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
March 31, 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 May 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 March 31, 2002
              (unaudited) and December 31, 2001                            3

              Consolidated Statements of Operations for the
              Three Months Ended March 31, 2002 and
              2001 (unaudited)                                             4

              Consolidated Statements of Comprehensive Income
              for the Three Months Ended March 31, 2002
              and 2001 (unaudited)                                         5

              Consolidated Statements of Cash Flows for the
              Three Months Ended March 31, 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

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

Item 1        Legal Proceedings                                           16

Item 2        Changes in Securities                                       16

Item 3        Defaults upon Senior Securities                             16

Item 4        Submission of Matters to a Vote of Security Holders         16

Item 5        Other Information                                           16

Item 6        Exhibits and Reports on Form 8-K                            16

Signatures                                                                17



                                       2
<PAGE>


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

Item 1   Financial Statements

                                  GUARANTY FINANCIAL CORPORATION
                                    CONSOLIDATED BALANCE SHEETS
                                          (In Thousands)

<TABLE>
<CAPTION>
                                                                      March 31,       December 31,
                                                                        2002              2001
                                                                    --------------   ---------------
<S>                                                                     <C>               <C>
ASSETS                                                               (Unaudited)
Cash and cash equivalents                                               $  16,856         $  12,437
Investment securities
   Held-to-maturity                                                           957               970
   Available for sale                                                      20,344            20,567
Investment in FHLB and other stocks                                         1,972             1,972
Loans receivable, net                                                     163,584           177,579
Accrued interest receivable                                                 1,281             1,245
Real estate owned                                                             327               764
Office properties and equipment, net                                        7,981             8,110
Other assets                                                                4,496             1,522
                                                                    --------------   ---------------
          Total assets                                                  $ 217,798         $ 225,166
                                                                    ==============   ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   Interest bearing demand                                              $  26,687         $  25,460
   Non-interest bearing demand                                             23,005            22,110
   Money market accounts                                                   20,322            22,394
   Savings accounts                                                        13,546            12,992
   Certificates of deposit                                                103,238           117,676
                                                                    --------------   ---------------
                                                                          186,798           200,632
Bonds payable                                                                 591               595
Advances from Federal Home Loan Bank                                        7,000             1,000
Accrued interest payable                                                      105               137
Payments by borrowers for taxes and insurance                                 350               165
Other liabilities                                                             590               546
                                                                    --------------   ---------------
          Total liabilities                                               195,434           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 comprehensive loss                                               (836)             (695)
Retained earnings                                                           5,775             5,369
                                                                    --------------   ---------------
          Total stockholders' equity                                       16,352            16,079
                                                                    --------------   ---------------
Total liabilities and stockholders' equity                              $ 217,798         $ 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
                                                                 March 31,
                                                         --------------------------
                                                            2002          2001
                                                         ------------  ------------
                                                                 (unaudited)
<S>                                                       <C>           <C>
Interest income
   Loans                                                  $    3,060    $    4,598
   Investment securities                                         412           507
                                                         ------------  ------------
Total interest income                                          3,472         5,105
                                                         ------------  ------------

Interest expense
   Deposits                                                    1,209         2,593
   Borrowings                                                    179           336
                                                         ------------  ------------
Total interest expense                                         1,388         2,929
                                                         ------------  ------------

Net interest income                                            2,084         2,176

Provision for loan losses                                         25           150
                                                         ------------  ------------

Net interest income after provision
      for loan losses                                          2,059         2,026

Non-interest income
   Deposit account fees                                          183           177
   Mortgage banking income                                       314           175
   Investment sales commissions                                   26            94
   Other                                                         115           116
                                                         ------------  ------------
Total noninterest income                                         638           562
                                                         ------------  ------------

Non-interest expense
   Personnel                                                   1,144         1,261
   Occupancy                                                     289           339
   Information services                                          291           278
   Marketing                                                      14            63
   Deposit insurance premiums                                     25            26
   Other                                                         331           367
                                                         ------------  ------------
Total noninterest expense                                      2,094         2,334
                                                         ------------  ------------

Income before income taxes                                       603           254
                                                         ------------  ------------

Provision for income taxes                                       197            86
                                                         ------------  ------------

Net income                                                $      406    $      168
                                                         ============  ============

Basic and diluted earnings
  per common share                                        $     0.21    $     0.09
                                                         ============  ============

</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
                                                                           March 31,
                                                                  ----------------------------
                                                                     2002            2001
                                                                  ------------    ------------
                                                                          (unaudited)

<S>                                                                <C>             <C>
Net income                                                         $      406      $      168
                                                                  ------------    ------------

Other comprehensive income:
   Unrealized gain (loss) on securities available for sale               (213)            641
                                                                  ------------    ------------

Other comprehensive income (loss), before tax                            (213)            641

Income tax (expense) benefit related to items of other
    comprehensive income                                                   72            (218)
                                                                  ------------    ------------

Other comprehensive income (loss), net of tax                            (141)            423
                                                                  ------------    ------------

Comprehensive income                                               $      265      $      591
                                                                  ============    ============
</TABLE>



              See accompanying notes to consolidated financial statements.

                                       5

<PAGE>



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

<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                              March 31,
                                                                                         2002          2001
                                                                                       ---------   ----------
                                                                                            (unaudited)
<S>                                                                                   <C>            <C>
Operating Activities
      Net Income                                                                      $     406      $     168
      Adjustments to reconcile net income to net cash provided
           (absorbed) by operating activities:
           Provision for loan losses                                                         25            150
           Provision for loss on sale of other real estate owned                             40             60
           Depreciation and amortization                                                    151            398
           Deferred loan fees                                                               (16)           (24)
           Net amortization of premiums and accretion of discounts                           44              7
           Gain on sale of loans                                                           (314)          (326)
           Originations of loans held for sale                                          (12,366)       (15,333)
           Proceeds from sale of loans                                                   19,975         15,659
           Gain on sale of other real estate owned                                          (18)             -
           Other                                                                              -           (218)
           Changes in:
               Accrued interest receivable                                                  (36)            (7)
               Other assets                                                                  89            141
               Accrued interest payable                                                     (32)           282
               Prepayments by borrowers for taxes and insurance                             185            419
               Other liabilities                                                             44           (246)
                                                                                     ----------     ----------

Net cash provided by operating activities                                                 8,177          1,130
                                                                                     ----------     ----------
Investing activities
      Net decrease in loans                                                               6,683          6,812
      Mortgage-backed securities principal repayments                                       169             35
      Purchase of securities held to maturity                                              (406)             -
      Proceeds from maturity of securities held to maturity                                 250              -
      Purchase of securities available for sale                                               -         (8,000)
      Proceeds from sale of real estate owned                                               415              -
      Purchase of bank-owned life insurance                                              (3,000)             -
      Origination of servicing rights                                                         -           (230)
      Proceeds from sale of office properties and equipment                                  21              -
      Purchase of office properties and equipment                                           (34)          (275)
                                                                                     ----------     ----------

Net cash provided by investing activities                                                 4,098         (1,658)
                                                                                     ----------     ----------

Financing activities
      Net increase in deposits                                                          (13,834)         9,224
      Proceeds from FHLB advances                                                        21,000         15,000
      Repayment of FHLB advances                                                        (15,000)       (23,000)
      Proceeds from issuance of common stock                                                  8              -
      Principal payments on bonds payable, including unapplied payments                     (30)           (33)
                                                                                     ----------     ----------

Net cash absorbed by financing activities                                                (7,856)         1,191
                                                                                     ----------     ----------

Increase in cash and cash equivalents                                                     4,419            663

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

Cash and cash equivalents, end of period                                              $  16,856      $  16,213
                                                                                     ==========     ==========


</TABLE>
              See accompanying notes to consolidated financial statements.


                                       6
<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               For the Three Months Ended March 31, 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 months
ended  March 31,  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  months
ended March 31, 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.


                              March 31,             March 31,
                                2002                  2001
                          -----------------     ------------------

Basic shares                   1,962,777              1,961,727

Diluted shares                 1,970,631              1,961,727


                                       7
<PAGE>

Note 4  Loans

The loan portfolio is comprised of the following:

                                                March 31,         December 31,
                                                  2002               2001
                                              ------------        ------------
                                                       (In thousands)

Mortgage loans:
  Residential                                   $  30,445          $  39,864
  Commercial                                       12,803             16,277
  Construction and land loans                      36,444             36,307
                                                ---------          ---------
  Total real estate loans                          79,692             92,448
Commercial business loans                          65,127             66,603
Consumer loans                                     21,227             20,973
                                                ---------          ---------
  Total loans receivable                          166,046            180,024
Adjustments:
  Allowance for losses                             (2,537)            (2,512)
  Deferred costs                                       75                 67
                                                ---------          ---------
Total loans receivable, net                     $ 163,584          $ 177,579
                                                =========          =========


Note 5  Allowance for Loan Loss

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

                                                March 31,        December 31,
                                                  2002              2001
                                              ------------       ------------
                                                       (In thousands)

Balance at January 1                              $  2,512         $  2,396
Provision charged to operating expense                  25              333
Recoveries added to the reserve                          0                9
Loans charged off                                        0             (226)
                                                  --------         --------
Balance at the end of the period                  $  2,537         $  2,512
                                                  ========         ========

                                       8
<PAGE>



Note 6  Investments

The investment portfolio was comprised of the following:


                                            March 31,           December 31,
                                               2002                 2001
                                         -----------------    -----------------
                                                     (In thousands)

Held to maturity:
    Mortgage-backed securities            $           551      $           720
    U.S. Government obligations                       406                  250

Available for sale:
    Corporate Bonds                                12,496               12,597
    U.S. Government obligations                     7,848                7,970

Other:
    Federal Home Loan Bank stock                    1,550                1,550
    Federal Reserve Bank & other stocks   $           422                  422
                                         -----------------    -----------------

                                          $        23,273      $        23,509
                                         =================    =================








                                       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  3.3% to $217.8  million at March 31, 2002,  from $225.2
million at December 31, 2001. Cash and cash  equivalents  increased $4.4 million
or 35.5%, to $16.9 million at March 31, 2002, from $12.4 million at December 31,
2001.  Net loans were  $163.6  million at March 31,  2002,  a decrease  of $14.0
million,  or 7.9%, from net loans of $177.6 million at December 31, 2001.  Total
deposits at March 31, 2002,  were $186.8  million  compared to $200.6 million at
December 31, 2001. FHLB borrowings were $7.0 million at March 31, 2002, compared
to $1.0 million at December 31, 2001.  Total  stockholders'  equity at March 31,
2002,  increased by $300,000 to $16.4 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  three  months of 2002,  Guaranty  continued  to  strategically
reposition its loan portfolio.  Net loans receivable decreased by 7.9% to $163.6
million at March 31, 2002, from $177.6 million at December 31, 2001. This change
was primarily  attributable to a $9.4 million reduction in residential  mortgage
loans and a $3.5 million reduction in commercial mortgage loans. During the most
recent quarter,  Guaranty originated $12.4 million in residential mortgage loans
and sold $19.7 million in residential  mortgage  loans in the secondary  market.
Residential  mortgage  loans held for sale were $7.1  million at March 31, 2002,
down from $14.3  million at December  31, 2001.  All other  segments of the loan
portfolio were relatively constant during the most recent quarter.


Investments

Total investments  declined by 1.0% to $23.3 million at March 31, 2002, compared
to $23.5 million at December 31, 2001. The majority of this change was due to an
increase in the mark to market loss adjustment of Guaranty's  available for sale
investments of approximately $141,000.


                                       10
<PAGE>



Real Estate Owned

Real estate  owned  decreased to $327,000 at March 31,  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
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  decreased to $8.0
million at March 31, 2002, from $8.1 million at December 31, 2001. This decrease
was primarily due to depreciation of existing assets.


Other Assets

Other assets  increased to $4.5 million at March 31, 2002,  primarily due to the
purchase of $3.0 million of bank owned life insurance.

Deposits

Deposits were $186.8 million at March 31, 2002, a decrease of $13.8 million,  or
6.9%, from total deposits of $200.6 million at December 31, 2001. Although total
deposits declined during the most recent quarter,  demand accounts  increased by
4.5% to $49.7 million from $47.6 million.  This increase  represents  Guaranty's
continued  emphasis on  providing  full  service  banking  relationships  to its
customers. Certificates of deposit comprise 55.3% of total deposits at March 31,
2002, compared to 58.7% at December 31, 2001.

FHLB Borrowings

Guaranty's borrowings from the Federal Home Loan Bank ("FHLB") at March 31, 2002
increased to $7.0  million from $1.0 million at December 31, 2001.  Guaranty was
able to reduce its cost on  certificates of deposit by increasing its borrowings
from the FHLB. At March 31, 2002,  Guaranty's  available  but unused  borrowings
with the FHLB were approximately $19.6 million.

Stockholders' Equity

Stockholders'  equity at March 31, 2002, increased by 1.7% to $16.4 million from
$16.1  million at December 31, 2001.  The primary  factors for the increase were
the quarterly net income of $406,000 and $8,000 related to the issuance of 1,050
shares for the 2002 annual retainer for outside  directors offset by an increase
in the  mark  to  market  loss  adjustment  of  Guaranty's  available  for  sale
investments by approximately $141,000.


                                       11
<PAGE>

Results of Operations

Net Income

Guaranty  reported net income of $406,000  ($.21 per share) for the three months
ended March 31, 2002,  compared  with a net income of $168,000  ($.09 per share)
for the three months  ended March 31,  2001.  The increase in the net income was
primarily  due to  the  combination  of  reduced  operating  expenses,  a  lower
provision for loan loss,  and  increased  mortgage  banking  income which offset
lower net interest income.

Net Interest Income

Net interest  income  decreased to $2.1 million for the three months ended March
31, 2002,  from the $2.2 million  reported  during the same period in 2001.  The
primary  cause for the decline in net interest  income was due to the decline in
average earning assets for the most recent  quarter.  Average earning assets for
the three months ended March 31, 2002,  were $201.1  million  compared to $232.9
million for the same period in 2001. The decline in average loans outstanding to
$171.6 million from $203.1 million  represented the majority of this change. For
these same periods, certificates of deposit decreased by $36.7 million to $110.5
million.  The negative  impact on net interest income because of the decrease in
earning  assets was partially  offset by an increase in Guaranty's  net interest
margin  percentage  during the most  recent  quarter.  The net  interest  margin
percentage  increased  to 4.20% for the most recent  quarter  from 3.79% for the
same period a year ago. The cost of interest  bearing  deposits  declined by 238
basis points primarily due to lower interest rates being paid on certificates of
deposit.  For the same time periods,  the yield on loans  decreased by 195 basis
points to 7.23%, primarily due to the impact of prime rate reductions throughout
2001 on  adjustable  rate loans.  The  following  table  summarizes  the factors
determining net interest income (dollars in thousands).


                                               Three Months      Three Months
                                                   Ended             Ended
                                                 March 31,         March 31,
                                                 ---------         ---------
                                                   2002               2001
                                                   ----               ----

     Average Interest Earning Assets             $ 201,140          $ 232,835

              Average Yield                        7.00%              8.89%


  Average Interest Bearing Liabilities           $ 180,359          $ 219,188

              Average Cost                         3.13%              5.42%


             Interest Spread                       3.87%              3.48%

             Interest Margin                       4.20%              3.79%



                                       12
<PAGE>

Provision for Loan Losses

Guaranty recorded a provision of $25,000 and $150,000 for the three months ended
March 31, 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 no loan  charge-offs  for the three  months  ended  March 31,  2002,
compared to $34,000 for the same period a year ago. At March 31, 2002,  Guaranty
had  $338,000  of loans  that  were 90 days or more  past  due.  Of this  total,
$187,000 of loans were  considered  to be  non-accrual.  At March 31, 2002,  the
allowance  for loan losses was $2.5 million or 1.53% of total loans.  Management
believes  that the  allowance  for loan  losses is adequate to cover loan losses
inherent in the loan portfolio at March 31, 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 March 31, 2002,
compared with $562,000 for the same period a year ago. This change was primarily
due to an increase in mortgage  banking  income to $314,000  for the most recent
quarter  compared  to  $175,000  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  eliminates the valuation  volatility  associated
with retained servicing rights. The results for the three months ended March 31,
2001,  included a $151,000  charge for  impairment  in the value of the mortgage
loan servicing rights.

Fees on deposit  accounts  increased  by 3.4% to  $183,000  for the most  recent
quarter  compared to $177,000 for the same period a year ago.  This  increase is
related  to  an  increase  in  demand  accounts.  Investment  sales  commissions
decreased  to $26,000 for the three  months  ended March 31,  2002,  compared to
$94,000 for the same period a year ago due to reduced sales volume.

                                       13
<PAGE>

Non-interest Expense

Non-interest  expense was $2.1  million for the quarter  ended March 31, 2002, a
$240,000  decrease over the amount  reported for the same period last year.  The
decrease is primarily attributable to the elimination of personnel and occupancy
expenses due to the sale of a retail  banking  office in the  suburban  Richmond
market and limited  marketing  expense in the most recent quarter.  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.
Marketing  expense was $14,000 for the most recent  quarter  compared to $63,000
for the same period a year ago. Marketing expense should increase throughout the
remainder of 2002 as activity increases.


Income Tax Expense

Guaranty  recognized  income tax expense of $197,000  for the three months ended
March 31, 2002, compared to income tax expense of $86,000 for the same period in
2001.  The effective tax rate for the most recent  quarter was 32.7% 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  $14.0 million and
certificates of deposit declined by approximately $14.5 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 March 31, 2002, total approved loan commitments  outstanding were
approximately $5.6 million. At the same date,  commitments under unused lines of
credit were  approximately  $51.8 million.  Certificates of deposit scheduled to
mature in one year or less at March 31,  2002,  were $92.4  million.  Management
believes  that a  significant  portion of  maturing  deposits  will  remain with
Guranty.  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 March 31, 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                    $ 22,919          10.45%           $  8,770         4.00%         $  14,149

     Tier 1 Risk Based Capital           22,919          12.96%              7,074         4.00%            15,845

     Total Risk Based Capital            25,417          14.37%             14,147         8.00%            11,270
</TABLE>


Regulatory Issues

In October 2000, Guaranty and the Bank entered into a written agreement with the
Federal   Reserve  Bank  of  Richmond   ("FRB")  and  the  Bureau  of  Financial
Institutions  of the  Commonwealth  of Virginia  ("BFI") with respect to various
operating  policies and procedures.  Various bank operating  policies  including
asset/liability management,  liquidity, risk management, loan administration and
capital  adequacy  were  rewritten  and  approved  by bank  regulators  in 2001.
Guaranty is restricted from paying future dividends or incurring any debt at the
parent company level without prior regulatory approval. In addition, the Bank is
prohibited  from  paying  intercompany   dividends  to  Guaranty  without  prior
regulatory approval.  Absent this intercompany dividend,  Guaranty does not have
sufficient  resources to make the payments due on its  outstanding  subordinated
debt securities.

Guaranty and the Bank have  received  regulatory  approval  for an  intercompany
dividend in an amount  sufficient to make the June 15, 2002,  payment due on its
subordinated  debt  securities.  While  the FRB and the BFI  have  approved  all
quarterly dividend payment requests since the written agreement was executed, no
assurances can be given that future requests will be approved.


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>


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 - None

                  (b)  Reports on Form 8-K - None



                                       16
<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:  May 14, 2002        By:      /s/ William E. Doyle, Jr.
                              --------------------------------------------------
                               William E. Doyle, Jr.
                               President and Chief Executive Officer



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







                                       17