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

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

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

|   |
|--------|

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| INDEX                                               | Page                                                                            |
|-----------------------------------------------------|---------------------------------------------------------------------------------|
|                                                |                                                                            |   |
| Part I – FINANCIAL INFORMATION                |                                                                            |
|                                                |                                                                            |   |
| Financial Statements:                               |                                                                            |
|                                                | Consolidated Balance Sheets                                                     |   |
|                                                | September 30, 2010 and December 31, 2009                                        | 2 |
|                                                |                                                                            |   |
|                                                | Consolidated Statements of Operations                                           |   |
|                                                | Three and Nine Months Ended September 30, 2010 and 2009                         | 3 |
|                                                |                                                                            |   |
|                                                | Consolidated Statements of Comprehensive Income (Loss)                          |   |
|                                                | Three and Nine Months Ended September 30, 2010 and 2009                         | 4 |
|                                                |                                                                            |   |
|                                                | Consolidated Statements of Changes in Shareholders’ Equity (Deficit) |   |
|                                                | Nine Months Ended September 30, 2010 and 2009                                   | 5 |
|                                                |                                                                            |   |
|                                                | Consolidated Statements of Cash Flows                                           |   |
|                                                | Nine Months Ended September 30, 2010 and 2009                                   | 6 |
|                                                |                                                                            |   |
|                                                | Notes to Consolidated Financial Statements                                      | 7 |
|                                                |                                                                            |   |
| Item 2 - Management’s Discussion and Analysis |                                                                            |
|                                                | Financial Condition and Results of Operations                                   | 16 |
|                                                |                                                                            |   |
| Item 4 – Controls and Procedures              | 31                                                                              |
|                                                |                                                                            |   |
| Part II – OTHER INFORMATION                   |                                                                            |
|                                                |                                                                            |   |
| Item 1. – Legal Proceedings                   | 33                                                                              |
|                                                |                                                                            |   |
| Item 5 – Other Information                    | 33                                                                              |
|                                                |                                                                            |   |
| Item 6 –Exhibits                              | 33                                                                              |
|                                                |                                                                            |   |
| Signatures                                          | 34                                                                              |

----

Index

Wests

|                                                                    |   | (unaudited)        |        |   |              |   |
|-------------------------------------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
|                                                                    |   | September 30, |        |   | December 31, |   |
|                                                                    |   | 2010               |        |   | 2009*             |   |
| ASSETS:                                                                 |   |               |        |   |              |   |   |
| Cash and cash equivalents:                                              |   |               |        |   |              |   |   |
| Cash and due from banks                                                 |   | $                  | 5,608,789   |   |              | $      | 6,785,293 |   |
| Interest-bearing deposits                                               |   |               | 11,219,539  |   |              |   | 1,550,240 |   |
| Total cash and cash equivalents                                         |   |               | 16,828,328  |   |              |   | 8,335,533 |   |
| Investment securities – available for sale, at fair value         |   |               |        |   |              |   |   |   |
| (amortized cost of $11,262,979 and $24,613,580, at                      |   |               |        |   |              |   |   |   |
| September 30, 2010 and December 31, 2009, respectively)                 |   |               | 11,631,139  |   |              |   | 25,046,500 |   |
| Loans                                                                   |   |               | 165,309,503 |   |              |   | 185,474,873 |   |
| Allowance for loan losses                                               |   |               | (8,449,832  | )      |              |   | (3,512,263 | ) |
| Net loans                                                               |   |               | 156,859,671 |   |              |   | 181,962,610 |   |
| Premises and equipment, net                                             |   |               | 2,709,219   |   |              |   | 2,415,933 |   |
| Accrued interest receivable                                             |   |               | 928,115     |   |              |   | 886,471 |   |
| Federal Home Loan Bank stock, at cost                                   |   |               | 549,700     |   |              |   | 592,300 |   |
| Deferred income taxes                                                   |   |               | -           |   |              |   | 985,802 |   |
| Foreclosed properties                                                   |   |               | 2,974,725   |   |              |   | 511,112 |   |
| Other assets                                                            |   |               | 2,824,953   |   |              |   | 3,019,479 |   |
|                                                                    |   |               |        |   |              |   |   |   |
| TOTAL                                                                   |   | $                  | 195,305,850 |   |              | $      | 223,755,740 |   |
|                                                                    |   |               |        |   |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):                         |   |               |        |   |              |   |   |   |
| Liabilities:                                                            |   |               |        |   |              |   |   |   |
| Deposits:                                                               |   |               |        |   |              |   |   |   |
| Demand                                                                  |   | $                  | 24,239,656  |   |              | $      | 23,569,001 |   |
| NOW accounts                                                            |   |               | 37,741,044  |   |              |   | 43,591,452 |   |
| Money market accounts                                                   |   |               | 24,546,986  |   |              |   | 26,442,360 |   |
| Savings                                                                 |   |               | 2,944,728   |   |              |   | 2,890,582 |   |
| Time deposits of $100,000 or more                                       |   |               | 19,948,731  |   |              |   | 27,166,487 |   |
| Other time deposits                                                     |   |               | 78,417,876  |   |              |   | 73,462,859 |   |
| Total deposits                                                          |   |               | 187,839,021 |   |              |   | 197,122,741 |   |
| Short-term borrowings                                                   |   |               | 15,234      |   |              |   | 4,374,673 |   |
| Accrued interest payable                                                |   |               | 289,268     |   |              |   | 372,356 |   |
| Other liabilities                                                       |   |               | 890,650     |   |              |   | 917,762 |   |
| Long-term debt                                                          |   |               | 8,124,000   |   |              |   | 4,124,000 |   |
| Total liabilities                                                       |   |               | 197,158,173 |   |              |   | 206,911,532 |   |
|                                                                    |   |               |        |   |              |   |   |   |
| COMMITMENTS AND CONTINGENCIES (Note 3)                                  |   |               |        |   |              |   |   |   |
|                                                                    |   |               |        |   |              |   |   |   |
| SHAREHOLDERS' EQUITY (DEFICIT):                                         |   |               |        |   |              |   |   |   |
| Preferred stock; authorized 1,000,000 shares;                           |   |               |        |   |              |   |   |   |
| no shares issued and outstanding                                        |   |               | -           |   |              |   | - |   |
| Common stock, $1 par value, authorized – 9,000,000 shares;        |   |               |        |   |              |   |   |   |
| outstanding shares– 2,167,489 and 2,167,517 at September 30, 2010 |   |               |        |   |              |   |   |   |
| and December 31, 2009, respectively                                     |   |               | 2,167,489   |   |              |   | 2,167,517 |   |
| Additional paid-in capital                                              |   |               | 6,269,432   |   |              |   | 6,269,404 |   |
| Retained earnings (accumulated deficit)                                 |   |               | (10,515,478 | )      |              |   | 8,141,258 |   |
| Accumulated other comprehensive income                                  |   |               | 226,234     |   |              |   | 266,029 |   |
| Total shareholders' equity (deficit) (Note 7)                           |   |               | (1,852,323  | )      |              |   | 16,844,208 |   |
|                                                                    |   |               |        |   |              |   |   |   |
| TOTAL                                                                   |   | $                  | 195,305,850 |   |              | $      | 223,755,740 |   |

----

Index

West

|                                          |   | Three Months Ended |       |   | Nine Months Ended |   |
|-----------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                          |   | September 30,      |       |   | September 30,     |   |
|                                          |   | 2010               |       |   | 2009              |   |   | 2010 |   |   | 2009 |   |
| INTEREST INCOME:                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Interest and fees on loans                    |   | $                  | 2,237,320  |   |              | $      | 2,941,802 |   |   | $ | 6,993,200 |   |   | $ | 8,701,003 |   |
| Federal funds sold                            |   |               | -          |   |              |   | 53 |   |   |   | - |   |   |   | 1,185 |   |
| Interest-bearing deposits                     |   |               | 7,193      |   |              |   | 6,790 |   |   |   | 15,558 |   |   |   | 10,795 |   |
| Investments:                                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Taxable interest income                       |   |               | 130,238    |   |              |   | 162,448 |   |   |   | 438,240 |   |   |   | 511,521 |   |
| Nontaxable interest income                    |   |               | 109,490    |   |              |   | 95,373 |   |   |   | 323,013 |   |   |   | 282,230 |   |
| Corporate dividends                           |   |               | 649        |   |              |   | 1,242 |   |   |   | 1,432 |   |   |   | 1,242 |   |
| Total interest income                         |   |               | 2,484,890  |   |              |   | 3,207,708 |   |   |   | 7,771,443 |   |   |   | 9,507,976 |   |
| INTEREST EXPENSE:                             |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Time deposits of $100,000 or more             |   |               | 78,524     |   |              |   | 170,615 |   |   |   | 323,160 |   |   |   | 619,427 |   |
| Other time and savings deposits               |   |               | 531,878    |   |              |   | 781,818 |   |   |   | 1,792,329 |   |   |   | 2,483,581 |   |
| Short-term borrowings                         |   |               | 269        |   |              |   | 51,074 |   |   |   | 45,737 |   |   |   | 111,188 |   |
| Long-term debt                                |   |               | 57,013     |   |              |   | 39,065 |   |   |   | 147,913 |   |   |   | 174,703 |   |
| Total interest expense                        |   |               | 667,684    |   |              |   | 1,042,572 |   |   |   | 2,309,139 |   |   |   | 3,388,899 |   |
| NET INTEREST INCOME                           |   |               | 1,817,206  |   |              |   | 2,165,136 |   |   |   | 5,462,304 |   |   |   | 6,119,077 |   |
| PROVISION FOR LOAN LOSSES                     |   |               | 4,497,030  |   |              |   | 869,015 |   |   |   | 19,004,420 |   |   |   | 1,344,905 |   |
| NET INTEREST INCOME (EXPENSE) AFTER PROVISION |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| FOR LOAN LOSSES                               |   |               | (2,679,824 | )      |              |   | 1,296,121 |   |   |   | (13,542,116 | ) |   |   | 4,774,172 |   |
| OTHER INCOME:                                 |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Services charges on deposit accounts          |   |               | 212,677    |   |              |   | 306,610 |   |   |   | 718,523 |   |   |   | 858,945 |   |
| Other service fees and commissions            |   |               | 158,967    |   |              |   | 146,009 |   |   |   | 454,448 |   |   |   | 446,621 |   |
| Gain on sale of available for sale securities |   |               | 504,200    |   |              |   | - |   |   |   | 504,200 |   |   |   | - |   |
| Other                                         |   |               | 14,802     |   |              |   | 10,847 |   |   |   | 31,355 |   |   |   | 30,698 |   |
| Total other income                            |   |               | 890,646    |   |              |   | 463,466 |   |   |   | 1,708,526 |   |   |   | 1,336,264 |   |
| OTHER EXPENSES:                               |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and wages                            |   |               | 708,746    |   |              |   | 703,476 |   |   |   | 2,070,355 |   |   |   | 2,094,747 |   |
| Employee benefits                             |   |               | 42,596     |   |              |   | 84,483 |   |   |   | 357,504 |   |   |   | 298,618 |   |
| Occupancy expense, net                        |   |               | 118,225    |   |              |   | 124,016 |   |   |   | 330,100 |   |   |   | 431,145 |   |
| Equipment rentals, depreciation and           |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| maintenance                                   |   |               | 86,057     |   |              |   | 86,420 |   |   |   | 288,574 |   |   |   | 287,795 |   |
| Supplies                                      |   |               | 63,877     |   |              |   | 64,901 |   |   |   | 203,197 |   |   |   | 196,759 |   |
| Professional fees                             |   |               | 162,400    |   |              |   | 84,704 |   |   |   | 330,722 |   |   |   | 220,691 |   |
| Data processing fees                          |   |               | 182,924    |   |              |   | 168,761 |   |   |   | 552,399 |   |   |   | 479,709 |   |
| FDIC insurance premiums                       |   |               | 247,712    |   |              |   | 76,968 |   |   |   | 419,022 |   |   |   | 323,180 |   |
| Audit, tax and accounting                     |   |               | 40,561     |   |              |   | 24,219 |   |   |   | 159,496 |   |   |   | 103,841 |   |
| Consultant fees                               |   |               | 27,612     |   |              |   | 18,085 |   |   |   | 144,781 |   |   |   | 33,491 |   |
| Marketing                                     |   |               | 74,908     |   |              |   | 65,431 |   |   |   | 226,514 |   |   |   | 238,553 |   |
| Credit and collection expenses                |   |               | 195,226    |   |              |   | (23,973 | ) |   |   | 470,959 |   |   |   | (48,337 | ) |
| Expenses from foreclosed properties           |   |               | 249,527    |   |              |   | 20,343 |   |   |   | 292,244 |   |   |   | 20,413 |   |
| Other                                         |   |               | 529,250    |   |              |   | 118,444 |   |   |   | 756,104 |   |   |   | 320,437 |   |
| Total other expenses                          |   |               | 2,729,621  |   |              |   | 1,616,278 |   |   |   | 6,601,971 |   |   |   | 5,001,042 |   |
| INCOME (LOSS) BEFORE INCOME TAXES             |   |               | (4,518,799 | )      |              |   | 143,309 |   |   |   | (18,435,561 | ) |   |   | 1,109,394 |   |
| INCOME TAX PROVISION                          |   |               | 138,415    |   |              |   | 11,686 |   |   |   | 221,175 |   |   |   | 319,959 |   |
| NET INCOME (LOSS)                             |   | $                  | (4,657,214 | )      |              | $      | 131,623 |   |   | $ | (18,656,736 | ) |   | $ | 789,435 |   |
|                                          |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS / (LOSS) PER SHARE:                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                         |   | $                  | (2.15      | )      |              | $      | .06 |   |   | $ | (8.61 | ) |   | $ | .37 |   |
| Diluted                                       |   | $                  | (2.15      | )      |              | $      | .06 |   |   | $ | (8.61 | ) |   | $ | .35 |   |

----

Index

Wests

|                                             |   | Three Months             |       |   | Nine Months              |   |
|--------------------------------------------------|--------|--------------------------|------------|--------|--------------------------|--------|
|                                             |   | Ended September 30, |       |   | Ended September 30, |   |
|                                             |   | 2010                     |       |   | 2009                     |   |   | 2010 |   |   | 2009 |   |
|                                             |   |                     |       |   |                     |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                |   | $                        | (4,657,214 | )      |                     | $      | 131,623 |   |   | $ | (18,656,736 | ) |   | $ | 789,435 |   |
|                                             |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME                       |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains (losses) on securities  |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| available for sale                               |   |                     | 145,145    |   |                     |   | 502,156 |   |   |   | 439,440 |   |   |   | 745,833 |   |
| Tax effect                                       |   |                     | (55,954    | )      |                     |   | (193,581 | ) |   |   | (169,404 | ) |   |   | (287,518 | ) |
| Unrealized holding gains (losses) on securities  |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| available for sale, net of tax                   |   |                     | 89,191     |   |                     |   | 308,575 |   |   |   | 270,036 |   |   |   | 458,315 |   |
|                                             |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification adjustment for realized losses  |   |                     | (504,200   | )      |                     |   | - |   |   |   | (504,200 | ) |   |   | - |   |
| Tax effect                                       |   |                     | 194,369    |   |                     |   | - |   |   |   | 194,369 |   |   |   | - |   |
| Reclassification adjustment for realized losses, |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| net of tax                                       |   |                     | (309,831   | )      |                     |   | - |   |   |   | (309,831 | ) |   |   | - |   |
|                                             |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX    |   |                     | (220,640   | )      |                     |   | 308,575 |   |   |   | (39,795 | ) |   |   | 458,315 |   |
|                                             |   |                     |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME (LOSS)                      |   | $                        | (4,877,854 | )      |                     | $      | 440,198 |   |   | $ | (18,696,531 | ) |   | $ | 1,247,750 |   |

----

Index

Wes

|                              |   |         |      |   |    |   |      |         |   |   | Retained      |   |   | Accumulated         |        |   |                  |   |
|-----------------------------------|--------|--------------|-----------|--------|---------|--------|-----------|--------------|--------|--------|---------------|--------|--------|---------------------|-------------|--------|-----------------------|--------|
|                              |   |         |      |   |    |   |      | Additional   |   |   | Earnings      |   |   | Other               |        |   | Total                 |   |
|                              |   | Common Stock |      |   | Paid-In |   |      | (Accumulated |   |   | Comprehensive |   |   | Shareholders’ |        |
|                              |   | Shares       |      |   | Amount  |   |      | Capital      |   |   | Deficit)      |   |   | Income (Loss)       |        |   | Equity (Deficit) |   |
| Balance December 31, 2008         |   |         | 2,125,747 |   |    | $      | 2,125,747 |         |   | $      | 6,152,868     |   |   | $                   | 8,214,480   |   |                  | $      | 17,476 |   |   | $ | 16,510,571 |   |
| Net change in unrealized          |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| gains on securities held for sale |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   | 458,315 |   |   |   | 458,315 |   |
| Issuance of common stock pursuant |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| to the exercise of stock options  |   |         | 21,385    |   |    |   | 21,385    |         |   |   | 48,330        |   |   |                |        |   |                  |   |   |   |   |   | 69,715 |   |
| Tax benefit on exercise of non-   |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| qualified stock options           |   |         |      |   |    |   |      |         |   |   | 17,421        |   |   |                |        |   |                  |   |   |   |   |   | 17,421 |   |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| Net Income                        |   |         |      |   |    |   |      |         |   |   |          |   |   |                | 789,435     |   |                  |   |   |   |   |   | 789,435 |   |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| Balance September 30, 2009        |   |         | 2,147,132 |   |    | $      | 2,147,132 |         |   | $      | 6,218,619     |   |   | $                   | 9,003,915   |   |                  | $      | 475,791 |   |   | $ | 17,845,457 |   |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| Balance December 31, 2009         |   |         | 2,167,517 |   |    | $      | 2,167,517 |         |   | $      | 6,269,404     |   |   | $                   | 8,141,258   |   |                  | $      | 266,029 |   |   | $ | 16,844,208 |   |
| Net change in unrealized          |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| gains on securities held for sale |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   | (39,795 | ) |   |   | (39,795 | ) |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| Stock conversion                  |   |         | (28       | )      |    |   | (28       | )            |   |   | 28            |   |   |                |        |   |                  |   |   |   |   |   |   |   |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| Net Income                        |   |         |      |   |    |   |      |         |   |   |          |   |   |                | (18,656,736 | )      |                  |   |   |   |   |   | (18,656,736 | ) |
|                              |   |         |      |   |    |   |      |         |   |   |          |   |   |                |        |   |                  |   |   |   |   |   |   |   |
| Balance September 30, 2010        |   |         | 2,167,489 |   |    | $      | 2,167,489 |         |   | $      | 6,269,432     |   |   | $                   | (10,515,478 | )      |                  | $      | 226,234 |   |   | $ | (1,852,323 | ) |

----

Index

West

|                                                      |   | 2010   |        |   | 2009   |   |
|-----------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                      |   |   |        |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                     |   |   |        |   |   |   |
| Net Income (loss)                                         |   | $      | (18,656,736 | )      |   | $      | 789,435 |   |
| Adjustments to reconcile net income (loss) to             |   |   |        |   |   |   |   |   |
| net cash provided by operating activities:                |   |   |        |   |   |   |   |   |
| Depreciation                                              |   |   | 233,074     |   |   |   | 248,978 |   |
| Provision for loan losses                                 |   |   | 19,004,420  |   |   |   | 1,344,905 |   |
| Premium amortization and discount accretion, net          |   |   | 15,158      |   |   |   | (24,641 | ) |
| Deferred income tax provision (benefit)                   |   |   | 1,010,767   |   |   |   | (507,651 | ) |
| Provision and net gain/loss on sale of other real estate  |   |   | 81,082      |   |   |   | 17,809 |   |
| Gain on sale of securities                                |   |   | (504,200    | )      |   |   |   |   |
| Increase in accrued interest receivable                   |   |   | (41,644     | )      |   |   | (131,089 | ) |
| (Increase) decrease in other assets                       |   |   | 211,760     |   |   |   | (57,312 | ) |
| Decrease in accrued interest payable                      |   |   | (83,088     | )      |   |   | (175,467 | ) |
| Increase (decrease) in other liabilities                  |   |   | (27,112     | )      |   |   | 117,119 |   |
| Net cash provided by operating activities                 |   |   | 1,243,481   |   |   |   | 1,622,086 |   |
|                                                      |   |   |        |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                     |   |   |        |   |   |   |   |   |
| Purchases of securities available for sale                |   |   | (1,132,875  | )      |   |   | (1,597,260 | ) |
| Maturities of securities available for sale               |   |   | 2,934,995   |   |   |   | 3,731,472 |   |
| Net (increase) decrease in loans                          |   |   | 2,023,332   |   |   |   | (15,026,358 | ) |
| Proceeds from sale of securities                          |   |   | 12,037,523  |   |   |   | - |   |
| Proceeds from sale of repossessions                       |   |   | 46,465      |   |   |   | - |   |
| Proceeds from sales of foreclosed properties              |   |   | 1,466,793   |   |   |   | 20,191 |   |
| FHLB stock purchase                                       |   |   | -           |   |   |   | (54,200 | ) |
| FHLB stock redemption                                     |   |   | 42,600      |   |   |   | 47,500 |   |
| Additions to premises and equipment                       |   |   | (526,360    | )      |   |   | (86,095 | ) |
| Net cash provided by (used in) investing activities       |   |   | 16,892,473  |   |   |   | (12,964,750 | ) |
|                                                      |   |   |        |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                     |   |   |        |   |   |   |   |   |
| Net increase (decrease) in demand deposits, NOW Accounts, |   |   |        |   |   |   |   |   |
| MMDA and savings accounts                                 |   |   | (7,020,981  | )      |   |   | 21,360,598 |   |
| Net increase (decrease) in time deposits                  |   |   | (2,262,739  | )      |   |   | 3,581,353 |   |
| Issuance of common stock                                  |   |   | -           |   |   |   | 69,715 |   |
| Proceeds of FHLB advances                                 |   |   | 4,000,000   |   |   |   | 1,110,000 |   |
| Repayment of FHLB advances                                |   |   | (4,000,000  | )      |   |   | (2,110,000 | ) |
| Tax benefit from exercise of non-qualified stock options  |   |   | -           |   |   |   | 17,421 |   |
| Net decrease in short-term borrowing                      |   |   | (359,439    | )      |   |   | (4,489,999 | ) |
| Net cash provided by (used in) financing activities       |   |   | (9,643,159  | )      |   |   | 19,539,088 |   |
|                                                      |   |   |        |   |   |   |   |   |
| NET INCREASE IN CASH AND CASH EQUIVALENTS                 |   |   | 8,492,795   |   |   |   | 8,196,424 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD          |   |   | 8,335,533   |   |   |   | 4,419,778 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                |   | $      | 16,828,328  |   |   | $      | 12,616,202 |   |

----

Index

WEST

| 1. | Weststar Financial Services Corporation (the “Company”) is the holding company for The Bank of Asheville (the “Bank”).  The Bank is a state chartered commercial bank, which was incorporated in North Carolina on October 29, 1997.  The Bank provides consumer and commercial banking services in Buncombe County and surrounding areas.  Common shares of The Bank of Asheville were exchanged for common shares of Weststar Financial Services Corporation on April 28, 2000.  Weststar Financial Services Corporation formed Weststar Financial Services Corporation I (the “Trust”) during October 2003 in order to facilitate the issuance of trust preferred securities.  The Trust is a statutory business trust formed under the laws of the state of Delaware, of which all common securities are owned by Weststar Financial Services Corporation. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | “Accounting for Transfers of Financial Assets”.  The Company adopted the new accounting standard governing the recognition and presentation of transfers of financial assets. This standard eliminates the concept of a qualifying special purpose entity (QSPE), changes the requirements for de-recognizing financial assets, and requires additional disclosures, including information about continuing exposure to risks related to transferred financial assets.  The effective date is for financial asset transfers occurring after the beginning of fiscal years beginning after November 15, 2009.  The disclosure requirements must be applied to transfers that occurred before and after the effective date. The adoption of this standard did not have a material effect on the Company’s financial position and results of operations. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| 3. | Commitments and Contingencies |
|----|-------------------------------|

| 4. | Earnings per Share |
|----|--------------------|

----

Index

|                             |   | Three Months        |      |   | Nine Months         |   |
|----------------------------------|--------|---------------------|-----------|--------|---------------------|--------|
|                             |   | Ended September 30, |      |   | Ended September 30, |   |
|                             |   | 2010                |      |   | 2009                |   |   | 2010 |   |   | 2009 |   |
| Weighted average number of       |   |                |      |   |                |   |   |   |   |   |   |   |
| common shares used in            |   |                |      |   |                |   |   |   |   |   |   |   |
| computing basic net income       |   |                |      |   |                |   |   |   |   |   |   |   |
| per share                        |   |                | 2,167,517 |   |                |   | 2,146,817 |   |   |   | 2,167,517 |   |   |   | 2,142,534 |   |
| Effect of dilutive stock options |   |                | -         |   |                |   | 97,212 |   |   |   | - |   |   |   | 99,464 |   |
| Weighted average number of       |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| common shares and dilutive       |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| potential common shares          |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| used in computing diluted net    |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| income per common share          |   |                | 2,167,517 |   |                |   | 2,244,029 |   |   |   | 2,167,517 |   |   |   | 2,241,998 |   |

| 5. | Fair Value |
|----|------------|

|                           |   | September 30, 2010 |    |   | December 31, 2009 |   |
|--------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                           |   | Carrying           |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                           |   | amount             |    |   | fair value   |   |   | amount |   |   | fair value |   |
|                           |   | (In thousands)     |    |
| Assets:                        |   |               |    |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents      |   | $                  | 16,828  |   |              | $      | 16,828 |   |   | $ | 8,336 |   |   | $ | 8,336 |   |
| Investment securities          |   |               | 11,631  |   |              |   | 11,631 |   |   |   | 25,047 |   |   |   | 25,047 |   |
| Federal Home Loan Bank stock   |   |               | 550     |   |              |   | 550 |   |   |   | 592 |   |   |   | 592 |   |
| Loans, net                     |   |               | 156,860 |   |              |   | 157,787 |   |   |   | 181,963 |   |   |   | 183,328 |   |
| Interest receivable            |   |               | 928     |   |              |   | 928 |   |   |   | 886 |   |   |   | 886 |   |
| Bank owned life insurance      |   |               | 329     |   |              |   | 329 |   |   |   | 361 |   |   |   | 361 |   |
|                           |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                   |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits, NOW accounts, |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| money market accounts, savings |   |               | 89,472  |   |              |   | 89,472 |   |   |   | 96,493 |   |   |   | 96,493 |   |
| Time deposits                  |   |               | 98,367  |   |              |   | 98,773 |   |   |   | 100,629 |   |   |   | 100,799 |   |
| Short-term borrowings          |   |               | 15      |   |              |   | 15 |   |   |   | 4,375 |   |   |   | 4,417 |   |
| Interest payable               |   |               | 289     |   |              |   | 289 |   |   |   | 372 |   |   |   | 372 |   |
| Long-term debt                 |   |               | 8,124   |   |              |   | 8,124 | * |   |   | 4,124 |   |   |   | 4,039 |   |

----

Index

----

Index

|                       |   | Quoted Prices |   |   |        |   |       |         |   |   |                    |   |
|----------------------------|--------|--------------------|--------|--------|-------------|--------|------------|--------------|--------|--------|-------------------------|--------|
|                       |   | in Active          |   |   | Significant |   |       |         |   |   |                    |   |
|                       |   | Markets for        |   |   | Other       |   |       | Significant  |   |   |                    |   |
|                       |   | Identical          |   |   | Observable  |   |       | Unobservable |   |   | Assets/                 |   |
|                       |   | Assets             |   |   | Inputs      |   |       | Inputs       |   |   | Liabilities             |   |
| Fair Value at:             |   | (Level 1)          |   |   | (Level 2)   |   |       | (Level 3)    |   |   | at Fair Value |   |
|                       |   |               |   |   |        |   |       |         |   |   |                    |   |
| September 30, 2010:        |   |               |   |   |        |   |       |         |   |   |                    |   |
|                       |   |               |   |   |        |   |       |         |   |   |                    |   |
| Mortgage-backed Securities |   |               | -      |   |        | $      | 1,743,430  |         |   |   | -                       |   |   | $ | 1,743,430 |   |
| Municipal bonds            |   |               | -      |   |        | $      | 9,887,709  |         |   |   | -                       |   |   | $ | 9,887,709 |   |
|                       |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
|                       |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
| December 31, 2009:         |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
|                       |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
| U.S. Government Agencies   |   |               | -      |   |        | $      | 2,449,886  |         |   |   | -                       |   |   | $ | 2,449,886 |   |
| Mortgage-backed Securities |   |               | -      |   |        | $      | 11,764,887 |         |   |   | -                       |   |   | $ | 11,764,887 |   |
| Municipal bonds            |   |               | -      |   |        | $      | 10,831,727 |         |   |   | -                       |   |   | $ | 10,831,727 |   |

----

Index

|                  |   | Quoted Prices |   |   |        |   |       |         |   |   |                    |   |
|-----------------------|--------|--------------------|--------|--------|-------------|--------|------------|--------------|--------|--------|-------------------------|--------|
|                  |   | in Active          |   |   | Significant |   |       |         |   |   |                    |   |
|                  |   | Markets for        |   |   | Other       |   |       | Significant  |   |   |                    |   |
| Fair Value at:        |   | Identical          |   |   | Observable  |   |       | Unobservable |   |   | Assets/                 |   |
|                  |   | Assets             |   |   | Inputs      |   |       | Inputs       |   |   | Liabilities             |   |
| September 30, 2010    |   | (Level 1)          |   |   | (Level 2)   |   |       | (Level 3)    |   |   | at Fair Value |   |
|                  |   |               |   |   |        |   |       |         |   |   |                    |   |
| Impaired Loans        |   |               | -      |   |        | $      | 17,185,593 |         |   | $      | 2,179,469               |   |   | $ | 19,365,062 |   |
| Foreclosed properties |   |               | -      |   |        |   | 2,974,725  |         |   |   | -                       |   |   |   | 2,974,725 |   |
|                  |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
| December 31, 2009     |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
|                  |   |               |   |   |        |   |       |         |   |   |                    |   |   |   |   |   |
| Impaired Loans        |   |               | -      |   |        | $      | 5,820,701  |         |   | $      | 313,776                 |   |   | $ | 6,134,477 |   |
| Foreclosed properties |   |               | -      |   |        |   | -          |         |   |   | 511,112                 |   |   |   | 511,112 |   |

| 6. | INVESTMENT PORTFOLIO |
|----|----------------------|

| Available-for-sale securities          |   | AmortizedCost |       |   | GrossUnrealizedGains |   |    | GrossUnrealizedLosses |   |   | Fair Value |   |
|----------------------------------------|--------|---------------|------------|--------|----------------------|--------|---------|-----------------------|--------|--------|-----------------|--------|
|                                   |   |          |       |   |                 |   |    |                  |   |   |            |   |
| Due within 1 year:                     |   |          |       |   |                 |   |    |                  |   |   |            |   |
| Municipal bonds                        |   | $             | 555,134    |   |                 | $      | 7,687   |                  |   |   | -               |   |   | $ | 562,821 |   |
| Residential mortgage-backed securities |   |          | 71,025     |   |                 |   | 673     |                  |   |   | -               |   |   |   | 71,698 |   |
|                                   |   |          | 626,159    |   |                 |   | 8,360   |                  |   |   | -               |   |   |   | 634,519 |   |
| Due within 5 to 10 years:              |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| Municipal bonds                        |   |          | 1,428,725  |   |                 |   | 50,817  |                  |   |   | -               |   |   |   | 1,479,542 |   |
|                                   |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| Due after 10 years:                    |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| Municipal bonds                        |   |          | 7,644,238  |   |                 |   | 223,524 |                  |   |   | (22,417         | )      |   |   | 7,845,345 |   |
| Residential mortgage-backed securities |   |          | 1,563,857  |   |                 |   | 107,876 |                  |   |   | -               |   |   |   | 1,671,733 |   |
|                                   |   |          | 9,208,095  |   |                 |   | 331,400 |                  |   |   | (22,417         | )      |   |   | 9,517,078 |   |
|                                   |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| Total available-for-sale securities    |   | $             | 11,262,979 |   |                 | $      | 390,577 |                  |   | $      | (22,417         | )      |   | $ | 11,631,139 |   |

| Available-for-sale securities          |   | AmortizedCost |      |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | Fair Value |   |
|----------------------------------------|--------|---------------|-----------|--------|----------------------|--------|--------|-----------------------|--------|--------|-----------------|--------|
|                                   |   |          |      |   |                 |   |   |                  |   |   |            |   |
| Due within 1 year:                     |   |          |      |   |                 |   |   |                  |   |   |            |   |
| Residential mortgage-backed securities |   | $             | 501,935   |   |                 |   | -      |                  |   | $      | (176            | )      |   | $ | 501,759 |   |
|                                   |   |          |      |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| Due within 1 to 5 years:               |   |          |      |   |                 |   |   |                  |   |   |            |   |   |   |   |   |
| U.S. Government agencies               |   |          | 1,019,655 |   |                 |   | 63,885 |                  |   |   | -               |   |   |   | 1,083,540 |   |
| Residential mortgage-backed securities |   |          | 999,939   |   |                 |   | 20,929 |                  |   |   | -               |   |   |   | 1,020,868 |   |
| Municipal bonds                        |   |          | 1,549,329 |   |                 |   | 60,297 |                  |   |   | -               |   |   |   | 1,609,626 |   |

----

Index

| Available-for-sale securities          |   | AmortizedCost |       |   | GrossUnrealizedGains |   |    | GrossUnrealizedLosses |   |   | Fair Value |   |
|----------------------------------------|--------|---------------|------------|--------|----------------------|--------|---------|-----------------------|--------|--------|-----------------|--------|
|                                   |   |          |       |   |                 |   |    |                  |   |   |            |   |
|                                   |   |          | 3,568,923  |   |                 |   | 145,111 |                  |   |   | -               |   |   |   | 3,714,034 |   |
|                                   |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| Due within 5 to 10 years:              |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| U.S. Government agencies               |   |          | 1,265,259  |   |                 |   | 101,087 |                  |   |   | -               |   |   |   | 1,366,346 |   |
| Residential mortgage-backed securities |   |          | 722,932    |   |                 |   | 32,432  |                  |   |   | -               |   |   |   | 755,364 |   |
| Municipal bonds                        |   |          | 1,642,396  |   |                 |   | 5,684   |                  |   |   | (9,887          | )      |   |   | 1,638,193 |   |
|                                   |   |          | 3,630,587  |   |                 |   | 139,203 |                  |   |   | (9,887          | )      |   |   | 3,759,903 |   |
| Due after 10 years:                    |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| U.S. Government agencies               |   |          | 9,227,386  |   |                 |   | 308,305 |                  |   |   | (48,795         | )      |   |   | 9,486,896 |   |
| Municipal bonds                        |   |          | 7,684,749  |   |                 |   | 50,973  |                  |   |   | (151,814        | )      |   |   | 7,583,908 |   |
|                                   |   |          | 16,912,135 |   |                 |   | 359,278 |                  |   |   | (200,609        | )      |   |   | 17,070,804 |   |
|                                   |   |          |       |   |                 |   |    |                  |   |   |            |   |   |   |   |   |
| Total available-for-sale securities    |   | $             | 24,613,580 |   |                 | $      | 643,592 |                  |   | $      | (210,672        | )      |   | $ | 25,046,500 |   |

|                           |   | Less Than 12 Months |    |   | 12 Months or More |   |   | Total  |   |
|--------------------------------|--------|---------------------|---------|--------|-------------------|--------|--------|--------|--------|
|                           |   | Fair                |    |   | Unrealized        |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                           |   | value               |    |   | losses            |   |   | value  |   |   | losses |   |   | value |   |   | losses |   |
| Securities available for sale: |   |                |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipal bonds                |   | $                   | 275,663 |   |              | $      | 12,084 |   |   | $ | 997,728 |   |   | $ | 10,333 |   |   | $ | 1,273,391 |   |   | $ | 22,417 |   |
|                           |   |                |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired     |   |                |    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                     |   | $                   | 275,663 |   |              | $      | 12,084 |   |   | $ | 997,728 |   |   | $ | 10,333 |   |   | $ | 1,273,391 |   |   | $ | 22,417 |   |

|                           |   | Less Than 12 Months |      |   | 12 Months or More |   |     | Total  |   |
|--------------------------------|--------|---------------------|-----------|--------|-------------------|--------|----------|--------|--------|
|                           |   | Fair                |      |   | Unrealized        |   |     | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                           |   | value               |      |   | losses            |   |     | value  |   |   | losses |   |   | value |   |   | losses |   |
| Securities available for sale: |   |                |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-          |   |                |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| backed U.S. Government         |   |                |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |
| agencies securities            |   | $                   | 2,912,885 |   |              | $      | (48,971  | )      |   | $ | - |   |   | $ | - |   |   | $ | 2,912,885 |   |   | $ | (48,971 | ) |
| Municipal bonds                |   |                | 3,998,244 |   |              |   | (53,226  | )      |   |   | 1,377,766 |   |   |   | (108,475 | ) |   |   | 5,376,010 |   |   |   | (161,701 | ) |
| Total temporarily impaired     |   |                |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                     |   | $                   | 6,911,129 |   |              | $      | (102,197 | )      |   | $ | 1,377,766 |   |   | $ | (108,475 | ) |   | $ | 8,288,895 |   |   | $ | (210,672 | ) |

----

Index

| 7. | Capital and Regulatory Matters |
|----|--------------------------------|

|   | · | Retain qualified management, including a chief executive officer, chief credit officer or senior lending officer, and a chief financial officer, with experience and expertise appropriate and necessary for the performance of their duties. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Must engage an independent third party to prepare a report analyzing and assessing the Bank’s management, staffing performance, and needs. Within 60 days of the receipt of the third-party report, the board must develop a written management plan and submit it to the Commissioner for review. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Maintain Tier 1 capital of at least 8% of the Bank’s total assets. |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Must develop a written plan to reduce the Bank’s amount of assets that were classified “substandard” or “doubtful.” |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Must eliminate from its books, by charge-off or collection, any assets classified “loss” and 50% of those assets classified “doubtful” and prevents the Bank from extending any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit that has been charged off or classified as “loss” or “doubtful.” |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | May not accept, renew, or roll over any brokered deposit unless it is in compliance with the requirements of the FDIC regulations governing brokered deposits. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Refrains from declaring or paying dividends or any distributions of interest, principal, or other sums on subordinated debentures without the prior written approval of the Commissioner. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Limit asset growth to no more than 10% per year. |
|--------|--------|--------------------------------------------------|

|   | · | Adopt an effective internal loan review and grading system to provide for the periodic review of the Bank’s loan portfolio |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | Improving the Bank’s liquidity position and funds management practices |
|--------|--------|------------------------------------------------------------------------------|

----

Index

|   | · | Reducing concentrations of credit |
|--------|--------|-----------------------------------|

|   | · | Implementing lending and collection practices to provide effective guidance and control over the Bank’s lending functions |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Establishing a comprehensive policy for determining the adequacy of the Bank’s allowance for loan and lease losses |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | Develop a comprehensive budget for all categories of income and expense for the 2011 calendar year |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | Develop a strategic plan consisting of long-term goals designed to improve the condition of the Bank and its viability and strategy for achieving those goals |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Develop written plans regarding management, capital, liquidity and funds management, reducing concentrations of credit and managing other real estate |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                 |   |   |   |   |     |   |   |        |   |   |                   |   |   | To Be Well             |   |
|--------------------------------------|--------|--------|--------|--------|----------|--------|--------|-------------|--------|--------|------------------------|--------|--------|------------------------|--------|
|                                 |   |   |   |   |     |   |   | For Capital |   |   |                   |   |   | Capitalized Under |   |
|                                 |   | Actual |   |   | Adequacy |   |   |        |   |   | Prompt Corrective |   |
|                                 |   |   |   |   |     |   |   | Purposes    |   |   |                   |   |   | Action Provisions |   |
|                                 |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |
|                                 |   | Amount |   |   | Ratio    |   |   | Amount      |   |   | Ratio                  |   |   | Amount                 |   |   | Ratio |   |
| (Dollars in Thousands)               |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |
| As of September 30, 2010             |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |
| Total Capital /(Deficit) (to Risk    |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |
| Weighted Assets)                     |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |
| Consolidated                         |   | $      | -      |   |     |   | 0      | %           |   | $      | 13,224                 |   |   |                   | 8.00   | % |   | $ | 16,530 |   |   |   | 10.00 | % |
| Bank                                 |   | $      | 2,712  |   |     |   | 1.63   | %           |   | $      | 13,205                 |   |   |                   | 8.00   | % |   | $ | 16,506 |   |   |   | 10.00 | % |
|                                 |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital/(Deficit) (to Risk    |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Weighted Assets)                     |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                         |   | $      | (2,091 | )      |     |   | (1.26  | %)          |   | $      | 6,612                  |   |   |                   | 4.00   | % |   | $ | 13,224 |   |   |   | 8.00 | % |
| Bank                                 |   | $      | 1,356  |   |     |   | 0.82   | %           |   | $      | 6,602                  |   |   |                   | 4.00   | % |   | $ | 13,205 |   |   |   | 8.00 | % |
|                                 |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital/(Deficit) (to Average |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Assets)                              |   |   |   |   |     |   |   |        |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                         |   | $      | (2,091 | )      |     |   | (0.98  | %)          |   | $      | 8,495                  |   |   |                   | 4.00   | % |   | $ | 16,990 |   |   |   | 8.00 | % |
| Bank                                 |   | $      | 1,356  |   |     |   | 0.65   | %           |   | $      | 8,495                  |   |   |                   | 4.00   | % |   | $ | 16,990 |   |   |   | 8.00 | % |

| 8. | Reclassifications |
|----|-------------------|

----

Index

| Item 2. | Management’s Discussion and Analysis |
|---------|--------------------------------------------|

----

Index

----

Index

|                         |   | September 30, 2010 |      |   | December 31, 2009 |   |
|------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
| Commercial real estate:      |   |                    |      |   |                   |   |
| Residential ADC              |   | $                       | 27,562    |   |                   | $      | 5,527,742 |   |
| Other commercial real estate |   |                    | -         |   |                   |   | 464,270 |   |
| Total non-owner occupied     |   |                    |      |   |                   |   |   |   |
| commercial real estate       |   |                    | 27,562    |   |                   |   | 5,992,012 |   |
| Commercial owner occupied    |   |                    |      |   |                   |   |   |   |
| real estate                  |   |                    | 2,126,998 |   |                   |   | 1,172,095 |   |
| Commercial and industrial    |   |                    | 138,658   |   |                   |   | 167,341 |   |
| Residential mortgage:        |   |                    |      |   |                   |   |   |   |
| First lien, closed end       |   |                    | 105,804   |   |                   |   | 274,151 |   |
| Home equity lines of credit  |   |                    | 80,080    |   |                   |   | 198,602 |   |
| Consumer                     |   |                    | 12,246    |   |                   |   | 8,987 |   |
| Total                        |   | $                       | 2,491,348 |   |                   | $      | 7,813,188 |   |

----

Index

----

Index

----

Index

----

Index

----

Index

----

Index

|                               |   | 1-90 Days |        |   | 91-180 Days |   |        | 181-365 Days |   |   | Total One   |   |   | Non-      |        |   | Total  |   |
|------------------------------------|--------|-----------|-------------|--------|-------------|--------|-------------|--------------|--------|--------|-------------|--------|--------|-----------|-------------|--------|--------|--------|
|                               |   |      |        |   |        |   |        |         |   |   | Year        |   |   | Sensitive |        |   |   |   |
| Interest-earning assets:           |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |
| Interest bearing deposits          |   | $         | 11,219,539  |   |        |   | -           |         |   |   | -           |   |   | $         | 11,219,539  |   |   |   | - |   |   | $ | 11,219,539 |   |
| Investment securities              |   |      | 91,334      |   |        | $      | 370,347     |         |   | $      | 246,456     |   |   |      | 708,137     |   |   | $      | 10,554,842 |   |   |   | 11,262,979 |   |
| Federal Home Loan Bank             |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| stock                              |   |      | 549,700     |   |        |   | -           |         |   |   | -           |   |   |      | 549,700     |   |   |   | - |   |   |   | 549,700 |   |
| Loans                              |   |      | 94,713,372  |   |        |   | 4,226,088   |         |   |   | 7,876,253   |   |   |      | 106,815,713 |   |   |   | 58,493,790 |   |   |   | 165,309,503 |   |
| Total Interest-earning assets      |   | $         | 106,573,945 |   |        | $      | 4,596,435   |         |   | $      | 8,122,709   |   |   | $         | 119,293,089 |   |   | $      | 69,048,632 |   |   | $ | 188,341,721 |   |
|                               |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
|                               |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:      |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| Time deposits                      |   |      | 21,724,971  |   |        |   | 29,048,228  |         |   |   | 34,772,801  |   |   |      | 85,546,000  |   |   |   | 12,820,607 |   |   |   | 98,366,607 |   |
| All other deposits                 |   |      | 65,232,758  |   |        |   | -           |         |   |   | -           |   |   |      | 65,232,758  |   |   |   | - |   |   |   | 65,232,758 |   |
| Short-term debt                    |   |      | 15,234      |   |        |   | -           |         |   |   | -           |   |   |      | 15,234      |   |   |   | - |   |   |   | 15,234 |   |
| Long-term debt                     |   |      | 4,124,000   |   |        |   | -           |         |   |   | -           |   |   |      | 4,124,000   |   |   |   | 4,000,000 |   |   |   | 8,124,000 |   |
| Total interest-bearing liabilities |   |      | 91,096,963  |   |        |   | 29,048,228  |         |   |   | 34,772,801  |   |   |      | 154,917,992 |   |   |   | 16,820,607 |   |   |   | 171,738,599 |   |
|                               |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
|                               |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| Interest sensitivity gap           |   | $         | 15,476,982  |   |        | $      | (24,451,793 | )            |   | $      | (26,650,092 | )      |   | $         | (35,624,903 | )      |   | $      | 52,228,025 |   |   |   |   |   |
| Cumulative interest sensitivity    |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| Gap                                |   |      |        |   |        | $      | (8,974,811  | )            |   | $      | (35,624,903 | )      |   |      |        |   |   |   |   |   |   |   |   |   |
| Interest-earning assets as         |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| Percent of interest sensitive      |   |      |        |   |        |   |        |         |   |   |        |   |   |      |        |   |   |   |   |   |   |   |   |   |
| liabilities*                       |   |      | 117.0       | %      |        |   | 15.8        | %            |   |   | 23.4        | %      |   |      | 77.0        | %      |   |   |   |   |   |   |   |   |

|                                   |   | September 30, 2010 |        |   | December 31, 2009 |   |
|----------------------------------------|--------|-------------------------|-------------|--------|------------------------|--------|
| Real Estate -                          |   |                    |        |   |                   |   |
| Construction                           |   | $                       | 60,986,613  |   |                   | $      | 68,712,886 |   |
| Mortgage                               |   |                    | 82,803,433  |   |                   |   | 88,843,525 |   |
| Commercial, financial and agricultural |   |                    | 19,678,784  |   |                   |   | 25,833,920 |   |
| Consumer                               |   |                    | 1,962,481   |   |                   |   | 2,254,665 |   |
| Subtotal                               |   |                    | 165,431,311 |   |                   |   | 185,644,996 |   |
| Deferred origination fees, net         |   |                    | (121,808    | )      |                   |   | (170,123 | ) |
| Total                                  |   | $                       | 165,309,503 |   |                   | $      | 185,474,873 |   |

----

Index

----

Index

| Loan Type                   |   |        |        |   |         |   |      | Restructured             |   |
|-----------------------------|--------|-------------|-------------|--------|--------------|--------|-----------|--------------------------|--------|
|                        |   | Loans       |        |   | Restructured |   |      | Loans to Loans |   |
|                        |   | Outstanding |        |   | Loans        |   |      | Outstanding              |   |
| Commercial real estate:     |   |        |        |   |         |   |      |                     |   |
| Residential ADC             |   | $           | 54,707,146  |   |         | $      | 3,230,259 |                     |   |   | 5.90 | % |
| Other Commercial            |   |        | 28,144,763  |   |         |   | 134,002   |                     |   |   | .48 | % |
| Agricultural                |   |        | 74,613      |   |         |   | -         |                     |   |   | - |   |
| Total non-owner occupied    |   |        | 82,926,522  |   |         |   | 3,364,261 |                     |   |   | 4.06 | % |
| Commercial real estate      |   |        |        |   |         |   |      |                     |   |   |   |   |
| owner-occupied              |   |        | 33,166,386  |   |         |   | 3,237,209 |                     |   |   | 9.76 | % |
| Commercial:                 |   |        |        |   |         |   |      |                     |   |   |   |   |
| Construction and industrial |   |        | 19,678,784  |   |         |   | 231,029   |                     |   |   | 1.17 | % |
| Residential mortgage:       |   |        |        |   |         |   |      |                     |   |   |   |   |
| 1st lien; closed end        |   |        | 13,638,739  |   |         |   | 1,007,433 |                     |   |   | 7.39 | % |
| Junior lien; closed end     |   |        | 1,960,424   |   |         |   | -         |                     |   |   | - |   |
| Total residential mortgage  |   |        | 15,599,163  |   |         |   | 1,007,433 |                     |   |   | 6.46 | % |
| Home equity lines           |   |        | 12,097,975  |   |         |   | 342,489   |                     |   |   | 2.83 | % |
| Consumer - other            |   |        | 1,962,482   |   |         |   | 22,499    |                     |   |   | 1.15 | % |
| Deferred fees/costs         |   |        | (121,809    | )      |         |   | -         |                     |   |   | - |   |
| Total                       |   | $           | 165,309,503 |   |         | $      | 8,204,920 |                     |   |   | 4.96 | % |

|                               |   | September 30, 2010 |       |   | December 31, 2009 |   |
|------------------------------------|--------|-------------------------|------------|--------|------------------------|--------|
|                               |   |                    |       |   |                   |   |
| Nonaccrual                         |   | $                       | 24,688,754 |   |                   | $      | 22,870,696 |   |
| Restructured loans                 |   |                    | 5,713,572  |   |                   |   | 2,591,289 |   |
| Nonperforming loans                |   |                    | 30,402,326 |   |                   |   | 25,461,985 |   |
| Other real estate owned            |   |                    | 2,974,725  |   |                   |   | 511,112 |   |
| Repossessions                      |   |                    | -          |   |                   |   | - |   |
|                               |   |                    |       |   |                   |   |   |   |
| Total                              |   | $                       | 33,377,051 |   |                   | $      | 25,973,097 |   |
| Restructured loans not included in |   |                    |       |   |                   |   |   |   |
| categories above                   |   | $                       | 2,491,348  |   |                   | $      | 7,748,562 |   |

----

Index

----

Index

|                                        |   | For the nine months           |        |   | For the year ended |   |
|---------------------------------------------|--------|-------------------------------|-------------|--------|-----------------------------------|--------|
|                                        |   | ended September 30, |        |   | December 31,                      |   |
|                                        |   | 2010                          |        |   | 2009                              |   |   | 2009 |   |
|                                        |   |                          |        |   |                              |   |   |   |   |
| Balance, beginning of period                |   | $                             | 3,512,263   |   |                              | $      | 2,529,981 |   |   | $ | 2,529,981 |   |
| Charge-offs:                                |   |                          |        |   |                              |   |   |   |   |   |   |   |
| Commercial, financial and agricultural      |   |                          | (4,026,985  | )      |                              |   | (236,392 | ) |   |   | (994,756 | ) |
| Real estate:                                |   |                          |        |   |                              |   |   |   |   |   |   |   |
| Construction                                |   |                          | (9,030,117  | )      |                              |   | (9,211 | ) |   |   | (693,002 | ) |
| Mortgage                                    |   |                          | (708,922    | )      |                              |   | (78,877 | ) |   |   | (493,467 | ) |
| Consumer                                    |   |                          | (389,431    | )      |                              |   | (55,914 | ) |   |   | (85,257 | ) |
| Total charge-offs                           |   |                          | (14,155,455 | )      |                              |   | (380,394 | ) |   |   | (2,266,482 | ) |
|                                        |   |                          |        |   |                              |   |   |   |   |   |   |   |
| Recoveries                                  |   |                          |        |   |                              |   |   |   |   |   |   |   |
| Commercial, financial and agricultural      |   |                          | 1,982       |   |                              |   | 28 |   |   |   | 28 |   |
| Real estate:                                |   |                          |        |   |                              |   |   |   |   |   |   |   |
| Construction                                |   |                          | -           |   |                              |   | - |   |   |   | - |   |
| Mortgage                                    |   |                          | -           |   |                              |   | - |   |   |   | - |   |
| Consumer                                    |   |                          | 86,622      |   |                              |   | 25,364 |   |   |   | 30,336 |   |
| Total recoveries                            |   |                          | 88,604      |   |                              |   | 25,392 |   |   |   | 30,364 |   |
| Net charge-offs                             |   |                          | (14,066,852 | )      |                              |   | (355,002 | ) |   |   | (2,236,118 | ) |
| Provision charged to operations             |   |                          | 19,004,420  |   |                              |   | 1,344,905 |   |   |   | 3,218,400 |   |
| Balance, end of period                      |   | $                             | 8,449,832   |   |                              | $      | 3,519,884 |   |   | $ | 3,512,263 |   |
|                                        |   |                          |        |   |                              |   |   |   |   |   |   |   |
|                                        |   |                          |        |   |                              |   |   |   |   |   |   |   |
| Percentage of annualized net charge-offs to |   |                          |        |   |                              |   |   |   |   |   |   |   |
| average loans                               |   |                          | 5.15        | %      |                              |   | .27 | % |   |   | 1.24 | % |
| Percentage of allowance to                  |   |                          |        |   |                              |   |   |   |   |   |   |   |
| period-end loans                            |   |                          | 5.11        | %      |                              |   | 1.90 | % |   |   | 1.89 | % |

----

Index

|                      |   | September 30, 2010 |      | December 31, 2009 |
|---------------------------|--------|-------------------------|-----------|------------------------|
|                      |   |                    |      |                   |   |   |   |   |   |   |   |   |
|                      |   |                    |      |                   | Percent of |   |   |   |   | Percent of |
|                      |   | Amount of          |      |                   | Loans |   | Amount of |   |   | Loans |
| TYPE OF LOAN:             |   | Allowance               |      |                   | Outstanding |   | Allowance |   |   | Outstanding |
|                      |   |                    |      |                   |   |   |   |   |   |   |   |   |
| Real Estate               |   | $                       | 7,581,174 |                   |   |   | 5 | % |   | $ | 2,481,578 |   |   |   | 2 | % |
| Commercial and industrial |   |                    |      |                   |   |   |   |   |   |   |   |   |   |   |   |   |
| loans                     |   |                    | 744,271   |                   |   |   | 4 | % |   |   | 878,086 |   |   |   | 3 | % |
| Consumer                  |   |                    | 124,387   |                   |   |   | 6 | % |   |   | 152,599 |   |   |   | 7 | % |
| Unallocated               |   |                    | -         |                   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total Allowance           |   | $                       | 8,449,832 |                   |   |   | 5 | % |   | $ | 3,512,263 |   |   |   | 2 | % |

----

Index

|                                 |   |                   |   |   |     |   |   |             |   |   |                   |   |   | To Be Well             |   |
|--------------------------------------|--------|------------------------|--------|--------|----------|--------|--------|------------------|--------|--------|------------------------|--------|--------|------------------------|--------|
|                                 |   |                   |   |   |     |   |   | For Capital |   |   |                   |   |   | Capitalized Under |   |
|                                 |   | Actual                 |   |   | Adequacy |   |   |             |   |   | Prompt Corrective |   |
|                                 |   |                   |   |   |     |   |   | Purposes         |   |   |                   |   |   | Action Provisions |   |
|                                 |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |
|                                 |   | Amount                 |   |   | Ratio    |   |   | Amount           |   |   | Ratio                  |   |   | Amount                 |   |   | Ratio |   |
|                                 |   | (Dollars in Thousands) |   |
| As of September 30, 2010             |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |
| Total Capital/(Deficit)              |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |
| (to Risk Weighted Assets)            |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |
| Consolidated                         |   | $                      | -      |   |     |   | 0      | %                |   | $      | 13,224                 |   |   |                   | 8.00   | % |   | $ | 16,530 |   |   |   | 10.00 | % |
| Bank                                 |   | $                      | 2,712  |   |     |   | 1.63   | %                |   | $      | 13,205                 |   |   |                   | 8.00   | % |   | $ | 16,506 |   |   |   | 10.00 | % |
|                                 |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital/(Deficit) (to Risk    |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Weighted Assets)                     |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                         |   | $                      | (2,091 | )      |     |   | (1.25  | %)               |   | $      | 6,612                  |   |   |                   | 4.00   | % |   | $ | 13,224 |   |   |   | 8.00 | %* |
| Bank                                 |   | $                      | 1,356  |   |     |   | 0.82   | %                |   | $      | 6,602                  |   |   |                   | 4.00   | % |   | $ | 13,205 |   |   |   | 8.00 | %* |
|                                 |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital/(Deficit) (to Average |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Assets)                              |   |                   |   |   |     |   |   |             |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                         |   | $                      | (2,091 | )      |     |   | (0.99  | %)               |   | $      | 8,495                  |   |   |                   | 4.00   | % |   | $ | 16,990 |   |   |   | 8.00 | %* |
| Bank                                 |   | $                      | 1,356  |   |     |   | 0.65   | %                |   | $      | 8,495                  |   |   |                   | 4.00   | % |   | $ | 16,990 |   |   |   | 8.00 | %* |

----

Index

| Item 4. | Controls and Procedures |
|---------|-------------------------|

|   | · | We have revised loan officer lending authority and reassigned portfolio responsibilities. |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | We have restructured the Chief Credit Officer role to be independent of lending and to report to the Loan Committee of the Board of Directors. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | We have provided additional resources to our Credit Administrative staff with the addition an interim Chief Credit Officer and Credit Analyst. We have also implemented additional monitoring procedures that have helped improve underwriting practices. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We have increased the frequency of loan committee meetings from monthly to weekly or as needed. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | We are in the process of developing a disciplined approach for problem assets.  We have strengthened our appraisal policies and obtaining updated appraisals on all troubled loans. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We are developing enhanced lending policies and credit administration procedures in order to improve the effectiveness of our internal controls. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| Part II. | OTHER INFORMATION |
|----------|-------------------|

| Item 1. | Legal Proceedings |
|---------|-------------------|

| Item 5. | Other Information |
|---------|-------------------|

|   | (a) | None. |
|--------|-----|-------|

|   | (b) | None. |
|--------|-----|-------|

| Item 6. | Exhibits |
|---------|----------|

|   | (a) | Exhibits. |
|--------|-----|-----------|

|   | 31.1 – | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 – | Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Index

SIG

|                    | WESTSTAR FINANCIAL SERVICES CORPORATION |   |
|-------------------------|-----------------------------------------|--------|
|                    |                                    |   |   |   |
|                    |                                    |   |   |   |
| Date: November 12, 2010 |                                    | By:    | /s/    Randall C. Hall |   |
|                    |                                    |   |   |   |
|                    |                                    |   | Randall C. Hall |   |
|                    |                                    |   | President and Chief Executive Officer |   |
|                    |                                    |   | Chief Financial and Principal Accounting Officer |   |

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