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. 33-76064
         September 30, 1996




                         GUARANTY FINANCIAL CORPORATION




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



                 1700 Seminole Trail, Charlottesville, VA 22901
                     (Address of Principal Executive Office)


                                 (804) 974-1100
              (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 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 ___  (not subject to filing
requirements for the past 90 days).
            As of November 13, 1996, 924,008 shares 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 Statements of Financial Condition
         as of September 30, 1996 and June 30, 1996......................................................3

         Consolidated Statements of Operations for the
         Three Months Ended September 30, 1996 and 1995..................................................4

         Consolidated Statements of Cash Flows for the
         Three Months Ended September 30, 1996 and 1995..................................................5

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

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

Part II.  Other Information

Item 1   Legal Proceedings..............................................................................12

Item 2   Changes in Securities..........................................................................12

Item 3   Defaults upon Senior Securities................................................................12

Item 4   Submission of Matters to a Vote of Securitiy Holders...........................................12

Item 5   Other Information..............................................................................12

Item 6   Exhibits and Reports on Form 8-K...............................................................12

         Signatures.....................................................................................13


</TABLE>


<PAGE>



                                     GUARANTY FINANCIAL CORPORATION
                                  CONSOLIDATED STATEMENTS OF CONDITION
                                             (In Thousands)

<TABLE>
<CAPTION>

                                                                             SEPTEMBER 30,    JUNE 30,
                                                                                 1996           1996

                                                                            -----------------------------

<S>                                                                            <C>              <C>
ASSETS                                                                        (Unaudited)
Cash and cash equivalents                                                        $6,480           $5,431
Investment securities
   Held-to-maturity                                                               3,529            3,731
   Available for sale                                                            11,416            9,564
Investment in FHLB stock at cost                                                  1,360            1,360
Loans receivable, net                                                            86,132           84,081
Accrued interest receivable                                                         725              712
Real estate owned                                                                   130               33
Office properties and equipment, net                                              3,963            3,525
Other assets                                                                      1,494            1,724
                                                                            ------------    -------------
          Total assets                                                         $115,229         $110,161
                                                                            ============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   NOW/MMDA accounts                                                            $10,331           $9,653
   Savings accounts                                                               5,047            4,654
   Certificates of deposit                                                       63,278           60,380
                                                                            ------------    -------------
                                                                                $78,656          $74,687
Bonds payable                                                                     3,006            3,144
Advances from Federal Home Loan Bank                                             22,500           17,500
Securities sold under agreement to repurchase                                     2,920            6,104
Accrued interest payable                                                             65               99
Deferred income taxes                                                                44                0
Payments by borrowers for taxes and insurance                                       319              146
Other liabilities                                                                 1,382            2,131
                                                                            ------------    -------------
          Total liabilities                                                    $108,892         $103,811
                                                                            ------------    -------------

STOCKHOLDERS' EQUITY
Preferred stock, par value $1 per share, 500,000
   shares authorized, none issued
                                                                            -               -
Common stock, par value $1.25 per share,
   4,000,000 shares authorized, 919,168 issued
   and outstanding                                                               $1,149           $1,149
Additional paid-in capital                                                        1,981            1,982
Net unrealized gain (loss) on securities
    avaiable for sale                                                             (258)            (279)
Retained earnings                                                                 3,465            3,498
                                                                            ------------    -------------
          Total stockholders' equity                                             $6,337           $6,350
                                                                            ------------    -------------
Total liabilities and stockholders' equity                                     $115,229         $110,161
                                                                            ============    =============
</TABLE>



<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                         Three Months
                                                                             Ended
                                                                         September 30,
                                                                -----------------------------
                                                                   1996             1995
                                                                ------------    -------------
                                                                              (unaudited)

<S>                                                                  <C>              <C>
Interest income
   Loans                                                             $1,740           $1,553
   Mortgage-backed securities                                           283              118
   Investment securities                                                136              127
   Trading account assets                                                 0               17
                                                                ------------    -------------
Total interest income                                                $2,159           $1,815
                                                                ------------    -------------

Interest expense
   Deposits                                                             968              685
   Borrowings                                                           475              560
                                                                ------------    -------------
Total interest expense                                               $1,443           $1,245
                                                                ------------    -------------

Net interest income                                                     716              570

Provision (credit) for loan losses                                       46              (4)
                                                                ------------    -------------

Net interest income after provision
      for loan losses                                                   670              574

Other income
   Loan fees and servicing income                                       149              139
   Gain (loss) on sale of loans and securities                           68               77
   Service fees on checking                                              25               21
   Other                                                                 32               25
                                                                ------------    -------------
Total other income                                                      274              262
                                                                ------------    -------------

Other expenses
   Personnel                                                            294              257
   Occupancy                                                             58               79
   Data processing                                                       76               68
   BIF/SAIF premium disparity assessment                                347                0
   Deposit insurance premiums                                            54               51
   Other                                                                166              143
                                                                ------------    -------------
Total other expenses                                                    995              598
                                                                ------------    -------------

Income before income taxes                                             (51)              238
                                                                ------------    -------------

Provision for income taxes                                             (18)               83
                                                                ------------    -------------

Net income                                                             (33)              155
                                                                ============    =============

Earnings per common share                                            (0.04)             0.17
                                                                ============    =============

</TABLE>


<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 Three Months Ended September 30, 1995 and 1996
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                        1996             1995
                                                                                 ------------    -------------

<S>                                                                                     <C>               <C>
Operating activities
     Net Income                                                                         (33)              155
     Adjustments to reconcile net income to net cash provided
         (absorbed) by operating activities:
         Provision for loan losses                                                        46              (4)
         Depreciation and amortization                                                    32               23
         Amortization of deferred loan fees                                               30               27
         Net amortization of premiums and accretion of discounts                          31               48
         Loss (gain) on sale of loans                                                   (77)                0
         Originations of loans held for sale                                         (4,364)                0
         Proceeds from sale of loans                                                   4,371                0
         Loss (gain) on sale of mortgage-backed securities                              (20)             (38)
         Loss (gain) on sale of securities available for sale                              0              (4)
         (Gain) loss on disposal of office properties and equipment                        0              (1)
         (Gain) loss on sale of trading securities                                        28             (34)
         Purchase of trading securities                                             (24,065)         (24,913)
         Sales of trading securities                                                  24,037           24,947
         (Gain) loss on sale of real estate owned                                          1                0
         (Increase) decrease in real estate owned                                       (97)             (45)
         Changes in:
             Accrued interest receivable                                                (14)             (62)
             Other assets                                                                213              112
             Accrued interest payable                                                   (34)                1
             Prepayment by borrowers for taxes and insurance                             173              121
             Other liabilities                                                         (749)              144
                                                                                 ------------    -------------

Net Cash provided (absorbed) by operating activities                                   (491)              477
                                                                                 ------------    -------------

Investing activities
     Net (increase) decrease in loans                                                (2,110)          (3,871)
     Mortgage- backed securities principal repayments                                    317              282
     Purchase of mortgage-backed securities                                          (3,940)          (4,079)
     Proceeds from sale of mortgage-backed securities                                  2,005            4,113
     Purchase of securities available for sale                                             0          (4,003)
     Proceeds from sales of securities available for sale                                  0            2,008
     Proceeds from sale of office equipment                                                0                5
     Purchase of office properties and equipment                                        (65)             (15)
     Disbursement on construction of office building                                   (279)                0
     Purchase of land                                                                    (3)                0
                                                                                 ------------    -------------

Net cash provided (absorbed) by investing activities                                 (4,075)          (5,560)
                                                                                 ------------    -------------
</TABLE>



<PAGE>




                         GUARANTY FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
<TABLE>
<CAPTION>




<S>                                                                                    <C>              <C>
Financing activities
     Net increase (decrease) in deposits                                               3,968            3,616
     Repayment of FHLB advances                                                            0          (3,000)
     Proceeds from FHLB advances                                                       5,000            3,000
     Increase (decrease) in securities sold under agreement to repurchase            (3,184)            1,875
     Principal payments on bonds payable, including unapplied payments                 (169)            (298)
                                                                                 ------------    -------------

Net cash provided (absorbed) by financing activities                                   5,615            5,193
                                                                                 ------------    -------------

Increase (decrease) in cash and cash equivalents                                       1,049              110
                                                                                 ------------    -------------

Cash and cash equivalents, beginning of period                                         5,431            5,753
                                                                                 ------------    -------------

Cash and cash equivalents, end of period                                               6,480            5,863
                                                                                 ============    =============
</TABLE>




<PAGE>



                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             For the Three Months ended September 30, 1996 and 1995



Note 1  Principles of Consolidation

The  accompanying  consolidated  financial  statements  include the  accounts of
Guaranty   Financial   Corporation   ("the   Company")   and  its   wholly-owned
subsidiaries,  Guaranty Savings and Loan , F.A. ("the Association"), GMSC, Inc.,
which was organized as a financing  subsidiary,  and Guaranty  Investments Corp.
which was  organized to sell  insurance  annuities.  All  material  intercompany
accounts and transactions have been eliminated in consolidation.

Note 2  Basis of Presentation

The  accompanying  interim  financial  statements are unaudited;  however,  such
information  reflects all  adjustments  which are, in the opinion of management,
necessary for a fair presentation of the consolidated financial statements.  All
adjustments are of a normal recurring nature.

Note 3  New Accounting Pronouncements

In March 1995, the FASB issued its Statements of Financial  Accounting Standards
No. 121 ("SFAS 121"),  "Accounting  for the Impairment of Long-Lived  Assets and
for  Long-Lived  Assets to be Disposed  of." SFAS 121 requires  that  long-lived
assets and certain  intangibles to be held and used by an entity be reviewed for
impairment  when events or changes in  circumstances  indicate that the carrying
amount may not be recoverable.  In addition SFAS 121 requires  long-lived assets
and  certain  intangibles  to be  disposed  of to be  reported  at the  lower of
carrying  amount or fair  value less costs to sell.  SFAS 121 is  effective  for
fiscal years beginning  after December 15, 1995.  Management does not expect the
application  of this  pronouncement  to have a material  effect on the financial
statements of Guaranty.

In May 1995, the FASB issued its Statement of Financial Accounting Standards No.
122 ("SFAS 122"), "Accounting for Mortgage Servicing Rights an Amendment of FASB
Statement No. 65." SFAS 122 requires  entities that acquire  mortgage  servicing
rights through either the purchase or origination of mortgage loans and sells or
securitizes  those loans with the servicing  rights retained should allocate the
total cost of the mortgage loans to the mortgage  servicing rights and the loans
(without the mortgage  servicing rights) based on their relative fair values. In
addition,  SFAS 122  requires  entities  to assess  their  capitalized  mortgage
servicing  rights for impairment  based on the fair value of those rights.  SFAS
122 is effective for fiscal years  beginning  after December 15, 1995.  Guaranty
elected early  adoption and recorded a gain of $161,  000 in fiscal year 1996 on
the sale of $12.2 million mortgage loans.

In October 1995, SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  was
issued. The statement is effective for fiscal years beginning after December 15,
1995. The statement encourages,  but does not require,  companies to expense the
fair value of employee stock options, based on the fair value on the date of the
grant. Companies that elect to continue to follow existing accounting rules (the
intrinsic  value method which often  results in no  compensation  results)  must
provide pro forma  disclosures  of net income and earnings per share which would
have  been had the new fair  value  method  been  used.  In  addition,  SFAS 123
requires all companies to make significantly more disclosures regarding employee
stock options than is currently required. Guaranty plans to adopt the disclosure
requirements only of SFAS 123 effective July 1, 1997.

In June 1996,  the FASB issued its Statement of Financial  Accounting  Standards
No. 125 ("SFAS  125"),  "Accounting  for  Transfers  and  Servicing of Financial
Assets and  Extinguishments of

<PAGE>

Liabilities."  This statement  provides  accounting and reporting  standards for
transfers and servicing of financial assets and  extinguishments of liabilities.
After a transfer of financial  assets,  an entity  recognizes  the financial and
servicing  assets it controls and the liabilities it has incurred,  derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when  extinguished.  In addition,  a transfer of  financial  assets in which the
transferor  surrenders  control over those assets is accounted  for as a sale to
the extent that consideration other than beneficial interests in the transferred
assets  is  received  in  exchange.  SFAS 125 is  effective  for  transfers  and
servicing of financial assets and  extinguishments of liabilities after December
31, 1996,  and is to be applied  prospectively.  Management  does not expect the
application  of this  pronouncement  to have a material  effect on the financial
statements of Guaranty.


<PAGE>



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



Changes in Financial Condition

Deposit growth during the three months ended September 30, 1996 enabled Guaranty
to increase assets. Total assets increased by $5.1 million, or 4.6%, from $110.2
million at June 30, 1996 to $115.2  million at September 30, 1996.  This deposit
growth of all local funds,  was invested in  mortgage-backed  securities  and in
local residential mortgage loans.

Cash and cash equivalents  increased $1.0 million, or 19.32%, to $6.5 million at
September 30, 1996.

Investment  securities,  at September 30, 1996,  increased by $1.65 million,  or
11.3%, to $16.3 million from June 30, 1996. Since loan growth was not increasing
at the rate of deposit growth, the excess funds were invested in mortgage-backed
securities.   Included  in  the   investment   portfolio  are  $3.5  million  of
mortgage-backed securities,  classified as held to maturity, which collateralize
the bonds payable,  $11.4 million of GNMA and FHLMC  mortgage-backed  securities
classified  as  available  for sale and $1.4  million of Federal  Home Loan Bank
stock, recorded at cost.

The loan portfolio  consists  primarily of mortgage loans, the majority of which
are  residential  first  mortgage  loans.  Of the $87.3  million of gross  loans
outstanding at Septemebr 30, 1996, 85.1% represent  residential first mortgages.
Net loans were $86.1  million at September  30,  1996,  a 2.44%  increase in net
loans of $84.1 million at June 30, 1996.

Real  estate  owned  increased  by $97  thousand  to $130  thousand,  or 294% at
September 30, 1996 from $33 thousand at June 30, 1996. These are assets acquired
through foreclosure and at September 30, 1996 consisted of two properties.  Both
properties are guaranteed by FHA/VA, and no significant losses are expected.

Deposits  increased  by $3.97  million,  or  5.31%  between  June  30,  1996 and
September  30,  1996.  The the  majority  of the growth was in  certificates  of
deposit,  which increased $2.9 million at September 30, 1996. This growth, which
is all local funds,  is a reflection of increased  marketing,  consolidation  of
other  financial  institutions  in  Charlottesville,  and  a  favorable  deposit
environment.

Office properties and equipment increased $438 thousand, or 12.4% since June 30,
1996. This increase is due to the construction in progress on the new operations
center  and  fourth  retail  branch  which  is  located  on  the  east  side  of
Charlottesville  on  Pantops  mountain.  The  construction  is  expected  to  be
completed the end of November 1996.

Other borrowed money decreased $3.2 million, or 52.16%,  while Federal Home Loan
Bank advances increased $5.0 million,  or 28.57%, from June 30, 1996. A two year
advance was made in  September  to extend  short term  borrowing  to match asset
maturites.


Results of Operations

Net Income

Guaranty  reported  a net  loss of $33  thousand  for  the  three  months  ended
September  30, 1996  compared to net income of $155 thousand for the same period
in 1995. This decrease in earnings is due to the Federal  legislation enacted in
September 1996 to recapitalize the Savings


<PAGE>


Association  Insurance Fund ("SAIF").  The one-time special  assessment based on
deposits of March 31, 1995 equaled $347 thousand for Guaranty.

Net income,  excluding the special assessment,  for the quarter ending September
30, 1996 was $192 thousand.  An increase of $37 thousand or 23.87% over the same
period in 1995.  This  increase is the result of an increase in the net interest
margin.


Net Interest Income

Net interest  income  increased by $146 thousand or 25.61%,  in the three months
ended September 30, 1996 to $716 thousand  compared to $570 thousand in the same
period in 1995. Average earning assets increased to $108.0 million for the three
months  ended  September  30, 1996  compared to an average of $95.6  million for
fiscal year June 30, 1996. The average rate earned also increase for the quarter
ended September 30, 1996 to 8.00% from 7.97% at June 30, 1996.  Average interest
bearing liabilities also increased for the three months ended September 30, 1996
to $104.5 million from an averge of $91.2 million for fiscal year 1996 while the
average  rate paid  decreased  17 basis  points to 5.52%.  The  majority of this
improvement  in net  interest  income is due to the decrease in the rate paid on
borrowed  money.  The average  rate paid on FHLB advances  and other  borrowings
decreased 49 basis point to 5.54% for the three months ended September  30, 1996
from 6.03% for fiscal year 1996.


Provision for loan losses

Management  analyzes the potential risk of loss on the Company's loan portfolio,
given  the  loan  balances  and the  value  of the  underlying  collateral.  The
allowance   for  loan  losses  is  reviewed   monthly  and  based  on  the  loan
classification system, which classifies problem loans as substandard,  doubtful,
or  loss,  additional  provisions  are  added  when  necessary.  Based  on  this
evaluation,  Guaranty  recorded a provision of $46 thousand for the three months
ended September 30, 1996. For the same three month period in 1995,  Guaranty had
a  credit  to the loss  provision  of $4  thousand  due to  recoveries  on loans
previously  expensed as a loss. As of September 30, 1996 the total allowance for
loan  losses   amounted  to  $834  thousand  of  which  $677  thousand  was  not
specifically allocated to identified problem loans.

Non-Interest Income

Non-interest  income for the three  months  ended  September  30,  1996 was $274
thousand,  an increase of $12 thousand,  or 4.58%, over non-interest  income for
the same period one year ago.  This  increase  was from loan fees and  servicing
income.


Non-Interest Expense

Non-interest  expense  increased  $50 thousand,  or 8.36%,  for the three months
ended  September 30, 1996 compared to the three month period ended September 30,
1995 from $598 thousand to $648  thousand.  The majority of this increase was in
personnel expense.  Additional personnel have been hired to staff the new retail
branch opening in December 1996 and to begin consumer and commercial lending.

Income Tax Expense

Due to a net loss,  Guaranty  recognized an income tax credit of $18,000 for the
three months ended  September 30, 1996 compared to income tax expense of $83,000
for the comparable period in 1995.



<PAGE>


Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either
through the sale of  existing  assets or the  acquisition  of  additional  funds
through asset and liability management. By regulatory definition,  liquid assets
include cash,  interest  bearing  deposits with banks,  federal funds sold,  and
government  agency and high rated  corporate  securities with maturities of five
years or less.  Guaranty is required  to  maintain  liquid  assets on an average
monthly  basis equal to at least 5% of its  liquidity  base.  Liquidity  base is
further defined as total deposits plus all short term  borrowings.  At September
30, 1996, Guaranty's liquidity ratio was 5.46%.

Guaranty's primary sources of funds are deposits,  borrowings, and amortization,
prepayments and maturities of outstanding loans and mortgage-backed  securities.
While  scheduled  payments from the  amortization  of loans and  mortgage-backed
securities are relatively  predictable sources of funds,  deposit flows and loan
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions and competition.  Excess funds are invested in overnight  deposits to
fund cash  requirements  experienced in the normal course of business.  Guaranty
has been able to  generate  sufficient  cash  through  its  deposits  as well as
borrowings.

Guaranty uses its sources of funds  primarily to meet its on going  commitments,
to pay deposit withdrawals and fund loan commitments. At September 30, 1996, the
total approved loan  commitments  outstanding  amounted to $5.2 million.  At the
same date,  commitments  under unused lines of credit  amounted to $5.8 million.
Certificate of deposits scheduled to mature in one year or less at September 30,
1996 totaled $51.2 million.  Management  believes that a significant  portion of
maturing deposits will remain with Guaranty.

Guaranty is subject to OTS regulations  requiring  savings  institutions to meet
the following  minimum levels of regulatory  capital (1) tangible  capital of at
least 1.5% of total  adjusted  assets,  (2) core capital of 3% of total adjusted
assets  and (3)  risk-based  capital  of 8% of total  risk-weighted  assets.  At
September 30, 1996,  Guaranty exceeded all such regulatory capital  requirements
as shown in the following table.

<TABLE>
<CAPTION>


                                                                                        Percent of
(Dollars in thousands)                                        Amount               Adjusted Assets
---------------------------------------------------------------------------------------------------
<S>                                                           <C>                            <C>
Tangible Capital:
Regulatory capital                                            $6,596                         5.71%
Minimum capital requirement                                    1,732                         1.50%
---------------------------------------------------------------------------------------------------
Excess regulatory capital                                     $4,864                         4.21%
---------------------------------------------------------------------------------------------------

Core Capital:
Regulatory capital                                            $6,596                         5.71%
Minimum capital requirement                                    3,465                         3.00%
---------------------------------------------------------------------------------------------------
Excess regulatory capital                                     $3,131                         2.71%
---------------------------------------------------------------------------------------------------

Risk-based Capital:
Regulatory capital                                            $7,273                        12.78%
Minimum capital requirement                                    4,392                         8.00%
---------------------------------------------------------------------------------------------------
Excess regulatory capital                                     $2,881                         4.78%
---------------------------------------------------------------------------------------------------

</TABLE>




<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 - None

         (b)      Reports on Form 8-K - None




<PAGE>






                                   SIGNATURES



Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



                         GUARANTY FINANCIAL CORPORATION




Date:   November 13, 1996            By:/s/ Thomas P. Baker
                                        -------------------
                                        Thomas P. Baker
                                        President and Chief Executive Officer



Date:   November 13, 1996             By:/s/ Kathleen M. Focht
                                         ---------------------
                                         Kathleen M. Focht
                                         Vice President, Secretary, Treasurer,
                                         and Chief Financial Officer