UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-QSB



Quarterly Report Under Section 13 or 15(d)

of the Securities Exchange Act of 1934







For Quarter Ended

Commission File No. 0-25905

March 31, 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 May 1, 2003, 1,978,577 shares of Common Stock, par value $1.25 per share, were outstanding.



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GUARANTY FINANCIAL CORPORATION



QUARTERLY REPORT ON FORM 10-QSB



INDEX



Part I.  Financial Information

Page No.



Item 1

Financial Statements



Consolidated Balance Sheets as of March 31, 2003

(unaudited) and December 31, 2002

3



Consolidated Statements of Operations for the

Three Months Ended March 31, 2003 and

2002 (unaudited)

4



Consolidated Statements of Comprehensive Income

for the Three Months Ended March 31, 2003

and 2002 (unaudited)

5



Consolidated Statements of Cash Flows for the

Three Months Ended March 31, 2003 and 2002 (unaudited)

6



Notes to Consolidated Financial Statements (unaudited)

7



Item 2

Managements Discussion and Analysis of Financial

Condition and Results of Operations

11



Item 3

Controls and Procedures

17



Part II.  Other Information



Item 1

Legal Proceedings

18



Item 2

Changes in Securities and Use of Proceeds

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

19



Certifications

20



2



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Part I.  Financial Information



Item 1

Financial Statements

|GUARANTY FINANCIAL CORPORATION                  
|------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                     
|(In Thousands)                                  
|                                                
|                                                
|                                                
|ASSETS                                          
|Cash and cash equivalents                       
|Investment securities                           
|Held-to-maturity                                
|Available for sale                              
|Investment in FHLB                              
|Loans receivable, net                           
|Accrued interest receivable                     
|Real estate owned                               
|Office properties and equipment, net            
|Other assets                                    
|Total assets                                    
|                                                
|LIABILITIES AND STOCKHOLDERS' EQUITY            
|LIABILITIES                                     
|Deposits:                                       
|Interest bearing demand                         
|Non-interest bearing demand                     
|Money market accounts                           
|Savings accounts                                
|Certificates of deposit                         
|                                                
|Bonds payable                                   
|Advances from Federal Home Loan Bank            
|Accrued interest payable                        
|Payments by borrowers for taxes and insurance   
|Other liabilities                               
|Total liabilities                               
|                                                
|                                                
|Convertible preferred securities                
|                                                
|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, 1,978,577          
|issued and outstanding (1,970,677 in 2002)      
|Additional paid-in capital                      
|Accumulated comprehensive loss                  
|Retained earnings                               
|Total stockholders' equity                      
|Total liabilities and stockholders' equity      
|                                                

See accompanying notes to consolidated financial statements

3



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GUARANTY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

|                                                   | Three Months Ended
|-------------------------------------------------- | ------------------
|                                                   |                   
|                                                   |                   
|                                                   |                   
|Interest income                                    |                   
|Loans                                              |                   
|Investment securities                              |                   
|Total interest income                              |                   
|                                                   |                   
|Interest expense                                   |                   
|Deposits                                           |                   
|Borrowings                                         |                   
|Total interest expense                             |                   
|                                                   |                   
|Net interest income                                |                   
|                                                   |                   
|Provision for loan losses                          |                   
|                                                   |                   
|Net interest income after provision                |                   
|for loan losses                                    |                   
|                                                   |                   
|Non-interest income                                |                   
|Deposit account fees                               |                   
|Mortgage banking income                            |                   
|Net gain on sale of branches                       |                   
|Increase in cash surrender value of life insurance |                   
|Investment sales commissions                       |                   
|Other                                              |                   
|Total noninterest income                           |                   
|                                                   |                   
|Non-interest expense                               |                   
|Personnel                                          |                   
|Occupancy                                          |                   
|Information services                               |                   
|Marketing                                          |                   
|Deposit insurance premiums                         |                   
|Other                                              |                   
|Total noninterest expense                          |                   
|                                                   |                   
|Income before income taxes                         |                   
|                                                   |                   
|Provision for income taxes                         |                   
|                                                   |                   
|Net income                                         |                   
|                                                   |                   
|Basic earnings per common share                    |                   
|Diluted earnings per common share                  |                   
|                                                   |                   

See accompanying notes to consolidated financial statements

4



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GUARANTY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)



|                                                        |  |  | Three Months Ended
|------------------------------------------------------- |  |  | ------------------
|                                                        |  |  | March 31,         
|                                                        |  |  | 2003              
|                                                        |  |  |                   
|                                                        |  |  |                   
|Net income                                              |  |  | $        979      
|                                                        |  |  |                   
|Other comprehensive income:                             |  |  |                   
|Unrealized gain (loss) on securities available for sale |  |  | $             8   
|Reclassification adjustment for (gains) losses          |  |  |                   
|included in net income                                  |  |  | (1)               
|                                                        |  |  |                   
|Other comprehensive income (loss), before tax           |  |  | 7                 
|                                                        |  |  |                   
|Income tax (expense) benefit related to items of other  |  |  |                   
|comprehensive income                                    |  |  | (2)               
|                                                        |  |  |                   
|Other comprehensive income (loss), net of tax           |  |  | 5                 
|                                                        |  |  |                   
|Comprehensive income                                    |  |  | $        984      
|                                                        |  |  |                   
|                                                        |  |  |                   



See accompanying notes to consolidated financial statements.

5



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See accompanying notes to consolidated financial statements.

6



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GUARANTY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2003 and 2002

(unaudited)





Note 1  Principles of Presentation



The accompanying consolidated financial statements of Guaranty Financial Corporation (Guaranty) have not been audited by independent accountants, except for the balance sheet at December 31, 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 months ended March 31, 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 months ended March 31, 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.

7



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Note 4  Loans



The loan portfolio is comprised of the following:











Note 5  Allowance for Loan Loss



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



8



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Note 6  Investments



The investment portfolio was comprised of the following:







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:

|                           | Three Months Ended |           | Year Ended       
|-------------------------- | ------------------ | --------- | -----------------
|                           | March 31, 2003     |           | December 31, 2002
|                           |                    |           |                  
|                           |                    | Weighted- |                  
|                           |                    | average   |                  
|                           |                    | exercise  |                  
|                           | Shares             | price     |                  
|Options outstanding at     |                    |           |                  
|beginning of period        | 76,012             | $ 10.01   |                  
|Granted                    | ---                | ---       |                  
|Forfeited                  | (362)              | 8.30      |                  
|Exercised                  | (7,900)            | 8.13      |                  
|Options outstanding at end |                    |           |                  
|of period                  | 67,750             | 10.13     |                  
|Options exercisable at end |                    |           |                  
|of period                  | 67,750             |           |                  

9



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|                                                            |                |                  
|----------------------------------------------------------- | -------------- | -----------------
|                                                            | March 31, 2003 | December 31, 2002
|                                                            |                |                  
|Net income attributable to common stockholders, as reported | $979           | $1,763           
|                                                            |                |                  
|Total stock-based employee compensation expense determined  |                |                  
|under the fair value based method for all awards            | -              | (86)             
|                                                            |                |                  
|Proforma net income attributable to common stockholders     | $979           | $1,677           
|                                                            |                |                  
|Income per share, as reported:                              |                |                  
|Basic                                                       | $0.50          | $0.89            
|Diluted                                                     | $0.49          | $0.89            
|                                                            |                |                  
|Income per share, proforma:                                 |                |                  
|Basic                                                       | $0.50          | $0.85            
|Diluted                                                     | $0.49          | $0.85            
|                                                            |                |                  

10





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ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS





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



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



Analysis of Financial Condition



Total assets decreased 3.7% to $190.0 million at March 31, 2003, from $197.1 million at December 31, 2002.  Cash and cash equivalents increased $3.1 million or 20.3%, to $18.5 million at March 31, 2003, from $15.4 million at December 31, 2002. Net loans were $156.6 million at March 31, 2003, a decrease of $6.7 million, or 4.1%, from net loans of $163.2 million at December 31, 2002.  Total deposits at March 31, 2003, were $162.7 million compared to $171.3 million at December 31, 2002.  There were no FHLB borrowings at March 31, 2003 or December 31, 2002.  Total stockholders equity at March 31, 2003, increased by $900,000 to $19.5 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 4.1% to $156.6 million at March 31, 2003, from $163.2 million at December 31, 2002.  This change was primarily attributable to a $4.8 million reduction in consumer loans, due to the sale of consumer loans associated with the Harrisonburg branch, and a $1.5 million decrease in construction and land loans.  During the most recent quarter, Guaranty originated and sold $12.3 million in residential mortgage loans in the secondary market.  Residential mortgage loans held for sale were $839,000 at March 31, 2003, up from $332,000 at December 31, 2002.  All other segments of the loan portfolio were relatively constant during the most recent quarter.





Investments



Total investments declined by 36.6% to $3.4 million at March 31, 2003, compared to $5.4 million at December 31, 2002.  This change was due to the sale of corporate securities in order to improve liquidity without incurring investment losses.

11



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Real Estate Owned



Real estate owned decreased to $210,000 at March 31, 2003, from $397,000 at December 31, 2002. The decline was primarily due to the sale of residential lots during the period.  The remainder of real estate owned consists of residential property listed for sale.  No material loss is anticipated on the ultimate sale of this property.



Office Properties and Equipment



Guarantys investment in office properties and equipment decreased to $6.2 million at March 31, 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 remained steady at $4.3 million at March 31, 2003 and December 31, 2002.



Deposits



Deposits were $162.7 million at March 31, 2003, a decrease of $8.6 million, or 5.0%, 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.  Guaranty continues to focus on attracting low cost deposits and money market accounts.  Certificates of deposit comprise 36.8% of total deposits at March 31, 2003, compared to 41.2% at December 31, 2002.



FHLB Borrowings



Guaranty had no borrowings outstanding from the Federal Home Loan Bank (FHLB) at March 31, 2003 or December 31, 2002.  At March 31, 2003, Guarantys available but unused borrowings with the FHLB were approximately $20.1 million.



Stockholders Equity



Stockholders equity at March 31, 2003, increased by 4.8% to $19.5 million from $18.6 million at December 31, 2002.  The primary factors for the increase were the quarterly net income of $979,000 and the issuance of shares in connection with open market purchases and employees exercising their stock options which increased capital by $654,000, offset by a cash dividend payment to shareholders of $149,000.

12



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Results of Operations



Net Income



Guaranty reported net income of $979,000 ($.49 per share) for the three months ended March 31, 2003, compared with a net income of $406,000 ($.21 per share) for the three months ended March 31, 2002.  The increase in the net income was primarily due to the gain on the sale of the Harrisonburg branch and increased mortgage banking income.



Net Interest Income



Net interest income decreased to $2.0 million for
the three months ended March 31, 2003, from the $2.1 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 March 31, 2003, were $172.4 million compared to $201.1 million for the same period in 2002.  Average loans outstanding decreased to $160.8 million from $171.6 million and average investments outstanding declined to $4.7 million from $24.1 million when comparing the three month period ended March 31, 2003 to the three month period ended March 31, 2002.  For these same periods, average certificates of deposit balances decreased by $46.9 million to $63.6 million.  The cost of interest bearing deposits declined by 156 basis points primarily due to lower interest rates being paid on certificates of deposit.  The following table summarizes the factors determining
net interest income (dollars in thousands).



|                                     |  | Three Months   | Three Months  
|------------------------------------ |  | -------------- | --------------
|                                     |  | Ended          | Ended         
|                                     |  | March 31, 2003 | March 31, 2002
|Average Interest Earning Assets      |  | $ 172,361      | $ 201,140     
|                                     |  |                |               
|Average Yield                        |  | 6.21%          | 7.00%         
|                                     |  |                |               
|                                     |  |                |               
|Average Interest Bearing Liabilities |  | $ 147,445      | $ 180,359     
|                                     |  |                |               
|Average Cost                         |  | 1.95%          | 3.13%         
|                                     |  |                |               
|                                     |  |                |               
|Interest Spread                      |  | 4.26%          | 3.87%         
|                                     |  |                |               
|Interest Margin                      |  | 4.54%          | 4.20%         
|                                     |  |                |               

13





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Provision for Loan Losses



Guaranty recorded a provision of $30,000 and $25,000 for the three months ended March 31, 2003 and 2002, respectively.  The Companys allowance for loan losses currently equals 1.43% 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 March 31, 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.



There were no loan charge-offs during the first quarter of 2003.  At March 31, 2003, the Company had $92,000 of loans that were 90 days or more past due and still accruing interest, compared to $338,000 at March 31, 2002.  Loans totaling $4.4 million were considered to be non-accrual as of March 31, 2003, compared to $187,000 as of March 31, 2002.  The increase in the non-accrual balance represents a small number of loans which are all in various stages of workout.



Non-interest Income



Non-interest income was $1.6 million for the three months ended March 31, 2003, compared to $638,000 for the same period a year ago.  This change was primarily due to the gain on the sale of the Harrisonburg branch of $949,000.  Mortgage banking income was $318,000 for the quarter ended March 31, 2003, which was a slight increase over the amount realized of $314,000 for the same period a year ago.



Fees on deposit accounts decreased by 8.7% to $167,000 for the most recent quarter compared to $183,000 for the same period a year ago.  Guaranty did not realize any investment sales commissions for the quarter ended March 31, 2003, compared to $26,000 for the quarter ended March 31, 2002, due to reduced sales volume, as the investment sales function was undergoing a management realignment during the first quarter of 2003.





Non-interest Expense



Non-interest expense
was $2.2 million for the quarter ended March 31, 2003, a $73,000 increase over the amount reported for the same period last year.  Non interest expense was negatively impacted by the accelerated amortization of $110,000 of expenses associated with Guaranty Capital Trusts Trust Preferred securities.  In the first quarter of 2003, Guarantys Board of Directors made the decision to call the Trust Preferred securities effective May 19, 2003.  As a result of this decision, three-fifths of the unamortized costs were expensed in the first quarter.  Occupancy expenses and marketing expenses increased from the first quarter of 2002 to the first quarter of 2003, by $5,000 and $16,000, respectively.  Offsetting these increases, personnel costs incurred in the first quarter of 2003 were lower than the amount incurred in the first quarter of 2002 by $41,000, and FDIC insurance premiums have declined by $18,000 for the same period.





Income Tax Expense



Guaranty recognized income tax expense of $476,000 for the three months ended March 31, 2003, compared to income tax expense of $197,000 for the same period in 2002.  The net increase in income tax expense between periods was a result of increases in the level of taxable income. The effective tax rate was 32.7% for the quarters ended March 31, 2003 and 2002.  The effective tax rates are lower than the standard corporate tax rate of 34% due to non-taxable income from bank owned insurance.

14



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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, total loans
declined by approximately $6.7 million and certificates of deposit declined by
approximately $10.6 million.  These decreases were a result of strategic decisions,
including the decision to exit the Harrisonburg market.  Guaranty has been very targeted in its lending approach and has desired to reduce its funding reliance on certificates of deposit.  At March 31, 2003, total approved loan commitments outstanding were approximately $5.1 million.  At the same date, commitments under unused lines of credit were approximately $55.4 million.  Certificates of deposit scheduled to mature in one year or less at March 31, 2003, were $51.2 million.  Management believes that a significant portion of maturing deposits will remain with Guaranty.  If these certificates of deposit do not remain with Guaranty, it will have to seek other sources of funding that may be at higher rates or reduce assets.



The reduction in total assets has continued to positively impacted Guarantys regulatory capital ratios.  At March 31, 2003, regulatory capital was in excess of amounts required by Federal Reserve regulations to be considered well capitalized as shown in the following table (dollars in thousands):



|                          |  | Actual Percentage |  |  | Percent Required |  | Excess Percentage
|------------------------- |  | ----------------- |  |  | ---------------- |  | -----------------
|Leverage Ratio            |  | 13.28%            |  |  | 4.00%            |  | 9.28%            
|                          |  |                   |  |  |                  |  |                  
|Tier 1 Risk Based Capital |  | 16.39%            |  |  | 4.00%            |  | 12.39%           
|                          |  |                   |  |  |                  |  |                  
|Total Risk Based Capital  |  | 17.85%            |  |  | 8.00%            |  | 9.85%            



Contractual Obligations



The following  summarizes  Guarantys  contractual  cash obligations and commercial  commitments,  including  maturing  certificates of
deposit, as of March 31, 2003 and the effect such obligations may have on liquidity and cash flows in future periods.



|                                      |           | Contractual Obligations |        |        |         
|------------------------------------- | --------- | ----------------------- | ------ | ------ | --------
|                                      | Less Than | 2-3                     | 4-5    | Over 5 |         
|                                      | One Year  | Years                   | Years  | Years  | Total   
|(Dollars in thousands)                |           |                         |        |        |         
|Certificate of deposit maturities (1) | $51,163   | $7,177                  | $1,562 | $8     | $59,910 
|Undisbursed credit lines              | 51,606    |                        |       |       | 51,606  
|Commitments to extend credit          | 5,655     |                        |       |       | 5,655   
|Standby letters of credit             | 3,843     |                        |       |       | 3,843   
|Total obligations                     | $112,267  | $7,177                  | $1,562 | $8     | $121,014
|                                      |           |                         |        |        |         
|                                      |           |                         |        |        |         

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



15



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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



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ITEM 3.  Controls and Procedures



Disclosure Controls and Procedures



The Company maintains disclosure controls and procedures that are designed to provide assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission.  Within the 90 day period prior to the filing of this report, an evaluation of the effectiveness of the design and operating 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.

In addition, there have been no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to the date that the Company carried out its evaluation.

17



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Part II.  Other Information



Item 1

Legal Proceedings

Not Applicable



Item 2

Changes in Securities and Use of Proceeds

Not Applicable



Item 3

Defaults Upon Senior Securities

Not Applicable



Item 4

Submission of Matters to a Vote of Security Holders

Not Applicable



Item 5

Other Information

Not Applicable



Item 6

Exhibits and Reports on Form 8-K



(a)

Exhibits



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



99.2   Statement of Chief Financial Officer Pursuant to 18 U.S.C. ss. 1350



(b)  Reports on Form 8-K  None





18



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SIGNATURES



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



GUARANTY FINANCIAL CORPORATION









Date:  May 14, 2003

By:

/s/ William E. Doyle, Jr.



William E. Doyle, Jr.

President and Chief Executive Officer







Date:  May 14, 2003

By:

/s/ Tara Y. Harrison



Tara Y. Harrison

Vice President and Chief Financial Officer

19



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CERTIFICATION





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



1.

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



2.

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



3.

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



4.

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



(a)

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



(b)

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



(c)

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



5.

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



(a)

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



(b)

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



6.

The registrants other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





Date:  May14, 2003

/s/ William E. Doyle, Jr.



William E. Doyle, Jr.

President and Chief Executive Officer

20



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CERTIFICATION





I, Tara Y. Harrison, certify that:



1.

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



2.

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



3.

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



4.

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



(a)

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



(b)

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



(c)

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



5.

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



(a)

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



(b)

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



6.

The registrants other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





Date:  May 14, 2003

/s/ Tara Y. Harrison



Tara Y. Harrison

Vice President and Chief Financial Officer

21



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EXHIBIT INDEX



Number

Document



99.1

Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350



99.2

Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350