----

----

| T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURTIES EXCHANGE ACT OF 1934 |
|---|----------------------------------------------------------------------------------------|

|   | For the quarterly period ended March 31, 2010 |
|--------|-----------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
|---|-----------------------------------------------------------------------|

|   | For the transition period from _____________________ to __________________________ |
|--------|------------------------------------------------------------------------------------|

| North Carolina                                                 |   | 56-2181423                        |
|----------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification No.) |

----

----

----

| INDEX                                                            |   | Page   |
|------------------------------------------------------------------|--------|--------|
|                                                             |   |   |
| Part I – FINANCIAL INFORMATION                             |   |   |
|                                                             |   |   |
| Financial Statements:                                            |   |   |
| Consolidated Balance Sheets                                      |   |   |
| March 31, 2010 and December 31, 2009                             |   | 3      |
|                                                             |   |   |
| Consolidated Statements of Operations                            |   |   |
| Three Months Ended March 31, 2010 and 2009                       |   | 4      |
|                                                             |   |   |
| Consolidated Statements of Comprehensive Income                  |   |   |
| Three Months Ended March 31, 2010 and 2009                       |   | 5      |
|                                                             |   |   |
| Consolidated Statements of Changes in Shareholders’ Equity |   |   |
| Three Months Ended March 31, 2010 and 2009                       |   | 6      |
|                                                             |   |   |
| Consolidated Statements of Cash Flows                            |   |   |
| Three Months Ended March 31, 2010 and 2009                       |   | 7      |
|                                                             |   |   |
| Notes to Consolidated Financial Statements                       |   | 8      |
|                                                             |   |   |
| Item 2 - Management’s Discussion and Analysis              |   |   |
| Financial Condition and Results of Operations                    |   | 16     |
| Item 4T - Controls and Procedures                                |   | 29     |
|                                                             |   |   |
| Part II – OTHER INFORMATION                                |   |   |
|                                                             |   |   |
| Item 5 – Other Information                                 |   | 31     |
|                                                             |   |   |
| Item 6 - Exhibits                                                |   | 31     |
|                                                             |   |   |
| Signatures                                                       |   | 32     |

----

Index

| Part I. | FINANCIAL INFORMATION |
|---------|-----------------------|

| Item I. | Financial Statements |
|---------|----------------------|

Weststar 

|                                                                |   | March 31, |        |   | December 31, |   |
|---------------------------------------------------------------------|--------|-----------|-------------|--------|--------------|--------|
|                                                                |   | 2010      |        |   | 2009*        |   |
| ASSETS:                                                             |   |      |        |   |         |   |   |
| Cash and cash equivalents:                                          |   |      |        |   |         |   |   |
| Cash and due from banks                                             |   | $         | 5,511,421   |   |         | $      | 6,785,293 |   |
| Interest-bearing deposits                                           |   |      | 4,646,604   |   |         |   | 1,550,240 |   |
| Total cash and cash equivalents                                     |   |      | 10,158,025  |   |         |   | 8,335,533 |   |
| Investment securities – available for sale, at fair value     |   |      |        |   |         |   |   |   |
| (amortized cost of $23,627,690 and $24,613,580, at                  |   |      |        |   |         |   |   |   |
| March 31, 2010 and December 31, 2009, respectively)                 |   |      | 24,082,597  |   |         |   | 25,046,500 |   |
| Loans                                                               |   |      | 184,066,654 |   |         |   | 185,474,873 |   |
| Allowance for loan losses                                           |   |      | (3,514,083  | )      |         |   | (3,512,263 | ) |
| Net loans                                                           |   |      | 180,552,571 |   |         |   | 181,962,610 |   |
| Premises and equipment, net                                         |   |      | 2,798,881   |   |         |   | 2,415,933 |   |
| Accrued interest receivable                                         |   |      | 993,281     |   |         |   | 886,471 |   |
| Federal Home Loan Bank stock, at cost                               |   |      | 592,300     |   |         |   | 592,300 |   |
| Deferred income taxes                                               |   |      | 1,121,077   |   |         |   | 985,802 |   |
| Foreclosed properties                                               |   |      | 1,248,947   |   |         |   | 511,112 |   |
| Other assets                                                        |   |      | 2,918,888   |   |         |   | 3,019,479 |   |
|                                                                |   |      |        |   |         |   |   |   |
| TOTAL                                                               |   | $         | 224,466,567 |   |         | $      | 223,755,740 |   |
|                                                                |   |      |        |   |         |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY:                               |   |      |        |   |         |   |   |   |
| Liabilities:                                                        |   |      |        |   |         |   |   |   |
| Deposits:                                                           |   |      |        |   |         |   |   |   |
| Demand                                                              |   | $         | 23,451,457  |   |         | $      | 23,569,001 |   |
| NOW accounts                                                        |   |      | 43,968,351  |   |         |   | 43,591,452 |   |
| Money market accounts                                               |   |      | 28,175,631  |   |         |   | 26,442,360 |   |
| Savings                                                             |   |      | 3,036,645   |   |         |   | 2,890,582 |   |
| Time deposits of $100,000 or more                                   |   |      | 24,501,457  |   |         |   | 27,166,487 |   |
| Other time deposits                                                 |   |      | 74,375,021  |   |         |   | 73,462,859 |   |
| Total deposits                                                      |   |      | 197,508,562 |   |         |   | 197,122,741 |   |
| Short-term borrowings                                               |   |      | 745,391     |   |         |   | 4,374,673 |   |
| Accrued interest payable                                            |   |      | 335,307     |   |         |   | 372,356 |   |
| Other liabilities                                                   |   |      | 814,340     |   |         |   | 917,762 |   |
| Long-term debt                                                      |   |      | 8,124,000   |   |         |   | 4,124,000 |   |
| Total liabilities                                                   |   |      | 207,527,600 |   |         |   | 206,911,532 |   |
| COMMITMENTS AND CONTIGENCIES (Note 2)                               |   |      |        |   |         |   |   |   |
| SHAREHOLDERS' EQUITY:                                               |   |      |        |   |         |   |   |   |
| Preferred stock; authorized $1,000,000 shares;                      |   |      |        |   |         |   |   |   |
| no shares issued and outstanding                                    |   |      | -           |   |         |   | - |   |
| Common stock, $1 par value, authorized – 9,000,000 shares;    |   |      |        |   |         |   |   |   |
| outstanding shares– 2,167,517 and 2,167,517 at March 31, 2010 |   |      |        |   |         |   |   |   |
| and December 31, 2009, respectively                                 |   |      | 2,167,517   |   |         |   | 2,167,517 |   |
| Additional paid-in capital                                          |   |      | 6,269,404   |   |         |   | 6,269,404 |   |
| Retained earnings                                                   |   |      | 8,222,506   |   |         |   | 8,141,258 |   |
| Accumulated other comprehensive income                              |   |      | 279,540     |   |         |   | 266,029 |   |
| Total shareholders' equity                                          |   |      | 16,938,967  |   |         |   | 16,844,208 |   |
|                                                                |   |      |        |   |         |   |   |   |
| TOTAL                                                               |   | $         | 224,466,567 |   |         | $      | 223,755,740 |   |

----

Index

Weststar 

|                                            |   | Three Months    |      |
|-------------------------------------------------|--------|-----------------|-----------|
|                                            |   | Ended March 31, |      |
|                                            |   | 2010            |      |   | 2009 |   |
|                                            |   |            |      |   |   |   |
| INTEREST INCOME:                                |   |            |      |   |   |   |
| Interest and fees on loans                      |   | $               | 2,493,100 |   |   | $ | 2,791,106 |   |
| Federal funds sold                              |   |            | -         |   |   |   | 972 |   |
| Interest-bearing deposits                       |   |            | 2,478     |   |   |   | 66 |   |
| Investments:                                    |   |            |      |   |   |   |   |   |
| Taxable interest income                         |   |            | 158,333   |   |   |   | 179,882 |   |
| Non-taxable interest income                     |   |            | 105,609   |   |   |   | 91,636 |   |
| Corporate dividends                             |   |            | 403       |   |   |   | - |   |
| Total interest income                           |   |            | 2,759,923 |   |   |   | 3,063,662 |   |
| INTEREST EXPENSE:                               |   |            |      |   |   |   |   |   |
| Time deposits of $100,000 or more               |   |            | 128,481   |   |   |   | 228,529 |   |
| Other time and savings deposits                 |   |            | 630,593   |   |   |   | 863,781 |   |
| Short-term borrowings                           |   |            | 44,993    |   |   |   | 4,785 |   |
| Long-term debt                                  |   |            | 36,698    |   |   |   | 95,978 |   |
| Total interest expense                          |   |            | 840,765   |   |   |   | 1,193,073 |   |
|                                            |   |            |      |   |   |   |   |   |
| NET INTEREST INCOME                             |   |            | 1,919,158 |   |   |   | 1,870,589 |   |
| PROVISION FOR LOAN LOSSES                       |   |            | 438,035   |   |   |   | 254,580 |   |
| NET INTEREST INCOME AFTER PROVISION             |   |            |      |   |   |   |   |   |
| FOR LOAN LOSSES                                 |   |            | 1,481,123 |   |   |   | 1,616,009 |   |
|                                            |   |            |      |   |   |   |   |   |
| OTHER INCOME:                                   |   |            |      |   |   |   |   |   |
| Service charges on deposit accounts             |   |            | 244,225   |   |   |   | 264,655 |   |
| Other service fees and commissions              |   |            | 141,300   |   |   |   | 133,680 |   |
| Other                                           |   |            | 7,447     |   |   |   | 9,872 |   |
| Total other income                              |   |            | 392,972   |   |   |   | 408,207 |   |
|                                            |   |            |      |   |   |   |   |   |
| OTHER EXPENSES:                                 |   |            |      |   |   |   |   |   |
| Salaries and wages                              |   |            | 692,903   |   |   |   | 681,397 |   |
| Employee benefits                               |   |            | 122,464   |   |   |   | 131,275 |   |
| Occupancy expense, net                          |   |            | 101,641   |   |   |   | 185,053 |   |
| Equipment rentals, depreciation and maintenance |   |            | 95,669    |   |   |   | 98,722 |   |
| Supplies                                        |   |            | 66,672    |   |   |   | 64,273 |   |
| Professional fees                               |   |            | 132,107   |   |   |   | 77,258 |   |
| Data processing fees                            |   |            | 182,747   |   |   |   | 153,988 |   |
| FDIC insurance premiums                         |   |            | 84,794    |   |   |   | 72,404 |   |
| Audit, tax and accounting                       |   |            | 86,384    |   |   |   | 55,164 |   |
| Marketing                                       |   |            | 63,674    |   |   |   | 92,687 |   |
| Expense from foreclosed properties              |   |            | 15,588    |   |   |   | - |   |
| Other                                           |   |            | 161,795   |   |   |   | 83,667 |   |
| Total other expenses                            |   |            | 1,806,438 |   |   |   | 1,695,888 |   |
| INCOME BEFORE INCOME TAXES                      |   |            | 67,657    |   |   |   | 328,328 |   |
| INCOME TAX PROVISION (BENEFIT)                  |   |            | (13,591   | ) |   |   | 104,385 |   |
| NET INCOME                                      |   | $               | 81,248    |   |   | $ | 223,943 |   |
| EARNINGS PER SHARE:                             |   |            |      |   |   |   |   |   |
| Basic                                           |   | $               | 0.04      |   |   | $ | 0.10 |   |
| Diluted                                         |   | $               | 0.04      |   |   | $ | 0.10 |   |

----

Index

Weststar 

|                                             |   | Three Months    |   |
|--------------------------------------------------|--------|-----------------|--------|
|                                             |   | Ended March 31, |   |
|                                             |   | 2010            |   |   | 2009 |   |
|                                             |   |            |   |   |   |   |
| NET INCOME                                       |   | $               | 81,248 |   |   | $ | 223,943 |   |
| OTHER COMPREHENSIVE INCOME                       |   |            |   |   |   |   |   |   |
| Unrealized holding gains on                      |   |            |   |   |   |   |   |   |
| securities available                             |   |            |   |   |   |   |   |   |
| for sale                                         |   |            | 21,987 |   |   |   | 250,663 |   |
| Tax effect                                       |   |            | (8,476 | ) |   |   | (96,630 | ) |
| Unrealized holding gains on securities available |   |            |   |   |   |   |   |   |
| for sale, net of tax                             |   |            | 13,511 |   |   |   | 154,033 |   |
|                                             |   |            |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME, NET OF TAX           |   |            | 13,511 |   |   |   | 154,033 |   |
| COMPREHENSIVE INCOME                             |   | $               | 94,759 |   |   | $ | 377,976 |   |

----

Index

Weststar 

|                              |   |         |      |   |    |   |      |       |   |   |          |   |   | Accumulated         |      |   |   |   |
|-----------------------------------|--------|--------------|-----------|--------|---------|--------|-----------|------------|--------|--------|---------------|--------|--------|---------------------|-----------|--------|--------|--------|
|                              |   |         |      |   |    |   |      | Additional |   |   |          |   |   | Other               |      |   | Total  |   |
|                              |   | Common Stock |      |   | Paid-In |   |      | Retained   |   |   | Comprehensive |   |   | Shareholders’ |      |
|                              |   | Shares       |      |   | Amount  |   |      | Capital    |   |   | Earnings      |   |   | Income              |      |   | Equity |   |
|                              |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |
| BALANCE, DECEMBER 31, 2008        |   |         | 2,125,747 |   |    | $      | 2,125,747 |       |   | $      | 6,152,868     |   |   | $                   | 8,214,480 |   |   | $      | 17,476 |   |   | $ | 16,510,571 |   |
|                              |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| Net unrealized gains on           |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| securities available for sale     |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   | 154,033 |   |   |   | 154,033 |   |
| Issuance of common stock pursuant |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| to the exercise of stock options  |   |         | 20,385    |   |    |   | 20,385    |       |   |   | 46,070        |   |   |                |      |   |   |   |   |   |   |   | 66,455 |   |
| Tax benefit on exercise of non-   |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| qualified stock options           |   |         |      |   |    |   |      |       |   |   | 16,581        |   |   |                |      |   |   |   |   |   |   |   | 16,581 |   |
| Net income                        |   |         |      |   |    |   |      |       |   |   |          |   |   |                | 223,943   |   |   |   |   |   |   |   | 223,943 |   |
|                              |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| BALANCE MARCH 31, 2009            |   |         | 2,146,132 |   |    | $      | 2,146,132 |       |   | $      | 6,215,519     |   |   | $                   | 8,438,423 |   |   | $      | 171,509 |   |   | $ | 16,971,583 |   |
|                              |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| BALANCE, DECEMBER 31, 2009        |   |         | 2,167,517 |   |    | $      | 2,167,517 |       |   | $      | 6,269,404     |   |   | $                   | 8,141,258 |   |   | $      | 266,029 |   |   | $ | 16,844,208 |   |
|                              |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| Net unrealized gains on           |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| securities available for sale     |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   | 13,511 |   |   |   | 13,511 |   |
| Net income                        |   |         |      |   |    |   |      |       |   |   |          |   |   |                | 81,248    |   |   |   |   |   |   |   | 81,248 |   |
|                              |   |         |      |   |    |   |      |       |   |   |          |   |   |                |      |   |   |   |   |   |   |   |   |   |
| BALANCE MARCH 31, 2010            |   |         | 2,167,517 |   |    | $      | 2,167,517 |       |   | $      | 6,269,404     |   |   | $                   | 8,222,506 |   |   | $      | 279,540 |   |   | $ | 16,938,967 |   |

----

Index

Weststar 

|                                                                              |   | 2010   |       |   | 2009   |   |
|-----------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                             |   |   |       |   |   |   |
| Net income                                                                        |   | $      | 81,248     |   |   | $      | 223,943 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |   |       |   |   |   |   |   |
| Depreciation                                                                      |   |   | 81,046     |   |   |   | 86,835 |   |
| Provision for loan losses                                                         |   |   | 438,035    |   |   |   | 254,580 |   |
| Premium amortization and discount accretion, net                                  |   |   | 3,041      |   |   |   | (5,536 | ) |
| Deferred income tax provision                                                     |   |   | (143,751   | )      |   |   | (84,905 | ) |
| (Increase) decrease in accrued interest receivable                                |   |   | (106,810   | )      |   |   | 70,559 |   |
| (Increase) decrease in other assets                                               |   |   | 119,811    |   |   |   | (62,993 | ) |
| Decrease in accrued interest payable                                              |   |   | (37,049    | )      |   |   | (31,894 | ) |
| Increase (decrease) in other liabilities                                          |   |   | (103,422   | )      |   |   | 527,964 |   |
| Net cash provided by operating activities                                         |   |   | 332,149    |   |   |   | 978,553 |   |
|                                                                              |   |   |       |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                             |   |   |       |   |   |   |   |   |
| Purchases of securities available for sale                                        |   |   | -          |   |   |   | (495,880 | ) |
| Maturities of securities available for sale                                       |   |   | 982,849    |   |   |   | 1,012,469 |   |
| Net (increase) decrease in loans                                                  |   |   | 214,949    |   |   |   | (3,873,657 | ) |
| FHLB stock purchase                                                               |   |   | -          |   |   |   | (54,200 | ) |
| Additions to premises and equipment                                               |   |   | (463,994   | )      |   |   | (47,040 | ) |
| Net cash provided in (used) by in investing activities                            |   |   | 733,804    |   |   |   | (3,458,308 | ) |
|                                                                              |   |   |       |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                             |   |   |       |   |   |   |   |   |
| Net increase in demand deposits, NOW accounts,                                    |   |   |       |   |   |   |   |   |
| MMDA and savings accounts                                                         |   |   | 2,138,689  |   |   |   | 5,109,693 |   |
| Net increase (decrease) in time deposits                                          |   |   | (1,752,868 | )      |   |   | 10,530,082 |   |
| Issuance of common stock                                                          |   |   | -          |   |   |   | 66,455 |   |
| Repayment of FHLB advances                                                        |   |   | (4,000,000 | )      |   |   | (2,110,000 | ) |
| Net increase (decrease) in overnight borrowings                                   |   |   | 370,718    |   |   |   | (4,253,489 | ) |
| Proceeds from FHLB advances                                                       |   |   | 4,000,000  |   |   |   | 1,110,000 |   |
| Tax benefit from non-qualified stock options                                      |   |   | -          |   |   |   | 16,581 |   |
| Net cash provided by financing activities                                         |   |   | 756,539    |   |   |   | 10,469,322 |   |
|                                                                              |   |   |       |   |   |   |   |   |
| NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |   |   | 1,822,492  |   |   |   | 7,989,567 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                  |   |   | 8,335,533  |   |   |   | 4,419,778 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        |   | $      | 10,158,025 |   |   | $      | 12,409,345 |   |

----

Index

WESTSTAR 

| 1. | Weststar Financial Services Corporation (the “Company”) is a holding company with one subsidiary, The Bank of Asheville (the “Bank”).  The Bank is a state chartered commercial bank, which was incorporated in North Carolina on October 29, 1997.  The Bank provides consumer and commercial banking services in Buncombe County and surrounding area.  Common shares of The Bank of Asheville were exchanged for common shares of Weststar Financial Services Corporation on April 29, 2000.  Weststar Financial Services Corporation formed Weststar Financial Services Corporation I (the “Trust”) during October 2003 in order to facilitate the issuance of trust preferred securities.  The Trust is a statutory business trust formed under the laws of the state of Delaware, of which all common securities are owned by Weststar Financial Services Corporation. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | “Accounting for Transfers of Financial Assets”.  The Company adopted the new accounting standard governing the recognition and presentation of transfers of financial assets. This standard eliminates the concept of a qualifying special purpose entity (QSPE), changes the requirements for de-recognizing financial assets, and requires additional disclosures, including information about continuing exposure to risks related to transferred financial assets.  The effective date is for financial asset transfers occurring after the beginning of fiscal years beginning after November 15, 2009.  The disclosure requirements must be applied to transfers that occurred before and after the effective date. The adoption of this standard did not have a material effect on the Company’s financial position and results of operations. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| 3. | In the normal course of business there are various commitments and contingent liabilities such as commitments to extend credit, which are not reflected on the financial statements.  The unused portions of commitments to extend credit were $30,219,353 and $26,179,686 at March 31, 2010 and December 31, 2009, respectively. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. | Basic and diluted net income per share have been computed by dividing net income for each period by the weighted average number of shares of common stock outstanding during each period. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| For the Period Ended March 31,       |   | 2010   |      |   | 2009   |   |
|--------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                 |   |   |      |   |   |   |
| Weighted average number of common    |   |   |      |   |   |   |
| shares used in computing basic       |   |   |      |   |   |   |
| net income per share                 |   |   | 2,167,517 |   |   |   | 2,136,837 |   |
| Effect of dilutive stock options     |   |   | 14,492    |   |   |   | 114,388 |   |
| Weighted average number of common    |   |   |      |   |   |   |   |   |
| shares and dilutive potential common |   |   |      |   |   |   |   |   |
| shares used in computing diluted net |   |   |      |   |   |   |   |   |
| income per common share              |   |   | 2,182,009 |   |   |   | 2,251,225 |   |

| 4. | The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2010 and December 31, 2009.  These fair values estimates are based on relevant market information and information about the financial instruments.  Fair value estimates are intended to represent the price an asset could be sold at or the price a liability could be settled for.  However, given there is no active market or observable market transaction for many of the Company’s financial instruments, the Company has made estimates of many of these fair values, which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimated values. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|                           |   | March 31, 2010  |    |   | December 31, 2009    |   |
|--------------------------------|--------|-----------------|---------|--------|----------------------|--------|
|                           |   | Carrying amount |    |   | Estimated fair value |   |   | Carrying amount |   |   | Estimated fair value |   |
|                           |   |            |    |   | (In thousands)       |   |   |   |   |
| Assets:                        |   |            |    |   |                 |   |   |   |   |   |   |   |
| Cash and cash equivalents      |   | $               | 10,158  |   |                 | $      | 10,158 |   |   | $ | 8,336 |   |   | $ | 8,336 |   |
| Investment securities          |   |            | 24,083  |   |                 |   | 24,083 |   |   |   | 25,047 |   |   |   | 25,047 |   |
| Federal Home Loan Bank stock   |   |            | 592     |   |                 |   | 592 |   |   |   | 592 |   |   |   | 592 |   |
| Loans, net                     |   |            | 180,553 |   |                 |   | 181,076 |   |   |   | 181,963 |   |   |   | 183,328 |   |
| Interest receivable            |   |            | 993     |   |                 |   | 993 |   |   |   | 886 |   |   |   | 886 |   |
| Bank owned life insurance      |   |            | 376     |   |                 |   | 376 |   |   |   | 361 |   |   |   | 361 |   |
|                           |   |            |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                   |   |            |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits, NOW accounts, |   |            |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| money market accounts, savings |   |            | 98,633  |   |                 |   | 98,633 |   |   |   | 96,493 |   |   |   | 96,493 |   |
| Time deposits                  |   |            | 98,876  |   |                 |   | 99,075 |   |   |   | 100,629 |   |   |   | 100,799 |   |
| Short-term borrowings          |   |            | 745     |   |                 |   | 745 |   |   |   | 4,375 |   |   |   | 4,417 |   |
| Interest payable               |   |            | 335     |   |                 |   | 335 |   |   |   | 372 |   |   |   | 372 |   |
| Long-term debt                 |   |            | 8,124   |   |                 |   | 8,030 |   |   |   | 4,124 |   |   |   | 4,039 |   |

----

Index

----

Index

|               |   | Fair Value Measurements at March 31, 2010                          |   |
|--------------------|--------|--------------------------------------------------------------------|--------|
| Description        |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Assets/Liabilitiesat Fair Value |   |
|               |   |                                                               |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale |   |                                                               |   |   |   |   |   |   |   |   |   |   |
| securities         |   |                                                               | -      |   |   | $ | 24,082,597 |   |   |   | - |   |   | $ | 24,082,597 |   |
|               |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               |   | Fair Value Measurements at December 31, 2009                       |   |
| Available-for-sale |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities         |   |                                                               | -      |   |   | $ | 25,046,500 |   |   |   | - |   |   | $ | 25,046,500 |   |

|                  |   | Fair Value Measurements at March 31, 2010                          |   |
|-----------------------|--------|--------------------------------------------------------------------|--------|
| Description           |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Assets/Liabilitiesat Fair Value |   |
|                  |   |                                                               |   |   |   |   |   |   |   |   |   |   |
| Impaired Loans        |   |                                                               | -      |   |   | $ | 11,393,066 |   |   | $ | 383,389 |   |   | $ | 11,776,455 |   |
| Foreclosed properties |   |                                                               | -      |   |   |   | 737,835 |   |   |   | 511,112 |   |   |   | 1,248,947 |   |
| Repossessions         |   |                                                               | -      |   |   |   | - |   |   |   | 19,220 |   |   |   | 19,220 |   |
|                  |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  |   | Fair Value Measurements at December 31, 2009                       |   |
|                  |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Description           |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Assets/Liabilitiesat Fair Value |   |
|                  |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired Loans        |   |                                                               | -      |   |   | $ | 5,820,701 |   |   | $ | 313,776 |   |   | $ | 6,134,477 |   |
| Foreclosed properties |   |                                                               | -      |   |   |   | - |   |   |   | 511,112 |   |   |   | 511,112 |   |

| 5. | INVESTMENT PORTFOLIO |
|----|----------------------|

----

Index

|                                 |   | Amortized cost |       |   | Gross unrealized gains |   |    | Gross unrealized losses |   |   | Fair value |   |
|--------------------------------------|--------|----------------|------------|--------|------------------------|--------|---------|-------------------------|--------|--------|------------|--------|
| Type and Maturity Group              |   |           |       |   |                   |   |    |                    |   |   |       |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |
| Residential mortgage-backed          |   |           |       |   |                   |   |    |                    |   |   |       |   |
| securities due -                     |   |           |       |   |                   |   |    |                    |   |   |       |   |
| Within 1 year                        |   | $              | 321,046    |   |                   | $      | 4,351   |                    |   | $      | -          |   |   | $ | 325,397 |   |
| Municipal bonds due –          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 year                        |   |           | 350,557    |   |                   |   | 8,308   |                    |   |   | -          |   |   |   | 358,865 |   |
| Total due within 1 year              |   |           | 671,603    |   |                   |   | 12,659  |                    |   |   | -          |   |   |   | 684,262 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| U.S. Government agencies due – |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 to 5 years                  |   |           | 975,114    |   |                   |   | 61,642  |                    |   |   | -          |   |   |   | 1,036,756 |   |
| Residential mortgage-backed          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| securities due -                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 to 5 years                  |   |           | 893,048    |   |                   |   | 19,913  |                    |   |   | -          |   |   |   | 912,961 |   |
| Municipal bonds due –          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 to 5 years                  |   |           | 1,196,171  |   |                   |   | 43,488  |                    |   |   | -          |   |   |   | 1,239,659 |   |
| Total due within 1 to 5 years        |   |           | 3,064,333  |   |                   |   | 125,043 |                    |   |   | -          |   |   |   | 3,189,376 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| U.S. Government agencies due -       |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 5 to 10 years                 |   |           | 1,216,381  |   |                   |   | 101,207 |                    |   |   | -          |   |   |   | 1,317,588 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Residential mortgage-backed          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| securities due -                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 5 to 10 years                 |   |           | 685,386    |   |                   |   | 41,128  |                    |   |   | -          |   |   |   | 726,514 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Municipal bonds due –          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 5 to 10 years                 |   |           | 1,638,844  |   |                   |   | 4,815   |                    |   |   | (6,976     | )      |   |   | 1,636,683 |   |
| Total due within 5 to 10 years       |   |           | 3,540,611  |   |                   |   | 147,150 |                    |   |   | (6,976     | )      |   |   | 3,680,785 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Residential mortgage-backed          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| securities due -                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| after 10 years                       |   |           | 8,667,627  |   |                   |   | 322,498 |                    |   |   | (21,828    | )      |   |   | 8,968,297 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Municipal bonds due –          |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| after 10 years                       |   |           | 7,683,516  |   |                   |   | 53,663  |                    |   |   | (177,302   | )      |   |   | 7,559,877 |   |
| Total due after years                |   |           | 16,351,143 |   |                   |   | 376,161 |                    |   |   | (199,130   | )      |   |   | 16,528,174 |   |
|                                 |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Total at March 31, 2010              |   | $              | 23,627,690 |   |                   | $      | 661,013 |                    |   | $      | (206,106   | )      |   | $ | 24,082,597 |   |

|   | Available-for-sale securities consist of the following at December 31, 2009: |
|--------|------------------------------------------------------------------------------|

----

Index

|                                     |   | Amortized cost |       |   | Gross unrealized gains |   |    | Gross unrealized losses |   |   | Fair value |   |
|------------------------------------------|--------|----------------|------------|--------|------------------------|--------|---------|-------------------------|--------|--------|------------|--------|
| Type and Maturity Group                  |   |           |       |   |                   |   |    |                    |   |   |       |   |
|                                     |   |           |       |   |                   |   |    |                    |   |   |       |   |
| Residential mortgage-backed securities - |   |           |       |   |                   |   |    |                    |   |   |       |   |
| Within 1 year                            |   | $              | 501,935    |   |                   | $      | -       |                    |   | $      | (176       | )      |   | $ | 501,759 |   |
|                                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| U.S. Government agencies due –     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 to 5 years                      |   |           | 1,019,655  |   |                   |   | 63,885  |                    |   |   | -          |   |   |   | 1,083,540 |   |
| Residential mortgage-backed U.S.         |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Government agencies securities due -     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 to 5 years                      |   |           | 999,939    |   |                   |   | 20,929  |                    |   |   | -          |   |   |   | 1,020,868 |   |
| Municipal bonds due –              |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 1 to 5 years                      |   |           | 1,549,329  |   |                   |   | 60,297  |                    |   |   | -          |   |   |   | 1,609,626 |   |
| Total due within 1 to 5 years            |   |           | 3,568,923  |   |                   |   | 145,111 |                    |   |   | -          |   |   |   | 3,714,034 |   |
|                                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| U.S. Government agencies due -           |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 5 to 10 years                     |   |           | 1,265,259  |   |                   |   | 101,087 |                    |   |   | -          |   |   |   | 1,366,346 |   |
| Residential mortgage-backed U.S.         |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Government agencies securities due -     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 5 to 10 years                     |   |           | 722,932    |   |                   |   | 32,432  |                    |   |   | -          |   |   |   | 755,364 |   |
| Municipal bonds due –              |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Within 5 to 10 years                     |   |           | 1,642,396  |   |                   |   | 5,684   |                    |   |   | (9,887     | )      |   |   | 1,638,193 |   |
| Total due within 5 to 10 years           |   |           | 3,630,587  |   |                   |   | 139,203 |                    |   |   | (9,887     | )      |   |   | 3,759,903 |   |
|                                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Residential mortgage-backed U.S.         |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Government agencies securities due -     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| after 10 years                           |   |           | 9,227,386  |   |                   |   | 308,305 |                    |   |   | (48,795    | )      |   |   | 9,486,896 |   |
| Municipal bonds due –              |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| after 10 years                           |   |           | 7,684,749  |   |                   |   | 50,973  |                    |   |   | (151,814   | )      |   |   | 7,583,908 |   |
| Total due after years                    |   |           | 16,912,135 |   |                   |   | 359,278 |                    |   |   | (200,609   | )      |   |   | 17,070,804 |   |
|                                     |   |           |       |   |                   |   |    |                    |   |   |       |   |   |   |   |   |
| Total at December 31, 2009               |   | $              | 24,613,580 |   |                   | $      | 643,592 |                    |   | $      | (210,672   | )      |   | $ | 25,046,500 |   |

----

Index

|                           |   | Less Than 12 Months |      |   | 12 Months or More |   |     | Total      |   |
|--------------------------------|--------|---------------------|-----------|--------|-------------------|--------|----------|------------|--------|
|                           |   | Fair value          |      |   | Unrealized losses |   |     | Fair value |   |   | Unrealized losses |   |   | Fair value |   |   | Unrealized losses |   |
| Securities available for sale: |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-          |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |
| backed securities              |   | $                   | 2,687,303 |   |              | $      | (21,828  | )          |   | $ | - |   |   | $ | - |   |   | $ | 2,687,303 |   |   | $ | (21,828 | ) |
| Municipal bonds                |   |                | 3,967,721 |   |              |   | (80,557  | )          |   |   | 1,381,339 |   |   |   | (103,721 | ) |   |   | 5,349,060 |   |   |   | (184,278 | ) |
|                           |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired     |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                     |   | $                   | 6,655,024 |   |              | $      | (102,385 | )          |   | $ | 1,381,339 |   |   | $ | (103,721 | ) |   | $ | 8,036,363 |   |   | $ | (206,106 | ) |
|                           |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009:             |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           |   | Less Than 12 Months |      |   | 12 Months or More |   |     | Total      |   |
|                           |   | Fair value          |      |   | Unrealized losses |   |     | Fair value |   |   | Unrealized losses |   |   | Fair value |   |   | Unrealized losses |   |
| Securities available for sale: |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-          |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| backed U.S. Government         |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| agencies securities            |   | $                   | 2,912,885 |   |              | $      | (48,971  | )          |   | $ | - |   |   | $ | - |   |   | $ | 2,912,885 |   |   | $ | (48,971 | ) |
| Municipal bonds                |   |                | 3,998,244 |   |              |   | (53,226  | )          |   |   | 1,377,766 |   |   |   | (108,475 | ) |   |   | 5,376,010 |   |   |   | (161,701 | ) |
|                           |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired     |   |                |      |   |              |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                     |   | $                   | 6,911,129 |   |              | $      | (102,197 | )          |   | $ | 1,377,766 |   |   | $ | (108,475 | ) |   | $ | 8,288,895 |   |   | $ | (210,672 | ) |

----

Index

| Item 2. | Management’s Discussion and Analysis Financial Condition and Results of Operations |
|---------|------------------------------------------------------------------------------------------|

----

Index

----

Index

|                              |   | March 31, |      |   | December 31, |   |
|-----------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                              |   | 2010           |      |   | 2009              |   |
| Commercial real estate:           |   |           |      |   |              |   |
| Residential ADC                   |   | $              | 5,905,068 |   |              | $      | 5,527,742 |   |
| Other commercial real estate      |   |           | 460,463   |   |              |   | 464,270 |   |
| Total non-owner occupied          |   |           |      |   |              |   |   |   |
| commercial  real estate |   |           | 6,365,531 |   |              |   | 5,992,012 |   |
| Commercial owner occupied         |   |           |      |   |              |   |   |   |
| real estate                       |   |           | 1,170,481 |   |              |   | 1,172,095 |   |
| Commercial and industrial         |   |           | 160,717   |   |              |   | 167,341 |   |
| Residential mortgage:             |   |           |      |   |              |   |   |   |
| First lien, closed end            |   |           | 269,995   |   |              |   | 274,151 |   |
| Home equity lines of credit       |   |           | 199,348   |   |              |   | 198,602 |   |
| Consumer                          |   |           | 11,165    |   |              |   | 8,987 |   |
| Total                             |   | $              | 8,177,237 |   |              | $      | 7,813,188 |   |

----

Index

----

Index

----

Index

----

Index

----

Index

|                                                                      |   | TERMS TO REPRICING AT MARCH 31, 2010 |        |
|---------------------------------------------------------------------------|--------|--------------------------------------|-------------|
|                                                                      |   | 1-90 Days                            |        |   | 91-180 Days |   |   | 181-365 Days |   |   | One Year |   |   | Non-sensitive |   |   | Total |   |
| Interest-earning assets:                                                  |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing deposits                                                 |   | $                                    | 4,646,604   |   |   |   | - |   |   |   | - |   |   | $ | 4,646,604 |   |   |   | - |   |   | $ | 4,646,604 |   |
| Investment securities                                                     |   |                                 | 359,553     |   |   | $ | 282,818 |   |   | $ | 760,472 |   |   |   | 1,402,843 |   |   | $ | 22,224,847 |   |   |   | 23,627,690 |   |
| Federal   Home   Loan   Bank |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                                                                     |   |                                 | 592,300     |   |   |   | - |   |   |   | - |   |   |   | 592,300 |   |   |   | - |   |   |   | 592,300 |   |
| Loans                                                                     |   |                                 | 112,826,013 |   |   |   | 9,589,976 |   |   |   | 11,793,528 |   |   |   | 134,209,517 |   |   |   | 49,857,137 |   |   |   | 184,066,654 |   |
| Total interest-earning assets                                             |   |                                 | 118,424,470 |   |   |   | 9,872,794 |   |   |   | 12,554,000 |   |   |   | 140,851,264 |   |   |   | 72,081,984 |   |   |   | 212,933,248 |   |
|                                                                      |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                             |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Time deposits                                                             |   |                                 | 29,268,271  |   |   |   | 35,075,520 |   |   |   | 30,357,528 |   |   |   | 94,701,319 |   |   |   | 4,175,159 |   |   |   | 98,876,478 |   |
| All other deposits                                                        |   |                                 | 75,180,627  |   |   |   | - |   |   |   | - |   |   |   | 75,180,627 |   |   |   | - |   |   |   | 75,180,627 |   |
| Short-term debt                                                           |   |                                 | 745,391     |   |   |   | - |   |   |   | - |   |   |   | 745,391 |   |   |   | - |   |   |   | 745,391 |   |
| Long-term debt                                                            |   |                                 | 4,124,000   |   |   |   | - |   |   |   | - |   |   |   | 4,124,000 |   |   |   | 4,000,000 |   |   |   | 8,124,000 |   |
| Total interest-bearing liabilities                                        |   |                                 | 109,318,289 |   |   |   | 35,075,520 |   |   |   | 30,357,528 |   |   |   | 174,751,337 |   |   |   | 8,175,159 |   |   |   | 182,926,496 |   |
|                                                                      |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest sensitivity gap                                                  |   | $                                    | 9,106,181   |   |   | $ | (25,202,726 | ) |   | $ | (17,803,528 | ) |   | $ | (33,900,073 | ) |   | $ | 63,906,825 |   |   |   |   |   |
| Cumulative interest sensitivity                                           |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| gap                                                                       |   | $                                    | 9,106,181   |   |   | $ | (16,096,545 | ) |   | $ | (33,900,073 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative interest-earning                                               |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets as a percent of interest                                           |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sensitive liabilities                                                     |   |                                 | 108.3       | % |   |   | 28.1 | % |   |   | 41.4 | % |   |   | 80.6 | % |   |   |   |   |   |   |   |   |
| cumulative interest-earning                                               |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets as a percent of interest                                           |   |                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sensitive liabilities                                                     |   |                                 | 108.3       | % |   |   | 88.9 | % |   |   | 80.6 | % |   |   |   |   |   |   |   |   |   |   |   |   |

|                                   |   | March 31, |        |   | December 31, |   |
|----------------------------------------|--------|-----------|-------------|--------|--------------|--------|
|                                   |   | 2010      |        |   | 2009         |   |
| LOANS:                                 |   |      |        |   |         |   |
| Real Estate -                          |   |      |        |   |         |   |
| Construction                           |   | $         | 69,767,543  |   |         | $      | 68,721,886 |   |
| Mortgage                               |   |      | 88,248,674  |   |         |   | 88,843,525 |   |
| Commercial, financial and agricultural |   |      | 23,988,365  |   |         |   | 25,833,920 |   |
| Consumer                               |   |      | 2,210,587   |   |         |   | 2,254,665 |   |
| Subtotal                               |   |      | 184,215,169 |   |         |   | 185,644,996 |   |
| Deferred origination, fees, net        |   |      | (148,515    | )      |         |   | (170,123 | ) |
| Total                                  |   | $         | 184,066,654 |   |         | $      | 185,474,873 |   |

----

Index

|                      |   |        |       |   |           |   |       | Nonperformingl |   |   | Allowance |   |   | Allowance   |      |
|---------------------------|--------|-------------|------------|--------|----------------|--------|------------|----------------|--------|--------|-----------|--------|--------|-------------|-----------|
|                      |   | Loans       |       |   | Nonperformingl |   |       | Loans to Loans |   |   | for Loan  |   |   | to Loans    |      |
|                      |   | Outstanding |       |   | Loans          |   |       | Outstanding    |   |   | Losses    |   |   | Outstanding |      |
| Commercial real estate:   |   |        |       |   |           |   |       |           |   |   |      |   |   |        |      |
| Residential ADC           |   | $           | 64,877,116 |   |           | $      | 13,673,668 |           |   |   | 21.08     | %      |   | $           | 1,173,786 |   |   |   | 1.81 | % |
| Other Commercial          |   |        | 27,775,150 |   |           |   | 1,963,115  |           |   |   | 7.07      | %      |   |        | 534,522   |   |   |   | 1.92 | % |
| Agricultural              |   |        | 78,130     |   |           |   | -          |           |   |   | -         |   |   |        | 2,083     |   |   |   | 2.67 | % |
| Total non-owner occupied  |   |        | 92,730,396 |   |           |   | 15,636,783 |           |   |   | 16.86     | %      |   |        | 1,710,391 |   |   |   | 1.84 | % |
| Commercial real estate    |   |        |       |   |           |   |       |           |   |   |      |   |   |        |      |   |   |   |   |   |
| owner-occupied            |   |        | 35,888,475 |   |           |   | 4,924,599  |           |   |   | 13.72     | %      |   |        | 527,893   |   |   |   | 1.47 | % |
| Commercial:               |   |        |       |   |           |   |       |           |   |   |      |   |   |        |      |   |   |   |   |   |
| Commercial and industrial |   |        | 23,988,365 |   |           |   | 3,568,818  |           |   |   | 14.88     | %      |   |        | 519,457   |   |   |   | 2.17 | % |
| Residential mortgage:     |   |        |       |   |           |   |       |           |   |   |      |   |   |        |      |   |   |   |   |   |
| 1st lien; closed end      |   |        | 15,529,196 |   |           |   | 435,102    |           |   |   | 2.80      | %      |   |        | 426,375   |   |   |   | 2.75 | % |
| Junior lien; closed end   |   |        | 2,381,384  |   |           |   | 181,000    |           |   |   | 7.60      | %      |   |        | 61,976    |   |   |   | 2.60 | % |

----

Index

| Total residential mortgage |   |   | 17,910,580  |   |   |   | 616,102    |   |   |   | 3.44   | %      |   |   | 488,351   |   |   |   | 2.73   | %      |
|----------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|
| Home equity lines          |   |   | 11,486,766  |   |   |   | 233,216    |   |   |   | 2.03   | %      |   |   | 178,479   |   |   |   | 1.55   | %      |
| Consumer - other           |   |   | 2,210,587   |   |   |   | 554,734    |   |   |   | 25.09  | %      |   |   | 89,512    |   |   |   | 4.05   | %      |
| Deferred fees/costs and    |   |   |        |   |   |   |       |   |   |   |   |   |   |   |      |   |   |   |   |   |
| unallocated reserve        |   |   | (148,515    | )      |   |   | -          |   |   |   | -      | %      |   |   | -         |   |   |   | -      | %      |
| Total                      |   | $      | 184,066,654 |   |   | $      | 25,534,252 |   |   |   | 13.87  | %      |   | $      | 3,514,083 |   |   |   | 1.91   | %      |

|                        |   |        |        |   |         |   |       | Restructured   |   |
|-----------------------------|--------|-------------|-------------|--------|--------------|--------|------------|----------------|--------|
|                        |   | Loans       |        |   | Restructured |   |       | Loans to Loans |   |
|                        |   | Outstanding |        |   | Loans        |   |       | Outstanding    |   |
| Commercial real estate:     |   |        |        |   |         |   |       |           |   |
| Residential ADC             |   | $           | 64,877,116  |   |         | $      | 7,431,851  |           |   |   | 11.46 | % |
| Other Commercial            |   |        | 27,775,150  |   |         |   | 448,102    |           |   |   | 1.61 | % |
| Agricultural                |   |        | 78,130      |   |         |   | -          |           |   |   | - |   |
| Total non-owner occupied    |   |        | 92,730,396  |   |         |   | 7,879,953  |           |   |   | 8.50 | % |
| Commercial real estate      |   |        |        |   |         |   |       |           |   |   |   |   |
| owner-occupied              |   |        | 35,888,475  |   |         |   | 2,172,906  |           |   |   | 6.05 | % |
| Commercial:                 |   |        |        |   |         |   |       |           |   |   |   |   |
| Construction and industrial |   |        | 23,988,365  |   |         |   | 239,342    |           |   |   | 1.00 | % |
| Residential mortgage:       |   |        |        |   |         |   |       |           |   |   |   |   |
| 1st lien; closed end        |   |        | 15,529,196  |   |         |   | 647,990    |           |   |   | 4.17 | % |
| Junior lien; closed end     |   |        | 2,381,384   |   |         |   | -          |           |   |   | - | % |
| Total residential mortgage  |   |        | 17,910,580  |   |         |   | 647,990    |           |   |   | 3.62 | % |
| Home equity lines           |   |        | 11,486,766  |   |         |   | 363,488    |           |   |   | 3.16 | % |
| Consumer - other            |   |        | 2,210,587   |   |         |   | 510,845    |           |   |   | 23.11 | % |
| Deferred fees/costs         |   |        | (148,515    | )      |         |   | -          |           |   |   | - | % |
| Total                       |   | $           | 184,066,654 |   |         | $      | 11,814,524 |           |   |   | 6.42 | % |

|                               |   | March 31, |       |   | December 31, |   |
|------------------------------------|--------|-----------|------------|--------|-------------------|--------|
|                               |   | 2010      |       |   | 2009              |   |
| NONPERFORMING ASSETS               |   |      |       |   |              |   |
| Nonaccrual                         |   | $         | 21,842,975 |   |              | $      | 22,870,696 |   |
| Restructured loans                 |   |      | 3,691,277  |   |              |   | 2,591,289 |   |
| Nonperforming loans                |   |      | 25,534,252 |   |              |   | 25,461,985 |   |
| Other real estate owned            |   |      | 1,248,947  |   |              |   | 511,112 |   |
| Repossessions                      |   |      | 19,220     |   |              |   | - |   |
|                               |   |      |       |   |              |   |   |   |
| Total                              |   | $         | 26,802,419 |   |              | $      | 25,973,097 |   |
| Restructured loans not included in |   |      |       |   |              |   |   |   |
| categories above                   |   | $         | 8,123,247  |   |              | $      | 7,748,562 |   |

----

Index

----

Index

|                                        |   | For the three months |      |   | For the year ended |   |
|---------------------------------------------|--------|----------------------|-----------|--------|--------------------|--------|
|                                        |   | ended March 31,      |      |   | December 31,       |   |
|                                        |   | 2010                 |      |   | 2009               |   |   | 2009 |   |
|                                        |   |                 |      |   |               |   |   |   |   |
| Balance, beginning of period                |   | $                    | 3,512,263 |   |               | $      | 2,529,981 |   |   | $ | 2,529,981 |   |
| Charge-offs:                                |   |                 |      |   |               |   |   |   |   |   |   |   |
| Commercial, financial and agricultural      |   |                 | (4,500    | )      |               |   | (77,754 | ) |   |   | (994,756 | ) |
| Real estate:                                |   |                 |      |   |               |   |   |   |   |   |   |   |
| Construction                                |   |                 | (156,057  | )      |               |   | - |   |   |   | (693,002 | ) |
| Mortgage                                    |   |                 | (70,261   | )      |               |   | - |   |   |   | (493,467 | ) |
| Consumer                                    |   |                 | (262,556  | )      |               |   | (39,939 | ) |   |   | (85,257 | ) |
| Total charge-offs                           |   |                 | (493,374  | )      |               |   | (117,693 | ) |   |   | (2,266,482 | ) |
|                                        |   |                 |      |   |               |   |   |   |   |   |   |   |
| Recoveries                                  |   |                 |      |   |               |   |   |   |   |   |   |   |
| Commercial, financial and agricultural      |   |                 | -         |   |               |   | - |   |   |   | 28 |   |
| Real estate:                                |   |                 |      |   |               |   |   |   |   |   |   |   |
| Construction                                |   |                 | -         |   |               |   | - |   |   |   | - |   |
| Mortgage                                    |   |                 | -         |   |               |   | - |   |   |   | - |   |
| Consumer                                    |   |                 | 57,159    |   |               |   | 10,997 |   |   |   | 30,336 |   |
| Total recoveries                            |   |                 | 57,159    |   |               |   | 10,997 |   |   |   | 30,364 |   |
| Net charge-offs                             |   |                 | (436,215  | )      |               |   | (106,696 | ) |   |   | (2,236,118 | ) |
| Provision charged to operations             |   |                 | 438,035   |   |               |   | 254,580 |   |   |   | 3,218,400 |   |
| Balance, end of period                      |   | $                    | 3,514,083 |   |               | $      | 2,677,865 |   |   | $ | 3,512,263 |   |
|                                        |   |                 |      |   |               |   |   |   |   |   |   |   |
|                                        |   |                 |      |   |               |   |   |   |   |   |   |   |
|                                        |   |                 |      |   |               |   |   |   |   |   |   |   |
| Percentage of annualized net charge-offs to |   |                 |      |   |               |   |   |   |   |   |   |   |
| average loans                               |   |                 | .95       | %      |               |   | .25 | % |   |   | 1.24 | % |
| Percentage of allowance to                  |   |                 |      |   |               |   |   |   |   |   |   |   |
| period-end loans                            |   |                 | 1.91      | %      |               |   | 1.53 | % |   |   | 1.89 | % |

----

Index

|                      |   | March 31, 2010 |      |   | December 31, 2009 |   |
|---------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                      |   | Amount of      |      |   | Percent of        |   |   | Amount of |   |   | Percent of |   |
|                      |   | Allowance      |      |   | Total Loans       |   |   | Allowance |   |   | Total Loans |   |
|                      |   |           |      |   |              |   |   |   |   |   |   |   |
| TYPE OF LOAN:             |   |           |      |   |              |   |   |   |   |   |   |   |
| Real Estate               |   | $              | 2,905,114 |   |              |   | 86 | % |   | $ | 2,481,578 |   |   |   | 85 | % |
| Commercial and industrial |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| loans                     |   |           | 519,457   |   |              |   | 13 | % |   |   | 878,086 |   |   |   | 14 | % |
| Consumer                  |   |           | 89,512    |   |              |   | 1 | % |   |   | 152,599 |   |   |   | 1 | % |
| Unallocated               |   |           | -         |   |              |   | - |   |   |   | - |   |   |   | - |   |
| Total Allowance           |   | $              | 3,514,083 |   |              |   | 100 | % |   | $ | 3,512,263 |   |   |   | 100 | % |

|                             |   | Actual                 |   |   | For Capital Adequacy Purposes |   |   | To Be Well Capitalized Under Prompt Corrective Action Provisions |   |
|----------------------------------|--------|------------------------|--------|--------|-------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                             |   | Amount                 |   |   | Ratio                         |   |   | Amount                                                           |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                             |   | (Dollars in Thousands) |   |
| As of March 31, 2010             |   |                   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to Risk Weighted  |   |                   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Assets)                          |   |                   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Consolidated                     |   | $                      | 23,077 |   |                          |   | 11.99  | %                                                                |   | $ | 15,395 |   |   |   | 8.00 | % |   | $ | 19,243 |   |   |   | 10.00 | % |
| Bank                             |   | $                      | 22,472 |   |                          |   | 11.69  | %                                                                |   | $ | 15,377 |   |   |   | 8.00 | % |   | $ | 19,221 |   |   |   | 10.00 | % |
|                             |   |                   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital (to Risk Weighted |   |                   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets)                          |   |                   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                     |   | $                      | 20,658 |   |                          |   | 10.74  | %                                                                |   | $ | 7,697 |   |   |   | 4.00 | % |   | $ | 11,546 |   |   |   | 6.00 | % |
| Bank                             |   | $                      | 20,056 |   |                          |   | 10.43  | %                                                                |   | $ | 7,688 |   |   |   | 4.00 | % |   | $ | 11,532 |   |   |   | 6.00 | % |

----

Index

| Tier 1 Capital (to Average Assets) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Consolidated                       |   | $      | 20,658 |   |   |   | 9.24   | %      |   | $      | 8,944  |   |   |   | 4.00   | %      |   | $      | 11,180 |   |   |   | 5.00 | % |
| Bank                               |   | $      | 20,056 |   |   |   | 8.98   | %      |   | $      | 8,935  |   |   |   | 4.00   | %      |   | $      | 11,169 |   |   |   | 5.00 | % |

Item 

----

Index

----

Index

| Item 5. | Other Information |
|---------|-------------------|

|   | (a) | None. |
|--------|-----|-------|

|   | (b) | None. |
|--------|-----|-------|

| Item 6. | Exhibits |
|---------|----------|

|   | (a) | Exhibits. |
|--------|-----|-----------|

|   | 31.1 – | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 – | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 – | Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 – | Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

SIGNATURES

|               |   |   | WESTSTAR FINANCIAL SERVICES CORPORATION      |
|--------------------|--------|--------|----------------------------------------------|
|               |   |   |                                         |
|               |   |   |                                         |
| Date: May13, 2010  |   | By:    | /s/ G. Gordon Greenwood                      |
|               |   |   |                                         |
|               |   |   | G. Gordon Greenwood                          |
|               |   |   | President and Chief Executive Officer        |
|               |   |   |                                         |
|               |   |   |                                         |
| Date: May 14, 2010 |   | By:    | /s/ Randall C. Hall                          |
|               |   |   |                                         |
|               |   |   | Randall C. Hall                              |
|               |   |   | Executive Vice President and Chief Financial |
|               |   |   | and Principal Accounting Officer             |

----