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, 2000




                         GUARANTY FINANCIAL CORPORATION




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



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


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

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

         As of November 1, 2000,  1,961,727  shares of Common  Stock,  par value
$1.25 per share, were outstanding.


<PAGE>

                         GUARANTY FINANCIAL CORPORATION

                         QUARTERLY REPORT ON FORM 10-QSB

                                      INDEX
                                      -----
<TABLE>
<CAPTION>
Part I.      Financial Information                                               Page No.
----------------------------------                                               --------
<S>                                                                                  <C>
Item 1       Financial Statements

             Consolidated Balance Sheets as of September 30, 2000
             (unaudited) and December 31, 1999                                       3

             Consolidated Statements of Operations for the
             Three and Nine Months Ended September 30, 2000 and
             1999 (unaudited)                                                        4

             Consolidated Statements of Comprehensive Income
             for the Three and Nine Months Ended September 30, 2000
             and 1999 (unaudited)                                                    5

             Consolidated Statements of Cash Flows for the Nine
             Months Ended September 30, 2000 and 1999 (unaudited)                    6

             Notes to Consolidated Financial Statements                              7

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

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

Item 1       Legal Proceedings                                                       13

Item 2       Changes in Securities and Use of Proceeds                               13

Item 3       Defaults upon Senior Securities                                         13

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

Item 5       Other Information                                                       13

Item 6       Exhibits and Reports on Form 8-K                                        13

Signatures

</TABLE>




                                       2
<PAGE>

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

Item 1   Financial Statements

                            GUARANTY FINANCIAL CORPORATION
                             CONSOLIDATED BALANCE SHEETS
                                    (In Thousands)
<TABLE>
<CAPTION>
                                                         September 30,     December 31,
                                                             2000              1999
                                                         -------------    -------------
                                                          (Unaudited)
<S>                                                      <C>              <C>
ASSETS
Cash and cash equivalents                                $      14,316    $      12,634
Investment securities
   Held-to-maturity                                              1,233            1,336
   Available for sale                                           17,264           22,197
Investment in FHLB stock at, cost                                1,550            1,500
Loans receivable, net                                          203,668          205,399
Accrued interest receivable                                      2,139            1,743
Real estate owned                                                1,250              843
Office properties and equipment, net                             9,509            9,331
Mortgage servicing rights                                          996              568
Other assets                                                     4,351            3,788
                                                         -------------    -------------
          Total assets                                   $     256,276    $     259,339
                                                         =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   NOW/MMDA accounts                                     $      58,858    $      58,083
   Savings accounts                                             10,977           11,203
   Certificates of deposit                                     143,494          130,308
                                                         -------------    -------------
                                                               213,329          199,594
Bonds payable                                                      855              903
Advances from Federal Home Loan Bank                            20,000           20,000
Securities sold under agreement to repurchase                        -           16,650
Accrued interest payable                                            74              258
Payments by borrowers for taxes and insurance                      562              494
Other liabilities                                                  855            1,099
                                                         -------------    -------------
          Total liabilities                                    235,675          238,998
                                                         -------------    -------------

Commitments & Contingencies

Convertible preferred securities                                 6,012            6,075

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, 1,961,727
   issued and outstanding                                        2,452            2,452
Additional paid-in capital                                       8,953            8,943
Accumulated comprehensive income (loss)                         (1,654)          (1,608)
Retained earnings                                                4,838            4,479
                                                         -------------    -------------
          Total stockholders' equity                            14,589           14,266
                                                         -------------    -------------
Total liabilities and stockholders' equity               $     256,276    $     259,339
                                                         =============    =============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                          Three Months Ended     Nine Months Ended
                                                             September 30,         September 30,
                                                          -------------------   -------------------
                                                            2000       1999       2000       1999
                                                          --------   --------   --------   --------
                                                              (unaudited)              (unaudited)
<S>                                                       <C>        <C>        <C>        <C>
Interest income
   Loans                                                  $  5,130   $  3,988   $ 15,158   $ 10,858
   Investment securities                                       572        664      1,721      1,993
                                                          --------   --------   --------   --------
Total interest income                                        5,702      4,652     16,879     12,851
                                                          --------   --------   --------   --------

Interest expense
   Deposits                                                  2,729      2,101      7,783      6,180
   Borrowings                                                  435        620      1,717      1,716
                                                          --------   --------   --------   --------
Total interest expense                                       3,164      2,721      9,500      7,896
                                                          --------   --------   --------   --------

Net interest income                                          2,538      1,931      7,379      4,955

Provision for loan losses                                      150        216      1,355        381
                                                          --------   --------   --------   --------

Net interest income after provision
      for loan losses                                        2,388      1,715      6,024      4,574

Other income
   Loan and deposit fees and servicing income                  197        106        562        329
   Gain (loss) on sale of loans and securities                  46     (1,572)       158     (1,026)
   Other                                                       157        143        395        326
                                                          --------   --------   --------   --------
Total other income                                             400     (1,323)     1,115       (371)
                                                          --------   --------   --------   --------

Other expenses
   Personnel                                                 1,046        971      3,140      2,877
   Occupancy                                                   226        277        673        794
   Data processing                                             199        196        574        503
   Deposit insurance premiums                                   65          5        184         15
   Other                                                       598        284      1,668        560
                                                          --------   --------   --------   --------
Total other expenses                                         2,134      1,733      6,239      4,749
                                                          --------   --------   --------   --------

Income (loss) before income taxes                              654     (1,341)       900       (546)
                                                          --------   --------   --------   --------

Provision (benefit) for income taxes                           222       (456)       306       (186)
                                                          --------   --------   --------   --------

Net income (loss)                                         $    432   $   (885)  $    594   $   (360)
                                                          ========   ========   ========   ========

Basic and diluted earnings (loss)
  per common share                                        $   0.22   $  (0.59)  $   0.30   $  (0.24)
                                                          ========   ========   ========   ========
</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,
                                                                    --------------------    --------------------
                                                                      2000        1999        2000        1999
                                                                    --------    --------    --------    --------
                                                                        (unaudited)              (unaudited)
<S>                                                                 <C>         <C>         <C>         <C>
Net Income (loss)                                                   $    432    ($   885)   $    594    ($   360)
                                                                    --------    --------    --------    --------

Other comprehensive income:
   Unrealized gains (loss) on securities available for sale              332         555         (70)     (2,031)
                                                                    --------    --------    --------    --------

Other comprehensive income (loss), before tax                            332         555         (70)     (2,031)

Income tax (expense) benefit related to items of other
    comprehensive income                                                (113)       (189)         24         691
                                                                    --------    --------    --------    --------

Other comprehensive income (loss), net of tax                            219         366         (46)     (1,340)
                                                                    --------    --------    --------    --------

Comprehensive Income (loss)                                         $    651    ($   519)   $    548    ($ 1,700)
                                                                    ========    ========    ========    ========
</TABLE>


           See accompanying notes to consolidated financial statements














                                       5
<PAGE>
                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                               September 30,
                                                                                        --------------------------
                                                                                          2000              1999
                                                                                        --------          --------
                                                                                               (unaudited)
<S>                                                                                     <C>               <C>
Operating Activities
       Net Income (Loss)                                                                $    594          $   (360)
       Adjustments to reconcile net income (loss) to net cash
                   provided by operating activities:
                   Provision for loan losses                                               1,355               381
                   Depreciation and amortization                                             632               478
                   Deferred loan fees                                                         68               148
                   Net amortization of premiums and accretion of discounts                    45               223
                   Gain on sale of loans                                                    (234)             (304)
                   Loss on sale of purchased servicing                                         -               146
                   Originations of loans held for sale                                   (32,444)          (40,040)
                   Proceeds from sale of loans                                            32,200            40,344
                   Loss on sale of securities available for sale                              76             1,298
                   Loss on trading securities                                                  -               222
                   Purchase of trading securities                                              -           (63,397)
                   Sales of trading securities                                                 -            64,175
                   Changes in:
                               Accrued interest receivable                                  (396)              (55)
                               Other assets                                                 (563)           (3,481)
                               Accrued interest payable                                     (184)              160
                               Prepayments by borrowers for taxes and insurance               68                95
                               Other liabilities                                            (244)            1,272
                                                                                        --------          --------

Net cash provided by operating activities                                                    973             1,305
                                                                                        --------          --------

Investing activities
       Net (increase) decrease in loans                                                      444           (28,124)
       Increase in originated mortgage servicing rights                                     (473)                -
       Mortgage-backed securities principal repayments                                       134               929
       Proceeds from sale of securities available for sale                                 4,722            17,562
       Purchase of securities available for sale                                               -           (17,145)
       Redemption (purchase) of FHLB stock                                                   (50)              150
       Purchase of servicing rights                                                          (47)             (666)
       Proceeds from sale of servicing rights                                                  -             2,696
       Purchase of other real estate                                                        (407)                -
       Purchase of office properties and equipment                                          (363)           (2,124)
                                                                                        --------          --------

Net cash provided (absorbed) by investing activities                                       3,960           (26,722)
                                                                                        --------          --------

Financing activities
       Net increase in deposits                                                           13,735            24,014
       Proceeds from FHLB advances                                                        43,000            14,000
       Repayment of FHLB advances                                                        (43,000)          (12,000)
       Increase (decrease) in securities sold under agreement to repurchase              (16,650)            3,791
       Repurchase of convertible preferred securities                                        (53)                -
       Dividends paid on common stock                                                       (235)             (271)
       Principal payments on bonds payable, including unapplied payments                     (48)             (695)
                                                                                        --------          --------

Net cash provided (absorbed) by financing activities                                      (3,251)           28,839
                                                                                        --------          --------

Increase in cash and cash equivalents                                                      1,682             3,422

Cash and cash equivalents, beginning of period                                            12,634            10,527
                                                                                        --------          --------

Cash and cash equivalents, end of period                                                $ 14,316          $ 13,949
                                                                                        ========          ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                         GUARANTY FINANCIAL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              For the Nine Months Ended September 30, 2000 and 1999



Note 1  Principles of Presentation

The  accompanying   consolidated  financial  statements  of  Guaranty  Financial
Corporation  (the "Company")  have not been audited by independent  accountants,
except for the balance sheet at December 31, 2000.  These  financial  statements
have been prepared in accordance  with the  regulations  of the  Securities  and
Exchange Commission in regard to quarterly (interim)  reporting.  In the opinion
of management,  the financial  information  presented  reflects all adjustments,
comprised  only of normal  recurring  accruals,  which 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 the  Company's  1999
Annual  Report on Form  10-KSB.  The results for the three and nine months ended
September 30, 2000, are not necessarily indicative of future financial results.

The accompanying  consolidated  financial statements include the accounts of the
Company 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 Corp., which was
organized to sell insurance annuities and other non-deposit investment products.
All material  intercompany  accounts and  transactions  have been  eliminated in
consolidation.

Amounts in the year 1999 financial  statements have been reclassified to conform
to  the  year  2000  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, 2000 and 1999 have been  determined by dividing net
income by the  weighted  average  number of shares of common  stock  outstanding
during these periods, 1,961,727.






                                       7
<PAGE>

Note 4  Accounting for Derivatives Instruments and Hedging Activities

In June 1998 the Financial  Accounting  Standards Board ("FASB") issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities," which is
effective  for fiscal years  beginning  after June 15, 2000.  The new  statement
requires  that  every  derivative   instrument   (including  certain  derivative
instruments  embedded in other  contracts)  be recorded in the balance  sheet as
either an asset or liability  measured at its fair value.  SFAS No. 133 requires
the  changes  in the  derivative's  fair  value to be  recognized  currently  in
earnings   unless   specific   hedge   accounting   criteria  are  met.  As  the
implementation  guidance related to this accounting  pronouncement has continued
to evolve,  the Company has not yet  determined  the effect that this  statement
will have on the consolidated financial position or results of operations of the
Company.


















                                       8
<PAGE>


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


Changes in Financial Condition

Total assets  decreased by $3.0  million to $256.3 at September  30, 2000,  from
$259.3 million at December 31, 1999.  Cash and cash  equivalents  increased $1.7
million,  or 13.3%, to $14.3 million at September 30, 2000 from $12.6 million at
December  31,  1999.  This  increase  resulted  primarily  from an  increase  of
approximately  $13.2  million in  certificates  of deposits and the sale of $4.7
million of long term investment  securities which were offset by a $16.6 million
decrease in securities sold under agreements to repurchase. Gross loans remained
relatively flat as the Company decreased it emphasis on growth.

Investment  securities  at September 30, 2000,  decreased  $5.0 million to $20.0
million from $25.0  million at December 31, 1999.  At the dates  indicated,  the
investment portfolio was comprised of the following:

                                            September 30,      December 31,
                                               2000                1999
                                         -----------------   -----------------

Mortgage-backed securities
    classified as held-to-maturity                   $983              $1,086
US Treasury Notes classified
    as held-to-maturity                               250                 250
Corporate bonds classified as
    available for sale                             16,863              17,097
Mortgage-backed securities
    classified as available for sale                    -               4,780
Other investments                                   1,951               1,820
                                         -----------------   -----------------
                                                  $20,047             $25,033
                                         =================   =================

Net loans were $203.7  million at September 30, 2000, a decrease of $1.7 million
from net loans of $205.4  million at December 31, 1999. The decrease in the loan
portfolio  was  primarily  related  to a net  increase  of $1.0  million  in the
allowance for loan losses. Gross loans remained relatively constant for the nine
month period.  During this period the Company has reduced its  construction  and
land  development  portfolio and its mortgage  portfolio.  These  decreases were
offset by increases in commercial business and consumer loans.

Real estate owned  increased to $1.2 million  outstanding at September 30, 2000,
from  $843,000  at  December  31,  1999,  due to the  addition  of one  $865,000
commercial real estate property.  The remainder of real estate owned consists of
developed  lots  located  within a  residential  subdivision.  Net  proceeds are
anticipated to approximate the carrying value at September 30, 2000.

Deposits  were  $213.3  million at  September  30,  2000,  an  increase of $13.7
million,  or 6.7%,  from total  deposits of $199.6 million at December 31, 1999.
The deposit  growth was primarily the result of an increase in  certificates  of
deposits of $13.2 million or 10.0%. This increase was a result of overall growth
and increases at our two newest branches, Lake Monticello in Fluvanna County and
Wellesley in Henrico County.

At September 30, 2000,  $20.0 million was borrowed from the FHLB on a short-term
basis, representing the same balance as of December 31, 1999. These advances are
comprised  entirely of daily rate credits  which  reprice based on previous days
Fed Fund rate. At September 30, 2000, the Company had no outstanding  balance of
securities sold under agreements to repurchase. This represented a 100% decrease
from the $16.6 million outstanding at December 31, 1999.



                                        9
<PAGE>

Total  stockholders'  equity  increased to $14.6  million at September 30, 2000.
This  increase was  primarily  due to net income of $594,000 for the  nine-month
period less dividends paid of $235,000.

Results of Operations

Net Income

The Company reported net income of $432,000 for the three months ended September
30, 2000, as compared to a net loss of $885,000 reported for the same quarter in
the prior year. The increase in net income was primarily due to the  elimination
of $ 1.4 million in losses reported on the sale of long-term  corporate bonds in
the prior year.  For the nine  months  ended  September  30,  2000,  the Company
reported  net income of $594,000  as compared to a net loss of $360,000  for the
same  period  in the  prior  year.  The  current  year to date  income  reflects
increases in net interest  income  offset by increases in the provision for loan
losses  and  operating  expenses  as  compared  to the prior  year.  Actions  to
restructure  the balance sheet  including the sale of long-term  corporate bonds
and mortgage  servicing  rights were the primary cause of the losses reported in
the prior year.

Net Interest Income

Net  interest  income  increased  to $2.5  million  for the three  months  ended
September  30, 2000,  from the $1.9 million  reported  during the same period in
1999. The following table summarizes the factors determining net interest income
($ in thousands).
<TABLE>
<CAPTION>
                           Three Months             Three Months            Nine Months             Nine Months
                              Ended                    Ended                   Ended                   Ended
                        September 30,2000        September 30,1999       September 30,2000       September 30,1999
                        -----------------        -----------------       -----------------       -----------------
<S>                          <C>                      <C>                     <C>                     <C>
   Avg. Interest
   Earning Assets            $240,500                 $230,846                $248,945                $222,873

     Avg. Yield                9.41%                    8.31%                   9.03%                   8.05%

   Avg. Interest
      Bearing
    Liabilities              $228,082                 $224,205                $236,374                $215,517

     Avg. Cost                 5.51%                    4.78%                   5.35%                   4.89%

  Interest Spread              3.90%                    3.53%                   3.68%                   3.16%

  Interest Margin              4.19%                    3.67%                   3.95%                   3.33%
</TABLE>

The  increases  in the net  interest  margin for the three and nine months ended
September 30, 2000, as compared to the same periods of the prior year are due to
increases  in the prime rate which  affected  the yield on prime based loans and
the increase of non-interest bearing demand accounts.

Provision for Loan Losses

The Company provides  valuation  allowances for anticipated losses on loans when
its  management  determines  that a  significant  decline  in the  value  of the
collateral  has  occurred,  and if the value of the  collateral is less than the
amount of the unpaid  principal of the related  loan,  plus  estimated  costs of
acquisition and sale. In addition,  the Company  provides  reserves based on the
dollar  amount and type of  collateral  securing its loans,  in order to protect
against  unanticipated  losses. A loss experience  percentage is established for
each loan type and is reviewed  annually.  Each quarter,  the loss percentage is
applied to the  portfolio,  by product type, to determine the minimum  amount of
reserves  required.  Guaranty  recorded a provision of $150,000 and $216,000 for
the three months ended September 30,


                                       10
<PAGE>

2000 and 1999 respectively, and a provision of $1.4 million and $381,000 for the
nine months ended September 30, 2000 and 1999, respectively. As of September 30,
2000 the total allowance for loan losses was $2.1 million or 1.1% of loans.  The
increase in loan loss reserves for both periods was due to management's  efforts
to properly reflect the credit risk in its loan portfolio.  Although  management
believes   that  it  uses  the  best   information   available   to  make   such
determinations,  future adjustments to reserves may be necessary, and net income
could be significantly  affected,  if circumstances  differ  substantially  from
assumptions used in making the initial determinations.

Other Income

Other income for the third quarter 2000 was $400,000, compared to a loss of $1.3
million  for the same period in 1999.  Deposit  fees and loan  servicing  income
increased to $197,000 for the current quarter from the $106,000 reported for the
same quarter of the prior year. Net gains on loan and security sales resulted in
income of $46,000  for the current  quarter,  while the same period in the prior
year included net losses of $1.6 million due to the sale of long-term  corporate
bonds and mortgage  servicing  rights to restructure the balance sheet.  For the
nine months ended  September 30, 2000,  deposit fees and loan  servicing  income
increased to $562,000 from  $329,000 for the same period of the prior year.  The
increases  were  primarily  due to increases in deposits and the loan  servicing
portfolio.

Other Expense

Other  expenses  during the third quarter of 2000 were $2.1 million,  a $401,000
increase  over  those  incurred  during the same  quarter of 1999.  For the nine
months ended  September 30, 2000,  other expenses were $6.2 million  compared to
$4.7 million  during the same period in 1999.  Both increases were primarily due
to increases in overall operating  expenses and increased  advertising  expenses
related  to the  increased  size of the  Company.  Other  expenses  for both the
current  quarter and the year to date period have  increased  at rates below the
increase in net interest income.

The Company currently operates eight full-service banking offices.  Construction
is currently  proceeding on an additional office in the Charlottesville  market,
which will be completed later this year. Except for this office, the Company has
no plans to open any additional offices.  The Company is currently reviewing the
profitability of all of its existing branches and operations.

Income Tax Expense

The Company recognized income tax expense of $222,000 for the three months ended
September  30,  2000,  compared to a $456,000 tax benefit for the same period in
1999.  For the nine months  ended  September  30, 2000,  the Company  recognized
income tax expense of $306,000 compared to an income tax benefit of $186,000 for
the same period in 1999.  Changes in tax expense and tax benefit between periods
are  primarily  a result of changes in the level of  taxable  income.  Effective
income tax and benefit rates for all periods presented was 34.0%.

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.  The Company'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.
The Company has been able to generate  sufficient  cash  through its deposits as
well as through its borrowings.

The Company uses its sources of funds  primarily to meet its on-going  operating
expenses, to pay deposit withdrawals and to fund loan commitments.  At September
30, 2000, total approved loan commitments




                                       11
<PAGE>

outstanding were approximately $8.9 million. At the same date, commitments under
unused lines of credit were approximately $49.8 million. Certificates of deposit
scheduled  to  mature in one year or less at  September  30,  2000  were  $123.2
million.  Management  believes that a significant  portion of maturing  deposits
will remain with the  Company.  If these  certificates  of deposit do not remain
with the Company,  it will have to seek other sources of funding which may be at
higher rates or reduce assets.

At September 30, 2000,  regulatory  capital was in excess of amounts required by
Federal Reserve  Regulations to be considered  well  capitalized as shown in the
following table:

          Tier 1 risk based capital ratio                     9.85%
          Total risk based capital ratio                     11.16%
          Tier 1 leverage ratio                               8.33%


Regulatory Issues

In October 2000,  the Company and it subsidiary,  Guaranty Bank,  entered into a
written  agreement  with the Federal  Reserve Bank of Richmond and the Bureau of
Financial  Institutions of the  Commonwealth of Virginia with respect to various
operating  policies and procedures.  Various bank operating  policies  including
asset/liability management,  liquidity, risk management, loan administration and
capital  adequacy  will be  submitted  to the bank  regulators  for  review  and
approval.  The Company is restricted  from paying future  dividends or incurring
any debt at the parent  company  level  without prior  regulatory  approval.  In
addition,  the Company's  subsidiary,  Guaranty Bank, is prohibited  from paying
intercompany dividends to the Company without prior regulatory approval.  Absent
this intercompany  dividend,  the Company does not have sufficient  resources to
make the payments  due on its  outstanding  subordinated  debt  securities.  The
Company and Guaranty Bank have requested  regulatory  approval for  intercompany
dividends in an amount sufficient to make the December 15, 2000,  payment due on
its subordinated debt securities.

Forward Looking Statements

Certain  statements in this quarterly report on Form 10-QSB are  forward-looking
and  may be  identified  by the  use  of  words  such  as  "believe",  "expect",
"anticipate",   "should",   "planned",   "estimated",  and  "potential".   These
statements are based on the Company's current expectations. A variety of factors
could  cause  the  Company'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 the Company's business include interest
rate movements,  competition from both financial and non-financial institutions,
the timing and occurrence (or  nonoccurence) of transactions and events that may
be subject to circumstances  beyond the Company's control,  and general economic
conditions.









                                       12
<PAGE>

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

Item 1        Legal Proceedings
                     Not Applicable

Item 2        Changes in Securities
                     Not Applicable

Item 3        Defaults Upon Senior Securities
                     Not Applicable

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

Item 5        Other Information
                     Not Applicable

Item 6        Exhibits and Reports on 8-K

              (a)  Exhibits

                     27     Financial Data Schedule (filed electronically only)

              (b)   Reports on Form 8-K - None













                                       13
<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, 2000                By: /s/ Thomas P. Baker
                                           -------------------------------------
                                           Thomas P. Baker
                                           President and Chief Executive Officer



Date: November 14, 2000                By: /s/ Thomas F. Crump
                                           -------------------------------------
                                           Thomas F. Crump
                                           Senior Vice President
                                           and Chief Financial Officer