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 June 30, 2003

|_|   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                                  (IRS Employer
of incorporation or organization)                            Identification No.)

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

                                  828.252.1735
              (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)

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

                      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 - 957,539 shares outstanding as of July 29, 2003.


                                                                               1
<PAGE>

INDEX                                                                       Page

Part I - FINANCIAL INFORMATION

Financial Statements:
         Consolidated Balance Sheets
           June 30, 2003 and December 31, 2002                              3

         Consolidated Statements of Income
           Three and Six Months Ended June 30, 2003 and 2002                4

         Consolidated Statements of Comprehensive Income
           Three and Six Months Ended June 30, 2003 and 2002                5

         Consolidated Statement of Changes in Shareholders' Equity
           Six Months Ended June 30, 2003                                   6

         Consolidated Statements of Cash Flows
           Six Months Ended June 30, 2003 and 2002                          7

         Notes to Consolidated Financial Statements                         8

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

Item 3 - Controls and Procedures                                            19

Part II - OTHER INFORMATION

Exhibit Index                                                               19

Signatures                                                                  21


                                                                               2
<PAGE>

WESTSTAR FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            (unaudited)
                                                                              June 30,          December 31,
                                                                                2003                2002*
                                                                           -------------        ------------
<S>                                                                        <C>                  <C>
ASSETS:
Cash and cash equivalents:
  Cash and due from banks                                                  $   5,232,317        $  3,796,804
  Interest-bearing deposits                                                      100,095              40,018
  Federal funds sold                                                          10,120,000          10,279,000
                                                                           -------------        ------------
      Total cash and cash equivalents                                         15,452,412          14,115,822
Investment securities -
  Available for sale, at fair value (amortized cost of
  $16,424,889 and $12,507,535, respectively)                                  16,540,589          12,557,103
                                                                           -------------        ------------
Loans                                                                         69,922,866          67,977,979
Allowance for loan losses                                                     (1,058,891)         (1,020,198)
                                                                           -------------        ------------
Net loans                                                                     68,863,975          66,957,781
Premises and equipment, net                                                    2,165,127           2,004,769
Accrued interest receivable                                                      456,545             487,949
Federal Home Loan Bank stock, at cost                                            175,400             229,800
Deferred income taxes                                                            180,626             189,486
Foreclosed properties                                                            896,079             792,190
Other assets                                                                     311,038             355,214
                                                                           -------------        ------------
TOTAL                                                                      $ 105,041,791        $ 97,690,114
                                                                           =============        ============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
  Demand                                                                   $  15,729,013        $ 16,806,011
  NOW accounts                                                                13,490,114           9,064,594
  Money market accounts                                                       27,860,161          25,949,134
  Savings                                                                      1,980,774           1,887,138
  Time deposits of $100,000 or more                                            7,620,155           8,036,462
  Other time deposits                                                         26,888,733          26,735,930
                                                                           -------------        ------------
        Total deposits                                                        93,568,950          88,479,269
                                                                           -------------        ------------
Other borrowings                                                               2,000,000                  --
Accrued interest payable                                                         153,182             157,460
Other liabilities                                                                382,765             384,231
                                                                           -------------        ------------
      Total liabilities                                                       96,104,897          89,020,960
                                                                           -------------        ------------

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 - 957,539                                     957,539             957,539
Additional paid-in capital                                                     7,120,187           7,120,187
Retained earnings                                                                788,070             561,003
Accumulated other comprehensive income                                            71,098              30,425
                                                                           -------------        ------------
      Total shareholders' equity                                               8,936,894           8,669,154
                                                                           -------------        ------------
TOTAL                                                                      $ 105,041,791        $ 97,690,114
                                                                           =============        ============
</TABLE>

*Derived from audited financial statements.

See notes to consolidated financial statements.


                                                                               3
<PAGE>

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

<TABLE>
<CAPTION>
                                                Three Months                     Six Months
                                               Ended June 30,                  Ended June 30,
                                            2003            2002            2003            2002
                                         ----------      ----------      ----------      ----------
<S>                                      <C>             <C>             <C>             <C>
INTEREST INCOME:
Interest and fees on loans               $1,208,369      $1,238,180      $2,388,093      $2,501,853
Federal funds sold                           23,452          32,087          49,403          34,089
Interest-bearing deposits                       182           5,830             304          11,986
Investments:
  U.S. Government and agencies               84,416          56,902         170,513         124,475
  Municipal bonds                            14,329           2,483          24,096           4,745
  Corporate dividends                         2,550           3,258           5,446           6,878
                                         ----------      ----------      ----------      ----------
       Total interest income              1,333,298       1,338,740       2,637,855       2,684,026
                                         ----------      ----------      ----------      ----------

INTEREST EXPENSE:
Time deposits of $100,000 or more            58,167          67,391         115,768         151,817
Other time and savings deposits             323,935         382,286         643,806         706,497
Federal funds purchased                          --              --              --          14,888
Other interest expense                        2,637           1,443           4,913           2,887
                                         ----------      ----------      ----------      ----------
     Total interest expense                 384,739         451,120         764,487         876,089
                                         ----------      ----------      ----------      ----------
NET INTEREST INCOME                         948,559         887,620       1,873,368       1,807,937
PROVISION FOR LOAN LOSSES                   288,380          89,300         643,380         291,950
                                         ----------      ----------      ----------      ----------
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                            660,179         798,320       1,229,988       1,515,987
                                         ----------      ----------      ----------      ----------
OTHER INCOME:
Service charges on deposit accounts         291,444         322,134         536,034         604,937
Other service fees and commissions          149,201          95,369         238,585         192,569
Securities gains                             45,482          30,889          45,482          30,889
Other                                         6,392           6,869          10,555          14,785
                                         ----------      ----------      ----------      ----------
       Total other income                   492,519         455,261         830,656         843,180
                                         ----------      ----------      ----------      ----------
OTHER EXPENSES:
Salaries and wages                          331,921         299,332         667,019         615,058
Employee benefits                            57,883          51,290         114,822         107,034
Occupancy expense, net                       52,178          44,919         101,991          84,422
Equipment rentals, depreciation and
  maintenance                                62,732          67,723         120,648         136,132
Supplies                                     58,581          59,547         105,316         102,955
Professional fees                           163,545         221,624         329,038         416,468
Marketing                                    40,307          41,978          55,908          63,729
Legal settlement                                 --         173,750              --         173,750
Other                                       128,290          36,354         196,735         137,438
                                         ----------      ----------      ----------      ----------
        Total other expenses                895,437         996,517       1,691,477       1,836,986
                                         ----------      ----------      ----------      ----------
INCOME BEFORE INCOME TAXES                  257,261         257,064         369,167         522,181
INCOME TAX PROVISION                        102,100          87,270         142,100         190,135
                                         ----------      ----------      ----------      ----------
NET INCOME                               $  155,161      $  169,794      $  227,067      $  332,046
                                         ==========      ==========      ==========      ==========

EARNINGS PER SHARE:
Basic                                    $     0.16      $     0.18      $      .24      $      .35
                                         ==========      ==========      ==========      ==========
Diluted                                  $     0.15      $     0.17      $      .23      $      .34
                                         ==========      ==========      ==========      ==========
</TABLE>

See notes to consolidated financial statements


                                                                               4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 Three   Months                  Six   Months
                                                                 Ended June 30,                 Ended June 30,
                                                              2003            2002            2003            2002
                                                            ---------       ---------       ---------       ---------
<S>                                                         <C>             <C>             <C>             <C>
NET INCOME                                                  $ 155,161       $ 169,794       $ 227,067       $ 332,046
OTHER COMPREHENSIVE INCOME BEFORE TAX:
  Unrealized holding gains (losses) on available
    for sale securities                                        70,389          36,812         111,746          (9,495)
  Reclassification adjustment for gains                       (45,482)        (30,889)        (45,482)        (30,889)
                                                            ---------       ---------       ---------       ---------
  Other comprehensive income (loss) before tax                 24,907           5,923          66,264         (40,384)
INCOME TAX EXPENSE (BENEFIT) RELATED TO ITEMS OF OTHER
COMPREHENSIVE INCOME (LOSS)                                    (9,619)         (2,287)        (25,591)         15,597
                                                            ---------       ---------       ---------       ---------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX                  15,288           3,636          40,673         (24,787)
                                                            ---------       ---------       ---------       ---------
COMPREHENSIVE INCOME                                        $ 170,449       $ 173,430       $ 267,740       $ 307,259
                                                            =========       =========       =========       =========
</TABLE>

See notes to consolidated financial statements.


                                                                               5
<PAGE>

WESTSTAR FINANCIAL SERVICES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                             Common Stock                 Additional                       Other           Total
                                     ----------------------------          Paid-In        Retained     Comprehensive   Shareholders'
                                          Shares          Amount           Capital        Earnings         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                                                                      (24,787)        (24,787)
  Net income                                                                               332,046                         332,046
Stock options                                 800             800             5,416                                          6,216
Stock dividend                             87,018          87,018                          (87,018)
                                     ---------------------------------------------------------------------------------------------
Balance June 30, 2002                     957,539        $957,539        $7,120,187       $202,014          $15,932     $8,295,672
                                     =============================================================================================

Balance December 31, 2002                 957,539        $957,539        $7,120,187       $561,003          $30,425     $8,669,154
  Net change in unrealized
     gain on securities held for sale                                                                        40,673         40,673
  Net income                                                                               227,067                         227,067
                                     ---------------------------------------------------------------------------------------------
Balance June 30, 2003                     957,539        $957,539        $7,120,187       $788,070          $71,098     $8,936,894
                                     =============================================================================================
</TABLE>

See notes to consolidated financial statements.


                                                                               6
<PAGE>

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

<TABLE>
<CAPTION>
For the Six Months Ended June 30,                                                          2003               2002
                                                                                       ------------       ------------
<S>                                                                                    <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                             $    227,067       $    332,046
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation                                                                              139,807            145,235
  Provision for loan loss                                                                   643,380            291,950
  Premium amortization and discount accretion, net                                           15,290              2,288
  Decrease in accrued interest receivable                                                    31,404              3,035
  Decrease in accrued interest payable                                                       (4,278)           (21,917)
  Increase in other assets                                                                  (60,093)            (6,400)
  Decrease in other liabilities                                                              (1,466)           (58,971)
  Net loss on sales of foreclosed properties                                                 31,689              8,149
  Loss on sales of premises and equipment                                                        --              1,588
  Gains on sale on securities                                                               (45,482)           (30,889)
  Deferred income tax benefit                                                               (16,599)              (540)
  Write-down of foreclosed property                                                          59,000                 --
  Loss on uninsured deposits                                                                 10,410             67,000
                                                                                       ------------       ------------
    Net cash provided by operating activities                                             1,030,129            732,574
                                                                                       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of Federal Home Loan Bank stock                                                   54,400                 --
Purchases of securities available for sale                                              (11,647,929)        (2,392,322)
Maturities of securities available for sale                                               5,722,017          2,600,000
Net increase in loans                                                                    (2,898,926)          (770,177)
Proceeds from sales of securities                                                         2,038,750          1,309,715
Proceeds from sales of foreclosed properties                                                158,574            229,699
Net expenditures of foreclosed properties                                                    90,059                 --
Additions to premises and equipment                                                        (300,165)           (27,822)
                                                                                       ------------       ------------
    Net cash provided by (used in) investing activities                                  (6,783,220)           949,093
                                                                                       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts, and savings accounts            5,353,185            (46,296)
Net (increase) decrease in certificates of deposits                                        (263,504)         6,614,004
Issuance of common stock                                                                         --              6,216
Proceeds from FHLB advances                                                               2,000,000                 --
                                                                                       ------------       ------------
    Net cash provided by financing activities                                             7,089,681          6,573,924
                                                                                       ------------       ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                 1,336,590          8,255,591
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         14,115,822          5,426,705
                                                                                       ------------       ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             $ 15,452,412       $ 13,682,296
                                                                                       ============       ============
</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 consolidated
      statements contain all adjustments necessary to present fairly the
      consolidated financial position of the Company as of June 30, 2003 and
      December 31, 2002, and the consolidated results of their operations for
      the three and six month periods ended June 30, 2003 and 2002 and their
      cash flows for the six month periods ended June 30, 2003 and 2002.
      Operating results for the three-month and six-month periods ended June 30,
      2003 are not necessarily indicative of the results expected for the period
      ending December 31, 2003.

      The accounting policies followed are set forth in Note 1 to the 2002
      Annual Report to Shareholders (Form 10-KSB) on file with the Securities
      and Exchange Commission.

2.    Loans at June 30, 2003 and December 31, 2002 classified by type are as
      follows:

                                                    June 30,       December 31,
                                                      2003             2002
      Real Estate:
        Construction                              $ 10,967,863     $ 12,334,543
        Mortgage                                    38,885,230       37,214,677
      Commercial, financial and agricultural        18,047,855       16,367,306
      Consumer                                       2,136,993        2,188,840
                                                  ------------     ------------
      Subtotal                                      70,037,941       68,105,366
      Net deferred loan origination fees              (115,075)        (127,387)
                                                  ------------     ------------
      Total                                       $ 69,922,866     $ 67,977,979
                                                  ============     ============

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 consolidated financial statements. The unused portions of
      lines to extend credit were $12,881,250 and $13,911,491 at June 30, 2003
      and December 31, 2002, respectively. In addition, letters of credit
      totaled $1,085,000 and $1,145,022 at June 30, 2003 and December 31, 2002,
      respectively.

4.    Basic earnings per share have been computed using the weighted average
      number of shares of common stock outstanding of 957,539 and 957,216 for
      the quarters ended June 30, 2003 and 2002, respectively and 957,539 and
      956,956 for the six-month periods ended June 30, 2003 and 2002,
      respectively. Diluted earnings per share have been computed using common
      stock and common stock equivalents of 1,004,438 and 974,036 for the
      quarters ended June 30, 2003 and 2002, respectively, and 998,501 and
      971,697 for the six-month periods ended June 30, 2003 and 2002,
      respectively. Shares have been adjusted to reflect a 10% stock split paid
      in the form of an 11-for-10 stock dividend paid December 2002.

5.    Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
      for Stock-Based Compensation, encourages all entities to adopt a fair
      value based method of accounting for employee stock compensation plans,
      whereby compensation cost is


                                                                               8
<PAGE>

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

      At June 30, 2003, the Company had two stock-based compensation plans. The
      Company accounts for compensation costs related to the Company's stock
      option plans using the intrinsic value method. Therefore, no compensation
      costs has been recognized for stock option awards because the options are
      granted at exercise prices based on the market value of the Company's
      stock on the date of grant. Had compensation costs for the Company's stock
      option plans been determined using the fair value method, the Company's
      pro forma net income would have been as follows:

<TABLE>
<CAPTION>
                                                            Three Months Ended                Six Months Ended
                                                        6/30/2003        6/30/2002        6/30/2003        6/30/2002
<S>                                                    <C>              <C>              <C>              <C>
      Net income as reported                           $   155,161      $   169,794      $   227,067      $   332,046
      Less:  Total stock based employee
      compensation expense determined
      under fair value method for all awards, net
      of related tax effects                                52,173           60,606          107,397          119,993
                                                       -----------      -----------      -----------      -----------

                                                       $   102,988      $   109,188      $   119,670      $   212,053
                                                       ===========      ===========      ===========      ===========
      Net income per share:
      As reported:

      Basic                                            $      0.16      $      0.18      $      0.24      $      0.35
      Diluted                                          $      0.15      $      0.17      $      0.23      $      0.34

      Pro forma:

      Basic                                            $      0.11      $      0.11      $      0.12      $      0.22
      Diluted                                          $      0.10      $      0.11      $      0.12      $      0.22
</TABLE>


                                                                               9
<PAGE>

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

CHANGES IN FINANCIAL CONDITION
JUNE 30, 2003 COMPARED TO DECEMBER 31, 2002

During the period from December 31, 2002 to June 30, 2003, total assets
increased $7,351,677 or 8%. This increase, reflected primarily in the cash and
cash equivalents, investment securities and loans, was funded primarily by
deposit growth.

Securities, federal funds sold and interest-bearing balances with other
financial institutions at June 30, 2003 totaled $26,760,684 compared to
$22,876,121 at December 31, 2002. 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. Net
investments in Federal Home Loan Bank stock to date total $175,400.

At June 30, 2003, the loan portfolio constituted 67% of the Company's total
assets. Loans increased $1,944,887 from December 31, 2002 to June 30, 2003. Slow
economic growth, net charge-offs of $604,687, and management's desire to improve
liquidity resulted in the modest increase in loan growth. Management places a
strong emphasis on loan quality. At June 30, 2003, 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 $1,825,868,
$1,269,695, and $2,160,936 at June 30, 2003 and 2002, and December 31, 2002,
respectively. The average recorded balance of impaired loans during 2003 and
2002 was not significantly different from the balance at June 30 2003 and 2002.
The average balance for the year ended December 31, 2002 was $1,085,215. The
related allowance for loan losses determined in accordance with SFAS No. 114 for
impaired loans was $396,418 and $130,520 and $115,865 at June 30, 2003 and 2002,
and December 31, 2002 respectively. For the six-month periods ended June 30,
2003 and 2002, Weststar recognized interest income from impaired loans of
$37,334 and $24,273. See "Asset Quality" for discussion of loan loss reserves.

Deposits increased $5,089,681 during the six months ended June 30, 2003. The
growth was found in NOW, money market and savings accounts. Growth stemmed from
continued market penetration. Transaction accounts such as demand, NOW, money
market demand and savings accounts reflected net growth of $5,353,185 in growth.
Interest rate sensitive customers shifted funds from time deposits to lower
interest-bearing, NOW, money market and savings accounts in anticipation of
future increases in interest rates.

Borrowings, which consisted of only one advance from the FHLB, totaled
$2,000,000 on June 30, 2003. The interest rate on this advance was 1.65% and
matures on June 27, 2005.

The Company's capital at June 30, 2003 to risk weighted assets totaled 13.27%.
Current regulations require a minimum ratio of total capital to risk weighted
assets of 8%, with at least


                                                                              10
<PAGE>

4% being in the form of Tier 1 capital, as defined in the regulation. As of June
30, 2003, the Company's capital exceeded the current regulatory capital
requirements.

RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2003 AND 2002

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 June 30, 2003 totaled $948,559
compared to $887,620 in 2002. This increase is attributable to growth in net
earning assets. The Company's net interest margin was approximately 3.9% and
4.1% for the quarters ended June 30, 2003 and 2002, respectively.

Weststar recorded a provision for loan losses of $288,380 and $89,300 for the
quarters ended June 30, 2003 and 2002, 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 loan losses increased primarily as a result of several large
charge-offs to multiple borrowers during the period.

Other non-interest income for the June 30, 2003 and 2002 quarters totaled
$492,519 and $455,261, respectively. The decrease in service charge income
primarily reflects a decrease in overdraft charge income of $37,241. The
decrease in overdraft charges was based on lower activity during the period.
Other service fees and commission increased $53,832 of which $46,541 was
attributable to increased fees from the origination of mortgage loans. Gains on
the sales of investment securities increased $14,593.

Other non-interest expense totaled $895,437 compared to $996,517 in 2002. In
2002 the Company incurred legal settlement expenses in the amount of $173,750.
No such expenses were incurred during 2003. Other expenses were principally
related to write-downs of $59,000 on foreclosed assets. Income before income tax
provision totaled $257,261 and $257,064 for the quarters ended June 30, 2003 and
2002, respectively. Income tax provision totaled $102,100 and $87,270 for the
quarters ended June 30, 2003 and 2002, respectively, which equated to effective
tax rates of 39.69% and 33.95%. Net income totaled $155,161 and $169,794 for the
quarters ended June 30, 2003 and 2002, respectively.

Other comprehensive income totaled $15,288 and $3,636 in 2003 and 2002,
respectively. Comprehensive income, which is the change in shareholders' equity
excluding transactions with shareholders, totaled $170,449 and $173,430 for the
quarters ended June 30, 2003 and 2002, respectively.

COMPARATIVE SIX MONTHS

Net interest income for the six-month period ended June 30, 2003 totaled
$1,873,368 compared to $1,807,937 in 2002. This increase is attributable to
growth in net earning assets. The


                                                                              11
<PAGE>

Company's net interest margin was approximately 3.8% and 4.3% for the six months
ended June 30, 2003 and 2002, respectively.

Weststar recorded a provision for loan losses of $643,380 and $291,950 for the
six-months ended June 30, 2003 and 2002, 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 primarily as a result of several large
charge-offs to multiple borrowers during the period.

Other non-interest income for the June 30, 2003 and 2002 periods totaled
$830,656 and $843,180, respectively. The decrease in service charge income
primarily reflects a decrease in overdraft charge income of $78,092. The
decrease in overdraft charges was based on lower activity during the period.
Other service fees and commissions reflected a net increase of $46,016 of which
$52,564 was attributable to increased fees from the origination of mortgage
loans. Gains on the sales of investment securities increased $14,593.

Other non-interest expense totaled $1,691,477 compared to $1,836,986 in 2002. In
2002 the Company incurred legal settlement expenses in the amount of $173,750.
No such expenses were incurred during 2003. Other expenses were principally
related to $31,689 loss on the sales of foreclosed assets and write-downs of
$59,000 on foreclosed assets due to permanent impairments. Income before income
tax provision totaled $369,167 and $522,181 for the periods ended June 30, 2003
and 2002, respectively. Income tax provision totaled $142,100 and $190,135,
which equated to effective tax rates of 38.49% and 36.41%, for the periods ended
June 30, 2003 and 2002, respectively. Net income totaled $227,067 and $332,046
for the periods ended June 30, 2003 and 2002, respectively.

Other comprehensive income (loss) totaled $40,673 and ($24,787) in 2003 and
2002, respectively. Comprehensive income, which is the change in shareholders'
equity excluding transactions with shareholders, totaled $267,740 and $307,259
for the quarters ended June 30, 2003 and 2002, 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.

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


                                                                              12
<PAGE>

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 June 30, 2003, 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 JUNE 30, 2003
                                         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               $   100,095           --            --    $    100,095             --   $   100,095
Federal funds sold                       10,120,000           --            --      10,120,000             --    10,120,000
Investment securities                     1,785,646   $2,689,769   $   371,292       4,846,707    $11,578,182    16,424,889

Federal Home Loan Bank stock                     --           --            --              --        175,400       175,400
Loans                                    50,806,595    2,136,883     2,015,164      54,958,642     13,863,306    68,821,948
Total interest-earning assets            62,812,336    4,826,652     2,386,456      70,025,444     25,616,888    95,642,332

Interest-bearing liabilities
Time deposits                            18,096,850    4,714,913     8,155,072      30,966,835      3,542,053    34,508,888
All other deposits                       43,331,049           --            --      43,331,049             --    43,331,049
Borrowings                                       --           --            --              --      2,000,000     2,000,000
Other                                            --           --            --              --        109,316       109,316
Total interest-bearing liabilities       61,427,899    4,714,913     8,155,072      74,297,884      5,651,369    79,949,253

Interest sensitivity gap                $ 1,384,437   $  111,739   ($5,768,616)   ($ 4,272,440)   $19,965,519    15,693,079
Cumulative interest sensitivity
Gap                                     $ 1,384,437   $1,496,176   ($4,272,440)
Cumulative ratio of interest -
earning assets as a percent of
interest sensitive liabilities                102.3%       102.4%         29.3%           94.2%
</TABLE>

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 through the one-year
horizon.

                                  ASSET QUALITY

Management considers Weststar's asset quality to be of primary importance. We
maintain an allowance for loan losses to absorb probable losses inherent in the
loan portfolio. The loan portfolio is analyzed monthly in an effort to identify
potential problems before they actually occur. The allowance for loan losses is
established as losses are estimated to have occurred through a provision for
loan losses charged to earnings. The provision for loan losses is based


                                                                              13
<PAGE>

upon management's best estimate of the amount needed to maintain the allowance
for loan losses at an adequate level. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance.

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

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

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

The provision for loan losses represents a charge against income in an amount
necessary to maintain the allowance at an appropriate level. The monthly
provision for loan losses may fluctuate based on the results of this analysis.
The allowance for loan losses at June 30, 2003, 2002 and December 31, 2002 and
2001 was $1,058,891, $985,593, $1,020,198 and $978,467 or 1.51%, 1.50%, 1.50%
and 1.50%, respectively, of gross loans outstanding. The ratio of net
charge-offs to average loans outstanding was .89%, .438%, 1.26% and .70% for the
six-month periods ended June 30, 2003 and 2002, and for the twelve-month periods
ended December 2002 and 2001, respectively. A sustained recessionary economy and
charge-offs in the amount of $280,000 to a single entity during the period
resulted in a larger provision during 2003 compared to the same period in 2002.


                                                                              14
<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
six-months ended June 30, 2003 and 2002, and for the years ended December 31,
2002 and 2001.

Summary of Allowance for Loan Losses

<TABLE>
<CAPTION>
                                               For the six months           For the years ended
                                                  ended June 30,                December 31,
                                               2003          2002            2002          2001
                                           -----------     ---------     -----------     ---------
<S>                                        <C>             <C>           <C>             <C>
Balance, beginning of period               $ 1,020,198     $ 978,467     $   978,467     $ 871,706
  Charge-offs:
  Commercial, financial and agricultural      (505,853)     (214,796)       (568,710)     (373,087)
  Real estate:
    Construction                                    --            --        (127,810)           --
    Mortgage                                   (57,253)      (25,000)        (33,574)      (90,275)
  Consumer                                     (59,000)      (70,644)       (159,471)      (27,238)
                                           -----------     ---------     -----------     ---------
Total charge-offs                             (622,106)     (310,440)       (889,565)     (490,600)
Recoveries
  Commercial, financial and agricultural         2,000        15,976          19,753        45,270
  Real estate:
    Construction                                    --            --           1,531            --
    Mortgage                                        --            --          13,322            --
  Consumer                                      15,419         9,640          18,770         1,671
                                           -----------     ---------     -----------     ---------
Total recoveries                                17,419        25,616          53,376        46,941
                                           -----------     ---------     -----------     ---------
Net (charge-offs) recoveries                  (604,687)     (284,824)       (836,189)     (443,659)
                                           -----------     ---------     -----------     ---------
Provision charged to operations                643,380       291,950         877,920       550,420
                                           -----------     ---------     -----------     ---------
Balance, end of period                     $ 1,058,891     $ 985,593     $ 1,020,198     $ 978,467
                                           ===========     =========     ===========     =========

Percentage of net charge-offs to
  average loans                                    .89%          .43%           1.26%          .70%
Percentage of allowance to
  period-end loans                                1.51%         1.50%           1.50%         1.50%
</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>
                                         June 30, 2003                   December 31, 2002
                                    Amount of      Percent of        Amount of         Percent of
                                    Allowance      Total Loans       Allowance        Total Loans
<S>                                <C>                 <C>           <C>                 <C>
TYPE OF LOAN:
Real estate                        $  698,212           71%          $  690,842           73%
Commercial and industrial
  loans                               321,521           26%             287,860           24%
Consumer                               28,554            3%              19,184            3%
Unallocated                            10,604           --               22,312           --
                                   ----------          ---           ----------          ---
Total allowance                    $1,058,891          100%          $1,020,198          100%
                                   ==========          ===           ==========          ===
</TABLE>

The Company does not have any significant loan concentrations. During the
period, loan quality and terms remained relatively unchanged.

During 2003, there were no changes in estimation methods or assumptions that
affected our methodology for assessing the appropriateness of the formula and
specific allowance for


                                                                              15
<PAGE>

credit losses. Changes in estimates and assumptions regarding the effect of
economic and business conditions on borrowers affect the assessment of the
allowance.

                                CAPITAL RESOURCES

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


                                                                              16
<PAGE>

                               REGULATORY CAPITAL

<TABLE>
<CAPTION>
                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                                              To Be Well Capitalized
                                                                           For Capital                 Under
                                                     Actual                 Adequacy             Prompt Corrective
                                                                            Purposes             Action Provisions
                                               Amount       Ratio      Amount       Ratio       Amount       Ratio
                                               ------       -----      ------       -----       ------       -----
                                                                       (Dollars in Thousands)
<S>                                            <C>          <C>        <C>           <C>        <C>         <C>
As of June 30, 2003
Total Capital (to Risk Weighted Assets)
  Consolidated                                 $9,790       13.27%     $5,902        8.00%      $7,378      10.00%
  Bank                                         $9,707       13.16%     $5,901        8.00%      $7,376      10.00%

Tier 1 Capital (to Risk Weighted Assets)
  Consolidated                                 $8,866       12.02%     $2,951        4.00%      $4,427       6.00%
  Bank                                         $8,783       11.91%     $2,951        4.00%      $4,426       6.00%

Tier 1 Capital (to Average Assets)
  Consolidated                                 $8,866        9.10%     $3,898        4.00%      $4,873       5.00%
  Bank                                         $8,783        9.02%     $3,897        4.00%      $4,871       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 June 30, 2003, liquid assets (cash due from banks, interest-earning bank
deposits and federal funds sold) were approximately $15.5 million, which
represents 14.7% of total assets and 16.5% of total deposits. Supplementing this
liquidity, Weststar has available lines of credit from correspondent banks of
approximately $14.9 million. At June 30, 2003, outstanding commitments to extend
credit and available lines of credit were $14 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 36.9% of Weststar's total
deposits at June 30, 2003. 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 8.1% of the
Company's total deposits at June 30, 2003. 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


                                                                              17
<PAGE>

are other subjective factors that will determine the Company's continued
retention of these deposits.

                              INVESTMENT ACTIVITIES

At June 30, 2003, Weststar's investments consisted of U.S. Government and agency
securities, and North Carolina municipal bonds. The investments, with aggregate
amortized cost of $16.4 million, are classified as available for sale and are
presented in the consolidated financial statements at their market values of
$16.5 million at June 30, 2003. These securities have tax equivalent yields of
3.4% with an aggregate remaining term of approximately 67.6 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
$175,400 with a yield of 4.0% at June 30, 2003. 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.


                                                                              18
<PAGE>

CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company carried out an
evaluation under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Securities Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
Filings. There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.

Part II. OTHER INFORMATION

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

The Annual Meeting of Stockholders was held on April 15, 2003. Of 957,539 shares
entitled to vote at the meeting, 816,213 or 85.2% voted. The following matters
were voted on at the meeting:

Proposal 1: To elect eleven board members to staggered terms. Votes and terms
            for each nominee were as follows:

           3-year terms               Votes For                 Votes Withheld
       ---------------------      -----------------            ----------------
       M. David Cogburn, MD            814,483                       1,730
       Stephen L. Pignatello           814,277                       1,936
       Kent W. Salisbury, MD           814,277                       1,936
       Patricia P. Grimes              814,761                       1,452

Proposal 2: To ratify the appointment of Dixon Odom PLLC as independent
            accountants for the year ending December 31, 2003. Votes were as
            follows:

         Votes For                Votes Against                Votes Withheld
       -------------            -----------------             ----------------
          815,693                      121                          399

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits.

            31.1 - Certification of the Principal Executive Officer Pursuant to
                   Section 302 of the Sarbanes-Oxley Act of 2002

            31.2 - Certification of the Principal Financial Officer Pursuant to
                   Section 302 of the Sarbanes-Oxley Act of 2002

            32.1 - Certification of the Principal Executive Officer Pursuant to
                   Section 906 of the Sarbanes-Oxley Act of 2002


                                                                              19
<PAGE>

            32.2 - Certification of the Principal Financial Officer Pursuant to
                   Section 906 of the Sarbanes-Oxley Act of 2002

      (b) Reports on Form 8-K.

            On April 17, 2003 the Registrant announced the results of its annual
            shareholders meeting.

            On April 24, 2003, the Registrant issued a press release announcing
            earnings for the first quarter of 2003.


                                                                              20
<PAGE>

SIGNATURES

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

                                    WESTSTAR FINANCIAL SERVICES CORPORATION


Date: July 29, 2003             By: /s/ G. Gordon Greenwood
                                    --------------------------------------------

                                    G. Gordon Greenwood
                                    President and Chief Executive Officer


Date: July 29, 2003             By: /s/ Randall C. Hall
                                    --------------------------------------------

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


                                      -21-