UNITED STATES SECURITITES AND EXCHANGE COMMISSION
                             Washington, D.C. 29549

                                   FORM 10-QSB
                                   (Mark One)

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

For the quarterly period ended September 30, 2005

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

For the transition period from _____________________ to _____________________

                        Commission File Number: 000-30515

                     Weststar Financial Services Corporation
             (Exact name of registrant as specified in its charter)

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

                      79 Woodfin Place, Asheville NC 28801
                    (Address of principal executive offices)

                                  828.252.1735
              (Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12-2 of the Exchange Act). Yes ___ No _X_

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common stock, $1.00 par value - 1,400,266 shares outstanding as of November 9,
2005.


                                                                               1
<PAGE>

INDEX                                                                       Page

Part I - FINANCIAL INFORMATION

Financial Statements:
         Consolidated Balance Sheets
           September 30, 2005 and December 31, 2004                            3

         Consolidated Statements of Operations
           Three and Nine Months Ended September 30, 2005 and 2004             4

         Consolidated Statements of Comprehensive Income
           Three and Nine Months Ended September 30, 2005 and 2004             5

         Consolidated Statements of Changes in Shareholders' Equity
           Nine Months Ended September 30, 2005 and 2004                       6

         Consolidated Statements of Cash Flows
           Nine Months Ended September 30, 2005 and 2004                       7

         Notes to Consolidated Financial Statements                            8

Item 2 - Management's Discussion and Analysis
           Financial Condition and Results of Operations                      11

Item 3 - Controls and Procedures                                              19

Part II - OTHER INFORMATION

Exhibit Index                                                                 20

Signatures                                                                    21


                                                                               2
<PAGE>

Part I. FINANCIAL INFORMATION

Item I. Financial Statements

Weststar Financial Services Corporation & Subsidiary
Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                             (unaudited)
                                                                             September 30,     December 31,
                                                                                 2005              2004*
                                                                             -------------    -------------
<S>                                                                          <C>              <C>
ASSETS:
Cash and cash equivalents:
  Cash and due from banks                                                    $   5,063,826    $   3,729,987
  Interest-bearing deposits                                                        326,080          321,280
  Federal funds sold                                                             5,464,000       15,570,000
                                                                             -------------    -------------
      Total cash and cash equivalents                                           10,853,906       19,621,267
Investment securities -
  Available for sale, at fair value (amortized cost of
  $28,736,924 and $23,301,098, respectively)                                    28,292,171       23,106,660
Loans                                                                           94,351,450       84,852,070
Allowance for loan losses                                                       (1,696,361)      (1,608,366)
                                                                             -------------    -------------
Net loans                                                                       92,655,089       83,243,704
Premises and equipment, net                                                      2,632,701        2,650,156
Accrued interest receivable                                                        666,310          564,816
Federal Home Loan Bank stock, at cost                                              531,500          307,900
Deferred income taxes                                                              613,302          390,140
Foreclosed properties                                                              161,077          443,586
Other assets                                                                       627,046          678,478
                                                                             -------------    -------------
TOTAL                                                                        $ 137,033,102    $ 131,006,707
                                                                             =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
  Demand                                                                     $  24,612,400    $  19,572,549
  NOW accounts                                                                  18,836,342       22,603,723
  Money market accounts                                                         34,582,359       41,332,780
  Savings                                                                        2,266,717        2,164,015
  Time deposits of $100,000 or more                                              9,744,906        6,380,898
  Other time deposits                                                           27,480,692       22,387,783
                                                                             -------------    -------------
        Total deposits                                                         117,523,416      114,441,748
Short-term borrowings                                                                   --        2,000,000
Accrued interest payable                                                           218,297          138,362
Other liabilities                                                                  812,036          492,410
Long-term debt                                                                   8,124,000        4,124,000
                                                                             -------------    -------------
      Total liabilities                                                        126,677,749      121,196,520
                                                                             -------------    -------------

SHAREHOLDERS' EQUITY:
Preferred stock; authorized $1,000,000; issued and outstanding - none                   --               --
Common stock, $1 par value, authorized - 9,000,000
    shares; issued and outstanding - 1,400,266 and 1,166,208, respectively       1,400,266        1,166,208
Additional paid-in capital                                                       6,801,431        7,030,589
Retained earnings                                                                2,426,957        1,732,872
Accumulated other comprehensive loss                                              (273,301)        (119,482)
                                                                             -------------    -------------
      Total shareholders' equity                                                10,355,353        9,810,187
                                                                             -------------    -------------
TOTAL                                                                        $ 137,033,102    $ 131,006,707
                                                                             =============    =============
</TABLE>

*Derived from audited consolidated financial statements.

See notes to consolidated financial statements.


                                                                               3
<PAGE>

Weststar Financial Services Corporation & Subsidiary
Consolidated Statements of Operations (unaudited)

<TABLE>
<CAPTION>
                                                              Three Months                  Nine Months
                                                           Ended September 30,          Ended September 30,
                                                           2005           2004          2005           2004
                                                       -----------    -----------   -----------    -----------
<S>                                                    <C>            <C>           <C>            <C>
INTEREST INCOME:
Interest and fees on loans                             $ 1,690,454    $ 1,295,595   $ 4,663,473    $ 3,881,414
Federal funds sold                                          98,356         36,669       242,672         72,096
Interest-bearing deposits                                    8,888          3,862        23,920          6,591
Investments:
  Taxable interest income                                  205,547        170,474       552,967        423,988
  Nontaxable interest income                                20,710         13,431        47,611         41,038
  Corporate dividends                                        5,963          2,367        12,018          5,468
                                                       -----------    -----------   -----------    -----------
       Total interest income                             2,029,918      1,522,398     5,542,661      4,430,595
                                                       -----------    -----------   -----------    -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more                           86,568         28,612       218,001         84,023
Other time and savings deposits                            475,812        301,276     1,259,693        828,452
Short-term borrowings                                           --          8,295        16,016          9,924
Long-term debt                                             121,270         48,198       300,794        150,896
                                                       -----------    -----------   -----------    -----------
     Total interest expense                                683,650        386,381     1,794,504      1,073,295
                                                       -----------    -----------   -----------    -----------
NET INTEREST INCOME                                      1,346,268      1,136,017     3,748,157      3,357,300
PROVISION FOR LOAN LOSSES                                   47,615        127,500       400,770        740,300
                                                       -----------    -----------   -----------    -----------
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                         1,298,653      1,008,517     3,347,387      2,617,000
                                                       -----------    -----------   -----------    -----------
OTHER INCOME:
Service charges on deposit accounts                        318,044        300,913       883,185        923,185
Other service fees and commissions                          67,118         81,921       217,120        249,300

Securities gains/(losses)                                  (22,209)            --       (22,209)        31,613
Equity in income (loss) of unconsolidated subsidiary        16,855             --        (1,053)            --
Other                                                       36,722         10,900        52,609         29,543
                                                       -----------    -----------   -----------    -----------
       Total other income                                  416,530        393,734     1,129,652      1,233,641
                                                       -----------    -----------   -----------    -----------
OTHER EXPENSES:
Salaries and wages                                         467,944        428,920     1,369,763      1,185,442
Employee benefits                                           93,271         54,402       265,141        200,503
Occupancy expense, net                                      69,249         95,562       238,544        253,291
Equipment rentals, depreciation and
  maintenance                                               84,844         81,462       268,194        243,186
Supplies                                                    61,833         58,754       184,677        183,400
Professional fees                                           72,936         57,817       232,744        200,248
Data processing fees                                       123,341        115,577       372,156        345,966
Marketing                                                   57,631         59,949       165,344        146,900
Net expenses from foreclosed properties                      4,123        122,078        91,332        208,278
Other                                                       64,014         55,381       185,162        148,924
                                                       -----------    -----------   -----------    -----------
        Total other expenses                             1,099,186      1,129,902     3,373,057      3,116,138
                                                       -----------    -----------   -----------    -----------
INCOME BEFORE INCOME TAXES                                 615,997        272,349     1,103,982        734,503
INCOME TAX PROVISION                                       228,565        108,810       407,510        278,115
                                                       -----------    -----------   -----------    -----------
NET INCOME                                             $   387,432    $   163,539   $   696,472    $   456,388
                                                       ===========    ===========   ===========    ===========

EARNINGS PER SHARE:
Basic                                                  $      0.28    $      0.12   $      0.50    $      0.33
                                                       ===========    ===========   ===========    ===========
Diluted                                                $      0.26    $      0.11   $      0.47    $      0.31
                                                       ===========    ===========   ===========    ===========
</TABLE>

See notes to consolidated financial statements


                                                                               4
<PAGE>

Weststar Financial Services Corporation & Subsidiary
Consolidated Statements of Comprehensive Income (Loss) (unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months                 Nine Months
                                                                Ended September 30,         Ended September 30,
                                                                2005          2004          2005          2004
                                                             ----------    ----------    ----------    ----------
<S>                                                          <C>           <C>           <C>           <C>
NET INCOME                                                   $  387,432    $  163,539    $  696,472    $  456,388
OTHER COMPREHENSIVE INCOME (LOSS)
  Unrealized holding gains (losses) on securities
    available for sale                                         (162,448)      357,993      (272,525)       77,124
  Tax effect                                                     62,624      (138,006)      105,059       (29,731)
                                                             ----------    ----------    ----------    ----------
  Unrealized holding gains (losses) on securities
  available for sale, net of tax                                (99,824)      219,987      (167,466)       47,393

  Reclassification adjustment for realized (gains) losses        22,209            --        22,209       (31,613)
  Tax effect                                                     (8,562)           --        (8,562)       12,187
                                                             ----------    ----------    ----------    ----------
  Reclassification adjustment for realized (gains) losses,
    net of tax                                                   13,647            --        13,647       (19,426)

OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX                                                      (86,177)      219,987      (153,819)       27,967
                                                             ----------    ----------    ----------    ----------

COMPREHENSIVE INCOME                                         $  301,255    $  383,526    $  542,653    $  484,355
                                                             ==========    ==========    ==========    ==========
</TABLE>

See notes to consolidated financial statements.


                                                                               5
<PAGE>

Weststar Financial Services Corporation & Subsidiary
Consolidated Statements of Changes in Shareholders' Equity (unaudited)
For the Nine Months Ended September 30, 2005 and 2004

<TABLE>

                                                                                                          Accumulated
                                                        Common Stock          Additional                    Other          Total
                                                   -----------------------     Paid-In       Retained   Comprehensive  Shareholders'
                                                    Shares        Amount       Capital       Earnings       Loss          Equity
                                                    ------        ------       -------       --------       ----          ------
<S>                                                <C>         <C>           <C>           <C>           <C>           <C>
Balance December 31, 2003                          1,166,208   $ 1,166,208   $ 7,030,589   $ 1,074,747   $   (80,596)  $ 9,190,948
 Net change in unrealized
    gain on securities held for sale                                                                          27,967        27,967
 Cash dividend paid in lieu of fractional shares                                                   (78)                        (78)
 Net income                                                                                    458,388                     458,388
                                                  --------------------------------------------------------------------------------
Balance September 30, 2004                         1,166,208   $ 1,166,208   $ 7,030,589   $ 1,531,057   $   (52,629)  $ 9,675,225
                                                  ================================================================================

Balance December 31, 2004                          1,166,208   $ 1,166,208   $ 7,030,589   $ 1,732,872   $  (119,482)  $ 9,810,187
 Stock split                                         233,058       233,058      (233,058)
  Net change in unrealized
     loss on securities held for sale                                                                       (153,819)     (153,819)
  Issuance of common stock                             1,000         1,000         3,900                                     4,900
 Cash paid in lieu of fractional shares                                                         (2,387)                     (2,387)
  Net income                                                                                   696,472                     696,472
                                                  --------------------------------------------------------------------------------
Balance September 30, 2005                         1,400,266   $ 1,400,266   $ 6,801,431   $ 2,426,957   $  (273,301)  $10,355,353
                                                  ================================================================================
</TABLE>

See notes to consolidated financial statements.


                                                                               6
<PAGE>

Weststar Financial Services Corporation & Subsidiary
Consolidated Statements of Cash Flows (unaudited)
For the Nine Months Ended September 30,

<TABLE>
<CAPTION>
                                                                                 2005            2004
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                   $    696,472    $    456,388
Adjustments to reconcile net income to net cash provided by operating
activities:
  Depreciation                                                                    268,262         280,011
  Provision for loan losses                                                       400,770         740,300
  Premium amortization and discount accretion, net                                 68,001          86,895
  Deferred income tax benefit                                                    (126,665)        (91,055)
  Net expenses from foreclosed properties                                          81,683         179,401
  (Gains)/losses  on sales of securities                                           22,209         (31,613)
  Losses on disposal/sales of premises and equipment                                1,584          18,156
  Increase in accrued interest receivable                                        (101,494)       (110,735)
  Decrease in other assets                                                        126,432          81,430
  Increase in accrued interest payable                                             77,959          16,909
  Increase in other liabilities                                                   321,602         104,395
                                                                             ------------    ------------
    Net cash provided by operating activities                                   1,836,815       1,730,482
                                                                             ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale                                     (9,333,695)     (9,885,613)
Maturities of securities available for sale                                     2,228,424       4,509,531
Net increase in loans                                                          (9,857,107)     (7,924,440)
Proceeds from sales of foreclosed properties                                      170,778         726,022
Proceeds from sales of securities                                               1,579,234         553,600
Proceeds from sales of premises and equipment                                       1,947             200
FHLB stock purchase                                                              (223,600)        (96,600)
Additions to premises and equipment                                              (254,338)       (622,835)
                                                                             ------------    ------------
    Net cash used in investing activities                                     (15,688,357)    (12,740,135)
                                                                             ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts, MMDA and savings
accounts                                                                       (5,375,249)     12,496,055
Net increase in time deposits                                                   8,456,917       5,714,757
Cash paid for fractional shares                                                    (2,387)            (78)
Issuance of common stock                                                            4,900              --
Proceeds from long-term borrowings                                              4,000,000              --
Maturity of short-term borrowing                                               (2,000,000)             --
                                                                             ------------    ------------
Net cash provided by financing activities                                       5,084,181      18,210,734
                                                                             ------------    ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (8,767,361)      7,201,081
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               19,621,267      11,990,677
                                                                             ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   $ 10,853,906    $ 19,191,758
                                                                             ============    ============
</TABLE>

See notes to consolidated financial statements.


                                                                               7
<PAGE>

WESTSTAR FINANCIAL SERVICES CORPORTION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.  The  Trust  is not
      consolidated for FIN 46R purposes. Bank of Asheville Mortgage Company, LLC
      (the  "Mortgage  Company") is a state  chartered  mortgage  bank which was
      incorporated  in North  Carolina  on October  19,  2004 of which  Weststar
      Financial  Services  Corporation  is a 50%  owner.  The  Mortgage  Company
      originates conventional mortgage loans.

      In the opinion of  management,  the  accompanying  consolidated  financial
      statements  contain  all  adjustments  necessary  to  present  fairly  the
      consolidated  financial  position of the Company as of September  30, 2005
      and December 31, 2004, and the  consolidated  results of their  operations
      for the three and nine-month periods ended September 30, 2005 and 2004 and
      their cash flows for the  nine-month  periods ended  September 30 2005 and
      2004.  Operating  results  for the  three  and  nine-month  periods  ended
      September 30, 2005 are not necessarily  indicative of the results that may
      be expected for the fiscal year ending December 31, 2005.

      The  accounting  policies  followed  are set  forth  in Note 1 to the 2004
      Annual Report to  Shareholders  (Form 10-KSB) on file with the  Securities
      and Exchange Commission.

2.    Loans at September  30, 2005 and December 31, 2004  classified by type are
      as follows:

                                                  September 30,     December 31,
                                                      2005              2004
                                                      ----              ----
      Real Estate:
        Construction                              $ 14,760,065     $ 11,470,223
        Mortgage                                    58,377,479       51,633,458
      Commercial, financial and agricultural        19,428,340       20,162,307
      Consumer                                       1,992,331        1,747,694
                                                  ------------     ------------
      Subtotal                                      94,558,215       85,013,682
      Net deferred loan origination fees              (206,765)        (161,612)
                                                  ------------     ------------
      Total                                       $ 94,351,450     $ 84,852,070
                                                  ============     ============

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  $24,101,001  and  $19,683,801 at September 30, 2005
      and December 31, 2004, respectively.


                                                                               8
<PAGE>

4.    Earnings per share have been computed using the weighted average number of
      shares of common stock and potentially  dilutive common stock  equivalents
      outstanding as follows:

<TABLE>
<CAPTION>
                                                           Three Months             Nine Months
                                                        Ended September 30,     Ended September 30,
                                                         2005        2004        2005        2004
<S>                                                    <C>         <C>         <C>         <C>
      Weighted average shares outstanding              1,400,266   1,399,266   1,400,039   1,399,266
      Potentially dilutive effect of stock options        88,103      66,973      91,335      70,925
                                                       ---------------------------------------------
      Weighted average shares outstanding, including
      potentially dilutive effect of stock options     1,488,369   1,466,239   1,491,374   1,470,191
                                                       =============================================
</TABLE>

      Prior period  amounts have been  adjusted to reflect a 6-for-5 stock split
      paid in the form of a 20% stock dividend during January 2005.

5.    Statement of Financial  Accounting  Standards ("SFAS") No. 123, Accounting
      for  Stock-Based  Compensation,  encourages  all  entities to adopt a fair
      value based method of accounting  for employee stock  compensation  plans,
      whereby compensation cost is measured at the grant date based on the value
      of the award and is recognized over the service  period,  which is usually
      the  vesting  period.  However,  it also  allows an entity to  continue to
      measure  compensation cost for those plans using the intrinsic value based
      method of accounting prescribed by Accounting Principles Board Opinion No.
      25, Accounting for Stock Issued to Employees, whereby compensation cost is
      the excess,  if any, of the quoted  market price of the stock at the grant
      date (or other  measurement  date) over the amount an employee must pay to
      acquire the stock. The Company has elected to continue with the accounting
      methodology in Opinion No. 25 and, as a result, has provided the below pro
      forma  disclosures  of  net  income  and  earnings  per  share  and  other
      disclosures  as if the fair  value  based  method of  accounting  had been
      applied.

      At September 30, 2005, the Company had two stock-based compensation plans.
      The Company accounts for compensation costs related to the Company's stock
      option plans using the intrinsic value method.  Therefore, no compensation
      costs has been  recognized for stock option awards because the options are
      granted at  exercise  prices  based on the market  value of the  Company's
      stock on the date of grant. Had compensation costs for the Company's stock
      option plans been  determined  using the fair value method,  the Company's
      pro forma net income would have been as follows:

<TABLE>
<CAPTION>
                                                 Three Months Ended       Nine Months Ended
                                                9/30/2005   9/30/2004   9/30/2005   9/30/2004
                                                ---------   ---------   ---------   ---------
<S>                                             <C>         <C>         <C>         <C>
      Net income as reported                    $ 387,432   $ 163,539   $ 696,472   $ 456,388
      Less: Total stock based employee
      compensation expense determined
      under fair value method for all awards,
      net of related tax effects                       --      25,716      47,815      76,488
                                                ---------   ---------   ---------   ---------
      Pro forma net income                      $ 387,432   $ 137,823   $ 648,657   $ 379,900
                                                =========   =========   =========   =========
      Net income per share:
      As reported:

      Basic                                     $    0.28   $    0.12   $    0.50   $    0.33
      Diluted                                   $    0.26   $    0.11   $    0.47   $    0.31

      Pro forma:

      Basic                                     $    0.28   $    0.09   $    0.46   $    0.26
      Diluted                                   $    0.26   $    0.09   $    0.43   $    0.25
</TABLE>


                                                                               9
<PAGE>

In December 2004, the FASB issued revised SFAS No. 123R,  "Share-Based  Payment"
("SFAS No. 123R"). SFAS No. 123R sets accounting  requirements for "share-based"
compensation  to  employees  and  requires  companies to recognize in the income
statement the grant-date fair value of the stock options and other  equity-based
compensation.  On April 14, 2005, the Securities and Exchange Commission adopted
a new rule that made SFAS No. 123R effective for annual periods  beginning after
December  15,  2005.  The Company will be required to adopt SFAS No. 123R in the
first  quarter  of 2006 and  currently  discloses  the  effect on net income and
earnings  per share of the fair  value  recognition  provision  of SFAS No.  123
"Accounting for Stock Based  Compensation." The Company is currently  evaluating
the  impact of the  adoption  of SFAS No.  123R on its  financial  position  and
results of  operations,  including  the  valuation  methods  and support for the
assumptions that underlie the valuation of the awards.


                                                                              11
<PAGE>

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

Weststar Financial Services Corporation & Subsidiary
Management's Discussion and Analysis

EXECUTIVE OVERVIEW

During 2005, the Company  continued its focus on improving asset quality,  asset
growth  and  market  penetration.  Management  emphasized  prudent  underwriting
standards, increased periodic reviews of loans of $100,000 or more, and expanded
its loan quality monitoring systems.  During the period, asset quality continued
to demonstrate  improvement.  Non-performing assets decreased from $3,011,402 at
December 31, 2004 to $1,941,439 at September 30, 2005. Net  charge-offs  for the
period totaled  $312,775  compared to $396,543 for the  nine-month  period ended
September 30, 2004.  Loans  outstanding grew by 11% to $94,351,450 from December
31, 2004,  which reflected  improved  economic  conditions and increased  market
share.  Deposits  increased 3% to  $117,523,416.  The increase was  reflected in
time,  savings  and demand  deposits.  Including  an  outflow  of  approximately
$13,400,000 in money market accounts, which were temporary funds from one of the
Company's largest real estate trust accounts,  deposits increased  approximately
14% over December 31, 2004.

The Company  increased  its net  interest  income by 19% during the  three-month
period due to growth in net earning  assets and improved  net  interest  margin.
Based upon loan growth, asset quality and historical charge-off experience,  the
Company added $47,615 to the loan loss reserve  compared to $127,500  during the
comparable  period in 2004.  Non-interest  income increased 6% to $416,530.  The
increase was primarily attributable to increased fees from overdraft charges and
fees from VISA/Master Card transactions, which are based on activity volume. The
Company's  investment in Bank of Asheville Mortgage Company, LLC earned a profit
of  $16,855  during the  quarter,  which was its third  quarter  of  operations.
Non-interest expenses decreased 3% primarily as a result of decreased foreclosed
property expenses.

Net income totaled  $387,432 and $163,539 for the quarters  ended  September 30,
2005 and 2004, respectively - an increase of 137%.

The  Company  increased  its net  interest  income by 12% during the  nine-month
period due to growth in earning  assets.  Based upon loan growth,  asset quality
and charge-off  experience,  the Company added $400,770 to the loan loss reserve
compared to $740,300 during the comparable period in 2004.  Non-interest  income
decreased 8% to $1,129,652.  The decrease was primarily  attributable to $49,051
decreased fees from overdraft  charges,  which is based on activity volume.  The
Company's  investment in Bank of Asheville Mortgage Company, LLC reflected a net
operating  loss of $1,053 during the nine-month  period  compared to none during
2004.  Non-interest  expenses  increased  8%  primarily as a result of growth in
loans,  deposits,  marketing,   personnel  and  personnel  expenses.  Management
monitors  expenses  closely and  reviews  each  expense  relative to the benefit
provided.

Net income  totaled  $696,472  and  $456,388 for the  nine-month  periods  ended
September 30, 2005 and 2004, respectively - an increase of 53%.


                                                                              11
<PAGE>

CHANGES IN FINANCIAL CONDITION
SEPTEMBER 30, 2005 COMPARED TO DECEMBER 31, 2004

During the period from  December  31, 2004 to September  30, 2005,  total assets
increased  $6,026,395 or 5%. This increase,  reflected  primarily in investments
and loans, resulted from an increase in deposits and borrowed funds.

Securities,   federal  funds  sold  and  interest-bearing  balances  with  other
financial  institutions  at September 30, 2005 totaled  $34,082,251  compared to
$38,997,940 at December 31, 2004. Through an investment in the Federal Home Loan
Bank,  the Company  gained  access to the Federal  Home Loan Bank  system.  This
access  grants  the  Company   sources  of  funds  for  lending  and  liquidity.
Investments in Federal Home Loan Bank stock to date total $531,500.

At September 30, 2005, the loan portfolio constituted 69% of the Company's total
assets. Loans increased $9,499,380 from December 31, 2004 to September 30, 2005.
Improved  economic  conditions  resulted  in the 11%  increase  in loan  growth.
Management  places a strong  emphasis on loan  quality.  At September  30, 2005,
there  were  no  loans  that  (i)   represented   or  resulted  from  trends  or
uncertainties  which management  reasonably  expects to materially impact future
operating results, liquidity, or capital resources, or (ii) represented material
credits  about  which  management  was  aware of any  information  which  caused
management to have serious  doubts as to the ability of such borrowers to comply
with the loan repayment terms.

The  recorded  investment  in  loans  that  are  considered  to be  impaired  in
accordance  with  criteria  set  forth  in  Statement  of  Financial  Accounting
Standards  No. 114 of the  Financial  Accounting  Standards  Board was $901,556,
$1,641,415,  and  $1,869,920  at September  30, 2005 and 2004,  and December 31,
2004,  respectively.  The average recorded balance of impaired loans during 2005
and 2004 was not significantly  different from the balance at September 30, 2005
and 2004 and December 31, 2004. The related allowance for loan losses determined
in accordance  with SFAS No. 114 for impaired loans was $99,368 and $265,300 and
$219,846 at September  30, 2005 and 2004,  and December 31, 2004,  respectively.
For  the  nine-month  periods  ended  September  30,  2005  and  2004,  Weststar
recognized  interest  income from impaired  loans of  approximately  $14,980 and
$50,145.  See  "Asset  Quality"  for  discussion  for an  analysis  of loan loss
reserves.

Deposits  increased  $3,081,668 during the nine months ended September 30, 2005.
The  increase  in  deposits is  reflected  in demand time and savings  accounts.
During the first  quarter of 2005  approximately  $13.4  million in money market
accounts,  which were  temporary  funds from one of the  Company's  largest real
estate trust accounts,  flowed out of the Bank. Excluding these funds,  deposits
increased  approximately  14% over  December  31, 2004.  Total  demand  deposits
accounts grew by $5,039,851 to $24,612,400 due to continued market  penetration.
NOW accounts decreased primarily as a result of rate sensitive customer shifting
funds to higher yielding time deposits.  Time deposits increased  $8,456,917 due
to competitive interest rates and market penetration.

Long-term  borrowings  consisted  of one advance  from the FHLB,  which  totaled
$4,000,000  and  subordinated  debt of  $4,124,000.  The  interest  rate on this
advance  was 5.01% and  matures on March 23,  2010.  Advances  from the FHLB are
secured by a blanket lien on 1-4 family real estate loans and certain commercial
real estate loans.  The  subordinated  debt bears a rate of LIBOR plus 315 basis
points and pays dividends  quarterly.  The rate is subject to quarterly  resets.
The  subordinated  debt  matures  October 7, 2033,  and is  callable on or after
October 7, 2008. Approximately $3.5 million was eligible for inclusion as Tier I
capital.

The  Company's  capital at September 30, 2005 to risk  weighted  assets  totaled
15.67%.  Current  regulations  require a minimum  ratio of total capital to risk
weighted assets of 8%, with at least


                                                                              12
<PAGE>

4% being in the form of Tier 1  capital,  as defined  in the  regulation.  As of
September  30, 2005,  the  Company's  capital  exceeded  the current  regulatory
capital requirements.

RESULTS OF OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004

Net interest  income,  the principal  source of the Company's  earnings,  is the
amount of income  generated by earning  assets  (primarily  loans and investment
securities)  less the total  interest  cost of the funds  obtained to carry them
(primarily  deposits  and other  borrowings).  The volume,  rate and mix of both
earning assets and related funding sources determine net interest income.

COMPARATIVE THREE MONTHS

Net interest income for the quarter ended September 30, 2005 totaled  $1,346,268
compared to $1,136,017 in 2004. This increase was  attributable to growth in net
earning  assets and improved net interest  margin.  The  Company's  net interest
margins were  approximately  4.0% and 3.7% for the quarters ended  September 30,
2005 and 2004, respectively.

Weststar  recorded a provision  for loan losses of $47,615 and  $127,500 for the
quarters ended September 30, 2005 and 2004, respectively. The provision for loan
losses is  charged  to  operations  to bring  the  allowance  to a level  deemed
appropriate by management based on the factors  discussed under "Asset Quality."
Despite improved  performance in credits, the allowance for loan losses remained
relatively high due to charge-off experience during the past three years.

Other  non-interest  income for the September 30, 2005 and 2004 quarters totaled
$416,530  and  $393,734,  respectively.  The increase in service  charge  income
primarily  reflects an  increase  in  overdraft  charge  income of $11,373.  The
increase in  overdraft  charges was based on activity  during the period.  Other
service  fees and  commission  decreased as a result of shifting  mortgage  loan
origination  from the Bank to the mortgage  company.  The Bank recorded none and
$28,175  from  the   origination   of  mortgage  loans  during  2005  and  2004,
respectively.  Net profit from Bank of Asheville  Mortgage Company,  LLC totaled
$16,855 during the 2005 quarter compared to none during the 2004 quarter.  Other
income increased  $25,822  primarily due to a recovery other than loans.  During
the period,  the  Company  realized  $22,209 in  securities  losses.  Securities
bearing yields  significantly  below current market yields were sold; funds were
reinvested at higher current market yields.

Other non-interest  expense totaled  $1,099,186  compared to $1,129,902 in 2004.
This  decrease was  primarily  attributable  to a decrease in net expenses  from
foreclosed properties. Foreclosed properties expenses decreased from $122,078 to
$4,123,  which  paralleled a decrease in  foreclosed  properties.  Income before
income tax  provision  totaled  $615,997 and  $272,349  for the  quarters  ended
September 30, 2005 and 2004, respectively. Income tax provision totaled $228,565
and $108,810 for the quarters ended  September 30, 2005 and 2004,  respectively,
which equated to an effective tax rate of 37.10% and 39.95%.  Net income totaled
$387,432  and  $163,539  for the  quarters  ended  September  30, 2005 and 2004,
respectively.

COMPARATIVE NINE MONTHS

Net  interest  income for the  nine-month  period  September  30,  2005  totaled
$3,748,157  compared to $3,357,300 in 2004.  This increase was  attributable  to
growth  in  net  earning   assets.   The  Company's  net  interest   margin  was
approximately  3.8% and 3.9% for the periods ended  September 30, 2005 and 2004,
respectively.


                                                                              13
<PAGE>

Weststar  recorded a provision  for loan losses of $400,770 and $740,300 for the
nine months ended September 30, 2005 and 2004,  respectively.  The provision for
loan losses is charged to  operations  to bring the  allowance to a level deemed
appropriate by management based on the factors  discussed under "Asset Quality."
Despite improved  performance in credits, the allowance for loan losses remained
relatively high due to charge-off experience during the past three years.

Other  non-interest  income for the September 30, 2005 and 2004 periods  totaled
$1,129,652 and $1,233,641,  respectively.  The decrease in service charge income
primarily  reflects  a decrease  in  overdraft  charge  income of  $49,051.  The
decrease in  overdraft  charges was based on activity  during the period.  Other
service  fees and  commission  decreased as a result of shifting  mortgage  loan
origination from the Bank to the mortgage company. The Bank recorded $12,612 and
$90,580  from  the   origination   of  mortgage  loans  during  2005  and  2004,
respectively.  Net  loss  from the  Company's  investment  in Bank of  Asheville
Mortgage  Company,  LLC totaled  $1,053 during the 2005 period  compared to none
during 2004.  Other income increased  $23,066  primarily due to a recovery other
than loans.

Other non-interest  expense totaled  $3,373,057  compared to $3,116,138 in 2004.
This increase was primarily  attributable  to overall  company growth to support
loans and deposits,  and accounting fees associated with the  Sarbanes-Oxley Act
of 2002.  Equipment  expenses  increased  $25,008 as the company  purchased  new
equipment for additional  employees,  and upgraded outdated servers and personal
computers  company-wide.  Marketing  expenses  increased  $18,444 as the Company
continued to penetrate its service area. Net expenses from foreclosed properties
decreased  from $208,278 to $91,332,  which  paralleled a decrease in foreclosed
properties.  Income before income tax provision totaled  $1,103,982 and $734,503
for the periods September 30, 2005 and 2004, respectively.  Income tax provision
totaled $407,510 and $278,115 for the periods ended September 30, 2005 and 2004,
respectively,  which equated to an effective tax rate of 36.91% and 37.86%.  Net
income  totaled  $696,472 and $456,388 for the periods ended  September 30, 2005
and 2004, respectively.

                           ASSET/LIABILITY MANAGEMENT

The Company's  asset/liability  management,  or interest  rate risk  management,
program is focused  primarily on evaluating and managing the  composition of its
assets and  liabilities  in view of various  interest  rate  scenarios.  Factors
beyond the Company's control, such as market interest rates and competition, may
also have an impact on the Company's interest income and interest expense.

In the  absence  of other  factors,  the  yield or  return  associated  with the
Company's  earning  assets  generally  will increase  from existing  levels when
interest rates rise over an extended  period of time and,  conversely,  interest
income will decrease when interest rates decline.  In general,  interest expense
will  increase  when  interest  rates rise over an extended  period of time and,
conversely, interest expense will decrease when interest rates decline.

Interest  Rate Gap  Analysis.  As a part of its  interest  rate risk  management
policy,  the Company  calculates  an interest  rate "gap."  Interest  rate "gap"
analysis is a common,  though  imperfect,  measure of interest rate risk,  which
measures   the  relative   dollar   amounts  of   interest-earning   assets  and
interest-bearing liabilities which reprice within a specific time period, either
through  maturity or rate  adjustment.  The "gap" is the difference  between the
amounts  of such  assets  and  liabilities  that are  subject  to  repricing.  A
"positive"  gap for a given  period  means that the  amount of  interest-earning
assets maturing or otherwise  repricing within that period exceeds the amount of
interest-bearing  liabilities  maturing or otherwise  repricing  within the same
period.  Accordingly,  in a declining interest rate environment,  an institution
with a positive gap would  generally  be  expected,  absent the effects of other
factors,  to  experience a decrease in the yield on its assets  greater than the
decrease  in the cost of its  liabilities  and its income  should be  negatively
affected. Conversely,


                                                                              14
<PAGE>

the cost of funds for an  institution  with a positive  gap would  generally  be
expected  to  increase  more  slowly  than the  yield on its  assets in a rising
interest rate environment,  and such institution's net interest income generally
would be expected to be positively affected by rising interest rates. Changes in
interest  rates  generally  have the opposite  effect on an  institution  with a
"negative gap."

During  the first  six  months of 2005,  rates on  interest-bearing  liabilities
repriced at incrementally  higher than rates on  interest-earning  assets due to
competitive  factors in the market place,  which caused a slight  compression in
net interest margin compared to 2004. However, during the third quarter of 2005,
the net interest  margin improved as interest rates on  interest-earning  assets
increased incrementally higher than rates on interest-bearing  liabilities.  The
shift in pricing was primarily market driven.

The  following  table sets  forth the  amounts  of  interest-earning  assets and
interest-bearing  liabilities  outstanding  at  September  30,  2005,  which are
projected to reprice or mature in each of the future time periods shown.  Except
as stated below,  the amounts of assets and  liabilities  shown which reprice or
mature  within a  particular  period  were  determined  in  accordance  with the
contractual terms of the assets or liabilities.  Loans with adjustable rates are
shown  as being  due at the end of the  next  upcoming  adjustment  period.  The
interest rate sensitivity of the Company's assets and liabilities illustrated in
the following table would vary substantially if different  assumptions were used
or if actual experience differs from that indicated by such assumptions.

<TABLE>
<CAPTION>
                                                                TERMS TO REPRICING AT SEPTEMBER 30, 2005
                                       1-90 Days      91-180 Days     181-365 Days    Total One Year   Non-Sensitive      Total
                                     ------------    ------------     ------------    --------------   -------------  ------------
<S>                                  <C>             <C>              <C>              <C>             <C>            <C>
Interest-earning assets:
Interest bearing deposits            $    326,080               ~                ~     $    326,080               ~   $    326,080
Federal funds sold                      5,464,000               ~                ~        5,464,000               ~      5,464,000
Investment securities                   5,076,656    $    750,576     $  6,509,103       12,336,335    $ 16,400,589     28,736,924

Federal Home Loan Bank stock                   --              --               --               --         531,500        531,500
Loans (1)                              71,859,646         943,485        2,452,636       75,255,767      17,315,321     92,571,088
Total interest-earning assets          82,726,382       1,694,061        8,961,739       93,382,182      34,247,410    127,629,592

Interest-bearing liabilities:
Time deposits                           5,360,114      11,652,027       14,619,242       31,631,383       5,594,215     37,225,598
All other deposits                     55,685,418              --               --       55,685,418              --     55,685,418
Long-term debt                          4,124,000              --               --        4,124,000       4,000,000      8,124,000
Total interest-bearing liabilities     65,169,532      11,652,027       14,619,242       91,440,801       9,594,215    101,035,016

Interest sensitivity gap             $ 17,556,850    $ (9,957,966)    $ (5,657,503)    $  1,941,381    $ 24,653,195              ~
Cumulative interest sensitivity
Gap                                  $ 17,556,850    $  7,598,884     $  1,941,381                ~               ~              ~
Cumulative ratio of interest -
earning assets as a percent
of interest sensitive liabilities           126.9%           14.5%            61.3%           102.1%              ~              ~
</TABLE>

(1)   Non-accrual loans have been excluded.

Weststar has established an acceptable range of 80% to 120% for interest-earning
assets as a percent of interest sensitive liabilities for the one year horizon.

                                  ASSET QUALITY

Management  considers  Weststar's asset quality to be of primary importance.  We
maintain an allowance for loan losses to absorb  probable losses inherent in the
loan portfolio. The loan


                                                                              15
<PAGE>

portfolio is analyzed monthly in an effort to identify potential problems before
they actually occur.  The allowance for loan losses is established as losses are
estimated  to have  occurred  through a  provision  for loan  losses  charged to
earnings. The provision for loan losses is based upon management's best estimate
of the amount  needed to maintain the  allowance  for loan losses at an adequate
level.  Loan losses are charged against the allowance when  management  believes
the uncollectibility of a loan balance is confirmed.  Subsequent recoveries,  if
any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management  and
is based upon management's periodic review of the collectibility of the loans in
light of the current status of the portfolio,  historical experience, the nature
and  volume  of the loan  portfolio,  adverse  situations  that may  affect  the
borrower's ability to repay, estimated value of any underlying  collateral,  and
prevailing economic  conditions.  Management segments the loan portfolio by loan
type in considering each of the aforementioned factors and their impact upon the
level of the allowance for loan losses.

This  evaluation is inherently  subjective,  as it requires  estimates  that are
susceptible  to  significant  revision as more  information  becomes  available.
Therefore,  while  management  uses  the  best  information  available  to  make
evaluations,  future adjustments to the allowance may be necessary if conditions
differ  substantially  from the assumptions used in making the  evaluations.  In
addition,  regulatory  examiners may require the Company to recognize changes to
the  allowance  for  loan  losses  based on their  judgments  about  information
available to them at the time of their examination.

A loan is considered  impaired when, based on current information and events, it
is probable that the Company will be unable to collect the scheduled payments of
principal or interest  when due according to the  contractual  terms of the loan
agreement.  Factors  considered by management in determining  impairment include
payment status,  collateral  value, and the probability of collecting  scheduled
principal and interest  payments when due. Loans that  experience  insignificant
payment delays and payment shortfalls  generally are not classified as impaired.
Management  determines the significance of payment delays and payment shortfalls
on a case-by-case  basis,  taking into  consideration  all of the  circumstances
surrounding  the loan and the borrower,  including the length of the delay,  the
reasons for the delay,  the borrower's  prior payment record,  and the amount of
the  shortfall in relation to the  principal  and interest  owed.  Impairment is
measured on a loan by loan basis for commercial and construction loans by either
the  present  value of  expected  future  cash  flows  discounted  at the loan's
effective  interest rate, the loan's  obtainable market price, or the fair value
of the collateral if the loan is collateral  dependent.  Large groups of smaller
balance   homogeneous   loans  are   collectively   evaluated  for   impairment.
Accordingly,  the Company does not separately  identify  individual consumer and
residential loans for impairment disclosures.

The provision for loan losses  represents a charge  against  income in an amount
necessary  to  maintain  the  allowance  at an  appropriate  level.  The monthly
provision for loan losses may fluctuate  based on the results of this  analysis.
The allowance  for loan losses at September 30, 2005 and 2004,  and December 31,
2004 and 2003 was  $1,696,361,  $1,517,760,  $1,608,366 and $1,174,003 or 1.80%,
1.85%, 1.90% and 1.57%, respectively,  of gross loans outstanding.  The ratio of
annualized net charge-offs to average loans outstanding was .47%, .68%, .72% and
1.82%, at September 30, 2005 and 2004, and December 2004 and 2003, respectively.
Improved asset quality and fewer  charge-offs  resulted in a lower  provision to
the loan loss reserve during 2005 compared to the same period in 2004. Primarily
because of a recessionary  economy,  charge-offs for the year ended 2003 totaled
$1,357,614.   As  the  economy  demonstrated  signs  of  recovery  during  2004,
charge-offs  decreased to $697,612.  Charge-offs during the first nine months of
2005 totaled $342,714 compared to $434,542 during the comparable period in 2004.


                                                                              16
<PAGE>

The  following  table  contains an analysis for the  allowance  for loan losses,
including the amount of  charge-offs  and  recoveries by loan type, for the nine
months ended  September 30, 2005 and 2004,  and for the years ended December 31,
2004 and 2003.

Summary of Allowance for Loan Losses

<TABLE>
<CAPTION>
                                                For the nine months            For the years ended
                                                ended September 30,                December 31,
                                               2005            2004            2004            2003
                                               ----            ----            ----            ----
<S>                                        <C>             <C>             <C>             <C>
Balance, beginning of period               $ 1,608,366     $ 1,174,003     $ 1,174,003     $ 1,020,198
  Charge-offs:
  Commercial, financial and agricultural      (188,365)       (388,102)       (579,930)     (1,075,792)
  Real estate:
    Construction                                    --              --              --              --
    Mortgage                                  (129,401)             --         (48,000)       (157,142)
  Consumer                                     (24,948)        (46,440)        (69,682)       (124,680)
                                           -----------     -----------     -----------     -----------
Total charge-offs                             (342,714)       (434,542)       (697,612)     (1,357,614)

Recoveries
  Commercial, financial and agricultural         9,707          18,339          73,054          71,942
  Real estate:
    Construction                                    --              --              --              --
    Mortgage                                        --              --          25,000              --
  Consumer                                      20,232          19,660          23,621          33,677
                                           -----------     -----------     -----------     -----------
Total recoveries                                29,939          37,999         121,675         105,619
                                           -----------     -----------     -----------     -----------
Net (charge-offs) recoveries                  (312,775)       (396,543)       (575,937)     (1,251,995)
                                           -----------     -----------     -----------     -----------
Provision charged to operations                400,770         740,300       1,010,300       1,405,800
                                           -----------     -----------     -----------     -----------
Balance, end of period                     $ 1,696,361     $ 1,517,760     $ 1,608,366     $ 1,174,003
                                           ===========     ===========     ===========     ===========

Annualized percentage of net
charge-offs to average loans                       .47%            .68%            .72%           1.82%
Percentage of allowance to
  period-end loans                                1.80%           1.85%           1.90%           1.57%
</TABLE>

The following  table allocates the allowance for loan losses by loan category at
the dates  indicated.  The  allocation  of the allowance to each category is not
necessarily  indicative  of future  losses and does not  restrict the use of the
allowance to absorb losses in any category.

                                September 30, 2005         December 31, 2004
                              Amount of   Percent of     Amount of   Percent of
                              Allowance   Total Loans    Allowance   Total Loans

TYPE OF LOAN:
Real estate                   $1,307,795       77%       $1,139,769       74%
Commercial and industrial
  loans                          331,772       21%          388,559       24%
Consumer                          56,794        2%           54,528        2%
Unallocated                           --       --            25,510       --
                              ----------    -----        ----------    -----
Total allowance               $1,696,361      100%       $1,608,366      100%
                              ==========    =====        ==========    =====

The  Company  does not have any  significant  loan  concentrations.  During  the
period, loan quality demonstrated improvement.  Impaired loans totaled $901,556,
$1,019,222, $1,598,956 and $1,869,920 at September 30, 2005, June 30 2005, March
31,  2005  and  December  31,  2004,  respectively.   Nonaccrual  loans  totaled
$1,780,362 $2,299,925, $2,823,869 and $2,567,816 at September 30, 2005, June 30,
2005, March 31, 2005 and December 31, 2004, respectively.


                                                                              17
<PAGE>

During 2005,  there were no changes in estimation  methods or  assumptions  that
affected our  methodology for assessing the  appropriateness  of the formula and
specific  allowance  for credit  losses.  Changes in estimates  and  assumptions
regarding the effect of economic and business conditions on borrowers affect the
assessment of the allowance.

                                CAPITAL RESOURCES

Banks and bank holding companies, as regulated institutions,  must meet required
levels of capital.  The Federal Deposit Insurance  Corporation  ("FDIC") and the
Federal Reserve,  the primary  regulators of The Bank of Asheville and Weststar,
respectively,  have adopted  minimum  capital  regulations  or  guidelines  that
categorize  components  and the level of risk  associated  with various types of
assets.  Financial  institutions  are  expected  to  maintain a level of capital
commensurate  with the risk profile  assigned to its assets in  accordance  with
these  guidelines.  As shown in the  following  table,  Weststar and The Bank of
Asheville both maintained  capital levels exceeding the minimum levels for "well
capitalized" banks and bank holding companies.

                               REGULATORY CAPITAL

<TABLE>
<CAPTION>
                                                                                                 To Be Well
                                                                          For Capital        Capitalized Under
                                                      Actual                Adequacy         Prompt Corrective
                                                                            Purposes         Action Provisions
                                                 Amount     Ratio      Amount      Ratio      Amount     Ratio
                                                 ------     -----      ------      -----      ------     -----
                                                                     (Dollars in Thousands)
<S>                                              <C>        <C>        <C>         <C>       <C>         <C>
As of September 30, 2005
Total Capital (to Risk Weighted Assets)
  Consolidated                                   $15,902    15.67%     $8,117      8.00%     $10,146     10.00%
  Bank                                           $15,217    15.04%     $8,092      8.00%     $10,116     10.00%

Tier 1 Capital (to Risk Weighted Assets)
  Consolidated                                   $14,170    13.97%     $4,059      4.00%     $ 6,088      6.00%
  Bank                                           $13,947    13.79%     $4,046      4.00%     $ 6,069      6.00%

Tier 1 Capital (to Average Assets)
  Consolidated                                   $14,170    10.38%     $5,460      4.00%     $ 6,825      5.00%
  Bank                                           $13,947    10.24%     $5,448      4.00%     $ 6,810      5.00%
</TABLE>

                                    LIQUIDITY

Maintaining  adequate liquidity while managing interest rate risk is the primary
goal of Weststar's  asset and liability  management  strategy.  Liquidity is the
ability  to fund the  needs  of the  Company's  borrowers  and  depositors,  pay
operating expenses, and meet regulatory liquidity requirements. Loan repayments,
deposit  growth,  federal funds  purchased and borrowings  from the Federal Home
Loan  Bank are  presently  the main  sources  of the  Company's  liquidity.  The
Company's primary uses of liquidity are to fund loans and to make investments.

As of September  30, 2005 liquid  assets (cash due from banks,  interest-earning
bank deposits and federal funds sold) were  approximately  $10.9 million,  which
represents 7.9% of total assets and 9.2% of total deposits.  Supplementing  this
liquidity,  Weststar has available lines of credit from  correspondent  banks of
approximately $12.7 million. At September 30, 2005,  outstanding  commitments to
extend credit and available lines of credit were $24.1 million. Management


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<PAGE>

believes  that the  combined  aggregate  liquidity  position  of the  Company is
sufficient  to  meet  the  funding  requirements  of  loan  demand  and  deposit
maturities and withdrawals in the near term.

Certificates  of deposit  represented  approximately  31.7% of Weststar's  total
deposits at September 30, 2005. The Company's  growth strategy  includes efforts
focused on increasing the relative volume of transaction  deposit  accounts,  as
the branch  network  is  expanded,  making it more  convenient  for our  banking
customers.  Certificates of deposit of $100,000 or more  represented 8.3% of the
Company's  total  deposits at September 30, 2005.  These  deposits are generally
considered   rate   sensitive,   but  management   believes  most  of  them  are
relationship-oriented.  While the Company will need to pay competitive  rates to
retain these deposits at maturity,  there are other subjective factors that will
determine the Company's continued retention of these deposits.

                              INVESTMENT ACTIVITIES

At  September  30, 2005,  Weststar's  investments  consisted of U.S.  Government
agency   securities,   mortgage  backed  securities  and  municipal  bonds.  The
investments,  with aggregate amortized cost of $28.7 million,  are classified as
available for sale and are presented in the consolidated financial statements at
their market  values of $28.3 million at September  30, 2005.  These  securities
have tax  equivalent  yields  of  3.5%,  4.0%  and  5.7%  respectively,  with an
aggregate remaining term of approximately 61.9 months. The Company's  investment
in stock of the Federal Home Loan Bank, which is required of every member and is
redeemable  only by the Federal  Home Loan Bank,  was  $531,500  with a yield of
3.25% at September 30, 2005.  Because the  investment is redeemable  only by the
Federal Home Loan Bank, it is listed  separately  rather than a component of the
Company's investment portfolio.

                     IMPACT OF INFLATION AND CHANGING PRICES

A financial institution has assets and liabilities that are distinctly different
from those of a company  with  substantial  investments  in plant and  inventory
because the major  portion of its assets is monetary in nature.  As a result,  a
bank's performance may be significantly influenced by changes in interest rates.
Although the banking industry is more affected by changes in interest rates than
by inflation in the prices of goods and services,  inflation is a factor,  which
may influence interest rates.  However,  the frequency and magnitude of interest
rate  fluctuations  do not  necessarily  coincide  with  changes in the  general
inflation  rate.  Inflation  does affect  operating  expenses in that  personnel
expenses,  cost of supplies and outside  services  tend to increase  more during
periods of high inflation.

Item 3. Controls and Procedures

The Company  carried out an  evaluation  as of the end of the period  covered by
this report under the  supervision and with the  participation  of the company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation  of the  Company's
disclosure  controls and procedures pursuant to Securities and Exchange Act Rule
13a-14.  Based  upon that  evaluation,  the Chief  Executive  Officer  and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to the Company  required to be included in the  Company's  periodic SEC
Filings. There were no significant changes in the Company's internal controls or
in other factors during the most recent quarter.


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<PAGE>

Part II. OTHER INFORMATION

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

      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


                                                                              20
<PAGE>

SIGNATURES

Under the  requirements  of the Securities  Exchange Act of 1934, the registrant
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
thereunto duly authorized.

                                    WESTSTAR FINANCIAL SERVICES CORPORATION


Date: November 9, 2005          By: /s/   G. Gordon Greenwood
                                    --------------------------------------------

                                    G. Gordon Greenwood
                                    President and Chief Executive Officer


Date: November 9, 2005          By: /s/   Randall C. Hall
                                    --------------------------------------------

                                    Randall C. Hall
                                    Executive Vice President and Chief Financial
                                    and Principal Accounting Officer


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