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

                                   FORM 10-QSB
(Mark One)

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

               For the quarterly period ended September 30, 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
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 - 790,695 shares outstanding as of November 13,
2001.

                                       1

<PAGE>


INDEX                                                                    Page

Part I - FINANCIAL INFORMATION

Financial Statements:
               Consolidated Balance Sheets
                 September 30, 2001 and December 31, 2000                  3

               Consolidated Statements of Income
                 Three and Nine Months Ended September 30, 2001 and 2000   4

               Consolidated Statements of Comprehensive Income
                 Three and Nine Months Ended September 30, 2001 and 2000   5

               Consolidated Statement of Changes in Shareholders' Equity
                 Nine Months Ended September 30, 2001                      6

               Consolidated Statements of Cash Flows
                 Nine Months Ended September 30, 2001 and 2000             7

               Notes to Consolidated Financial Statements                  8

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

Part II - OTHER INFORMATION

Exhibit Index                                                             18

Signatures                                                                19


                                       2

<PAGE>


WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            (unaudited)
                                                                            September 30,       December 31,
                                                                               2001                2000
                                                                            ------------       ------------
<S>                                                                         <C>                <C>
ASSETS:
Cash and cash equivalents:
  Cash and due from banks                                                   $  5,285,056       $  3,791,415
  Interest-bearing deposits                                                      782,040            352,394
  Federal funds sold                                                           6,826,000            900,000
                                                                            ------------       ------------
      Total cash and cash equivalents                                         12,893,096          5,043,809
                                                                            ------------       ------------
Investment securities -
  Available for sale, at fair value (amortized cost of
  $5,044,541 and $2,019,607, respectively)                                     5,149,463          2,022,608
                                                                            ------------       ------------
Loans                                                                         63,141,500         60,292,631
Allowance for loan losses                                                       (848,189)          (871,706)
                                                                            ------------       ------------
Net loans                                                                     62,293,311         59,420,925
Premises and equipment, net                                                    2,241,668          2,432,535
Accrued interest receivable                                                      496,856            433,394
Federal Home Loan Bank stock, at cost                                            229,800            225,000
Deferred income taxes                                                            258,641            459,931
Other assets                                                                     356,885            152,215
                                                                            ------------       ------------
TOTAL                                                                       $ 83,919,720       $ 70,190,417
                                                                            ============       ============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
  Demand                                                                    $ 11,822,757       $ 10,652,742
  NOW accounts                                                                 9,199,183          7,838,070
  Money market accounts                                                       16,294,639         12,111,132
  Savings                                                                      1,167,579            755,286
  Time deposits of $100,000 or more                                            9,546,720          6,729,107
  Other time deposits                                                         27,230,106         25,116,249
                                                                            ------------       ------------
        Total deposits                                                        75,260,984         63,202,586
Accrued interest payable                                                         246,774           285,0649
Other liabilities                                                                571,781            253,209
Stock subscriptions due                                                               --            328,396
                                                                                               ------------
                                                                                               ------------
      Total liabilities                                                       76,079,539         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                                                             (209,137)          (643,614)
Accumulated other comprehensive income                                            64,474              1,842
                                                                            ------------       ------------
      Total shareholders' equity                                               7,840,181          6,121,162
                                                                            ------------       ------------
TOTAL                                                                       $ 83,919,720       $ 70,190,417
                                                                            ============       ============
</TABLE>
                                       3

<PAGE>



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

<TABLE>
<CAPTION>
                                                         Three Months       Nine Months
                                                     Ended September 30, Ended September 30,
                                                            2001               2000              2001               2000
                                                        -----------        -----------        -----------        -----------
<S>                                                     <C>                <C>                <C>                <C>
INTEREST INCOME:
Interest and fees on loans                              $ 1,354,704        $ 1,386,333        $ 4,393,551        $ 3,467,835
Federal funds sold                                           45,463              9,967            125,312             50,749
Interest-bearing deposits with other banks                    7,086                114             11,369                230
Investments:
  U.S Treasuries                                              4,082             11,969             27,997             32,643
  U.S. Government agencies                                   57,308             20,392            121,816             66,849
  Other                                                       3,868              2,806             11,974              5,153
                                                        -----------        -----------        -----------        -----------
       Total interest income                              1,472,511          1,431,581          4,692,019          3,623,459
                                                        -----------        -----------        -----------        -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more                           141,219             96,272            401,324            263,268
Other time and savings deposits                             542,988            468,075          1,763,600          1,167,418
Federal funds purchased                                          72             16,884                616             20,211
Other interest expense                                          687                 --              2,093                 41
                                                        -----------        -----------        -----------        -----------
     Total interest expense                                 684,966            581,231          2,167,633          1,450,938
                                                        -----------        -----------        -----------        -----------
NET INTEREST INCOME                                         787,545            850,350          2,524,386          2,172,521
PROVISION FOR LOAN LOSSES                                   105,000            160,260            322,770            317,460
                                                        -----------        -----------        -----------        -----------
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                            682,545            690,090          2,201,616          1,855,061
                                                        -----------        -----------        -----------        -----------
OTHER INCOME:
Service charges on deposit accounts                         209,256             89,255            526,472            258,297
Other service fees and commissions                           90,486             44,995            227,743            101,755
Other                                                         6,384              1,768             15,265              8,951
                                                        -----------        -----------        -----------        -----------
       Total other income                                   306,126            136,018            769,480            369,003
                                                        -----------        -----------        -----------        -----------
OTHER EXPENSES:
Salaries and wages                                          282,176            255,339            876,416            770,877
Employee benefits                                            49,561             37,117            191,943            115,933
Occupancy expense, net                                       36,214             35,790            119,848             98,843
Equipment rentals, depreciation and
  maintenance                                                64,048             53,862            196,901            167,383
Supplies                                                     46,204             36,852            126,577             97,546
Professional fees                                           168,133            143,691            441,133            416,631
Marketing                                                    28,701             44,312            127,318            113,604
Other                                                        81,122             16,379            143,552             32,465
                                                        -----------        -----------        -----------        -----------
        Total other expenses                                756,159            623,342          2,223,688          1,813,282
                                                        -----------        -----------        -----------        -----------
INCOME BEFORE INCOME TAXES                                  232,512            202,766            747,408            410,782
INCOME TAX PROVISION (BENEFIT)                               98,942             70,049            312,931           (403,627)
                                                        -----------        -----------        -----------        -----------
NET INCOME                                              $   133,570        $   132,717        $   434,477        $   814,409
                                                        ===========        ===========        ===========        ===========

PER SHARE AMOUNTS:
 Basic and diluted net income                           $      0.16        $      0.21        $       .57        $      1.29
                                                        ===========        ===========        ===========        ===========
 Pro forma basic and diluted net income (Note 5)        $      0.15        $      0.19        $       .52        $      1.17
                                                        ===========        ===========        ===========        ===========
</TABLE>


See notes to consolidated financial statements.


                                       4
<PAGE>



WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

<TABLE>
<CAPTION>
                                                    Three Months                  Nine Months
                                                 Ended September 30,           Ended September 30,
                                                2001            2000           2001            2000

<S>                                           <C>             <C>             <C>           <C>
NET INCOME                                    $133,570        $132,717        $434,477      $  814,409
OTHER COMPREHENSIVE INCOME
Unrealized holding gains on securities
  available for sale, net of taxes              45,426           2,908          62,632           4,380
                                              --------        --------        ----------      --------

COMPREHENSIVE INCOME                          $178,996        $135,625        $497,109      $  818,789
                                              ========        ========        ==========      ========
</TABLE>



See notes to consolidated financial statements.


                                       5
<PAGE>



WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (unaudited)

<TABLE>
<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 sale                                                                   62,632               62,632
  Issuance of common stock              157,397         157,397        1,064,513                                          1,221,910
  Net income                                                                               434,477                          434,477
                                       ---------------------------------------------------------------------------------------------
Balance September 30, 2001              790,695        $790,695       $7,194,149        $(209,137)      $64,474          $7,840,181
                                       =============================================================================================

</TABLE>


See notes to consolidated financial statements.

                                       6

<PAGE>

WESTSTAR FINANCIAL SERVICES CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, (unaudited)
<TABLE>
<CAPTION>
                                                                      2001                 2000
<S>                                                             <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                      $    434,477         $    814,409
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Depreciation                                                       212,030              174,637
  Provision for loan loss                                            322,770              317,460
  Premium amortization and discount accretion, net                    (4,039)             (18,233)
  Increase in accrued interest receivable                            (63,004)            (200,931)
  Increase in accrued interest and income tax payable                  5,094               67,262
  Increase in other assets                                          (204,671)             (34,412)
  (Increase) decrease in deferred income tax                         162,003             (406,627)
  Increase in other liabilities                                       13,342               74,235
                                                                ------------         ------------
    Net cash provided by operating activities                        878,002              787,800
                                                                ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Federal Home Loan Bank stock                              (4,800)             (87,500)
Purchases of securities available for sale                        (4,784,508)          (2,010,234)
Maturities of securities available for sale                        2,025,000            2,521,000
Net increase in loans                                             (3,195,156)         (21,550,814)
Additions to premises and equipment                                  (21,163)             (73,521)
                                                                ------------         ------------
    Net cash used in investing activities                         (5,980,627)         (21,201,069)
                                                                ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts, and
  savings accounts                                                 7,126,928           11,806,039
Net increase in time deposits                                      4,931,470            7,828,132
Net increase in fed funds purchased                                       --            1,760,000
Issuance of common stock                                           1,221,910                   --
Common stock subscriptions                                          (328,396)                  --
                                                                ------------         ------------
    Net cash provided by financing activities                     12,951,912           21,394,171
                                                                ------------         ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                          7,849,287              980,902
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                   5,043,809            4,005,187
                                                                ------------         ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                      $ 12,893,096         $  4,986,089
                                                                ============         ============


SUPPLEMENTAL DISCLOSURES:
  Cash paid during the period for:
    Interest                                                    $  2,205,923         $  1,363,424
    Income taxes                                                $    107,545         $      3,000
    Securities purchased, not yet settled                       $    261,388         $         --
</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
               September 30, 2001 and December 31, 2000, and the consolidated
               results of their operations for the three and nine month periods
               ended September 30, 2001 and 2000 and their cash flows for the
               nine month periods ended September 30, 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 September 30, 2001 and December 31, 2000 classified by
               type are as follows:
<TABLE>
<CAPTION>
                                                             September 30,        December 31,
                                                                  2001              2000
               <S>                                           <C>                <C>
               Real Estate:
                 Construction                                $ 11,401,158       $  8,894,309
                 Mortgage                                      31,496,264         32,332,304
               Commercial, financial and agricultural          17,775,784         17,939,971
               Consumer                                         2,653,888          1,338,067
                                                             ------------       ------------
               Subtotal                                        63,327,094         60,504,651
               Net deferred loan origination fees                (185,594)          (212,020)
                                                             ------------       ------------
               Total                                         $ 63,141,500       $ 60,292,631
                                                             ============       ============
</TABLE>

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 $11,508,000 and
               $16,144,000 at September 30, 2001 and December 31, 2000,
               respectively.

5.             On October 16, 2001, the Company's Board of Directors approved a
               10% stock dividend of the Company's common stock. As a result,
               shareholders will receive one additional share on November 13,
               2001 for each 10 shares held as of the record date on October 30,
               2001. The par value of the Company's common stock will remain at
               $1.00. Basic and fully diluted earnings per shares restated for
               the stock split will be $.15 and $.19 for the


                                       8
<PAGE>

               quarters ended September 30, 2001 and 2000, respectively, and
               $.52 and $1.17 for the nine months ended September 30, 2001 and
               2000, respectively.

               Basic earnings per share have been computed using the weighted
               average number of shares of common stock outstanding of 790,695
               and 633,298 for the three for the quarters ended September 30,
               2001 and 2000, respectively, and 756,679 and 633,298 for the nine
               month period ended September 30, 2001 and 2000, respectively.

               There were no potentially dilutive common stock equivalents
               outstanding during the three and nine month periods ended
               September 30, 2001 and 2002.

6.             The Company's capital to risk weighted assets at September 30,
               2001 and December 31, 2000 totaled 13.80% 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 September 30,
               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. The adoption of SFAS No. 140 did not have a material
               effect on the Company's financial statements and current
               disclosures.



               On June 29, 2001, SFAS No. 141, "Business Combinations" was
               approved by the FASB. SFAS No. 141 requires that the purchase
               method of accounting be used for all business combinations
               initiated after June 30, 2001. Goodwill and certain intangible
               assets will remain on the balance sheet and not be amortized. On
               an annual basis, and where there is reason to suspect that their
               values have been diminished or impaired, these assets must be
               tested for impairment, and write-downs may be necessary. The
               statement became effective on July 1, 2001. The adoption of SFAS
               No. 141 did not have a material effect on the Company's financial
               statements and current disclosures.

                                        9
<PAGE>



               On June 29, 2001 SFAS No. 142 "Goodwill and Other Intangible
               Assets" was approved by FASB. SFAS No. 142 changes the accounting
               for goodwill from an amortization method to an impairment-only
               approach. Amortization of goodwill, including goodwill recorded
               in past business combination, will cease upon adoption of this
               statement. The Company is required to implement SFAS No. 142 on
               January 1, 2002. Goodwill and certain intangible assets with
               indefinite lives acquired after June 30, 2001 are immediately
               subject to the nonamortization provisions of SFAS No. 142.
               Intangible assets with definite useful lives will continue to be
               amortized over their useful lives. The adoption of this statement
               will not have a material effect on the Company's financial
               statement and current disclosures.


                                       10
<PAGE>


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

CHANGES IN FINANCIAL CONDITION
SEPTEMBER 30, 2001 COMPARED TO DECEMBER 31, 2000

During the period from December 31, 2000 to September 30, 2001, total assets
increased $13,729,303 or 20%. This increase, reflected primarily in the cash and
cash equivalents, investments, 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 September 30, 2001 totaled $12,757,503 compared to
$3,275,002 at December 31, 2000. Securities available for sale increased
$3,024,934 (excluding unrealized gains). The growth in securities and federal
funds sold resulted from management's goal of improving liquidity. 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. The investment to date totaled $229,800.

The loan portfolio constituted 75% of the Company's total assets. Loans
increased $2,848,869 from December 31, 2000 to September 30, 2001. A softening
in the economy in addition to management's desire to improve liquidity and
manage loan growth commensurate with deposit growth resulted in the modest 5%
increase in loan growth. Management places a strong emphasis on loan quality. At
September 30, 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 $1,199,226,
$194,528, and $199,650 at September 30, 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 September 30, 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 $64,036 and
$51,779 and $86,152 at September 30, 2001 and 2000, and December 31, 2000,
respectively. Loans classified as impaired at September 30, 2001 contain
substantial marketable collateral, thus the reserve shown reflects the
difference between the fair value of the collateral and potential losses
associated with the loans. For the nine month periods ended September 30, 2001
and 2000, Weststar recognized interest income from impaired loans of
approximately $74,732 and $8,660.

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 September 30, 2001 and 2000, and December 31,
2000 was 1.34% 1.47% and 1.45%, respectively, of gross loans outstanding.


                                       11
<PAGE>


The following table contains an analysis for the allowance for loan losses,
including the amount of charge-offs and recoveries by loan type, for the
nine-months ended September 30, 2001 and 2000, and for the years ended December
31, 2000 and 1999.


Summary of Allowance for Loan Losses

<TABLE>
<CAPTION>
                                             For the nine months                   For the year ended
                                             ended September 30,                       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                   (75,275)                --                 --                 --
  Consumer                                 (26,713)                --                 --             (2,114)
  Commercial and industrial loans         (273,087)           (22,123)          (112,062)           (16,453)
                                         ---------          ---------          ---------          ---------
Total charge-offs                         (375,075)           (22,123)          (112,062)           (18,567)
Recoveries                                  28,788                 --                 --             11,971
                                         ---------          ---------          ---------          ---------
Net (charge-offs) recoveries              (346,287)           (22,123)          (112,062)            (6,596)
                                                                                                  ---------
Provision charged to operations            322,770            317,460            454,960            316,685
                                         ---------          ---------          ---------          ---------
Balance, end of period                   $ 848,189          $ 824,145          $ 871,706          $ 528,808
                                         =========          =========          =========          =========

Percentage of net charge-offs to
  average loans                                .55%               .05%               .24%               .03%
Percentage of allowance to
  period-end loans                            1.34%              1.47%              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.

<TABLE>
<CAPTION>
                                     September 30, 2001               December 31, 2000
                                 Amount of      Percent of        Amount of      Percent of
                                 Allowance      Total Loans       Allowance      Total Loans
<S>                              <C>                   <C>        <C>                   <C>
TYPE OF LOAN:
Real estate                      $501,212              68%        $553,337              68%
Commercial and industrial
  loans                           309,081              28%         278,879              30%
Consumer                           24,961               4%          15,822               2%
Unallocated                        12,935              --           23,668              --
                                 --------        --------         --------        --------
Total allowance                  $848,189             100%        $871,706             100%
                                 ========        ========         ========        ========
</TABLE>


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

During 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 $12,058,398 during the nine months ended September 30, 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

                                       12
<PAGE>

accounted for $7,126,928 or 59% of growth, while time deposits accounted for
$4,931,470 or 41% of growth.

The Company's capital to risk weighted assets at September 30, 2001 totaled
13.80%. 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 September 30, 2001, the Company's capital
exceeded the current regulatory capital requirements.

RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 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 September 30, 2001 totaled $787,545
compared to $850,350 in 2000. This decrease is attributable to a lower net
interest margin. The Company's net interest margin was approximately 4.0% and
5.7% for the quarters ended September 30, 2001 and 2000, respectively. The
decrease in net interest margin was attributable to a larger volume of interest
earning assets repricing to lower market rates compared to the volume of
interest-bearing liabilities that repriced during the period. In addition,
interest rates on interest earning assets decreased by a larger percentage than
did interest rates on interest-bearing liabilities due to the competitive nature
of interest bearing deposits.

Weststar recorded a provision for loan losses of $105,000 and $160,260 for the
quarters ended September 30, 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."

Non-interest income for the September 30, 2001 and 2000 quarters totaled
$306,126 and $136,018, respectively. The growth in service charge income
increased commensurate with the addition of new products, growth in transaction
related deposit accounts and fees from the origination of mortgage loans.
Mortgage loan income totaled $53,684 and $11,392 during the quarters ended
September 30, 2001 and 2000, respectively. Non-interest expense totaled $756,159
in 2001 compared to $623,342 in 2000. Other expenses 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, legal fees
and other miscellaneous expenses. Income before income taxes totaled $232,512
and $202,766 for the quarters ended September 30, 2001 and 2000, respectively.
Income taxes totaled $98,942 and $70,049 for the quarters ended September 30,
2001 and 2000, respectively. Net income totaled $133,570 and $132,717 for the
quarters ended September 30, 2001 and 2000, respectively, an increase of .6%.

Other comprehensive income totaled $45,426 and $2,908 for the quarters ended
September 30, 2001 and 2000, respectively. Comprehensive income, which is the
change in shareholders' equity excluding transactions with shareholders',
totaled $178,996 and $135,625 for the quarters ended September 30, 2001 and
2000, respectively.

                                       13
<PAGE>


COMPARATIVE NINE MONTHS

Net interest income for the nine months ended September 30, 2001 totaled
$2,524,386 compared to $2,172,521 in 2000. This increase is attributable to
growth in net earning assets. The Company's net interest margin was
approximately 4.4% and 5.5% for the nine months ended September 30, 2001 and
2000, respectively. The decrease in net interest margin was attributable to a
larger volume of interest earning assets repricing to lower market rates
compared to the volume of interest-bearing liabilities that repriced during the
period. In addition, interest rates on interest earning assets decreased by a
larger percentage than did interest rates on interest-bearing liabilities due to
the competitive nature of interest bearing deposits.

Weststar recorded a provision for loan losses of $322,770 and $317,460 for the
periods ended September 30, 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 1.47% to 1.84% of gross loans
outstanding at September 30, 2001 and 2000, respectively.

Non-interest income for the September 30, 2001 and 2000 periods totaled $769,480
and $369,003, respectively. The growth in service charge income increased
commensurate with the addition of new products, growth in transaction related
deposit accounts and fees from the origination of mortgage loans. Mortgage loan
income totaled $126,654 and $11,955 during the nine months ended September 30,
2001 and 2000, respectively. Non-interest expense totaled $2,223,688 compared to
$1,813,282 in 2000. Other expenses 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, legal fees and other
miscellaneous expenses. Income before income tax provision (benefit) totaled
$747,408 and $410,782 for the periods ended September 30, 2001 and 2000,
respectively. Income tax provision (benefit) totaled $312,931 and $(403,627) for
the periods ended September 30, 2001 and 2000, respectively. Net income totaled
$434,477 and $814,409 for the nine months ended September 30, 2001 and 2000,
respectively.

Other comprehensive income totaled $62,632 and $4,380 in 2001 and 2000,
respectively. Comprehensive income, which is the change in shareholders' equity
excluding transactions with shareholders', totaled $497,109 and $818,789 for the
nine months ended September 30, 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.

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

                                       14
<PAGE>

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 September 30, 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 SEPTEMBER 30, 2001
                                       1-90 Days      91-180 Days      181-365 Days   Total One Year    Non-Sensitive       Total
Interest-earning assets:
<S>                                  <C>             <C>              <C>              <C>              <C>            <C>
Interest bearing deposits            $     32,040              --     $    750,000     $    782,040               --   $    782,040
Federal funds sold                      6,826,000              --               --        6,826,000               --      6,826,000
Investment securities                     725,000              --        1,275,000        2,000,000     $  3,044,541      5,044,541
Federal Home Loan Bank stock                   --              --               --               --          229,800        229,800
Loans                                  47,689,256    $  2,429,138        2,546,027       52,664,421       10,477,079     63,141,500
Total interest-earning assets          55,272,296       2,429,138        4,571,027       62,272,461       13,751,420     76,023,881

Interest-bearing liabilities
Time deposits                          14,807,133      13,913,766        7,608,665       36,329,564          447,262     36,776,826
All other deposits                     26,661,401              --               --       26,661,401               --     26,661,401
Total interest-bearing liabilities     41,468,534      13,913,766        7,608,665       62,990,965          447,262     63,438,227

Interest sensitivity gap             $ 13,803,762    ($11,484,628)    ($ 3,037,638)    ($   718,504)    $ 13,304,158   $ 12,585,654
Cumulative interest sensitivity
gap                                  $ 13,803,762    $  2,319,134     ($   718,504)
Interest-earning assets as a
percent of interest sensitive
liabilities                                 133.3%           17.5%            60.1%            98.9%
</TABLE>



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



                                       15
<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.


                                       16
<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
                                                                         For Capital            Capitalized Under
                                                                           Adequacy             Prompt Corrective
                                                 Actual                    Purposes             Action Provisions
                                            Amount     Ratio         Amount         Ratio       Amount       Ratio
                                            ------     -----         ------         -----       ------       -----
                                                                    (Dollars in Thousands)
<S>                                         <C>        <C>           <C>            <C>         <C>          <C>
As of September 30, 2001
Total Capital (to Risk Weighted Assets)
  Consolidated                              $8,551     13.80%        $4,957         8.00%       $6,197       10.00%
  Bank                                      $8,446     13.63%        $4,958         8.00%       $6,197       10.00%

Tier 1 Capital (to Risk Weighted Assets)
  Consolidated                              $7,775     12.54%        $2,478         4.00%       $3,718        6.00%
  Bank                                      $7,670     12.38%        $2,479         4.00%       $3,718        6.00%

Tier 1 Capital (to Average Assets)
  Consolidated                              $7,775      9.75%        $3,189         4.00%       $3,987        5.00%
  Bank                                      $7,670      9.62%        $3,189         4.00%       $3,986        5.00%
</TABLE>


                                    LIQUIDITY

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

As of September 30, 2001, liquid assets (cash due from banks, interest-earning
bank deposits and federal funds sold) were approximately $12.9 million, which
represents 15.4% of total assets and 17.1% of total deposits. Supplementing this
liquidity, Weststar has available lines of credit from correspondent banks of
approximately $13.3 million. At September 30, 2001, outstanding commitments to
extend credit and available lines of credit were $11.5 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 48.9% of Weststar's total
deposits at September 30, 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 12.7%
of the Company's total deposits at September 30, 2001. 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



                                       17
<PAGE>

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


                              INVESTMENT ACTIVITIES

At September 30, 2001, Weststar's investments consisted of U.S. Government
agency securities and a municipal bond. The agency securities and municipal
bond, with aggregate amortized cost of $5.0 million, are classified as available
for sale and are presented in the financial statements at their market value of
$5.1 million at September 30, 2001. These securities have tax equivalent yields
of 5.1% and 5.9% with an aggregate duration of approximately 32.2 months. The
Company's investment in stock of the Federal Home Loan Bank, which is required
of every member and is redeemable only by the Federal Home Loan Bank, was
$229,800 with a yield of 6.75% at September 30, 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.

                            FORWARD LOOKING STATEMENT

This document contains Forward-Looking Statements that are subject to risks and
uncertainties. These Forward-Looking Statements include information about
possible or assumed future results of our operations. When we use any of the
words "believes", "expects", "anticipates" or similar expressions, we are making
Forward-Looking Statements. many possible events or factors could effect the
future financial results and performance of our company. This could cause
results or performance to differ materially from those expressed in our
Forward-Looking Statements. You should consider these risks.


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.



                                       18
<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)

November 13, 2001                        /s/ Randall C.  Hall
                                         -------------------
                                         Randall C. Hall
                                         Executive Vice President and
                                         Chief Financial and
                                         Principal Accounting Officer



                                       19
<PAGE>