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
June 30, 2002




                         GUARANTY FINANCIAL CORPORATION




         Virginia                                            54-1786496
(State or Other Jurisdiction of                          (I.R.S. Employer
Incorporation or Organization)                            Identification No.)



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


                                 (434) 970-1100
                (Issuer's Telephone Number, Including Area Code)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the issuer 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 August 1, 2002, 1,962,777 shares of Common Stock, par value $1.25
per share, were outstanding.


<PAGE>


                         GUARANTY FINANCIAL CORPORATION

                         QUARTERLY REPORT ON FORM 10-QSB

                                      INDEX
                                      -----

Part I.  Financial Information                                          Page No.
------------------------------                                          --------

Item 1        Financial Statements

              Consolidated Balance Sheets as of June 30, 2002
              (unaudited) and December 31, 2001                             3

              Consolidated Statements of Operations for the
              Three and Six Months Ended June 30, 2002 and
              2001 (unaudited)                                              4

              Consolidated Statements of Comprehensive Income
              for the Three and Six Months Ended June 30, 2002
              and 2001 (unaudited)                                          5

              Consolidated Statements of Cash Flows for the
              Six Months Ended June 30, 2002 and 2001 (unaudited)           6

              Notes to Consolidated Financial Statements (unaudited)        7

Item 2        Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          10

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

Item 1        Legal Proceedings                                            16

Item 2        Changes in Securities and Use of Proceeds                    16

Item 3        Defaults upon Senior Securities                              16

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

Item 5        Other Information                                            16

Item 6        Exhibits and Reports on Form 8-K                             16

Signatures                                                                 17


                                       2

<PAGE>


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

Item 1   Financial Statements

                                  GUARANTY FINANCIAL CORPORATION
                                    CONSOLIDATED BALANCE SHEETS
                                         ($ In Thousands)
<TABLE>
<CAPTION>

                                                                      June 30,        December 31,
                                                                        2002              2001
                                                                    --------------   ---------------
<S>                                                                     <C>               <C>
ASSETS                                                                (Unaudited)
Cash and cash equivalents                                                $ 15,253          $ 12,437
Investment securities
   Held-to-maturity                                                           883               970
   Available for sale                                                      16,626            20,567
Investment in FHLB and other stocks                                         1,972             1,972
Loans receivable, net                                                     162,883           177,579
Accrued interest receivable                                                 1,039             1,245
Real estate owned                                                             418               764
Office properties and equipment, net                                        7,908             8,110
Other assets                                                                4,513             1,522
                                                                    --------------   ---------------
          Total assets                                                  $ 211,495         $ 225,166
                                                                    ==============   ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   Interest bearing demand                                               $ 27,596          $ 25,460
   Non-interest bearing demand                                             25,550            22,110
   Money market accounts                                                   21,722            22,394
   Savings accounts                                                        13,318            12,992
   Certificates of deposit                                                 89,682           117,676
                                                                    --------------   ---------------
                                                                          177,868           200,632
Bonds payable                                                                 434               595
Advances from Federal Home Loan Bank                                        9,000             1,000
Accrued interest payable                                                       54               137
Payments by borrowers for taxes and insurance                                 357               165
Other liabilities                                                             442               546
                                                                    --------------   ---------------
          Total liabilities                                               188,155           203,075
                                                                    --------------   ---------------


Convertible preferred securities                                            6,012             6,012
                                                                    --------------   ---------------

STOCKHOLDERS' EQUITY
Preferred stock, par value $1 per share, 500,000
   shares authorized, none issued                                               -                 -
Common stock, par value $1.25 per share,
   4,000,000 shares authorized, 1,962,777
   issued and outstanding (1,961,727 in 2001)                               2,453             2,452
Additional paid-in capital                                                  8,960             8,953
Accumulated comprehensive loss                                               (288)             (695)
Retained earnings                                                           6,203             5,369
                                                                    --------------   ---------------
          Total stockholders' equity                                       17,328            16,079
                                                                    --------------   ---------------
Total liabilities and stockholders' equity                              $ 211,495         $ 225,166
                                                                    ==============   ===============
</TABLE>



           See accompanying notes to consolidated financial statements.

                                       3

<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                            Three Months Ended            Six Months Ended
                                                                 June 30,                     June 30,
                                                         --------------------------  --------------------------
                                                            2002          2001          2002          2001
                                                         ------------ -------------  ------------  ------------
                                                                 (unaudited)                 (unaudited)
<S>                                                          <C>           <C>           <C>           <C>
Interest income
   Loans                                                     $ 2,915       $ 3,957       $ 5,975       $ 8,555
   Investment securities                                         398           612           810         1,119
                                                         ------------ -------------  ------------  ------------
Total interest income                                          3,313         4,569         6,785         9,674
                                                         ------------ -------------  ------------  ------------

Interest expense
   Deposits                                                      922         2,582         2,131         5,175
   Borrowings                                                    199           171           378           507
                                                         ------------ -------------  ------------  ------------
Total interest expense                                         1,121         2,753         2,509         5,682
                                                         ------------ -------------  ------------  ------------

Net interest income                                            2,192         1,816         4,276         3,992

Provision for loan losses                                         25            75            50           225
                                                         ------------ -------------  ------------  ------------

Net interest income after provision
      for loan losses                                          2,167         1,741         4,226         3,767

Non-interest income
   Deposit account fees                                          189           204           372           381
   Mortgage banking income                                       153           295           467           470
   Investment sales commissions                                   38            59            64           153
   Gain on sale of Investments                                    17             -            17             -
   Other                                                         148            42           263           158
                                                         ------------ -------------  ------------  ------------
Total non-interest income                                        545           600         1,183         1,162
                                                         ------------ -------------  ------------  ------------

Non-interest expense
   Personnel                                                   1,142         1,150         2,286         2,411
   Occupancy                                                     282           423           571           762
   Information services                                          287           290           578           568
   Marketing                                                      29            54            43           117
   Deposit insurance premiums                                     23            26            48            52
   Other                                                         328           387           659           754
                                                         ------------ -------------  ------------  ------------
Total non-interest expense                                     2,091         2,330         4,185         4,664
                                                         ------------ -------------  ------------  ------------

Income before income taxes                                       621            11         1,224           265
                                                         ------------ -------------  ------------  ------------

Provision for income taxes                                       193             4           390            90
                                                         ------------ -------------  ------------  ------------

Net income                                                   $   428       $     7       $   834       $   175
                                                         ============ =============  ============  ============

Basic and diluted earnings
  per common share                                           $  0.22       $  0.00       $  0.42       $  0.09
                                                         ============ =============  ============  ============

</TABLE>


          See accompanying notes to consolidated financial statements.

                                        4

<PAGE>


                         GUARANTY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                      Three Months Ended     Six Months Ended
                                                            June 30,             June 30,
                                                      ------------------    ------------------
                                                        2002      2001       2002       2001
                                                      -------    -------    -------    -------
                                                          (unaudited)           (unaudited)

<S>                                                   <C>        <C>        <C>        <C>
Net income                                            $   428    $     7    $   834    $   175
                                                      -------    -------    -------    -------

Other comprehensive income:
   Unrealized gain on securities available for sale       830         81        617        722
                                                      -------    -------    -------    -------

Other comprehensive income, before tax                    830         81        617        722

Income tax expense related to items of other
    comprehensive income                                 (282)       (28)      (210)      (246)
                                                      -------    -------    -------    -------

Other comprehensive income, net of tax                    548         53        407        476
                                                      -------    -------    -------    -------

Comprehensive income                                  $   976    $    60    $ 1,241    $   651
                                                      =======    =======    =======    =======

</TABLE>



          See accompanying notes to consolidated financial statements.

                                       5


<PAGE>




                         GUARANTY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                 Six Months Ended
                                                                                      June 30,
                                                                                2002            2001
                                                                              --------        --------
                                                                                  (unaudited)
<S>                                                                           <C>             <C>
Operating Activities
      Net Income                                                              $   834         $   175
      Adjustments to reconcile net income to net cash provided
           (absorbed) by operating activities:
           Provision for loan losses                                               50             225
           Provision for loss on sale of other real estate owned                   40               -
           Depreciation and amortization                                          295             719
           Deferred loan fees                                                     (34)            (75)
           Net amortization of premiums and accretion of discounts                122              60
           Gain on sale of loans                                                 (467)           (586)
           Gain on sale of securities available for sale                          (17)              -
           Originations of loans held for sale                                (20,076)        (36,255)
           Proceeds from sale of loans                                         28,956          36,841
           Gain on sale of other real estate owned                                (18)              -
           Changes in:
                Accrued interest receivable                                       206             343
                Other assets                                                     (126)           (151)
                Accrued interest payable                                          (83)            369
                Prepayments by borrowers for taxes and insurance                  192             (24)
                Other liabilities                                                (104)           (390)
                                                                              --------        --------

Net cash provided by operating activities                                       9,770           1,251
                                                                              --------        --------

Investing activities
      Net decrease in loans                                                     6,085          11,487
      Mortgage-backed securities principal repayments                             240              88
      Purchase of securities held to maturity                                    (406)              -
      Proceeds from maturity of securities held to maturity                       250               -
      Purchase of securities available for sale                                     -         (12,000)
      Proceeds from sale of securities available for sale                       4,559               -
      Proceeds from sale of real estate owned                                     470             757
      Purchase of bank-owned life insurance                                    (3,000)              -
      Increase in bank-owned life insurance                                       (53)              -
      Origination of servicing rights                                               -            (314)
      Proceeds from sale of office properties and equipment                        21               -
      Purchase of office properties and equipment                                (136)           (312)
                                                                              --------        --------

Net cash provided (absorbed) by investing activities                            8,030            (294)
                                                                              --------        --------

Financing activities
      Net increase (decrease) in deposits                                     (22,764)         10,244
      Proceeds from FHLB advances                                              35,000          31,000
      Repayment of FHLB advances                                              (27,000)        (41,000)
      Proceeds from issuance of common stock                                        8               -
      Principal payments on bonds payable, including unapplied payments          (228)            (56)
                                                                              --------        --------

Net cash provided (absorbed) by financing activities                          (14,984)            188
                                                                              --------        --------

Increase in cash and cash equivalents                                           2,816           1,145

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

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

                                       6
<PAGE>

                         GUARANTY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            For the Three and Six Months Ended June 30, 2002 and 2001
                                   (unaudited)


Note 1  Principles of Presentation

The  accompanying   consolidated  financial  statements  of  Guaranty  Financial
Corporation  ("Guaranty")  have not been  audited  by  independent  accountants,
except for the balance sheet at December 31, 2001.  These  financial  statements
have been prepared in accordance  with the  regulations  of the  Securities  and
Exchange Commission in regard to quarterly (interim) reporting.  In management's
opinion, the financial information presented reflects all adjustments, comprised
only of normal recurring  accruals that are necessary for a fair presentation of
the  results  for the  interim  periods.  Significant  accounting  policies  and
accounting  principles  have been  consistently  applied in both the interim and
annual  consolidated  financial  statements.   Certain  notes  and  the  related
information have been condensed or omitted from the interim financial statements
presented in this Quarterly  Report on Form 10-QSB.  Therefore,  these financial
statements  should be read in conjunction with Guaranty's  Annual Report on Form
10-KSB for the year ended  December 31, 2001.  The results for the three and six
months ended June 30, 2002, are not necessarily  indicative of future  financial
results.

The accompanying  consolidated  financial statements include Guaranty's accounts
and its wholly-owned  subsidiaries,  Guaranty Capital Trust I and Guaranty Bank,
and Guaranty Bank's wholly-owned  subsidiaries,  GMSC, Inc., which was organized
as a financing  subsidiary,  and  Guaranty  Investments  Corporation,  which was
organized to sell non-deposit  investment  products.  All material  intercompany
accounts and transactions have been eliminated in consolidation.

Amounts in the year 2001 financial  statements have been reclassified to conform
to  the  year  2002  presentation.  These  reclassifications  had no  effect  on
previously reported net income.

Note 2  Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Note 3  Earnings Per Share

Basic earnings per share is based on net income divided by the weighted  average
number of common  shares  outstanding  during the period.  Diluted  earnings per
share shows the dilutive effect of additional common shares issuable under stock
option plans.  The basic and diluted earnings per share for the three months and
six months ended June 30, 2002 and 2001,  have been  determined  by dividing net
income by the  weighted  average  number of shares of common  stock  outstanding
during these periods.  The following table indicates the weighted average shares
outstanding for each period.


                              June 30,              June 30,
                                2002                  2001
                          -----------------     ------------------

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

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


                                       7
<PAGE>

Note 4  Loans

The loan portfolio is comprised of the following:

                                             June 30,         December 31,
                                               2002               2001
                                         -----------------   ----------------
                                                     (In thousands)

Mortgage loans:
  Residential                                   $  27,550          $  39,864
  Commercial                                        9,731             16,277
  Construction and land loans                      37,941             36,307
                                         -----------------   ----------------
  Total real estate loans                          75,222             92,448
Commercial business loans                          67,347             66,603
Consumer loans                                     22,746             20,973
                                         -----------------   ----------------
  Total loans receivable                          165,315            180,024
Adjustments:
  Allowance for losses                             (2,517)            (2,512)
  Deferred costs                                       85                 67
                                         -----------------   ----------------
Total loans receivable, net                     $ 162,883          $ 177,579
                                         =================   ================



Note 5  Allowance for Loan Loss

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

                                           June 30,           December 31,
                                             2002                 2001
                                         ----------------    -----------------
                                                    (In thousands)

Balance at January 1                             $ 2,512              $ 2,396
Provision charged to operating expense                50                  333
Recoveries added to the reserve                        3                    9
Loans charged off                                    (48)                (226)
                                         ----------------    -----------------
Balance at the end of the period                 $ 2,517              $ 2,512
                                         ================    =================



                                       8

<PAGE>

Note 6  Investments

The investment portfolio is comprised of the following:

                                             June 30,         December 31,
                                              2002                2001
                                         ---------------    ---------------
                                           In thousands)

Held to maturity:
    Mortgage-backed securities               $      480        $       720
    U.S. Government obligations                     403                250

Available for sale:
    Corporate Bonds                               8,593             12,597
    U.S. Government obligations                   8,033              7,970

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

                                             $   19,481        $    23,509
                                         ===============    ===============



                                       9
<PAGE>

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


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

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

Analysis of Financial Condition

Total assets  decreased  6.1% to $211.5  million at June 30,  2002,  from $225.2
million at December 31, 2001. Cash and cash  equivalents  increased $2.9 million
or 22.6%,  to $15.3 million at June 30, 2002, from $12.4 million at December 31,
2001.  Net loans were  $162.9  million  at June 30,  2002,  a decrease  of $14.7
million,  or 8.3%, from net loans of $177.6 million at December 31, 2001.  Total
deposits at June 30, 2002,  were $177.9  million  compared to $200.6  million at
December 31, 2001. FHLB borrowings were $9.0 million at June 30, 2002,  compared
to $1.0  million at December 31, 2001.  Total  stockholders'  equity at June 30,
2002,  increased by $1.2 million to $17.3 million from $16.1 million at December
31, 2001.

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

Loans

During  the  first six  months  of 2002,  Guaranty  continued  to  strategically
reposition its loan portfolio.  Net loans receivable decreased by 8.3% to $162.9
million at June 30, 2002,  from $177.6 million at December 31, 2001. This change
was primarily  attributable to a $12.3 million reduction in residential mortgage
loans and a $6.5 million reduction in commercial  mortgage loans. During the six
months ended June 30, 2002,  Guaranty  originated  $20.1 million in  residential
mortgage  loans and sold $28.5  million  in  residential  mortgage  loans in the
secondary market.  Residential mortgage loans held for sale were $1.7 million at
June 30, 2002,  down from $14.3 million at December 31, 2001. All other segments
of the loan portfolio were relatively  constant  through the first six months of
2002.


Investments

Total investments  declined by 17.0% to $19.5 million at June 30, 2002, compared
to $23.5  million at December 31,  2001.  The majority of this change was due to
the  sale  of  approximately  $4.0  million  in  corporate  bonds  for a gain of
approximately $17,000.

                                       10
<PAGE>

Real Estate Owned

Real estate  owned  decreased  to $418,000 at June 30,  2002,  from  $764,000 at
December 31, 2001.  The decline was  primarily  due to the sale of a residential
property  during the period.  No material losses are anticipated on the ultimate
sale of the remaining properties.

Office Properties and Equipment

Guaranty's  investment  in office  properties  and  equipment  decreased to $7.9
million at June 30, 2002,  from $8.1 million at December 31, 2001. This decrease
was primarily due to depreciation of existing assets.


Other Assets

Other assets  increased to $4.5 million at June 30, 2002,  primarily  due to the
purchase of $3.0 million of bank owned life insurance.

Deposits

Deposits were $177.9 million at June 30, 2002, a decrease of $22.7  million,  or
11.3%,  from total  deposits of $200.6  million at  December  31,  2001.  Demand
accounts  increased  by 11.6% to $53.1  million  from $47.6  million  during the
current year as Guaranty has  continued to reposition  its deposit  funding mix.
This increase represents Guaranty's continued emphasis on providing full service
banking  relationships to its customers.  Certificates of deposit comprise 50.4%
of total deposits at June 30, 2002, compared to 58.7% at December 31, 2001.

FHLB Borrowings

Guaranty's  borrowings from the Federal Home Loan Bank ("FHLB") at June 30, 2002
increased to $9.0  million from $1.0 million at December 31, 2001.  Guaranty was
able to reduce its cost on  certificates of deposit by increasing its borrowings
from the FHLB. At June 30, 2002, Guaranty's available but unused borrowings with
the FHLB were approximately $10.6 million.

Stockholders' Equity

Stockholders'  equity at June 30, 2002,  increased by 7.8% to $17.3 million from
$16.1  million at December 31, 2001.  The primary  factors for the increase were
the year to date net income of $834,000, $8,000 related to the issuance of 1,050
shares for the 2002 annual  retainer for outside  directors,  and an increase in
the mark to market  gain  adjustment  (after  the  effect  of  income  taxes) of
Guaranty's available for sale investments by approximately $407,000.

                                       11
<PAGE>

Results of Operations

Net Income

Guaranty  reported net income of $428,000  ($.22 per share) for the three months
ended June 30, 2002,  compared  with a net income of $7,000 ($.00 per share) for
the three  months  ended  June 30,  2001.  The  increase  in the net  income was
primarily  due to  the  combination  of  higher  net  interest  income,  reduced
operating  expenses and a lower  provision for loan loss. Net income of $834,000
for the six months  ended June 30,  2002 was an  improvement  over the  $175,000
reported for the same period a year ago for the same reasons.

Net Interest Income


Net interest income for the quarter increased by 20.7% to $2.2 million from $1.8
million for the same quarter of the previous year. The continued  decline in the
cost of interest  bearing  deposits had a positive  impact on the  Company's net
interest  margin.  Reduced  interest  expense  more than offset the  decrease in
interest   income  that  resulted  from  the  reduction  in  average  loans  and
investments held for the respective  periods.  The net interest margin increased
to 4.53% for the three  months  ended June 30,  2002,  compared to 3.13% for the
same period a year ago. During the most recent quarter, the cost of certificates
of deposit  declined to 3.40%  compared to 5.95% for the same period a year ago.
Total cost of  interest  bearing  deposits  declined to 2.38% from 4.99% for the
same  quarterly  periods.  Interest  rates  on  earning  assets  did not fall as
dramatically.  The yield on earning  assets for the three  months ended June 30,
2002,  was 6.84%  compared with 7.86% for the same period a year ago. The effect
of the increase in the Company's net interest  margin more than offset the lower
amount of the Company's  loan and  investment  portfolios in the second  quarter
2002  compared to the same period a year ago.  For the six months ended June 30,
2002, Guaranty's net interest income increased by 7.1% to $4.3 million from $4.0
million for the same  period a year ago.  The  following  table  summarizes  the
factors determining net interest income (dollars in thousands).

<TABLE>
<CAPTION>

                                          Three Months        Three Months        Six Months         Six Months
                                              Ended              Ended              Ended              Ended
                                          June 30, 2002      June 30, 2001       June 30, 2002      June 30, 2001
                                        ------------------  -----------------   -----------------  -----------------

<S>                                         <C>                 <C>                 <C>                <C>
    Average Interest Earning Assets         $194,151            $233,052            $197,627           $232,945

             Average Yield                    6.84%              7.86%               6.92%              8.37%

  Average Interest Bearing Liabilities      $172,811            $216,690            $176,564           $217,938

              Average Cost                    2.60%              5.10%               2.87%              5.26%

            Interest Spread                   4.24%              2.77%               4.06%              3.12%

            Interest Margin                   4.53%              3.13%               4.36%              3.46%


</TABLE>

                                       12

<PAGE>

Provision for Loan Losses

Guaranty  recorded a provision of $25,000 and $75,000 for the three months ended
June 30, 2002 and 2001,  respectively.  The  decrease in the  provision  for the
current year  resulted  from the decrease in the size of the loan  portfolio and
the  increased  level of the  allowance for loan losses as a percentage of total
loans.  For the six months ended June 30, 2002,  Guaranty's  loan loss provision
was $50,000 compared with $225,000 for the same period a year ago. The allowance
for loan losses is maintained at a level considered by management to be adequate
to  absorb  future  loan  losses  currently  inherent  in  the  loan  portfolio.
Management's  assessment of the adequacy of the allowance is based upon type and
volume  of  the  loan  portfolio,  past  loan  loss  experience,   existing  and
anticipated  economic  conditions,   and  other  factors  that  deserve  current
recognition  in estimating  future loan losses.  Management's  assessment of the
adequacy of the allowance is subject to evaluation  and adjustment by Guaranty's
regulators.

There were loan charge-offs for the three months ended June 30, 2002 of $48,000,
compared to $9,000 for the same period a year ago.  At June 30,  2002,  Guaranty
had  $119,000  of loans that were 90 days or more past due.  Of this  total,  no
loans were  considered to be  non-accrual.  At June 30, 2002,  the allowance for
loan losses was $2.5 million or 1.52% of total loans.  Management  believes that
the allowance  for loan losses is adequate to cover loan losses  inherent in the
loan portfolio at June 30, 2002, and that loans  classified as special  mention,
substandard,   doubtful  and  loss  have  been  adequately  reserved.   Although
management  believes  that it uses the best  information  available to make such
determinations,  future  adjustments  to the  allowance  for loan  losses may be
necessary,  and net income could be  significantly  affected,  if  circumstances
differ substantially from assumptions used in making the initial determinations.

Non-interest Income

Non-interest  income was  $545,000  for the three  months  ended June 30,  2002,
compared with $600,000 for the same period a year ago. This change was primarily
due to a decrease in  mortgage  banking  income to $153,000  for the most recent
quarter  compared to $295,000 for the same period a year ago. For the six months
ended June 30, 2002, Guaranty's  non-interest income was $1.2 million, a $21,000
increase  over the same period a year ago.  During  2001,  Guaranty  changed its
mortgage  banking  business  model to sell all  residential  fixed rate mortgage
loans on a servicing  released  basis.  In addition,  Guaranty sold its mortgage
loan servicing rights related to mortgage loans serviced for others. The revised
mortgage  banking  business model  eliminates the secondary market interest rate
risk through simultaneously locking a mortgage loan rate with the borrower and a
correspondent  investor  at the same time.  The 2001 sale of  existing  mortgage
servicing  rights  and the  continued  sale of  mortgage  loans  on a  servicing
released basis  eliminated  the valuation  volatility  associated  with retained
servicing rights. The results for the three months ended June 30, 2001, included
a $35,000 gain in the value of the mortgage loan servicing rights.

Fees on deposit  accounts  decreased  by 7.4% to  $189,000  for the most  recent
quarter  compared to $204,000 for the same period a year ago.  Investment  sales
commissions  decreased  to $38,000  for the three  months  ended June 30,  2002,
compared to $59,000 for the same period a year ago due to reduced sales volume.

                                       13
<PAGE>

Non-interest Expense

Non-interest  expense was $2.1  million for the quarter  ended June 30,  2002, a
$239,000  decrease over the amount  reported for the same period last year.  The
decrease is primarily attributable to the elimination of personnel and occupancy
expenses due to the sale of a retail  banking  office in the  suburban  Richmond
market,  the  right  sizing of  administrative  function  including  information
technology and mortgage banking administration, and limited marketing expense in
the most recent quarter.  The expenses  related to the suburban  Richmond retail
banking  office were included in the 2001 financial  statements  until July 2001
when the sale transaction was consummated. Marketing expense was $29,000 for the
most  recent  quarter  compared  to  $54,000  for the same  period  a year  ago.
Marketing  expense should increase  throughout the remainder of 2002 as activity
increases.  For the six months  ended  June 30,  2002,  Guaranty's  non-interest
expense was $4.2 million, a 10.3% decrease from $4.7 million for the same period
a year ago.


Income Tax Expense

Guaranty  recognized  income tax expense of $193,000  for the three months ended
June 30,  2002,  compared to income tax expense of $4,000 for the same period in
2001.  The effective tax rate for the most recent  quarter was 31.1% compared to
33.8% for the same period a year ago. The lower  effective tax rate for the most
recent  quarter  was due to an increase  in  non-taxable  income from bank owned
insurance.  The net increase in income tax expense  between periods was a result
of increases in the level of taxable income.


Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either
through the sale of existing  assets or through the  acquisition  of  additional
funds through  asset and liability  management.  Guaranty's  primary  sources of
funds are deposits,  borrowings and amortization,  prepayments and maturities of
outstanding loans and securities. While scheduled payments from the amortization
of loans and  securities are relatively  predictable  sources of funds,  deposit
flows and loan  prepayments  are greatly  influenced by general  interest rates,
economic  conditions  and  competition.  Excess  funds are invested in overnight
deposits to fund cash requirements experienced in the normal course of business.
Guaranty has been able to generate  sufficient cash through its deposits as well
as through its borrowings.

Guaranty  uses its sources of funds  primarily  to meet its  on-going  operating
expenses,  to pay deposit  withdrawals and to fund loan commitments.  During the
most  recent  quarter,  total  loans  declined  by  approximately  $700,000  and
certificates of deposit declined by approximately $13.6 million. These decreases
were a result of strategic  decisions.  Guaranty  has been very  targeted in its
lending  approach and has desired to reduce its funding reliance on certificates
of deposit.  At June 30, 2002, total approved loan commitments  outstanding were
approximately $6.0 million. At the same date,  commitments under unused lines of
credit were  approximately  $55.8 million.  Certificates of deposit scheduled to
mature in one year or less at June 30,  2002,  were  $80.0  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.

                                       14
<PAGE>

The  reduction in total assets has  positively  impacted  Guaranty's  regulatory
capital ratios.  At June 30, 2002,  regulatory  capital was in excess of amounts
required by Federal  Reserve  regulations to be considered  well  capitalized as
shown in the following table (dollars in thousands):

<TABLE>
<CAPTION>

                                    Actual         Actual          Amount         Percent         Excess
                                    Amount       Percentage       Required       Required         Amount
                                 ------------   ------------    ------------   ------------    ------------
<S>                                 <C>             <C>          <C>              <C>           <C>
     Leverage Ratio                 $ 23,489        11.01%       $  8,533         4.00%         $  14,956

     Tier 1 Risk Based Capital        23,489        13.56%          6,929         4.00%            16,560

     Total Risk Based Capital         25,797        14.89%         13,858         8.00%            11,939

</TABLE>


Regulatory Issues

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

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


Forward Looking Statements

Certain  statements  in  this  quarterly  report  on  Form  10-QSB  may  include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are generally identified by the use
of  words  such  as  "believe",  "expect",  "anticipate",  "should",  "planned",
"estimated",  and "potential".  These statements are based on Guaranty's current
expectations.  A variety of factors  could cause  Guaranty's  actual  results to
differ materially from the anticipated  results or other expectations  expressed
in such forward-looking  statements. The risks and uncertainties that may affect
the operations,  performance,  development,  and results of Guaranty's  business
include   interest  rate   movements,   competition   from  both  financial  and
non-financial  institutions,  the timing and  occurrence (or  nonoccurrence)  of
transactions and events that may be subject to circumstances  beyond  Guaranty's
control, and general economic conditions.



                                       15
<PAGE>

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

Item 1            Legal Proceedings
                           Not Applicable

Item 2            Changes in Securities 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

                  On  April  25,  2002,   the   Company's   Annual   Meeting  of
                  Shareholders was held to elect three directors to serve on its
                  Board of Directors for terms of three years each.  The results
                  of the votes were as follows:


                                                           For         Withheld
                                                           ---         --------

                           William E. Doyle, Jr.        1,738,435       57,508
                           Jason I. Eckford, Jr.        1,738,435       57,508
                           Harry N. Lewis               1,738,263       57,680


Item 5            Other Information
                           Not Applicable

Item 6            Exhibits and Reports on Form 8-K

                  (a)  Exhibits

                            99.1        Statement of Chief Executive Officer and
                                        and  Chief Financial Officer Pursuant to
                                        18 USC ss 1350.

                  (b)  Reports on Form 8-K - None


                                       16
<PAGE>

                                   SIGNATURES

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

                                 GUARANTY FINANCIAL CORPORATION



Date:  August 13, 2002     By:    /s/ William E. Doyle, Jr.
                              --------------------------------------------------
                               William E. Doyle, Jr.
                               President and Chief Executive Officer



Date:  August 13, 2002     By:    /s/ Thomas F. Crump
                              --------------------------------------------------
                               Thomas F. Crump
                               Senior Vice President and Chief Financial Officer