most recent quarter.  For these same periods,  the cost of interest  bearing
liabilities  declined by 239 basis  points to 2.20%.  The primary  cause of this
decline was a 258 basis  point  decline in the cost of  certificates  of deposit
which  reflected the downward  trend in interest  rates during this time period.
For the same time periods,  the yield on loans  decreased by 100 basis points to
6.94%,  primarily due to the impact of prime rate reductions  throughout 2001 on
adjustable rate loans.  The net interest margin  increased to 4.82% for the most
recent quarter from 3.39% for the same period a year ago. Average earning assets
for the three months ended September 30, 2002,  were $185.2 million  compared to
$219.9 million for the same period in 2001.  Average loans outstanding  declined
by $16.1 million to $165.3 million and average investment securities declined by
$13.5 million to $15.0 million.  For the same periods,  average  certificates of
deposit  decreased  by $55.9  million  to $80.9  million.  The  following  table
summarizes the factors determining net interest income (dollars in thousands).
<TABLE>
<CAPTION>


                                          Three Months        Three Months         Nine Months          Nine Months
                                              Ended               Ended               Ended                Ended
                                          September 30,       September 30,       September 30,        September 30,
                                              2002                2001                 2002                2001
                                        ------------------  ------------------   -----------------   ------------------
<S>                                        <C>                 <C>                  <C>                 <C>

    Avg. Interest Earning Assets            $185,196            $219,909             $193,438            $228,552

            Average Yield                     6.75%               7.58%               6.87%                8.12%

  Avg. Interest Bearing Liabilities         $162,136            $201,203             $171,702            $212,299

            Average Cost                      2.20%               4.59%               2.66%                5.04%

         Net Interest Spread                  4.55%               3.00%               4.21%                3.07%

         Net Interest Margin                  4.82%               3.39%               4.51%                3.43%


</TABLE>

                                       12
<PAGE>

Provision for Loan Losses

Guaranty  recorded a provision of $25,000 and $75,000 for the three months ended
September 30, 2002 and 2001, respectively. The decrease in the provision for the
current year  resulted  from the decrease in the size of the loan  portfolio and
the  increased  level of the  allowance for loan losses as a percentage of total
loans.  The allowance  for loan losses is  maintained  at a level  considered by
management to be adequate to absorb future loan losses currently inherent in the
loan  portfolio.  Management's  assessment  of the adequacy of the  allowance is
based upon type and  volume of the loan  portfolio,  past loan loss  experience,
existing and  anticipated  economic  conditions,  and other factors that deserve
current recognition in estimating future loan losses. Management's assessment of
the  adequacy  of the  allowance  is subject to  evaluation  and  adjustment  by
Guaranty's regulators.

There were loan  charge-offs  for the three months ended  September  30, 2002 of
$10,000,  compared to $87,000 for the same period a year ago. At  September  30,
2002,  Guaranty had $119,000 of loans that were 90 days or more past due,  while
loans totaling $1.9 million were considered to be non-accrual.  At September 30,
2002,  the  allowance  for loan losses was $2.5 million or 1.51% of total loans.
Management believes that the allowance for loan losses is adequate to cover loan
losses  inherent in the loan  portfolio  at September  30, 2002,  and that loans
classified  as  special  mention,  substandard,  doubtful  and  loss  have  been
adequately  reserved.  Although  management  believes  that  it  uses  the  best
information  available to make such  determinations,  future  adjustments to the
allowance  for  loan  losses  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 $638,000 for the three months ended September 30, 2002,
compared with $613,000 for the same period a year ago. This change was primarily
due to a decrease in  mortgage  banking  income to $259,000  for the most recent
quarter  compared  to  $330,000  for the same  period a year  ago.  During  2001
Guaranty  changed its mortgage  banking  business model to sell all  residential
fixed rate mortgage loans on a servicing  released basis. In addition,  Guaranty
sold its mortgage loan  servicing  rights related to mortgage loans serviced for
others.  The revised  mortgage  banking  business model eliminates the secondary
market  interest rate risk through  simultaneously  locking a mortgage loan rate
with the borrower and a  correspondent  investor at the same time. The 2001 sale
of existing  mortgage  servicing rights and the continued sale of mortgage loans
on a servicing  released basis  eliminated the valuation  volatility  associated
with retained servicing rights.

Fees on deposit  accounts  decreased  by 1.6% to  $181,000  for the most  recent
quarter compared to $184,000 for the same period a year ago. The decline was due
to the price  reduction of certain  consumer and small business  account fees in
order to  increase  the  competitiveness  of those  accounts.  Investment  sales
commissions  decreased to $40,000 for the three months ended September 30, 2002,
compared to $53,000 for the same period a year ago due to reduced  sales volume.
The current quarter  included a $53,000  increase in the cash surrender value of
bank owned life insurance related to policies  purchased in the first quarter of
2002.

                                       13
<PAGE>

Non-interest Expense

Non-interest  expense was $2.2 million for the quarter ended September 30, 2002,
a $167,000  decrease over the amount reported for the same period last year. The
decrease  is  primarily  attributable  to the  right  sizing  of  administrative
functions and the  elimination  of personnel  and occupancy  expenses due to the
sale of a retail  banking office in the suburban  Richmond  market in July 2001.
The  expenses  related to the  suburban  Richmond  retail  banking  office  were
included  in the  2001  financial  statements  until  July  2001  when  the sale
transaction was  consummated.  The most recent quarter included a $30,000 charge
related  to  impaired  assets  in  the  relocation  of  the  Company's  Downtown
Charlottesville branch.


Income Tax Expense

Guaranty  recognized  income tax expense of $212,000  for the three months ended
September  30,  2002,  compared  to income tax  expense of $20,000  for the same
period in 2001.  The  effective  tax rate for the most recent  quarter was 31.4%
compared to 33.9% for the same period a year ago. The lower  effective  tax rate
for the most recent  quarter was due to an increase in  non-taxable  income from
bank owned insurance. The net increase in income tax expense between periods was
a result of increases 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.  During the
most recent  quarter,  total loans  declined by  approximately  $2.5 million and
certificates of deposit declined by approximately $12.9 million. These decreases
were a result of strategic  decisions.  Guaranty  has been very  targeted in its
lending  approach and has desired to reduce its funding reliance on certificates
of deposit.  At September 30, 2002, total approved loan commitments  outstanding
were  approximately  $5.0 million.  At the same date,  commitments  under unused
lines of credit  were  approximately  $56.6  million.  Certificates  of  deposit
scheduled  to mature  in one year or less at  September  30,  2002,  were  $65.3
million.  Management  believes that a significant  portion of maturing  deposits
will remain with Guaranty.  If these  certificates of deposit do not remain with
Guaranty,  it will have to seek other  sources of funding  that may be at higher
rates or reduce assets.

                                       14
<PAGE>



The  reduction in total assets has  positively  impacted  Guaranty's  regulatory
capital  ratios.  At  September  30, 2002,  regulatory  capital was in excess of
amounts   required  by  Federal  Reserve   regulations  to  be  considered  well
capitalized as shown in the following table (dollars in thousands):

<TABLE>
<CAPTION>


                                          Actual          Actual            Amount        Percent            Excess
                                          Amount        Percentage          Required      Required           Amount
                                          ------        ----------          --------      --------           ------
 <S>                                     <C>               <C>              <C>              <C>           <C>
     Leverage Ratio                      $ 24,093          11.75%           $  8,204         4.00%         $  15,889

     Tier 1 Risk Based Capital             24,093          14.29%                            4.00%            17,350

     Total Risk Based Capital              26,205          15.54%             13,486         8.00%            12,719


</TABLE>

Regulatory Issues

In October 2000, Guaranty and the Bank entered into a written agreement with the
Federal Reserve Bank of Richmond and the Bureau of Financial Institutions of the
Commonwealth  of  Virginia  with  respect  to  various  operating  policies  and
procedures.  Under the terms of the  agreement,  Guaranty  was  restricted  from
paying  future  dividends  or  incurring  any debt at the parent  company  level
without prior  regulatory  approval.  In addition,  the Bank was prohibited from
paying  intercompany  dividends to Guaranty without prior  regulatory  approval.
This  agreement  was  terminated,  and  as a  result  the  restriction  and  the
prohibition described above were lifted, effective October 18, 2002.

Forward Looking Statements

Certain  statements  in  this  quarterly  report  on  Form  10-QSB  may  include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are generally identified by the use
of  words  such  as  "believe",  "expect",  "anticipate",  "should",  "planned",
"estimated",  and "potential".  These statements are based on Guaranty's current
expectations.  A variety of factors  could cause  Guaranty's  actual  results to
differ materially from the anticipated  results or other expectations  expressed
in such forward-looking  statements. The risks and uncertainties that may affect
the operations,  performance,  development,  and results of Guaranty's  business
include   interest  rate   movements,   competition   from  both  financial  and
non-financial  institutions,  the timing and  occurrence (or  nonoccurrence)  of
transactions and events that may be subject to circumstances  beyond  Guaranty's
control, and general economic conditions.

                                       15
<PAGE>

ITEM 3.  Controls and Procedures

Disclosure Controls and Procedures

The Company  maintains  disclosure  controls and procedures that are designed to
provide  assurance that  information  required to be disclosed by the Company in
the reports that it files or submits under the  Securities  Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods required
by the Securities and Exchange Commission. Within the 90 day period prior to the
filing of this report,  an  evaluation  of the  effectiveness  of the design and
operation of the Company's  disclosure  controls and  procedures was carried out
under the supervision and with the  participation  of management,  including the
Company's Chief Executive Officer and Chief Financial  Officer.  Based on and as
of the date of such evaluation,  the aforementioned  officers concluded that the
Company's disclosure controls and procedures were effective.

Internal Controls

The Company maintains internal  accounting controls that are designed to provide
reasonable  assurance  that assets are  safeguarded  and that  transactions  are
executed in accordance with management's  authorization and properly recorded as
necessary to permit  preparation  of financial  statements  in  conformity  with
generally  accepted  accounting  principles or any other criteria  applicable to
such  statements.  There were no significant  changes to the Company's  internal
controls or in other  factors that could  significantly  affect  those  controls
subsequent  to the date of the most  recent  evaluation  by the Chief  Executive
Officer and Chief Financial Officer.

                                       16
<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 Form 8-K

                  (a)      Exhibits

                           99.1     Statement  of Chief  Executive  Officer  and
                                    Chief  Financial   Officer  Pursuant  to  18
                                    U.S.C. ss. 1350

                  (b)      Reports on Form 8-K - None

                                       17
<PAGE>
                                   SIGNATURES

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

                                  GUARANTY FINANCIAL CORPORATION



Date:  November 14, 2002          By:  /s/ William E. Doyle, Jr.
                                       --------------------------------------
                                       William E. Doyle, Jr.
                                       President and Chief Executive Officer



Date:  November 14, 2002          By:  /s/ Thomas F. Crump
                                       --------------------------------------
                                       Thomas F. Crump
                                       Senior Vice President and Chief
                                       Financial Officer

                                       18
<PAGE>
                                 CERTIFICATIONS
                                 --------------

         I, William E. Doyle, Jr., certify that:

         1. I have  reviewed  this  quarterly  report on Form 10-QSB of Guaranty
Financial Corporation;

         2. Based on my knowledge,  this  quarterly  report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

                  a) designed such disclosure  controls and procedures to ensure
         that material  information  relating to the  registrant,  including its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this quarterly report (the "Evaluation Date"); and

                  c) presented in this quarterly  report our  conclusions  about
         the  effectiveness  of the disclosure  controls and procedures based on
         our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

                  a) all significant  deficiencies in the design or operation of
         internal controls which could adversely affect the registrant's ability
         to  record,  process,  summarize  and  report  financial  data and have
         identified  for the  registrant's  auditors any material  weaknesses in
         internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
         management  or  other  employees  who  have a  significant  role in the
         registrant's internal controls; and

                                       19
<PAGE>

         6. The registrant's  other certifying  officers and I have indicated in
this quarterly report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  November 14, 2002                   /s/ William E. Doyle, Jr.
                                           William E. Doyle, Jr.
                                           President and Chief Executive Officer

                                       20
<PAGE>


                                 CERTIFICATIONS
                                 --------------

         I, Thomas F. Crump, certify that:

         1. I have  reviewed  this  quarterly  report on Form 10-QSB of Guaranty
Financial Corporation;

         2. Based on my knowledge,  this  quarterly  report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

                  a) designed such disclosure  controls and procedures to ensure
         that material  information  relating to the  registrant,  including its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this quarterly report (the "Evaluation Date"); and

                  c) presented in this quarterly  report our  conclusions  about
         the  effectiveness  of the disclosure  controls and procedures based on
         our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

                  a) all significant  deficiencies in the design or operation of
         internal controls which could adversely affect the registrant's ability
         to  record,  process,  summarize  and  report  financial  data and have
         identified  for the  registrant's  auditors any material  weaknesses in
         internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
         management  or  other  employees  who  have a  significant  role in the
         registrant's internal controls; and

                                       21
<PAGE>
         6. The registrant's  other certifying  officers and I have indicated in
this quarterly report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  November 14, 2002                      /s/ Thomas F. Crump
                                              Thomas F. Crump
                                              Senior Vice President and
                                              Chief Financial Officer



<PAGE>

                                 Exhibit Index

               Exhibit No.

                  99.1     Certification  Statement of Chief  Executive  Officer
                           pursuant to 18 U.S.C. Section 1350

                  99.2     Certification  Statement of Chief  Financial  Officer
                           pursuant to 18 U.S.C. Section 1350




















                                       22