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 March 31, 2002

  [ ]  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 Identification No.)
 incorporation or organization)

                      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 [ ]

                      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 - 869,721 shares outstanding as of May 7, 2002.


                                                                               1


<PAGE>


INDEX                                                                       Page

Part I - FINANCIAL INFORMATION

Financial Statements:
         Consolidated Balance Sheets
           March 31, 2002 and December 31, 2001                               3

         Consolidated Statements of Operations
           Three Months Ended March 31, 2002 and 2001                         4

         Consolidated Statements of Comprehensive Income
           Three Months Ended March 31, 2002 and 2001                         5

         Consolidated Statement of Changes in Shareholders' Equity
           Three Months Ended March 31, 2002                                  6

         Consolidated Statements of Cash Flows
           Three Months Ended March 31, 2002 and 2001                         7

         Notes to Consolidated Financial Statements                           8

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

Part II - OTHER INFORMATION

Exhibit Index                                                                17

Signatures                                                                   18


                                                                               2


<PAGE>


<TABLE>
<CAPTION>


WESTSTAR FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS

                                                                            (unaudited)        (audited)
                                                                             March 31,        December 31,
                                                                                2002               2001
                                                                                ----               ----

<S>                                                                         <C>                <C>
ASSETS:
Cash and cash equivalents:
  Cash and due from banks                                                   $  4,934,735       $  3,805,590
  Interest-bearing deposits                                                       30,367             36,115
  Federal funds sold                                                           3,799,000          1,585,000
                                                                            ------------       ------------
      Total cash and cash equivalents                                          8,764,102          5,426,705
                                                                            ------------       ------------
Investment securities -
  Available for sale, at fair value (amortized cost of
  $6,542,066 and $6,793,328, respectively)                                     6,562,099          6,859,668
                                                                            ------------       ------------
Loans                                                                         66,485,058         65,230,982
Allowance for loan losses                                                       (998,399)          (978,467)
                                                                            ------------       ------------
Net loans                                                                     65,486,659         64,252,515
Premises and equipment, net                                                    2,127,195          2,195,191
Accrued interest receivable                                                      576,188            470,592
Federal Home Loan Bank stock, at cost                                            229,800            229,800
Deferred income taxes                                                            290,811            246,510
Foreclosed properties                                                            808,890            752,539
Other assets                                                                     280,741            218,645
                                                                            ------------       ------------
TOTAL                                                                       $ 85,126,485       $ 80,652,165
                                                                            ============       ============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
  Demand                                                                    $ 16,062,836       $ 14,243,137
  NOW accounts                                                                 9,073,805          8,435,579
  Money market accounts                                                       17,862,985         16,296,256
  Savings                                                                      1,645,170          1,158,818
  Time deposits of $100,000 or more                                            7,537,766         10,066,980
  Other time deposits                                                         24,373,978         21,931,581
                                                                            ------------       ------------
        Total deposits                                                        76,556,540         72,132,351
Accrued interest payable                                                         132,597           197,2209
Other liabilities                                                                321,322            340,397
                                                                            ------------       ------------
      Total liabilities                                                       77,010,459         72,669,968
                                                                            ------------       ------------


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 - 869,721 and 869,721, respectively           869,721            869,721
Additional paid-in capital                                                     7,114,771          7,114,771
Retained earnings (accumulated deficit)                                          119,238            (43,014)
Accumulated other comprehensive income                                            12,296             40,719
                                                                            ------------       ------------
      Total shareholders' equity                                               8,116,026          7,982,197
                                                                            ------------       ------------
TOTAL                                                                       $ 85,126,485       $ 80,652,165
                                                                            ============       ============

</TABLE>


See notes to consolidated financial statements.


                                                                               3


<PAGE>


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

<TABLE>
<CAPTION>
                                                     Three Months
                                                    Ended March 31,
                                                  2002           2001
                                                  ----           ----
<S>                                            <C>            <C>
INTEREST INCOME:
Interest and fees on loans                     $1,263,673     $1,568,521
Federal funds sold                                  2,002         37,703
Interest-bearing deposits with other banks          6,156          3,556
Investments:
  U.S Treasuries                                       --         11,861
  U.S. Government agencies                         67,573         19,949
  Municipal bonds                                   2,262             --
  Corporate dividends                               3,620          4,081
                                               ----------     ----------
       Total interest income                    1,345,286      1,645,671
                                               ----------     ----------
INTEREST EXPENSE:
Time deposits of $100,000 or more                  84,426        115,948
Other time and savings deposits                   324,211        633,817
Federal funds purchased                            14,888            544
Other interest expense                              1,444            719
                                               ----------     ----------
     Total interest expense                       424,969        751,028
                                               ----------     ----------
NET INTEREST INCOME                               920,317        894,643
PROVISION FOR LOAN LOSSES                         202,650        114,070
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                  717,667        780,573
                                               ----------     ----------
OTHER INCOME:
Service charges on deposit accounts               282,803        127,080
Other service fees and commissions                 97,200         56,353
Other                                               7,916          3,128
                                               ----------     ----------
       Total other income                         387,919        186,561
                                               ----------     ----------
OTHER EXPENSES:
Salaries and wages                                315,726        298,386
Employee benefits                                  55,744         83,603
Occupancy expense, net                             39,503         41,458
Equipment rentals, depreciation and
  Maintenance                                      68,409         67,288
Supplies                                           43,408         38,601
Professional fees                                 194,844        123,356
Marketing                                          21,751         46,608
Other                                             101,084         24,897
                                               ----------     ----------
        Total other expenses                      840,469        724,197
                                               ----------     ----------
INCOME BEFORE INCOME TAXES                        265,117        242,937
INCOME TAX PROVISION                              102,865        100,011
                                               ----------     ----------
NET INCOME                                     $  162,252     $  142,926
                                               ==========     ==========

EARNINGS PER SHARE:
Basic                                          $     0.19     $     0.19
                                               ==========     ==========
Diluted                                        $     0.18     $     0.19
                                               ==========     ==========


</TABLE>


See notes to consolidated financial statements


                                                                               4


<PAGE>


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

                                                            Three   Months
                                                            Ended March 31,
                                                         2002           2001
                                                         ----           ----

NET INCOME                                           $  162,252     $  142,926
OTHER COMPREHENSIVE INCOME
Unrealized holding gains (losses) on securities
  available for sale, net of taxes                      (28,423)         6,192
                                                     ----------     ----------
COMPREHENSIVE INCOME                                 $  133,829     $  149,118
                                                     ==========     ==========


See notes to consolidated financial statements.

                                                                               5


<PAGE>


WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2002(unaudited)

<TABLE>
<CAPTION>
                                                                        Retained       Accumulated
                                             Common Stock             Additional      Earnings/           Other           Total
                                      -------------------------         Paid-In      (Accumulated     Comprehensive    Shareholders'
                                         Shares          Amount         Capital         Deficit)          Income         Equity


<S>                                     <C>           <C>              <C>             <C>              <C>            <C>
Balance December 31, 2001               869,721       $  869,721       $7,114,771      $  (43,014)      $   40,719     $7,982,197
  Net change in unrealized
     gain on securities held for sale   (28,423)         (28,423)

  Net income                            162,252          162,252
                                        -------       ----------       ----------      ----------       ----------     ----------
Balance March 31, 2002                  869,721       $  869,721       $7,114,771      $  119,238       $   12,296     $8,116,026
                                        =======       ==========       ==========      ==========       ==========     ==========


</TABLE>


See notes to consolidated financial statements.


                                                                               6


<PAGE>


<TABLE>
<CAPTION>

Weststar Financial Services Corporation & Subsidiary
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
                                                                                        2002               2001
                                                                                        ----               ----

<S>                                                                                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                         $    162,252       $    142,926
Adjustments to reconcile net income to net cash used by operating activities:
  Depreciation                                                                           72,377             70,150
  Provision for loan loss                                                               202,650            114,070
  Premium amortization and discount accretion, net                                        1,262             (2,913)
  (Increase) decrease in accrued interest receivable                                   (105,596)            19,265
  Increase (decrease) in accrued interest payable                                       (64,623)            24,762
  (Increase) decrease in other assets                                                    20,608            (84,323)
  Decrease in other liabilities                                                         (19,075)           (71,100)
  Loss on sales of foreclosed properties                                                  1,299                 --
  Loss on sales of premises and equipment                                                 1,588                 --
  Deferred income tax provision (benefit)                                               (26,121)            99,390
  Permanent write-down of investment security                                            67,000                 --
                                                                                   ------------       ------------
    Net cash provided by operating activities                                           313,621            312,227
                                                                                   ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Federal Home Loan Bank stock                                                     --             (4,800)
Purchases of securities available for sale                                                   --           (781,539)
Maturities of securities available for sale                                             100,000            775,000
Net increase in loans                                                                (1,502,444)        (3,073,680)
Proceeds from sales of foreclosed properties                                              8,000                 --
Proceeds from sales of premises and equipment                                             3,005                 --
Additions to premises and equipment                                                      (8,974)            (5,344)
                                                                                   ------------       ------------
    Net cash used in investing activities                                            (1,400,413)        (3,090,363)
                                                                                   ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts, MMDA and savings accounts              4,511,006          2,042,769
Net increase in certificates of deposits                                                (86,817)         6,015,656
Issuance of common stock                                                                     --          1,221,910
Common stock subscriptions                                                                   --           (328,396)
                                                                                   ------------       ------------
    Net cash provided by financing activities                                         4,424,189          8,951,939
                                                                                   ------------       ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                             3,337,397          6,173,803
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                      5,426,705          5,043,809
                                                                                   ------------       ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         $  8,764,102       $ 11,217,612
                                                                                   ============       ============


SUPPLEMENTAL DISCLOSURES:
  Cash paid during the period for:
    Interest                                                                       $    489,592       $    726,266
    Income taxes                                                                   $     62,368       $      2,545
    Transfer from investments to other assets                                      $     83,000       $         --
    Transfer from loans to foreclosed properties                                   $     65,650       $         --

</TABLE>


See notes to consolidated financial statements.


                                                                               7


<PAGE>


WESTSTAR FINANCIAL SERVICES CORPORTION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   Weststar Financial  Services  Corporation (the "Company") is a bank holding
     company  with one  subsidiary,  The Bank of  Asheville,  a state  chartered
     commercial bank  incorporated in North Carolina on October 29, 1997. Common
     shares of The Bank of Asheville  were  exchanged  for common  shares of the
     Company on April 29, 2000.

     In the opinion of management, the accompanying financial statements contain
     all  adjustments  necessary to present  fairly the  consolidated  financial
     position of the Company as of March 31, 2002 and December 31, 2001, and the
     consolidated results of their operations and their cash flows for the three
     month periods ended March 31, 2002 and 2001.

     The accounting policies followed are set forth in Note 1 to the 2001 Annual
     Report  to  Shareholders  (Form  10-KSB)  on file with the  Securities  and
     Exchange Commission.

2.   Loans at March 31, 2002 and  December  31, 2001  classified  by type are as
     follows:

                                              March 31,         December 31,
                                                2002                2001
Real Estate:
  Construction                              $ 10,870,177       $ 11,139,588
  Mortgage                                    36,388,711         35,189,010
Commercial, financial and agricultural        16,928,786         16,512,498
Consumer                                       2,459,955          2,553,710
                                            ------------       ------------
Subtotal                                      66,647,629         65,394,806
Net deferred loan origination fees              (162,571)          (163,824)
                                            ------------       ------------
Total                                       $ 66,485,058       $ 65,230,982
                                            ============       ============

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  portion of lines to
     extend  credit  were  $12,733,636  and  $19,280,406  at March 31,  2002 and
     December 31, 2001, respectively.

4.   Basic  earnings per share have been  computed  using the  weighted  average
     number of shares of common stock outstanding of 869,721 and 756,264 for the
     quarters ended March 31, 2002 and 2001, respectively.  Diluted earnings per
     share have been computed using common stock and common stock equivalents of
     880,270 and 756,264. Shares have been adjusted to reflect a 10% stock split
     paid in the form of an 11-for-10 stock dividend paid November 2001.

5.   The  Company's  capital at March 31,  2002 and  December  31,  2001 to risk
     weighted  assets totaled 13.72% and 13.79%,  respectively.  Current federal
     regulations  require  that the  Company  maintain a minimum  ratio of total
     capital to risk  weighted  assets of 8%, with at least 4% being in the form
     of Tier 1 capital, as defined in the regulations.  In addition, the Company
     must maintain a leverage ratio of 4%. As of March 31, 2002 and December 31,
     2001, the Company's capital exceeded the current capital requirements.


                                                                               8


<PAGE>


6.   In June 2001, the Financial  Accounting Standards Board issued Statement of
     Financial Accounting Standards ("SFAS") No. 141, Business  Combinations and
     SFAS No. 142, Goodwill and Other Intangible  Assets.  SFAS No. 141 requires
     that  all  business  combinations  entered  into  after  June  30,  2001 be
     accounted  for under the purchase  method.  SFAS No. 142 requires  that all
     intangible   assets,   including   goodwill   that  results  from  business
     combinations, be periodically (at least annually) evaluated for impairment,
     with any resulting  impairment loss being charged against  earnings.  Also,
     under  SFAS No.  142,  goodwill  resulting  from any  business  combination
     accounted  for  according  to SFAS No. 141 will not be  amortized,  and the
     amortization  of goodwill  related to business  combinations  entered  into
     prior to June 30, 2001 will be  discontinued  effective,  for the  Company,
     January 1, 2002.  The adoption of the  provisions  of SFAS No. 141 and SFAS
     142  effective  January  1, 2002 did not  affect  the  Company's  financial
     statements.

     In  June  2001,  the  Securities  and  Exchange   Commission  issued  Staff
     Accounting  Bulleting  ("SAB")  No.  102,  "Selected  Loan  Loss  Allowance
     Methodology and  Documentation  Issues." SAB No. 102 sets forth  guidelines
     for  determining  the  allowance for loan losses under  generally  accepted
     accounting  principles.  In addition, SAB No. 102 sets forth guidelines for
     documentation  by  registrants in support of the allowance for loan losses.
     The Company adopted SAB No. 102 on October 1, 2001. The Company  prepares a
     detailed  loan  classification  and applies an estimated  loss  calculation
     methodology,  which is the basis for the determination of the allowance for
     loan  losses.  This  methodology  and related  documentation  thereof,  has
     historically  been in place.  The Company  believes the adoption of SAB No.
     102 will not have an impact on its consolidated financial statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
     Impairment or Disposal of Long-Lived  Assets."  This  statement  supersedes
     SFAS No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
     Long-Lived  Assets to be Disposed of." SFAS No. 144 retains the fundamental
     provision  of SFAS  No.  121 for (a)  recognition  and  measurement  of the
     impairment of long-lived  assets to be held and used and (b)  measurment of
     long-lived  assets to be disposed of by sale. SFAS No. 144 is effective for
     fiscal years beginning after December 15, 2001. Management does not believe
     the adoption of SFAS No. 144 will have a material  effect on the  Company's
     financial position and results of operations.


                                                                               9


<PAGE>


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

CHANGES IN FINANCIAL CONDITION
MARCH 31, 2002 COMPARED TO DECEMBER 31, 2001

During the  period  from  December  31,  2001 to March 31,  2002,  total  assets
increased  $4,474,320 or 6%. This increase,  reflected primarily in the cash and
cash equivalents, investment securities and loan portfolio, was funded primarily
by deposit growth.

Securities,   federal  funds  sold  and  interest-bearing  balances  with  other
financial  institutions  at March  31,  2002  totaled  $10,391,466  compared  to
$8,480,783  at December 31, 2001.  Securities  available  for sale  decreased by
$250,000  due  to the  default  of an  investment.  The  Bank  had  purchased  a
certificate  of  deposit  from an FDIC  insured  institution  in the  amount  of
$250,000.  Subsequently,  the  institution  fell into FDIC  receivership,  which
resulted in the receipt of and FDIC insurance check in the amount of $100,000, a
permanent write down of $67,000, and a transfer from investments to other assets
in the amount of $83,000.  Based upon figures released by the FDIC regarding the
collection  of  uninsured  deposits,  the  Company  fully  expects to recoup the
remaining  balance of $83,000.  During 1999,  the Company  gained  access to the
Federal Home Loan Bank system. This access grants the Company additional sources
of funds for lending and liquidity.  An initial equity investment of $58,100 was
required to gain access to the Federal Home Loan Bank's  resources.  Investments
in Federal Home Loan Bank stock to date total $229,800.

The  loan  portfolio  constituted  78%  of the  Company's  total  assets.  Loans
increased  $1,254,076  from  December 31, 2001 to March 31, 2002.  Slow economic
growth in addition to management's  desire to improve  liquidity and manage loan
growth  commiserate  with deposit  growth  resulted in the modest 2% increase in
loan growth.  Management places a strong emphasis on loan quality.  At March 31,
2002,  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 $518,658,
$1,443,404,  and  $605,006 at March 31, 2002 and 2001,  and  December  31, 2001,
respectively.  The average  recorded  balance of impaired  loans during 2002 and
2001 was not  significantly  different  from the  balance at March 31,  2002 and
2001, and December 31, 2001, respectively. The related allowance for loan losses
determined  in accordance  with SFAS No. 114 for impaired  loans was $28,262 and
$90,667  and  $68,353  at March  31,  2001 and  2000,  and  December  31,  2000,
respectively.  For the  three  month  periods  ended  March  31,  2002 and 2001,
Weststar recognized interest income from impaired loans of approximately  $5,736
and $42,276.

Loans are considered impaired when based on current information,  it is probable
that the Company  will be unable to collect all  amounts  due  according  to the
contractual terms of the loan agreement,  including interest payments.  Impaired
loans are  carried  at the lower of the  recorded  investment  in the loan,  the
estimated  present value of the total expected future cash flows,  discounted at
the loan's  effective rate or the fair value of the  collateral,  if the loan is
collateral dependent.

The allowance for loan losses at March 31, 2002 and 2001, and December 31, 2001
was 1.50%, respectively, of gross loans outstanding.


                                                                              10


<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
three-months ended March 31, 2002 and 2001, and for the years ended December 31,
2001 and 2000.

Summary of Allowance for Loan Losses

<TABLE>
<CAPTION>
                                                 For the three months              For the years ended
                                                    ended March 31,                    December 31,
                                                 2002             2001             2001             2000
                                                 ----             ----             ----             ----
<S>                                           <C>              <C>              <C>              <C>
Balance, beginning of period                  $ 978,467        $ 871,706        $ 871,706        $ 528,808
  Charge-offs:
  Commercial, financial and agricultural       (131,020)          (4,957)        (373,087)        (112,062)
  Real estate: Mortgage                         (25,000)         (20,000)         (90,275)              --
  Consumer                                      (34,796)         (11,391)         (27,238)              --
                                              ---------        ---------        ---------        ---------
Total charge-offs                              (190,816)         (36,348)        (490,600)        (112,062)
Recoveries
  Commercial, financial and agricultural          5,976               --           45,270               --
  Consumer                                        2,122               --            1,671               --
                                              ---------        ---------        ---------        ---------
Total recoveries                                  8,098               --           46,941               --
                                              ---------        ---------        ---------        ---------
Net (charge-offs) recoveries                   (182,718)         (36,348)        (443,659)        (112,062)
                                              ---------        ---------        ---------        ---------
Provision charged to operations                 202,650          114,070          550,420          454,960
Balance, end of period                        $ 998,399        $ 949,428        $ 978,467        $ 871,706
                                              =========        =========        =========        =========

Percentage of net charge-offs to
  average loans                                    2.73%             .06%             .70%             .23%
Percentage of allowance to
  period-end loans                                 1.50%            1.50%            1.50%            1.45%

</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.

<TABLE>
<CAPTION>
                                    March 31, 2002               December 31, 2001
                              Amount of        Percent of    Amount of        Percent of
                              Allowance       Total Loans    Allowance        Total Loans

<S>                            <C>                 <C>        <C>                 <C>
TYPE OF LOAN:
Real estate                    $695,287            71%        $645,743            71%
Commercial and industrial
  loans                         265,842            25%         280,653            25%
Consumer                         18,049             4%          19,381             4%
Unallocated                      19,221            --           32,690            --
                               --------           ---         --------           ---
Total allowance                $998,399           100%        $978,467           100%
                               ========           ===         ========           ===

</TABLE>


The  Company  does not have any  significant  loan  concentrations.  During  the
period, loan quality and terms remained  relatively  unchanged and therefore had
no significant  impact on the allowance.  Growth in the allowance has been based
upon  our  formula  allowance.  Due  to the  overall  consistency  of  the  loan
portfolio, there has been no reallocation of the allowance among different parts
of the portfolio.

During  2000,  2001 and 2002,  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.

Deposits increased  $4,424,189 during the three months ended March 31, 2002. The
growth was found in all  categories of deposits.  Growth  stemmed from continued
market  penetration


                                                                              11


<PAGE>


and the addition of new  products/services.  Transaction accounts such as demand
deposits,  NOW  accounts,  savings and money market  demand  accounts  reflected
$4,511,006 in growth.  Interest rate sensitive customers shifted funds from time
deposits to lower interest-bearing NOW accounts and money market demand accounts
in anticipation of future increases in interest rates.

The Company's  capital at March 31, 2002 to risk weighted assets totaled 13.72%.
Current  regulations  require a minimum  ratio of total capital to risk weighted
assets of 8%,  with at least 4% being in the form of Tier 1 capital,  as defined
in the  regulation.  As of March 31, 2002,  the Company's  capital  exceeded the
current regulatory capital requirements.

RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2002 AND 2001

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 March 31,  2002  totaled  $920,317
compared to $894,643 in 2001.  This  increase is  attributable  to growth in net
earning  assets.  The Company's net interest margin was  approximately  4.5% and
4.9% for the quarters ended March 31, 2002 and 2001, respectively.

Weststar  recorded a provision  for loan losses of $202,650 and $114,070 for the
quarters  ended March 31, 2002 and 2001,  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."
The provision for credit losses  increased due to growth in the loan  portfolio,
and an  increase  in  non-performing  loans from  1.44% to 3.23% of gross  loans
outstanding at March 31, 2001 and 2002, respectively.

Non-interest  income for the March 31, 2001 and 2000 quarters  totaled  $387,919
and  $186,561,  respectively.  The growth in  service  charge  income  increased
commensurate with growth in transaction related deposit accounts, the deployment
of new and  enhanced  products  and  services,  and  increased  income  from the
origination  of mortgage  loans.  Mortgage loan income  increase from $24,174 in
2001 to $57,328 in 2002 as a result customer  refinancing.  Non-interest expense
totaled $840,469  compared to $724,197 in 2001.  Non-interest  expense increased
primarily  as a result of Company  wide asset  growth,  the costs of servicing a
larger loan and deposit base of customers and the $67,000  permanent  write down
of an  investment  security.  Additional  increased  costs  related  directly to
insurance,  supplies,  audit, tax and legal fees as well as sundry items. Income
before income tax provision totaled $265,117 and $242,937 for the quarters ended
March 31, 2002 and 2001, respectively. Income tax provision totaled $102,865 and
$100,011  for the  quarters  ended  March 31, 2002 and 2001,  respectively.  Net
income  totaled  $162,252 and $142,926 for the quarters ended March 31, 2002 and
2001, respectively.

Other comprehensive income (loss) totaled ($28,423) and $6,192 in 2002 and 2001,
respectively.  Comprehensive income, which is the change in shareholders' equity
excluding transactions with shareholders', totaled $133,829 and $149,118 for the
quarters ended March 31, 2002 and 2001, respectively.


                                                                              12


<PAGE>


                           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,  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."

The  following  table sets  forth the  amounts  of  interest-earning  assets and
interest-bearing  liabilities outstanding at March 31, 2002, 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. In addition,  the
table reflects scheduled principal  payments,  which will be received throughout
the lives of the loans.  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 MARCH 31, 2002
                                     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          $     30,367               --                --     $     30,367               --    $     30,367
Federal funds sold                    3,799,000               --                --        3,799,000               --       3,799,000
Investment securities                 2,500,000     $    500,000      $  1,500,000        4,500,000     $  2,042,066       6,542,066

Federal Home Loan Bank stock                 --               --                --               --          229,800         229,800
Loans                                47,252,025        1,593,939         5,015,059       53,861,023       10,476,260      64,337,283
Total interest-earning assets        53,581,392        2,093,939         6,515,059       62,190,390       12,748,126      74,938,516

Interest-bearing liabilities
Time deposits                        16,163,519       10,420,706         4,764,808       31,349,033          562,711      31,911,744
All other deposits                   28,581,960               --                --       28,581,960               --      28,581,960
Total interest-bearing               44,745,479       10,420,706         4,764,808       59,930,993          562,711      60,493,704
liabilities

Interest sensitivity gap           $  8,835,913     ($ 8,326,767)     $  1,750,251     $  2,259,397     $ 12,185,415    $ 14,444,812
Cumulative interest sensitivity
Gap                                $  8,835,913     $    509,146      $  2,259,397
Interest-earning assets as a
Percent of interest sensitive
liabilities                               119.7%            20.1%            136.7%           103.8%


</TABLE>

                                                                              13

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.

                                  ASSET QUALITY

Management  considers  Weststar's asset quality to be of primary importance.  We
maintain an allowance  for loan losses,  to absorb  losses  inherent in the loan
portfolio.  The loan  portfolio  is  analyzed  monthly in an effort to  identify
potential  problems before they actually occur. The allowance for loan losses is
evaluated on a regular basis by management using a methodology that segments the
loan   portfolio   by  types.   Weststar's   methodology   for   assessing   the
appropriateness  of the allowance  for loan losses  consists of two key elements
which are the formula allowance and specific allowance.

The formula  allowance is  calculated  by applying  loss factors to  outstanding
loans and certain  unused  commitments,  in each case based on the internal risk
grade of such loans,  pools of loans and commitments.  Changes in risk grades of
both  performing  and  nonperforming  loans  affect  the  amount of the  formula
allowance.  Loss  factors  are based in part on  limited  experience  and may be
adjusted for  significant  factors that, in  management's  judgment,  affect the
collectibility  of the  portfolio as of the  evaluation  date.  Loss factors are
developed in the following way.

     - Problem  graded loan loss  factors are derived  from a  methodology  that
utilizes  published  experience  of peer  community  banks  and  the  historical
experiences encountered by Weststar's management and senior lending officers.

     - Pass  graded  loan loss  factors  are  based on the  average  annual  net
charge-off rate over a period we believe is reflective of a business cycle.

     - Pooled loan loss factors  (not  individually  graded  loans) are based on
expected  net  charge-offs  for one  year.  Pooled  loans  are  loans  that  are
homogeneous in nature, such as consumer installment loans.

     -  Specific  allowances  are  established  in cases  where  management  has
identified  significant  conditions  or  circumstances  related to a credit that
management  believes  indicate the probability  that a loss has been incurred in
excess  of  the  formula  allowance.  This  amount  is  determined  either  by a
discounted cash flow method or the fair value of the collateral.

The allowance for loan losses is a significant estimate that can and does change
based  upon  management's  process  in  analyzing  the  loan  portfolio  and  on
management's  assumptions about specific  borrowers and applicable  economic and
environmental  conditions.  Specific  reserves  are  affected by the  underlying
quality of the collateral  securing the loans.  General reserves reflect changes
in market  conditions,  similar  types of loans or loans among a similar  group,
changes in regulations and laws, among other factors.

                                                                              14


<PAGE>


Actual  charge-offs  are  compared to the  allowance  and  adjustments  are made
accordingly.  By basing the past graded loan loss  factors on  charge-off  rates
over a period  reflective of a business  cycle,  the  methodology is designed to
take our recent loss  experience  into  account.  Pooled  loan loss  factors are
adjusted monthly based upon the level of net charge-offs  expected by management
in the next twelve months.  Furthermore,  our methodology permits adjustments to
any loss factor used in the  computation  of the formula  allowance in the event
that,  in  management's   judgement,   significant  factors,  which  affect  the
collectibility  of the portfolio as of the evaluation date, are not reflected in
the loss factors.  By assessing the probable  estimated  losses  inherent in the
loan portfolio on a monthly basis,  we are able to adjust  specific and inherent
loss estimates based upon the most recent information that has become available.


                                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
                                                                                                    Capitalized Under
                                                                             For Capital            Prompt Corrective
                                                        Actual            Adequacy Purposes         Action Provisions
                                                  Amount      Ratio      Amount        Ratio       Amount       Ratio
                                                  ------      -----      ------        -----       ------       -----
                                                                      (Dollars in Thousands)
<S>                                               <C>         <C>         <C>           <C>        <C>         <C>
As of March 31, 2002
Total Capital (to Risk Weighted Assets)
  Consolidated                                    $8,918      13.72%      $5,200        8.00%      $6,500      10.00%
  Bank                                            $8,821      13.58%      $5,197        8.00%      $6,496      10.00%

Tier 1 Capital (to Risk Weighted Assets)
  Consolidated                                    $8,103      12.47%      $2,599        4.00%      $3,898       6.00%
  Bank                                            $8,007      12.33%      $2,600        4.00%      $3,900       6.00%

Tier 1 Capital (to Average Assets)
  Consolidated                                    $8,103       9.96%      $3,254        4.00%      $4,068       5.00%
  Bank                                            $8,007       9.84%      $3,254        4.00%      $4,067       5.00%

</TABLE>


                                                                              15


<PAGE>


                                    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 March 31, 2002, liquid assets (cash due from banks,  interest-earning bank
deposits  and  federal  funds  sold)  were  approximately  $8.8  million,  which
represents 10.3% of total assets and 11.4% of total deposits. Supplementing this
liquidity,  Weststar has available lines of credit from  correspondent  banks of
approximately $12 million. At March 31, 2002, outstanding  commitments to extend
credit and available  lines of credit were $12.7  million.  Management  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  41.7% of Weststar's  total
deposits at March 31, 2002. The Company's  growth  strategy will include 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 9.8% of the
Company's  total  deposits  at March 31,  2002.  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 March 31, 2002,  Weststar's  investments  consisted of U.S. Government agency
securities,  a North Carolina  municipal bond and  certificates of deposit.  The
investments,  with aggregate  amortized cost of $6.5 million,  are classified as
available for sale and are presented in the financial statements at their market
value of $6.6 million at March 31, 2002.  These  securities  have tax equivalent
yields of 4.7%, 5.9% and 4.6%, respectively, with an aggregate remaining term of
approximately 27.2 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  $229,800  with a yield of 5.75% at March 31, 2002.
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.


                                                                              16


<PAGE>


Part II - OTHER INFORMATION

ITEM 4 - OTHER INFORMATION

None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

A.)  Exhibits
     None

B.)  Reports on Form 8-K The  Company  filed a current  report on Form 8-K dated
     April 17, 2002  announcing  the  termination of the firm Deloitte & Touche,
     LLP as the Company's  independent  auditors and  appointing  the firm Dixon
     Odom PLLC as the Company's  independent auditors for the fiscal year ending
     December 31, 2002.

     Items 1, 2, 3, 4, 5, 6, 7, 8 and 9 are inapplicable and are omitted.


                                                                              17


<PAGE>


SIGNATURE

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

                                      Weststar Financial Services Corporation
                                      (Registrant)

May 7, 2002                           /s/Randall C.  Hall
                                      Randall C. Hall
                                      Executive Vice President and
                                      Chief Financial and
                                      Principal Accounting Officer