<PAGE>

                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, 2001

[ ] 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 - 790,695 shares outstanding as of May 11, 2001.

<PAGE>

INDEX                                                                  Page

Part I - FINANCIAL INFORMATION

Financial Statements:
         Consolidated Balance Sheets
           March 31, 2001 and December 31, 2000                          3

         Consolidated Statements of Operations
           Three Months Ended March 31, 2001 and 2000                    4

         Consolidated Statements of Comprehensive Income
           Three Months Ended March 31, 2001 and 2000                    5

         Consolidated Statement of Changes in Shareholders' Equity
           Three Months Ended March 31, 2001                             6

         Consolidated Statements of Cash Flows
           Three Months Ended March 31, 2001 and 2000                    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                                                           16

Signatures                                                              17

                                                                               2
<PAGE>

<TABLE>
WESTSTAR FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS (unaudited)
<CAPTION>
                                                                            March 31,        December 31,
                                                                              2001               2000
                                                                         ----------------   ---------------
<S>                                                                      <C>                <C>
ASSETS:
Cash and cash equivalents:
  Cash and due from banks                                                $     5,642,980    $    3,791,415
  Interest-bearing deposits                                                       23,632           352,394
  Federal funds sold                                                           5,551,000           900,000
                                                                         ---------------    --------------
      Total cash and cash equivalents                                         11,217,612         5,043,809
                                                                         ---------------    --------------
Investment securities -
  Available for sale, at fair value (amortized cost of
  $2,029,059 and $2,019,607, respectively)                                     2,042,148         2,022,608
                                                                         ----------------   --------------
Loans                                                                         63,329,963        60,292,631
Allowance for loan losses                                                       (949,428)         (871,706)
                                                                         ---------------    --------------
Net loans                                                                     62,380,535        59,420,925
Premises and equipment, net                                                    2,367,729         2,432,535
Accrued interest receivable                                                      414,129           433,394
Federal Home Loan Bank stock, at cost                                            229,800           225,000
Deferred income taxes                                                            356,646           459,931
Other assets                                                                     236,537           152,215
                                                                         ---------------    --------------
TOTAL                                                                    $    79,245,136    $   70,190,417
                                                                         ===============    ==============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
  Demand                                                                 $    10,834,478    $   10,652,742
  NOW accounts                                                                 8,979,132         7,838,070
  Money market accounts                                                       12,683,380        12,111,132
  Savings                                                                        903,009           755,286
  Time deposits of $100,000 or more                                            7,600,059         6,729,107
  Other time deposits                                                         30,260,953        25,116,249
                                                                         ---------------    --------------
        Total deposits                                                        71,261,011        63,202,586
Accrued interest payable                                                         309,826           285,064
Other liabilities                                                                182,109           253,209
Stock subscriptions due                                                                -           328,396
                                                                         ---------------    --------------
      Total liabilities                                                       71,752,946        64,069,255
                                                                         ---------------    --------------


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 - 790,695 and 633,298, respectively           790,695           633,298
Additional paid-in capital                                                     7,194,149         6,129,636
Accumulated deficit                                                             (500,688)         (643,614)
Accumulated other comprehensive income                                             8,034             1,842
                                                                         ---------------    --------------
      Total shareholders' equity                                               7,492,190         6,121,162
                                                                         ---------------    --------------
TOTAL                                                                    $    79,245,136    $   70,190,417
                                                                         ===============    ==============
</TABLE>

See notes to consolidated financial statements.
                                                                               3
<PAGE>

<TABLE>
Weststar Financial Services Corporation & Subsidiary
Consolidated Statements of Operations (unaudited)
<CAPTION>
                                                         Three Months
                                                       Ended March 31,
                                                   2001               2000
                                               --------------     -------------
<S>                                            <C>                <C>
INTEREST INCOME:
Interest and fees on loans                     $   1,568,521      $    933,186
Federal funds sold                                    37,703            27,446
Interest-bearing deposits with other banks             3,556                54
Investments:
  U.S Treasuries                                      11,861            10,302
  U.S. Government agencies                            19,949            24,114
  Corporate dividends                                  4,081             1,135
                                               -------------      ------------
       Total interest income                       1,645,671           996,237
                                               -------------      ------------
INTEREST EXPENSE:
Time deposits of $100,000 or more                    115,948            82,643
Other time and savings deposits                      633,817           327,835
Federal funds purchased                                  544                 -
Other interest expense                                   719                41
                                               -------------      ------------
     Total interest expense                          751,028           410,519
                                               -------------      ------------
NET INTEREST INCOME                                  894,643           585,718
PROVISION FOR LOAN LOSSES                            114,070            57,200
                                               -------------      ------------
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                     780,573           528,518
                                               -------------      ------------
OTHER INCOME:
Service charges on deposit accounts                  127,080            90,026
Other service fees and commissions                    56,353            25,270
Other                                                  3,128             3,779
                                               -------------      ------------
       Total other income                            186,561           119,075
                                               -------------      ------------
OTHER EXPENSES:
Salaries and wages                                   298,386           264,431
Employee benefits                                     83,603            29,198
Occupancy expense, net                                41,458            28,538
Equipment rentals, depreciation and
  maintenance                                         67,288            57,496
Supplies                                              38,601            32,442
Professional fees                                    123,356           145,274
Marketing                                             46,608            34,567
Other                                                 24,897             4,086
                                               -------------      ------------
        Total other expenses                         724,197           596,032
                                               -------------      ------------
INCOME BEFORE INCOME TAXES                           242,937            51,561
INCOME TAX PROVISION (BENEFIT)                       100,011          (530,612)
                                               -------------      ------------
NET INCOME                                     $     142,926      $    582,173
                                               =============      ============

EARNINGS PER SHARE:
Basic                                          $        0.21      $       0.92
                                               =============      ============
Diluted                                        $        0.21      $       0.92
                                               =============      ============
</TABLE>

See notes to consolidated financial statements
                                                                               4

<PAGE>

<TABLE>
Weststar Financial Services Corporation
Consolidated Statements of Comprehensive Income (unaudited)
<CAPTION>

                                                            Three Months
                                                           Ended March 31,
                                                        2001            2000
<S>                                                <C>              <C>
NET INCOME                                         $    142,926   $    582,173
OTHER COMPREHENSIVE INCOME
Unrealized holding gains on securities
  available for sale, net of taxes                        6,192            200
                                                   ------------   ------------

COMPREHENSIVE INCOME                               $    149,118   $    582,373
                                                   ============   ============
</TABLE>

See notes to consolidated financial statements.
                                                                               5

<PAGE>

<TABLE>
WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001 (unaudited)
<CAPTION>
                                                                                       Accumulated
                                       Common Stock       Additional                      Other           Total
                                    --------------------   Paid-In     Accumulated    Comprehensive    Shareholders'
                                      Shares     Amount    Capital       Deficit          Income          Equity
<S>                                 <C>         <C>       <C>          <C>            <C>              <C>
Balance December 31, 2000            633,298    $633,298   $6,129,636    $(643,614)       $1,842         $6,121,162
  Net change in unrealized
     gain on securities held for                                                           6,192              6,192
sale
  Issuance of common stock           157,397     157,397    1,064,513                                     1,221,910
  Net income                                                               142,926                          142,926
                                   ---------------------------------------------------------------------------------
Balance March 31, 2001               790,695    $790,695   $7,194,149    $(500,688)       $8,034         $7,492,190
                                   =================================================================================
</TABLE>


See notes to consolidated financial statements.

                                                                              6
<PAGE>

<TABLE>
WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,                              2001           2000
<S>                                                          <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                   $   142,926    $   582,173
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Depreciation                                                    70,150         54,211
  Provision for loan loss                                        114,070         57,200
  Premium amortization and discount accretion, net                (2,913)       (11,000)
  (Increase) decrease in accrued interest receivable              19,265        (70,495)
  Increase in accrued interest payable                            24,762          6,652
  Increase in other assets                                       (84,323)       (36,471)
  Deferred income tax provision (benefit)                         99,390       (530,612)
  Decrease in other liabilities                                  (71,100)        (7,674)
                                                             -----------    -----------
    Net cash provided by operating activities                    312,227         43,984
                                                             -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Federal Home Loan Bank stock                          (4,800)       (87,500)
Purchases of securities available for sale                      (781,539)             -
Maturities of securities available for sale                      775,000              -
Net increase in loans                                         (3,073,680)    (6,431,565)
Additions to premises and equipment                               (5,344)        (9,875)
                                                             -----------    -----------
    Net cash used in investing activities                     (3,090,363)    (6,528,940)
                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts, and
  savings accounts                                             2,042,769      5,723,862
Net increase in certificates of deposits                       6,015,656      1,887,644
Issuance of common stock                                       1,221,910              -
Common stock subscriptions                                      (328,396)             -
                                                             -----------    -----------
    Net cash provided by financing activities                  8,951,939      7,611,506
                                                             -----------    ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                      6,173,803      1,126,550
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD               5,043,809      4,005,187
                                                             -----------    -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                   $11,217,612    $ 5,131,737
                                                             ===========    ===========


SUPPLEMENTAL DISCLOSURES:
  Cash paid during the period for:
    Interest                                                 $   726,266    $   403,867
    Income taxes                                             $     2,545    $         -
</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, 2001 and December 31, 2000, and the
     consolidated results of their operations and their cash flows for the three
     month periods ended March 31, 2001 and 2000.

     The accounting policies followed are set forth in Note 1 to the 2000 Annual
     Report to Shareholders (Form 10-KSB) on file with the Securities and
     Exchange Commission.

2.   Loans at March 31, 2001 and December 31, 2000 classified by type are as
     follows:

                                                  March 31,      December 31,
                                                    2001             2000
     Real Estate:
      Construction                               $10,545,083     $ 8,894,309
     Mortgage                                     33,207,954      32,332,304
     Commercial, financial and agricultural       17,324,451      17,939,971
     Consumer                                      2,438,762       1,338,067
                                                 -----------     -----------
     Subtotal                                     63,516,250      60,504,651
     Net deferred loan origination fees             (186,287)       (212,020)
                                                 -----------     -----------
     Total                                       $63,329,963     $60,292,631
                                                 ===========     ===========

3.   At December 31, 1999, the Company had a $543,000 valuation allowance
     related to deferred tax assets for which, in the opinion of management,
     realization was not reasonably assured. Based upon the taxable income being
     generated in 2000 and management expectations of continued profitability,
     management now believes that realization of the deferred tax assets is more
     likely than not. The valuation allowance was reversed in the first quarter
     of 2000, thereby providing a deferred tax benefit.

4.   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 $9,990,000 and $16,144,000 at March 31, 2001 and
     December 31, 2000, respectively.

5.   Basic earnings per share have been computed using the weighted average
     number of shares of common stock outstanding of 687,513 and 633,298 for the
     quarters ended March 31, 2001 and 2000, respectively. There were no
     potentially dilutive common stock equivalents outstanding during the three
     month periods.

6.   The Company's capital at March 31, 2001 and December 31, 2000 to risk

                                                                               8
<PAGE>

     weighted assets totaled 15.17% and 12.01%, 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, 2001 and December 31,
     2000, the Company's capital exceeded the current capital requirements.

7.   In June 1998, the Financial Accounting Standards Board ("FASB") issued
     Statement of financial Accounting Standards ("SFAS") No. 133, Accounting
     for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes
     accounting and reporting standards for derivative instruments, including
     certain derivative instruments embedded in other contracts, (collectively
     referred to as derivatives) and for hedging activities. The new standard
     requires that an entity recognize all derivatives as either assets or
     liabilities in the statement of financial position and measure those
     instruments at fair value. SFAS No. 133 was amended by SFAS No. 137,
     Accounting for Derivative Instruments and Hedging Activities - Deferral of
     Effective Date for FASB Statement No. 133, which delayed the Company's
     effective date until January 1, 2001. The adoption of SFAS No. 133 did not
     have a material effect on the Company's financial statements and current
     disclosures.

     In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers
     and Servicing of Financial Assets and Extinguishment of Liabilities". SFAS
     140 revises the standards for accounting for securitization and other
     transfers of financial assets and collateral and requires certain
     disclosures, but carries over most of the provisions of SFAS 125 without
     reconsideration. The statement is effective for transfers and servicing of
     financial assets and extinguishment of liabilities occurring after March
     31, 2001. Management does not believe that SFAS 140 will have a material
     effect on the Company's financial statements and current disclosures.

                                                                               9

<PAGE>

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

CHANGES IN FINANCIAL CONDITION
MARCH 31, 2001 COMPARED TO DECEMBER 31, 2000

During the period from December 31, 2000 to March 31, 2001, total assets
increased $9,054,719 or 13%. This increase, reflected primarily in the cash and
cash equivalents, and loan portfolio, was funded primarily by deposit growth and
proceeds raised during the Company's secondary stock issue.

Securities, federal funds sold and interest-bearing balances with other
financial institutions at March 31, 2001 totaled $7,616,780 compared to
$3,275,002 at December 31, 2000. Securities available for sale remained
relatively flat when compared to December 31, 2000. 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. During the three month period of 2001, the Federal Home Loan
Bank required an additional investment of $4,800. The total investment in the
Federal Home Loan Bank equaled $229,800.

The loan portfolio constituted 79% of the Company's total assets. Loans
increased $3,037,332 from December 31, 2000 to March 31, 2001. A softening in
the economy in addition to management's desire to improve liquidity and manage
loan growth commiserate with deposit growth resulted in the modest 5% increase
in loan growth. Management places a strong emphasis on loan quality. At March
31, 2001, 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 $1,443,404,
$361,312, and $199,650 at March 31, 2001and 2000, and December 31, 2000,
respectively. The average recorded balance of impaired loans during 2001 and
2000 was not significantly different from the balance at March 31, 2001 and
2000, and December 31, 2000, respectively. The related allowance for loan losses
determined in accordance with SFAS No. 114 for impaired loans was $90,667 and
$64,660 and $86,152 at March 31, 2001 and 2000, and December 31, 2000,
respectively. For the three month periods ended March 31, 2001 and 2000,
Weststar recognized interest income from impaired loans of approximately $42,276
and $1,571.

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, 2001 and 2000, and December 31, 2000
was 1.50% 1.43% and 1.45%, respectively, of gross loans outstanding.

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, 2001 and 2000, and for the year ended December 31,
2000.

                                                                              10

<PAGE>

Summary of Allowance for Loan Losses

<TABLE>
<CAPTION>
                                        For the three months      For the year ended
                                          ended March 31,            December 31,
                                         2001        2000          2000       1999
                                         ----        ----          ----       ----
<S>                                    <C>         <C>           <C>        <C>
Balance, beginning of period           $871,706    $528,808      $528,808   $218,719
  Charge-offs:
  Real estate - mortgage                (20,000)          -             -          -
  Consumer                              (11,391)          -             -     (2,114)
  Commercial and industrial loans        (4,957)          -      (112,062)   (16,453)
                                       --------    --------      --------   --------
Total charge-offs                       (36,348)          -      (112,062)   (18,567)
Recoveries                                    -           -             -     11,971
                                       --------    --------      --------   --------
Net (charge-offs) recoveries            (36,348)          -      (112,062)    (6,596)
                                       --------    --------      --------   --------
Provision charged to operations         114,070      57,200       454,960    316,685
                                       --------    --------      --------   --------
Balance, end of period                 $949,428    $586,008      $871,706   $528,808
                                       ========    ========      ========   ========

Percentage of net charge-offs to
  average loans                        .06%        0%            .24%       .03%
Percentage of allowance to
  period-end loans                     1.50%       1.43%         1.45%      1.53%
</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.

                               Amount of   Percent of   Amount of   Percent of
                               Allowance   Total Loans  Allowance   Total Loans

TYPE OF LOAN:
Real estate                     $591,036        69%      $553,337        68%
Commercial and industrial
  loans                          315,874        27%       278,879        30%
Consumer                          16,832         4%        15,822         2%
Unallocated                       25,686         -         23,668         -
                                --------       ---       --------       ---
Total allowance                 $949,428       100%      $871,706       100%
                                ========       ===       ========       ===

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 1999, 2000 and 2001, 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 $8,058,425 during the three months ended March 31, 2001. The
growth was found in all categories of deposits. Growth stemmed from continued
market penetration and the addition of new products/services. Transaction and
savings accounts accounted for $2,042,769 or 25.3% of growth, while time
deposits accounted for $6,015,656 or 74.7% of growth.

The Company's capital at March 31, 2001 to risk weighted assets totaled 15.17%.
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, 2001, the Company's capital exceeded the
current regulatory capital requirements.

                                                                              11

<PAGE>

RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2001 AND 2000

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, 2001 totaled $894,643
compared to $585,718 in 2000. This increase is attributable to growth in net
earning assets. The Company's net interest margin was approximately 4.9% and
5.2% for the quarters ended March 31, 2001 and 2000, respectively.

Weststar recorded a provision for loan losses of $114,070 and $57,200 for the
quarters ended March 31, 2001 and 2000, 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 .87% to 1.44% of gross loans
outstanding at March 31, 2000 and 2001, respectively.

Non-interest income for the March 31, 2001 and 2000 quarters totaled $186,561
and $119,075, respectively. The growth in service charge income increased
commensurate with growth in transaction related deposit accounts. Non-interest
expense totaled $724,197 compared to $596,032 in 2000. 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 addition of a new
banking location. Additional increased costs related directly to insurance,
supplies, audit, tax and legal fees as well as a sundry of other items. Income
before income tax provision (benefit) totaled $242,937 and $51,561 for the
quarters ended March 31, 2001 and 2000, respectively. Income tax provision
(benefit) totaled $100,011 and ($530,612) for the quarters ended March 31, 2001
and 2000, respectively. Net income totaled $142,926 and $582,173 for the
quarters ended March 31, 2001 and 2000, respectively.

Other comprehensive income totaled $6,192 and $200 in 2001 and 2000,
respectively. Comprehensive income, which is the change in shareholders' equity
excluding transactions with shareholders', totaled $149,118 and $582,373 for the
quarters ended March 31, 2001 and 2000, 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.

                                                                              12
<PAGE>

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, 2001, 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, 2001
                                    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         $    23,632                -                 -       $  23,632                -       $  23,632
Federal funds sold                  5,551,000                -                 -       5,551,000                -       5,551,000
Investment securities                 500,036      $   747,670                 -       1,247,706                -       2,029,059

Federal Home Loan Bank stock                -                -                 -               -        $ 229,800         229,800
Loans                              45,010,162        1,828,061       $ 2,841,458      49,679,681       13,650,282      63,329,963
Total interest-earning assets      51,084,830        2,575,731         2,841,458      56,502,019       14,661,435      71,163,454

Interest-bearing liabilities
Time deposits                       7,078,706       10,603,114        19,051,550      36,733,370        1,127,642      37,861,012
All other deposits                 22,565,521                -                 -      22,565,521                -      22,565,521
Total interest-bearing             29,644,227       10,603,114        19,051,550      59,298,891        1,127,642      60,426,533
liabilities

Interest sensitivity gap          $21,440,603      ($8,027,383)     ($16,210,092)    ($2,796,872)     $13,533,793     $10,736,921
Cumulative interest sensitivity
Gap                               $21,440,603      $13,413,220       ($2,796,872)
Interest-earning assets as a
Percent of interest sensitive
liabilities                             172.3%            24.2%             14.9%           95.3%
</TABLE>


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

                                                                              13
<PAGE>

                                  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 Company has incurred limited charge-off experience. Actual charge-offs are
compared to the allowance and adjustments are made accordingly. Also, by basing
the pass 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.

                                                                              14
<PAGE>

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
                                                 ------       -----      ------       -----       ------       -----
<S>                                              <C>          <C>        <C>           <C>        <C>         <C>
                                                                     (Dollars in Thousands)
As of March 31, 2001
Total Capital (to Risk Weighted Assets)
  Consolidated                                    $8,160      15.17%      $4,304        8.00%      $5,380      10.00%
  Bank                                            $8,037      14.94%      $4,304        8.00%      $5,380      10.00%

Tier 1 Capital (to Risk Weighted Assets)
  Consolidated                                    $7,484      13.91%      $2,152        4.00%      $3,228       6.00%
  Bank                                            $7,361      13.68%      $2,152        4.00%      $3,228       6.00%

Tier 1 Capital (to Average Assets)
  Consolidated                                    $7,484      10.32%      $2,902        4.00%      $3,628       5.00%
  Bank                                            $7,361      10.15%      $2,902        4.00%      $3,628       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 March 31, 2001, liquid assets (cash due from banks, interest-earning bank
deposits and federal funds sold) were approximately $11.2 million, which
represents 14.2% of total assets and 15.8% of total deposits and borrowings.
Supplementing this liquidity, Weststar has available lines of credit from
correspondent banks of approximately $12.8 million. At March 31, 2001,
outstanding commitments to extend credit and available lines of credit were
$10.0 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 53.1% of Weststar's total
deposits at March 31, 2001. 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 10.7% of the
Company's total deposits at year-end. 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.

                                                                              15
<PAGE>


                              INVESTMENT ACTIVITIES

At March 31, 2001, Weststar's investments consisted of U.S. Treasury notes and
U.S. Government agency securities. The treasury notes and agency securities,
with aggregate amortized cost of $2 million, are classified as available for
sale and are presented in the financial statements at their market value of $2
million at March 31, 2001. These securities have a yield of 6.4% and 5.7% with
an aggregate duration of approximately 12.6 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
7.25% at March 31, 2001. Because the investment is redeemable only by the
Federal Home Loan Bank, it is listed as an other asset 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.

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
     No reports on Form 8-K have been filed for the quarter ended June 30, 1999.
     Items 1, 2, 3, 4, 5, 6, 7, 8 and 9 are inapplicable and are omitted.

                                                                              16

<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 11,  2001                     /s/Randall C.  Hall
                                  Randall C. Hall
                                  Executive Vice President and
                                  Chief Financial and
                                  Principal Accounting Officer

                                                                              17