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, 2003




                         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 October 31, 2003,  1,991,477  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, 2003
              (unaudited) and December 31, 2002                              3

              Consolidated Statements of Operations for the
              Three and Nine Months Ended September 30, 2003 and
              2002 (unaudited)                                               4

              Consolidated Statements of Comprehensive Income
              for the Three and Nine Months Ended September 30, 2003
              and 2002 (unaudited)                                           5

              Consolidated Statements of Cash Flows for the
              Nine Months Ended September 30, 2003 and 2002 (unaudited)      6

              Notes to Consolidated Financial Statements (unaudited)         7

Item 2        Management's Discussion and Analysis or Plan of Operation     11

Item 3        Controls and Procedures                                       17

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

Item 1        Legal Proceedings                                             18

Item 2        Changes in Securities                                         18

Item 3        Defaults upon Senior Securities                               18

Item 4        Submission of Matters to a Vote of Security Holders           18

Item 5        Other Information                                             18

Item 6        Exhibits and Reports on Form 8-K                              18

Signatures

Certifications


                                      -2-
<PAGE>


Part I.  Financial Information

Item 1   Financial Statements

                         GUARANTY FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                     September 30,    December 31,
                                                                        2003               2002
                                                                    --------------   ---------------
ASSETS                                                              (Unaudited)
<S>                                                                     <C>               <C>
Cash and cash equivalents                                                $ 30,419          $ 15,392
Investment securities
   Held-to-maturity                                                         2,795               836
   Available for sale                                                       1,471             3,212
Investment in FHLB                                                            532               947
Loans receivable, net                                                     149,933           163,250
Accrued interest receivable                                                   677               910
Real estate owned                                                               -               397
Office properties and equipment, net                                        6,338             7,443
Other assets                                                                4,910             4,758
                                                                    --------------   ---------------
          Total assets                                                  $ 197,075         $ 197,145
                                                                    ==============   ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   Interest bearing demand                                               $ 33,168          $ 28,773
   Non-interest bearing demand                                             29,528            24,725
   Money market accounts                                                   43,995            34,445
   Savings accounts                                                        13,407            12,812
   Certificates of deposit                                                 55,465            70,504
                                                                    --------------   ---------------
                                                                          175,563           171,259
Bonds payable                                                                   -               360
Advances from Federal Home Loan Bank                                            -                 -
Accrued interest payable                                                       11                58
Payments by borrowers for taxes and insurance                                 127               127
Other liabilities                                                           1,566               722
                                                                    --------------   ---------------
          Total liabilities                                               177,267           172,526
                                                                    --------------   ---------------


Convertible preferred securities                                                -             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, 1,991,377
   issued and outstanding (1,970,677 in 2002)                               2,489             2,463
Additional paid-in capital                                                  9,206             9,034
Accumulated comprehensive loss                                                (17)              (23)
Retained earnings                                                           8,130             7,133
                                                                    --------------   ---------------
          Total stockholders' equity                                       19,808            18,607
                                                                    --------------   ---------------
Total liabilities and stockholders' equity                              $ 197,075         $ 197,145
                                                                    ==============   ===============
</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,
                                                         --------------------------  --------------------------
                                                            2003          2002          2003          2002
                                                         ------------ -------------  ------------  ------------
                                                                  (unaudited)                 (unaudited)
<S>                                                          <C>           <C>           <C>           <C>
Interest income
   Loans                                                     $ 2,430       $ 2,891       $ 7,527       $ 8,866
   Investment securities                                          68           260           219         1,070
                                                         ------------ -------------  ------------  ------------
Total interest income                                          2,498         3,151         7,746         9,936
                                                         ------------ -------------  ------------  ------------

Interest expense
   Deposits                                                      362           727         1,222         2,858
   Borrowings                                                     54           174           456           552
                                                         ------------ -------------  ------------  ------------
Total interest expense                                           416           901         1,678         3,410
                                                         ------------ -------------  ------------  ------------

Net interest income                                            2,082         2,250         6,068         6,526
Provision (credit) for loan losses                              (198)           25           811            75
                                                         ------------ -------------  ------------  ------------

Net interest income after provision
      for loan losses                                          2,280         2,225         5,257         6,451

Non-interest income
   Mortgage banking income                                       504           259         1,264           726
   Deposit account fees                                          180           181           513           553
   Net gain on sale of branches                                    1             -           939             -
   Increase in cash surrender value of life insurance             54            53           163           129
   Investment sales commissions                                    3            40             3           104
   Other                                                         168           105           418           309
                                                         ------------ -------------  ------------  ------------
Total non-interest income                                        910           638         3,300         1,821
                                                         ------------ -------------  ------------  ------------

Non-interest expense
   Personnel                                                   1,267         1,158         3,560         3,444
   Occupancy                                                     271           282           839           853
   Information services                                          282           275           848           853
   Marketing                                                      40            59           102           102
   Deposit insurance premiums                                      6             8            20            56
   Other                                                         412           406         1,084         1,065
                                                         ------------ -------------  ------------  ------------
Total non-interest expense                                     2,278         2,188         6,453         6,373
                                                         ------------ -------------  ------------  ------------

Income before income taxes                                       912           675         2,104         1,899
                                                         ------------ -------------  ------------  ------------

Provision for income taxes                                       293           212           661           602
                                                         ------------ -------------  ------------  ------------

Net income                                                     $ 619         $ 463       $ 1,443       $ 1,297
                                                         ============ =============  ============  ============

Basic earnings per common share                               $ 0.31        $ 0.24        $ 0.73        $ 0.66
                                                         ============ =============  ============  ============
Diluted earnings per common share                             $ 0.31        $ 0.23        $ 0.72        $ 0.65
                                                         ============ =============  ============  ============
</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,
                                                                  ----------------------------    ----------------------------
                                                                     2003            2002            2003            2002
                                                                  ------------    ------------    ------------   -------------

                                                                           (unaudited)                    (unaudited)

<S>                                                                  <C>             <C>           <C>             <C>
Net income                                                              $ 619           $ 463         $ 1,443         $ 1,297
                                                                  ------------    ------------    ------------   -------------

Other comprehensive income:
   Unrealized gain (loss) on securities available for sale                (25)            389               9           1,006
                                                                  ------------    ------------    ------------   -------------

Other comprehensive income (loss) , before tax                            (25)            389               9           1,006

Income tax expense related to items of
    other comprehensive income                                              8            (132)             (3)           (343)
                                                                  ------------    ------------    ------------   -------------

Other comprehensive income (loss), net of tax                             (17)            257               6             663
                                                                  ------------    ------------    ------------   -------------

Comprehensive income                                                    $ 602           $ 720         $ 1,449         $ 1,960
                                                                  ============    ============    ============   =============

</TABLE>


          See accompanying notes to consolidated financial statements.

                                      -5-
<PAGE>
<TABLE>
<CAPTION>

                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In Thousands)                                  Nine Months Ended
                                                                                 September 30,
                                                                               2003         2002
                                                                            ----------    ---------
<S>                                                                          <C>           <C>
Operating Activities                                                              (unaudited)
      Net Income                                                             $ 1,443       $ 1,297
      Adjustments to reconcile net income to net cash provided
          (absorbed) by operating activities:
          Provision for loan losses                                              811            75
          Provision for loss on sale of other real estate owned                    -            40
          Depreciation and amortization                                          390           437
          Deferred loan fees                                                     (84)          (45)
          Net amortization of premiums and accretion of discounts                 96           361
          Gain on sale of loans                                               (1,264)         (726)
          Gain on sale of securities available for sale                          (12)          (20)
          Originations of loans held for sale                                (54,845)      (32,566)
          Proceeds from sale of loans                                         56,553        43,416
          Gain on sale of other real estate owned                                 (2)          (18)
          Increase in value of bank owned life insurance                        (163)         (106)
          Gain on sale of Harrisonburg branch                                   (986)            -
          Changes in:
               Accrued interest receivable                                       233           218
               Other assets                                                      120           (30)
               Accrued interest payable                                          (46)          (86)
               Prepayments by borrowers for taxes and insurance                    -           144
               Other liabilities                                                 844           (10)
                                                                            ----------    ---------
Net cash provided by operating activities                                      3,088        12,381
                                                                            ----------    ---------

Investing activities
      Net decrease in loans                                                    6,634         1,821
      Mortgage-backed securities principal repayments                            137           250
      Purchase of securities held to maturity                                 (2,500)         (406)
      Proceeds from maturity of securities held to maturity                      400           250
      Purchase of securities available for sale                               (1,635)            -
      Proceeds from sale of securities available for sale                      3,261        14,162
      Proceeds from redemption of FHLB stock                                     415             -
      Proceeds from sale of real estate owned                                    400           500
      Purchase of bank-owned life insurance                                        -        (3,000)
      Net decrease in cash from sale of branch
          Proceeds from sale of loans                                          5,446             -
          Sale of deposits                                                    (9,984)            -
          Proceeds from sale of office properties, equipment and land          1,653             -
      Proceeds from sale of office properties and equipment                       30            22
      Purchase of office properties and equipment                               (687)         (423)
                                                                            ----------    ---------
Net cash provided (absorbed) by investing activities                           3,570        13,176
                                                                            ----------    ---------

Financing activities
      Net increase (decrease) in deposits                                     15,056       (28,218)
      Proceeds from FHLB advances                                             16,000        48,000
      Repayment of FHLB advances                                             (16,000)      (43,000)
      Redemption of Trust Preferred Securities                                (6,013)            -
      Proceeds from issuance of common stock                                     197             8
      Cash dividend paid on common stock                                        (446)            -
      Principal payments on bonds payable, including unapplied payments         (425)         (299)
                                                                            ----------    ---------
Net cash provided (absorbed) by financing activities                           8,369       (23,509)
                                                                            ----------    ---------
Increase in cash and cash equivalents                                         15,027         2,048
Cash and cash equivalents, beginning of period                                15,392        12,437
                                                                            ----------    ---------
Cash and cash equivalents, end of period                                    $ 30,419      $ 14,485
                                                                            ==========    =========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      -6-
<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         For the Three and Nine Months Ended September 30, 2003 and 2002
                                   (unaudited)


Note 1  Principles of Presentation

The  accompanying   consolidated  financial  statements  of  Guaranty  Financial
Corporation  ("Guaranty" or the "Company")  have not been audited by independent
accountants,  except for the balance sheet at December 31, 2002. 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, 2002.
The results for the three and nine months  ended  September  30,  2003,  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 2002 financial  statements have been reclassified to conform
to  the  year  2003  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, 2003 and 2002,  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,
                                               2003               2002                   2003                 2002
                                               ----               ----                   ----                 ----
<S>                                         <C>                 <C>                    <C>                  <C>
Basic shares                                1,989,092           1,962,777              1,983,965            1,962,777
Dilutive effect of stock options               20,464              22,724                 18,547               21,477
Dilutive shares                             2,009,556           1,985,501              2,002,512            1,984,254
                                     =================  ==================     ==================  ===================
</TABLE>


                                      -7-
<PAGE>


Note 4  Loans

The loan portfolio is comprised of the following:

                                             September 30,     December 31,
                                                 2003               2002
                                         -----------------   ----------------
                                                    (In thousands)
Mortgage loans:
  Residential                                    $ 32,872           $ 20,119
  Commercial                                        6,527              7,894
  Construction and land loans                      33,839             38,480

  Total real estate loans                          73,238             66,493
Commercial business loans                          60,677             76,651
Consumer loans                                     17,875             22,238

  Total loans receivable                          151,790            165,382
Adjustments:
  Allowance for losses                             (1,985)            (2,242)
  Deferred costs                                      128                110

Total loans receivable, net                     $ 149,933          $ 163,250
                                         =================   ================

Note 5  Allowance for Loan Loss

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

                                          September 30,        December 31,
                                            2003                   2002
                                      ------------------    ------------------
                                                   (In thousands)

Balance at January 1                            $ 2,242                $ 2,512
Provision charged to expense                        811                    100
Recoveries added to the reserve                     235                      3
Loans charged-off                                (1,303)                  (373)

Balance at the end of the period                $ 1,985                $ 2,242
                                      ==================    ===================


                                      -8-
<PAGE>


Note 6  Investments

The investment portfolio was comprised of the following:

<TABLE>
<CAPTION>
                                                     September 30,             December 31,
                                                        2003                 2002
                                                  -----------------    -----------------

                                                                (In thousands)
<S>                                                        <C>                  <C>
Held to maturity:
    Mortgage-backed securities                               $ 295                $ 433
    U.S. Government obligations                              2,500                  403

Available for sale:
    Corporate Bonds                                          1,471                3,212

Other:
    Federal Home Loan Bank stock                               532                  947
    Federal Reserve Bank & other stocks                        557                  422
                                                  -----------------    -----------------

                                                           $ 5,355              $ 5,417
                                                  =================    =================

</TABLE>


Note 7  Trust Preferred Securities

On May 19,  2003,  the  Company  redeemed  100% of Guaranty  Capital  Trust's 7%
preferred  securities,  resulting in a reduction in  liabilities of $6.0 million
and  annualized  savings of  $420,000  in  interest  expense in future  periods.
Subsequent  to the  redemption  of the  preferred  securities,  the Bank and the
holding company remain well capitalized.


Note 8  Stock Option Plan

Guaranty  has a  non-compensatory  stock  option plan (the  "Plan")  designed to
provide long-term incentives to key employees.  All options are exercisable upon
date of vesting.

The following table summarizes options outstanding:
<TABLE>
<CAPTION>

                                                  Nine Months Ended                            Year Ended
                                                 September 30, 2003                        December 31, 2002
-------------------------------------------------------------------------------------------------------------------
                                                             Weighted -                              Weighted -
                                                               average                                 average
                                                              exercise                                exercise
                                                 Shares         price                      Shares       price
-------------------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>                       <C>            <C>
Options outstanding at
  beginning of period                             76,012       $10.02                      57,912        $12.07
Granted                                           17,500        13.47                      47,500          8.59
Forfeited                                         (5,662)        8.30                     (21,500)        12.45
Exercised                                        (20,700)        9.53                      (7,900)        10.59
-------------------------------------------------------------------------------------------------------------------
Options outstanding at end
  of period                                       67,150        10.66                      76,012         10.02
-------------------------------------------------------------------------------------------------------------------
Options exercisable at end
  of period                                       67,150                                   76,012
-------------------------------------------------------------------------------------------------------------------
</TABLE>

The weighted  average fair value of options granted during the nine months ended
September 30, 2003 was $3.48.

                                      -9-
<PAGE>

Guaranty  applies  Accounting  Principals Board Opinion No. 25 in accounting for
stock options  granted to employees.  Had  compensation  expense been determined
based upon the fair value of the  awards at the grant date and  consistent  with
the method under Statement of Financial Accounting Standards No. 123, Guaranty's
net earnings  and net  earnings  per share would have been  decreased to the pro
forma amounts indicated in the following table:

                                   Three Months Ended        Nine Months Ended
                                  September 30, 2003         September 30, 2003
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Net income
  As reported                           $   618,909             $ 1,443,316
  Pro forma                                 618,909               1,403,139

Net income per share (basic)
  As reported                                $ 0.31                 $  0.73
  Pro forma                                    0.31                    0.71

Net income per share (diluted)
  As reported                                $ 0.31                 $  0.72
  Pro forma                                    0.31                    0.70

The fair value of each option  granted is  estimated  on the date of grant using
the  Black-Sholes  option pricing model with the following  assumptions used for
grants: a risk free interest rate range of 2.69% - 2.95%,  depending on the date
of grant,  for grants  issued  during the nine months ended  September 30, 2003;
dividend  yield  of  2%;  expected  weighted  average  term  of 5  years;  and a
volatility of 30% for each of the period presented.

                                      -10-
<PAGE>


                   ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
                              OR PLAN OF OPERATION


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 BI Investments Group, LLC,
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  slightly to $197.1 million at September 30, 2003,  only
$70,000 less than the balance at December 31,  2002.  Cash and cash  equivalents
increased  $15.0 million or 97.6%,  to $30.4 million at September 30, 2003, from
$15.4 million at December 31, 2002.  Net loans were $149.9  million at September
30, 2003, a decrease of $13.3 million, or 8.2%, from net loans of $163.3 million
at December 31, 2002.  Total deposits at September 30, 2003, were $175.6 million
compared to $171.3  million at December 31, 2002,  an increase of $4.3  million.
Guaranty held no Federal Home Loan Bank (the "FHLB") borrowings at September 30,
2003 or December 31, 2002.  Total  stockholders'  equity at September  30, 2003,
increased by over $1.2 million to $19.8  million from $18.6  million at December
31, 2002.

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

Loans

Net loans  receivable  decreased  8.2% to $149.9  million at September 30, 2003,
from  $163.3  million  at  December  31,  2002.  Real  estate  loans,  excluding
construction and land loans, increased $11.4 million, as the result of increased
activity in the mortgage  refinance  market. A $4.8 million decrease in consumer
loans, resulting from the sale of loans associated with the Harrisonburg branch,
was offset by originations and increased outstanding balances on consumer loans,
netting a $4.4 million  reduction in consumer loans.  Commercial  business loans
decreased  $16.0 million,  as the result of the continued  repositioning  of the
loan portfolio, along with one significant charge-off during the second quarter.
During the most recent  quarter,  Guaranty  originated and sold $21.4 million in
residential mortgage loans in the secondary market,  bringing the total sold for
the  year to $56.6  million.  Residential  mortgage  loans  held  for sale  were
$287,000 at September 30, 2003, compared to $332,000 at December 31, 2002.

Investments

Total investments  declined $62,000, to $5.4 million at September 30, 2003, only
a 1.1% decrease from the investments  balance at December 31, 2002. In the first
half of the year,  management  significantly  reduced the  balance in  corporate
securities in order to improve liquidity without  incurring  investment  losses.
The Company is in the process of rebuilding the portfolio with an improved focus
on liquidity, earnings and interest rate risk.

                                      -11-
<PAGE>


Real Estate Owned

Real estate  owned  decreased to zero at September  30, 2003,  from  $397,000 at
December 31, 2002. During the first half of 2003, Guaranty liquidated all of its
other  real  estate  holdings,  without  incurring  losses  on the  sales of the
properties.

Office Properties and Equipment

Guaranty's  investment  in office  properties  and  equipment  decreased to $6.3
million at  September  30, 2003,  from $7.4  million at December 31, 2002.  This
decrease was  primarily  due to the sale of the  Harrisonburg  branch in January
2003.

Other Assets

Other assets  increased to $4.9 million at September  30, 2003 from $4.8 million
at December  31, 2002.  The primary  reason for the increase in other assets was
the increase in prepaid taxes, relating to first quarter net income.

Deposits

Balances in deposit  accounts  were $175.6  million at September  30,  2003,  an
increase of $4.3  million,  or 2.5%,  from total  deposits of $171.3  million at
December 31, 2002.  The sale of the deposits  associated  with the  Harrisonburg
branch resulted in a decline of $10 million in deposits. Offsetting the decrease
associated  with the sale,  Guaranty has been  successful in attracting low cost
deposits and money market  accounts  and in  retaining  existing  relationships.
Certificates of deposit  comprise 31.6% of total deposits at September 30, 2003,
compared to 41.2% at December 31, 2002.

FHLB Borrowings

Guaranty had no  borrowings  outstanding  from the FHLB at September 30, 2003 or
December  31, 2002.  At September  30,  2003,  Guaranty's  available  but unused
borrowings with the FHLB were approximately $26 million.

Stockholders' Equity

Stockholders'  equity at September 30, 2003,  increased by 6.5% to $19.8 million
from $18.6  million at December 31, 2002.  The primary  factors for the increase
were the nine months net income of $1.4  million  and the  issuance of shares in
connection  with open market  purchases  and  employees  exercising  their stock
options,  which increased capital by $197,000,  offset by cash dividend payments
to shareholders of $446,000.

                                      -12-

<PAGE>


Results of Operations

Net Income

Guaranty  reported net income of $619,000 ($.31 per diluted share) for the three
months ended  September 30, 2003,  compared with a net income of $463,000  ($.23
per diluted  share) for the three months  ended  September  30,  2002.  Guaranty
reported net income of $1.4 million ($.72 per diluted share) for the nine months
ended  September 30, 2003,  compared with a net income of $1.3 million ($.65 per
diluted share) for the nine months ended September 30, 2002.

Net Interest Income

Net  interest  income  decreased  to $2.1  million  for the three  months  ended
September 30, 2003,  from the $2.2 million  reported  during the same period the
prior year. The primary cause for the decline in net interest  income was due to
the decline in average  earning  assets and lower  interest rates earned on loan
balances  for the most  recent  quarter.  Average  earning  assets for the three
months ended September 30, 2003, were $172.0 million  compared to $185.2 million
for the same  period in 2002.  Average  loans  outstanding  decreased  to $157.0
million from $165.2 million and average investments outstanding declined to $3.6
million from $15.0 million when comparing the three month period ended September
30, 2003 to the three month period  ended  September  30,  2002.  For these same
periods,  average certificates of deposit balances decreased by $24.1 million to
$56.8  million.  The cost of  interest  bearing  deposits  declined by 104 basis
points  primarily  due to change in the  composition  of deposits as well as the
lower interest rates being paid on certificates of deposit.  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,
                                                        2003              2002               2003               2002

<S>                                                  <C>                <C>                <C>               <C>
     Average Interest Earning Assets                 $ 172,003          $ 185,196          $ 172,388         $ 193,438


              Average Yield                            5.76%              6.75%              6.01%             6.87%


  Average Interest Bearing Liabilities               $ 142,359          $ 162,136          $ 145,092         $ 171,702

              Average Cost                             1.16%              2.20%              1.55%             2.66%


             Interest Spread                           4.60%              4.55%              4.46%             4.21%

             Interest Margin                           4.80%              4.82%              4.71%             4.51%
</TABLE>

                                      -13-
<PAGE>

Provision for Loan Losses

Guaranty  recorded a credit of $198,000 to its loan loss provision for the three
months ended  September  30, 2003 and an expense of $25,000 for the three months
ended  September 30, 2002.  During the second  quarter of 2003, a $1.025 million
charge-off was realized as the consequence of substantial fraudulent activity by
one commercial  borrower.  The loss was due to fraudulent  activities related to
cash and financial  management  by the borrower  which caused the borrower to be
insolvent.  The loan held by  Guaranty  was  secured  by  equipment,  inventory,
receivables  and  marketable  securities.  During  the  third  quarter  of 2003,
Guaranty received a partial recovery relating to this loan.  Management recorded
the recovery through the allowance for loan losses. The Company's  allowance for
loan losses currently equals 1.30% of the loan portfolio. 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
believes  that the  allowance  for loan  losses is adequate to cover loan losses
inherent in the loan portfolio at September 30, 2003, 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.

Guaranty  charged-off  $264,000 in loans  during the third  quarter of 2003.  At
September 30, 2003,  the Company had $410,000 of loans that were 90 days or more
past due and still  accruing  interest,  compared to $119,000 at  September  30,
2002.  The Bank  held no loans  that were  considered  to be  non-accrual  as of
September 30, 2003, compared to $1.9 million as of September 30, 2002.

Non-interest Income

Non-interest  income was $910,000 for the three months ended September 30, 2003,
compared to $638,000 for the same period a year ago.  This change was  primarily
due to increased  mortgage  banking  income,  which amounted to $504,000 for the
quarter  ended  September  30, 2003,  compared to $259,000 for the same period a
year ago.

Fees on deposit  accounts  remained  approximately  the same at $180,000 for the
most  recent  quarter  compared  to  $181,000  for the same  period a year  ago.
Guaranty  realized $3,000 of investment sales  commissions for the quarter ended
September  30, 2003,  compared to $40,000 for the quarter  ended  September  30,
2002,  due to  reduced  sales  volume,  as the  investment  sales  function  was
undergoing a management realignment during the first nine months of 2003.

Non-interest Expense

Non-interest  expense was $2.3 million for the quarter ended September 30, 2003,
a $90,000  increase  over the amount  reported  for the same  period  last year.
Personnel  expense  increased  $109,000 as the result of  increased  commissions
relating  to  mortgage  banking  activity.  This  increase  was  offset by lower
occupancy and marketing expenses.

Income Tax Expense

Guaranty  recorded  income tax expense of $293,000  for the three  months  ended
September  30, 2003,  compared to $212,000 for the same period in 2002.  The net
increase in income tax expense  between  periods was a result of fluctuations in
the level of taxable  income.  Guaranty's  effective  tax rate is lower than the
standard  corporate  tax rate of 34% due to  non-taxable  income from bank owned
insurance.

                                      -14-
<PAGE>

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.  While scheduled payments from the amortization of loans 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,  net loans  decreased  by  approximately  $8.5 million and
certificates of deposit declined by approximately $2.3 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, 2003, total approved loan commitments  outstanding
were  approximately  $7.2 million.  At the same date,  commitments  under unused
lines of credit  were  approximately  $49.5  million.  Certificates  of  deposit
scheduled  to mature  in one year or less at  September  30,  2003,  were  $47.5
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 may have to reduce assets or seek other sources of funding that may
be at higher rates.

At September 30, 2003,  regulatory  capital was in excess of amounts required by
Federal Reserve  regulations to be considered  well  capitalized as shown in the
following table for Guaranty Bank:

                                    Actual           Percent           Excess
                                  Percentage         Required       Percentage
                                 --------------     -----------   -------------
     Leverage Ratio                  10.27%           4.00%            6.27%

     Tier 1 Risk Based Capital       12.56%           4.00%            8.56%

     Total Risk Based Capital        13.81%           8.00%
                                                                       5.81%


Contractual Obligations

The following summarizes Guaranty's  contractual cash obligations and commercial
commitments,  including  maturing  certificates of deposit,  as of September 30,
2003 and the effect such  obligations  may have on  liquidity  and cash flows in
future periods.
<TABLE>
<CAPTION>
                                                         Contractual Obligations
-------------------------------------------------------------------------------------------------------------------
                                       Less Than          1-3          4-5          Over 5
                                       One Year          Years        Years          Years            Total
------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                               <C>  <C>            <C>         <C>           <C>                <C>
Certificate of deposit maturities (1)  $ 47,542       $  6,545    $  1,369      $       9          $ 55,465
Undisbursed credit lines                 49,464           -           -                 -            49,464
-------------------------------------------------------------------------------------------------------------------
Commitments to extend credit              7,185           -           -                 -             7,185
Standby letters of credit                 4,148           -           -                 -             4,148
-------------------------------------------------------------------------------------------------------------------
Total obligations                      $108,339       $  6,545    $  1,369      $       9          $116,262
-------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)  Guaranty  expects to retain maturing  deposits or replace  maturing amounts
     with comparable deposits based on current market interest rates.


                                      -15-
<PAGE>

Regulatory Issues

The Written  Agreement with the Federal Reserve Bank and the Bureau of Financial
Institutions  of the  Commonwealth  of  Virginia  related to  various  operating
policies and procedures dated October 26, 2000, was terminated effective October
18, 2002.

Critical Accounting Policies, Estimates and Judgments

Guaranty's  financial  statements  are prepared in  accordance  with  accounting
principles  generally  accepted in the United States.  The  preparation of these
financial  statements  requires  management to make estimates and judgments that
affect the reported  amounts of assets,  liabilities,  revenue and expenses,  as
well  as  the  disclosure  of  contingent  liabilities.  Management  continually
evaluates its estimates and judgments,  including those related to the allowance
for loan losses and income taxes.  Management  bases its estimates and judgments
on  historical  experience  and other factors that are believed to be reasonable
under the  circumstances.  Actual results may differ from these  estimates under
different   assumptions  or  conditions.   Management   believes  that,  of  its
significant  accounting policies, the most critical accounting policies we apply
are those related to the valuation of the loan portfolio.

A variety of factors impact carrying value of the loan portfolio,  including the
calculation of the allowance for loan losses,  valuation of amortization of loan
fees, and deferred  origination costs. The allowance for loan losses is the most
difficult and subjective  judgment.  The allowance is established and maintained
at a level that management  believes is adequate to cover losses  resulting from
the  inability of borrowers to make  required  payments on loans.  Estimates for
loan losses determined by analyzing risks associated with specific loans and the
loan portfolio,  current trends in delinquencies  and charge-offs,  the views of
regulators,  changes  in the size and  composition  of loan  portfolio  and peer
comparisons.  The analysis also requires  consideration  of the economic climate
and  directions,  changes in the interest rate  environment,  which may impact a
borrower's  ability to pay,  legislation  impacting  the  banking  industry  and
economic conditions specific to our service area. Because the calculation of the
allowance  for loan  losses  relies  on  estimates  and  judgments  relating  to
inherently uncertain events, results may differ from our estimates.

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.

                                      -16-
<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.  As of the end of the period covered
by 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.

The Company's  management is also  responsible for  establishing and maintaining
adequate internal control over financial reporting. There were no changes in the
Company's  internal  control over financial  reporting  identified in connection
with the evaluation of it that occurred during the Company's last fiscal quarter
that  materially  affected,  or are  reasonably  likely  to  materially  affect,
internal control over financial reporting.

                                      -17-
<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

                        31.1  Rule 13a-14(a) Certification  of  Chief  Executive
                              Officer.

                        31.2  Rule 13a-14(a) Certification  of  Chief  Financial
                              Officer.

                        32    Certification of Chief Executive Officer and Chief
                              Financial  Officer  Pursuant to  18 U.S.C. Section
                              1350.

                  (b)   Reports on Form 8-K -
                        The Company furnished a Current  Report on Form 8-K with
                        the Securities and Exchange Commission on July 28, 2003.
                        The Form  8-K reported Items 7 and 12 and attached as an
                        exhibit and  incorporated by reference  a press  release
                        that reported  the  Company's  financial results for the
                        quarter ended June 30, 2003.



                                      -18-
<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, 2003         By:      /s/ William E. Doyle, Jr.
                                    --------------------------------------------
                                     William E. Doyle, Jr.
                                     President and Chief Executive Officer



Date:  November 14, 2003         By:      /s/ Tara Y. Harrison
                                    --------------------------------------------
                                      Tara Y. Harrison
                                      Vice President and Chief Financial Officer




<PAGE>

                                  EXHIBIT INDEX

   Number                                 Document
   ------                                 --------

    31.1        Rule 13a-14(a) Certification  of  Chief  Executive Officer.

    31.2        Rule 13a-14(a) Certification  of  Chief  Financial Officer.

    32          Certification of Chief Executive  Officer  and  Chief  Financial
                Officer  Pursuant to  18 U.S.C. Section 1350.