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

                                   FORM 10-QSB
                                   (Mark One)

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

For the quarterly period ended March 31, 2004

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

For the transition period from _____________________ to ________________________

                        Commission File Number: 000-30515

                     Weststar Financial Services Corporation
             (Exact name of registrant as specified in its charter)

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

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

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

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common stock, $1.00 par value - 1,166,208 shares outstanding as of May 4, 2004.

<PAGE>

INDEX                                                                       Page

Part I - FINANCIAL INFORMATION

Financial Statements:
         Consolidated Balance Sheets
           March 31, 2004 and December 31, 2003                             3

         Consolidated Statements of Operations
           Three Months Ended March 31, 2004 and 2003                       4

         Consolidated Statements of Comprehensive Income
           Three Months Ended March 31, 2004 and 2003                       5

         Consolidated Statement of Changes in Shareholders' Equity
           Three Months Ended March 31, 2004 and 2003                       6

         Consolidated Statements of Cash Flows
           Three Months Ended March 31, 2004 and 2003                       7

         Notes to Consolidated Financial Statements                         8

Item 2 - Management's Discussion and Analysis
           Financial Condition and Results of Operations                    11

Item 3 - Controls and Procedures                                            19

Part II - OTHER INFORMATION

Exhibit Index                                                               20

Signatures                                                                  21


                                                                               2
<PAGE>

Part I. FINANCIAL INFORMATION

Item I. Financial Statements

<TABLE>
<CAPTION>
Weststar Financial Services Corporation & Subsidiaries
Consolidated Balance Sheets                                                       (unaudited)
                                                                                    March 31,            December 31,
                                                                                      2004                   2003*
                                                                                  -------------          -------------
<S>                                                                               <C>                    <C>
ASSETS:
Cash and cash equivalents:
  Cash and due from banks                                                         $   3,072,201          $   3,657,060
  Interest-bearing deposits                                                             335,507                 39,617
  Federal funds sold                                                                 11,312,000              8,294,000
                                                                                  -------------          -------------
      Total cash and cash equivalents                                                14,719,708             11,990,677
Investment securities -
  Available for sale, at fair value (amortized cost of
  $18,484,648 and $18,643,453, respectively)                                         18,492,566             18,512,297
                                                                                  -------------          -------------
Loans                                                                                78,713,494             74,753,066
Allowance for loan losses                                                            (1,255,715)            (1,174,003)
                                                                                  -------------          -------------
Net loans                                                                            77,457,779             73,579,063
Premises and equipment, net                                                           2,288,828              2,333,869
Accrued interest receivable                                                             452,224                457,814
Federal Home Loan Bank stock, at cost                                                   272,000                175,400
Deferred income taxes                                                                   181,947                220,460
Foreclosed properties                                                                 1,338,086              1,266,969
Other assets                                                                            481,030                525,739
                                                                                  -------------          -------------
TOTAL                                                                             $ 115,684,168          $ 109,062,288
                                                                                  =============          =============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
  Demand                                                                          $  15,758,220          $  17,707,429
  NOW accounts                                                                       20,335,401             22,923,031
  Money market accounts                                                              25,549,957             25,469,714
  Savings                                                                             2,304,207              1,973,225
  Time deposits of $100,000 or more                                                   5,532,874              4,966,351
  Other time deposits                                                                28,296,784             20,361,788
                                                                                  -------------          -------------
        Total deposits                                                               97,777,443             93,401,538
Borrowings                                                                            2,000,000             2,000,0000
Accrued interest payable                                                                144,985               120,8533
Other liabilities                                                                     2,333,142                348,949
Trust preferred securities                                                            4,000,000              4,000,000
                                                                                  -------------          -------------
      Total liabilities                                                             106,255,570             99,871,340
                                                                                  -------------          -------------

SHAREHOLDERS' EQUITY:
Preferred stock; authorized $1,000,000; issued and outstanding - none                        --                     --
Common stock, $1 par value, authorized - 9,000,000
    shares; issued and outstanding - 1,166,208 and 1,166,208, respectively            1,166,208              1,166,208
Additional paid-in capital                                                            7,030,589              7,030,589
Retained earnings                                                                     1,226,936              1,074,747
Accumulated other comprehensive income (loss)                                             4,865                (80,596)
                                                                                  -------------          -------------
      Total shareholders' equity                                                      9,428,598              9,190,948
                                                                                  -------------          -------------
TOTAL                                                                             $ 115,684,168          $ 109,062,288
                                                                                  =============          =============
</TABLE>

*Derived from audited financial statements.

See notes to consolidated financial statements.


                                                                               3
<PAGE>

<TABLE>
<CAPTION>
Weststar Financial Services Corporation & Subsidiaries
Consolidated Statements of Operations (unaudited)                            Three Months
                                                                            Ended March 31,
                                                                        2004                 2003
                                                                     ----------           ----------
<S>                                                                  <C>                  <C>
INTEREST INCOME:
Interest and fees on loans                                           $1,314,336           $1,179,724
Federal funds sold                                                        8,109               25,951
Interest-bearing deposits                                                   615                  122
Investments:
  Taxable interest income                                               128,972               86,097
  Nontaxable interest income                                             14,553                9,767
  Corporate dividends                                                     1,547                2,896
                                                                     ----------           ----------
       Total interest income                                          1,468,132            1,304,557
                                                                     ----------           ----------
INTEREST EXPENSE:
Time deposits of $100,000 or more                                        26,852               57,601
Other time and savings deposits                                         246,842              319,871
Federal funds purchased                                                   1,358                   --
Other interest expense                                                   51,403                2,276
                                                                     ----------           ----------
     Total interest expense                                             326,455              379,748
                                                                     ----------           ----------
NET INTEREST INCOME                                                   1,141,677              924,809
PROVISION FOR LOAN LOSSES                                               322,800              355,000
                                                                     ----------           ----------
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                                        818,877              569,809
                                                                     ----------           ----------
OTHER INCOME:
Service charges on deposit accounts                                     300,659              244,590
Other service fees and commissions                                       83,345               89,384
Securities gains                                                         31,613                   --
Other                                                                    10,080                4,163
                                                                     ----------           ----------
       Total other income                                               425,697              338,137
                                                                     ----------           ----------
OTHER EXPENSES:
Salaries and wages                                                      405,738              335,098
Employee benefits                                                        78,254               56,939
Occupancy expense, net                                                   77,734               49,813
Equipment rentals, depreciation and
  maintenance                                                            80,130               57,916
Supplies                                                                 61,666               46,735
Professional fees                                                       187,710              165,493
Marketing                                                                35,448               15,601
Other                                                                    83,695               68,445
                                                                     ----------           ----------
       Total other expenses                                           1,010,375              796,040
                                                                     ----------           ----------
INCOME BEFORE INCOME TAXES                                              234,199              111,906
INCOME TAX PROVISION                                                     82,010               40,000
                                                                     ----------           ----------
NET INCOME                                                           $  152,189           $   71,906
                                                                     ==========           ==========

EARNINGS PER SHARE:
Basic                                                                $     0.13           $     0.06
                                                                     ==========           ==========
Diluted                                                              $     0.12           $     0.06
                                                                     ==========           ==========
</TABLE>

See notes to consolidated financial statements


                                                                               4
<PAGE>

<TABLE>
<CAPTION>
Weststar Financial Services Corporation & Subsidiaries
Consolidated Statements of Comprehensive Income                               (unaudited)
                                                                              Three Months
                                                                             Ended March 31,
                                                                         2004                2003
<S>                                                                   <C>                  <C>
NET INCOME                                                            $ 152,189            $ 71,906
OTHER COMPREHENSIVE INCOME
  Unrealized holding gains on securities
    available for sale                                                  170,730              41,357
  Tax effect                                                            (65,849)            (15,972)
                                                                      ---------            --------
  Unrealized holding gains on securities
  available for sale, net of tax                                        104,881              25,385

  Reclassification adjustment for realized gains                        (31,613)                 --
     Tax effect                                                          12,193                  --
                                                                      ---------            --------
  Reclassification adjustment fro realized gains,
     Net of tax                                                         (19,420)                 --

OTHER COMPREHENSIVE INCOME, NET OF
TAX                                                                      85,461              25,385
                                                                      ---------            --------

COMPRHENSIVE INCOME                                                   $ 237,650            $ 97,291
                                                                      =========            ========
</TABLE>

See notes to consolidated financial statements.


                                                                               5
<PAGE>

Weststar Financial Services Corporation & Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
For the Three Months Ended March 31, 2004 and 2003

<TABLE>
<CAPTION>
                                                                                                   Accumulated
                                              Common Stock            Additional                      Other           Total
                                     ----------------------------       Paid-In       Retained    Comprehensive   Shareholders'
                                         Shares          Amount         Capital       Earnings     Income/(Loss)      Equity
<S>                                     <C>            <C>            <C>            <C>             <C>            <C>
Balance December 31, 2002                 957,539      $  957,539     $7,120,187     $  561,003      $  30,425      $8,669,154
  Net change in unrealized
     gain on securities held for sale                                                                   25,385          25,385
Stock dividend                            191,507         191,507       (191,507)
  Net income                                                                             71,906                         71,906
                                     -----------------------------------------------------------------------------------------
Balance March 31, 2003                  1,149,046      $1,149,046     $6,928,680     $  632,909      $  55,810      $8,766,445
                                     =========================================================================================

Balance December 31, 2003               1,166,208      $1,166,208     $7,030,589     $1,074,747       ($80,596)     $9,190,948
  Net change in unrealized
     gain on securities held for sale                                                                   85,461          85,461
  Net income                                                                            152,189                        152,189
                                     -----------------------------------------------------------------------------------------
Balance March 31, 2004                  1,166,208      $1,166,208     $7,030,589     $1,226,936      $   4,865      $9,428,598
                                     =========================================================================================
</TABLE>

See notes to consolidated financial statements.


                                                                               6
<PAGE>

<TABLE>
<CAPTION>
Weststar Financial Services Corporation & Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,                                                     2004                 2003
                                                                                     ------------         ------------
<S>                                                                                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                           $    152,189         $     71,906
Adjustments to reconcile net income to net cash used by operating activities:
  Depreciation                                                                             97,229               66,547
  Provision for loan losses                                                               322,800              355,000
  Premium amortization and discount accretion, net                                         23,463                4,618
  Deferred income tax provision (benefit)                                                 (15,100)               1,101
  Loss on disposals of foreclosed properties                                               21,783               32,014
  Gain on sales of securities                                                             (31,613)                  --
  Decrease in accrued interest receivable                                                   6,002                9,875
 (Increase) decrease in other assets                                                       44,709              (82,765)
  Increase in accrued interest payable                                                     24,132                  185
  Increase (decrease) in other liabilities                                                 95,543              (41,944)
  Loss on uninsured deposits                                                                   --                5,205
                                                                                     ------------         ------------
    Net cash provided by operating activities                                             741,137              421,742
                                                                                     ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale                                                     --           (4,508,950)
Maturities of securities available for sale                                             1,501,593            3,536,371
Net increase in loans                                                                  (4,301,516)            (100,863)
Proceeds from sales of foreclosed properties                                                7,100               66,849
Proceeds from sales of securities                                                         553,600                   --
Net expenditures on foreclosed properties                                                      --               93,859
FHLB stock purchase                                                                       (96,600)                  --
Additions to premises and equipment                                                       (52,188)            (136,928)
                                                                                     ------------         ------------
    Net cash used in investing activities                                              (2,388,011)          (1,049,662)
                                                                                     ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts, MMDA and savings accounts               (4,125,614)           2,476,281
Net increase (decrease) in time deposits                                                8,501,519             (360,761)
                                                                                     ------------         ------------
    Net cash provided by financing activities                                           4,375,905            2,115,520
                                                                                     ------------         ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                               2,729,031            1,487,600
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                       11,990,677           14,115,822
                                                                                     ------------         ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                           $ 14,719,708         $ 15,603,422
                                                                                     ============         ============
</TABLE>

See notes to consolidated financial statements.


                                                                               7
<PAGE>

WESTSTAR FINANCIAL SERVICES CORPORTION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Weststar Financial Services Corporation (the "Company") is a bank holding
      company with two subsidiaries, The Bank of Asheville (the "Bank"), and
      Weststar Financial Services Corporation I (the "Trust"). The Bank is a
      state chartered commercial bank which was incorporated in North Carolina
      on October 29, 2997. The Bank provides consumer and commercial banking
      services in Buncombe County and surrounding area. Common shares of The
      Bank of Asheville were exchanged for common shares of Weststar Financial
      Services Corporation on April 29, 2000. Weststar Financial Services
      Corporation formed 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.

      In the opinion of management, the accompanying consolidated financial
      statements contain all adjustments necessary to present fairly the
      consolidated financial position of the Company as of March 31, 2004 and
      December 31, 2003, and the consolidated results of their operations and
      their cash flows for the three-month periods ended March 31, 2004 and
      2003. Operating results for the three-month period ended March 31, 2004
      are not necessarily indicative of the results that may be expected for the
      fiscal year ending December 31, 2004.

      The accounting policies followed are set forth in Note 1 to the 2003
      Annual Report to Shareholders (Form 10-KSB) on file with the Securities
      and Exchange Commission.

2.    Loans at March 31, 2004 and December 31, 2003 classified by type are as
      follows:

<TABLE>
<CAPTION>
                                                      March 31,          December 31,
                                                        2004                 2003
<S>                                                 <C>                  <C>
      Real Estate:
        Construction                                $ 13,288,386         $  8,372,934
        Mortgage                                      45,424,517           46,014,314
      Commercial, financial and agricultural          18,280,416           18,603,317
      Consumer                                         1,868,902            1,909,709
                                                    ------------         ------------
      Subtotal                                        78,862,221           74,900,274
      Net deferred loan origination fees                (148,727)            (147,208)
                                                    ------------         ------------
      Total                                         $ 78,713,494         $ 74,753,066
                                                    ============         ============
</TABLE>

3.    In the normal course of business there are various commitments and
      contingent liabilities such as commitments to extend credit, which are not
      reflected on the financial statements. The unused portions of commitments
      to extend credit were $20,364,794 and $20,435,251 at March 31, 2004 and
      December 31, 2003, respectively.

4.    Basic earnings per share have been computed using the weighted average
      number of shares of common stock outstanding of 1,166,208 and 1,149,046
      for the quarters ended March 31, 2004 and 2003, respectively. Diluted
      earnings per share have been computed using common stock and common stock
      equivalents of 1,226,848 and 1,193,365. Shares have been adjusted to
      reflect a 6-for-5 stock split paid in the form of a 20% stock dividend
      during September 2003.

5.    Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
      for Stock-Based Compensation, encourages all entities to adopt a fair
      value based method of accounting for employee stock compensation plans,
      whereby compensation cost is measured at the grant date based on the value
      of the award and is recognized over the service period, which is usually
      the vesting period. However, it also allows an entity to continue to
      measure


                                                                               8
<PAGE>

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

      At March 31, 2004, the Company had two stock-based compensation plans. The
      Company accounts for compensation costs related to the Company's stock
      option plans using the intrinsic value method. Therefore, no compensation
      costs has been recognized for stock option awards because the options are
      granted at exercise prices based on the market value of the Company's
      stock on the date of grant. Had compensation costs for the Company's stock
      option plans been determined using the fair value method, the Company's
      pro forma net income would have been as follows:

<TABLE>
<CAPTION>
      For the Periods Ended March 31,                        2004               2003
<S>                                                      <C>                <C>
      Net income as reported                             $   152,189        $    71,906
      Less:  Total stock-based employee
      compensation expense determined
      under fair value method for all awards, net
      of related tax effects                                  25,358             59,520
                                                         -----------        -----------
      Pro forma net income                               $   126,831        $    12,386
                                                         ===========        ===========

      Net income per share:
        As reported:

          Basic                                          $      0.13        $      0.06
                                                         ===========        ===========
          Diluted                                        $      0.12        $      0.06
                                                         ===========        ===========

        Pro forma:

          Basic                                          $      0.11        $      0.01
                                                         ===========        ===========
          Diluted                                        $      0.10        $      0.01
                                                         ===========        ===========
</TABLE>

6.    Recent Accounting Pronouncements In January 2003, the FASB issued FASB
      Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities.
      This interpretation addresses the consolidation by business enterprises of
      variable interest entities as defined in the interpretation. In December
      2003, the FASB issued a revision to FIN 46 (FIN 46R) to clarify some of
      the provisions of FIN 46 and to exempt certain entities from its
      requirements. FIN 46 is effective for public entities that have interests
      in structures that are commonly referred to as special-purpose entities
      for periods ending after December 15, 2003.

      Adoption of FIN 46R will result in deconsolidation of the Company's trust
      preferred subsidiary, Weststar Financial Services Corporation I. Upon
      deconsolidation, the junior subordinated debentures issued by the Company
      to the trust will be included in long-term debt (instead of the trust
      preferred securities) and the Company's equity interest in the trust will
      be included in other assets. If this trust was deconsolidated as of March
      31, 2004 and December 31, 2003, the effect on the Company's balance sheets
      for both dates would be an increase in other assets of $124,000 with a
      corresponding increase in long-term debt. The deconsolidation of the trust
      will not materially impact net income.

      The trust preferred securities presently qualify as Tier 1 regulatory
      capital and are reported in Federal Reserve regulatory reports as a
      minority interest in a consolidated subsidiary. The junior


                                                                               9
<PAGE>

      subordinated debentures do not qualify as Tier 1 regulatory capital. On
      July 2, 2003, the Board of Governors of the Federal Reserve issued a
      letter, SR 03-13, stating that notwithstanding FIN 46, trust preferred
      securities will continue to be included in Tier 1 capital until notice is
      given to the contrary. There can be no assurance that the Federal Reserve
      will continue to allow institutions to include trust preferred securities
      in Tier I capital for regulatory capital purposes. In the event of a
      disallowance, there would be a reduction in the Company's consolidated
      capital ratios. However, the Company believes that its subsidiary bank
      would remain "well capitalized" under Federal Reserve Board guidelines and
      that the Company would still exceed the regulatory required minimums for
      capital adequacy purposes.


                                                                              10
<PAGE>

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

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

EXECUTIVE OVERVIEW

During 2004, the Company focused significant attention on improving asset
quality, asset growth and expansion. Management emphasized prudent underwriting
standards, increased periodic reviews of loans of $100,000 or more, and expanded
it loan quality monitoring systems. During the period asset quality began to
demonstrate signs of improvement. Non-performing assets decreased from
$3,412,741 at December 31, 2003 to $2,320,214 at March 31, 2004. Net charge-offs
for the period totaled $241,088 compared to $355,462 for the period ended Mach
31, 2003. Loans outstanding grew by 5% to $78,713,494 from December 31, 2002,
which reflected improved economic conditions and increased market share.

Deposits increased 5% to $97,777,443. Deposit growth reflected continued market
penetration and the addition of fourth banking location, which opened during the
latter part of December, 2003. Interest rate sensitive customers shifted funds
from lower interest paying NOW and money market demand accounts into longer
time-sensitive deposit accounts, which have begun to pay higher rates.

During the period, construction began on a permanent location for the New
Leicester Highway office. Management anticipates the facility to be open during
the middle of July, 2004. Funds from the trust preferred securities are being
used to fund this expansion.

The Company increased its net interest margin from 4.2% for the period ended
March 31, 2003 to 4.3% for the period ended March 31, 2004, which, combined with
net earning asset growth, resulted in a 23% increase in net interest income
during the period. As a result of charge-offs and loan growth, the Company added
$322,800 to the loan loss reserve compared to $355,000 during the comparable
period in 2003. Non-interest income increased 26% to $425,697. The increase was
primarily attributable to $50,880 increased fees from overdraft charges, which
is based on activity volume, and $31,612 in gains from the sale of investment
securities. Non-interest expenses increased 27% primarily as a result of growth
in loans, deposits and the addition of a fourth banking location. Management
monitors expenses closely and reviews each expense relative to the benefit
provided.

Net income totaled $152,180 and $71,096 for the periods ended March 31, 2004 and
2003, respectively - an increase of 112%.

CHANGES IN FINANCIAL CONDITION
MARCH 31, 2004 COMPARED TO DECEMBER 31, 2003

During the period from December 31, 2003 to March 31, 2004, total assets
increased $6,621,880 or 6%. This increase, reflected primarily in the cash and
cash equivalents and loans, was funded primarily by deposit growth.

Securities, federal funds sold and interest-bearing balances with other
financial institutions at March 31, 2004 totaled $30,140,073 compared to
$26,845,914 at December 31, 2003. During 1999, the Company gained access to the
Federal Home Loan Bank system. This access grants


                                                                              11
<PAGE>

the Company additional sources of funds for lending and liquidity. An initial
equity investment of $58,100 was required to gain access to the Federal Home
Loan Bank's resources. Investments in Federal Home Loan Bank stock to date total
$272,000.

At March 31, 2004, the loan portfolio constituted 68% of the Company's total
assets. Loans increased $3,960,428 from December 31, 2003 to March 31, 2004.
Improved economic conditions resulted in the 5% increase in loan growth.
Management places a strong emphasis on loan quality. At March 31, 2004, there
were no loans that (i) represented or resulted from trends or uncertainties
which management reasonably expects to materially impact future operating
results, liquidity, or capital resources, or (ii) represented material credits
about which management was aware of any information which caused management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment terms.

The recorded investment in loans that are considered to be impaired in
accordance with criteria set forth in Statement of Financial Accounting
Standards No. 114 of the Financial Accounting Standards Board was $1,709,452,
$2,118,882, and $1,838,798 at March 31, 2004 and 2003, and December 31, 2003,
respectively. The average recorded balance of impaired loans during 2004 and
2003 was not significantly different from the balance at March 31, 2004 and 2003
and December 31, 2002. The related allowance for loan losses determined in
accordance with SFAS No. 114 for impaired loans was $166,732 and $495,438 and
$182,013 at March 31, 2004 and 2003, and December 31, 2003 respectively. For the
three-month periods ended March 31, 2004 and 2003, Weststar recognized interest
income from impaired loans of approximately $12,484 and $29,527. See "Asset
Quality" for discussion for an analysis of loan loss reserves.

Deposits increased $4,375,905 during the three months ended March 31, 2004. The
5% growth was found primarily in time-deposits. Growth stemmed from continued
market penetration and competitive interest rate pricing. Transactions accounts
such as demand deposits, NOW accounts, money market demand and savings accounts
reflected a decrease of $4,125,614. The decrease was primarily attributable to
fluctuations in commercial real estate escrow deposit accounts resulting from
increases in mortgage loan rates, which bears a direct correlation to the
balance in the accounts.

Borrowings consisted of only one advance from the FHLB, totaled $2,000,000 on
March 31, 2004. The interest rate on this advance was 1.65% and matured on June
27, 2005. The advance was secured by a blanket lien on 1-4 family real estate
loans and certain commercial real estate loans.

Other liabilities increased $1,984,193 over 2003. Of this amount, $1,888,238 was
attributable to securities purchased but not yet settled.

During 2004, the Trust maintained trust preferred securities in the amount of
$4,000,000 at a floating rate of LIBOR plus 315 basis points with dividends paid
quarterly. The trust preferred securities, which mature on October 7, 2033, and
are redeemable on or after October 7, 2008 at par value. Approximately $3.1
million was eligible for inclusion as Tier I capital. The Company plans to use
the capital to support growth and branch expansion.

The Company's capital at March 31, 2004 to risk weighted assets totaled 17.08%.
Current regulations require a minimum ratio of total capital to risk weighted
assets of 8%, with at least 4% being in the form of Tier 1 capital, as defined
in the regulation. As of March 31, 2004, the Company's capital exceeded the
current regulatory capital requirements.


                                                                              12
<PAGE>

RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2004 AND 2003

Net interest income, the principal source of the Company's earnings, is the
amount of income generated by earning assets (primarily loans and investment
securities) less the total interest cost of the funds obtained to carry them
(primarily deposits and other borrowings). The volume, rate and mix of both
earning assets and related funding sources determine net interest income.

COMPARATIVE THREE MONTHS

Net interest income for the quarter ended March 31, 2004 totaled $1,141,677
compared to $924,809 in 2003. This increase was primarily attributable to growth
in net earning assets. The Company's net interest margin was approximately 4.3%
and 4.2% for the quarters ended March 31, 2004 and 2003, respectively.

Weststar recorded a provision for loan losses of $322,800 and $355,000 for the
quarters ended March 31, 2004 and 2003, respectively. The provision for loan
losses is charged to operations to bring the allowance to a level deemed
appropriate by management based on the factors discussed under "Asset Quality."
Despite improved performance in credits, the provision for credit losses
remained relatively high due to charge-off experience during the past two years.

Other non-interest income for the March 31, 2004 and 2003 quarters totaled
$425,697 and $338,137, respectively. The increase in service charge income
primarily reflects an increase in overdraft charge income of $50,880. The
increase in overdraft charges was based on activity during the period. Other
service fees and commission remained relatively flat principally due to an
increase in master card fees of $13,700 and insurance commissions of $2,333,
which were offset by a decrease of $25,409 in mortgage loan income. Securities
gains generated $31,613 in additional income in 2003. Other income increased
$5,917 primarily due to rental income from repossessed assets.

Other non-interest expense totaled $1,010,375 compared to $796,040 in 2003. This
increase was primarily attributable to overall company growth and additional
overhead associated with the opening of a fourth banking location. Income before
income tax provision totaled $234,199 and $111,906 for the quarters ended March
31, 2004 and 2003, respectively. Income tax provision totaled $82,010 and
$40,000 for the quarters ended March 31, 2004 and 2003, respectively, which
equated to an effective tax rate of 35.02% and 35.74%. Net income totaled
$152,189 and $71,906 for the quarters ended March 31, 2004 and 2003,
respectively.

Other comprehensive income totaled $85,461 and $25,385 in 2004 and 2003,
respectively. Comprehensive income, which is the change in shareholders' equity
excluding transactions with shareholders, totaled $237,650 and $97,291 for the
quarters ended March 31, 2004 and 2003, respectively.

                           ASSET/LIABILITY MANAGEMENT

The Company's asset/liability management, or interest rate risk management,
program is focused primarily on evaluating and managing the composition of its
assets and liabilities in view of various interest rate scenarios. Factors
beyond the Company's control, such as market interest rates and competition, may
also have an impact on the Company's interest income and interest expense.


                                                                              13
<PAGE>

In the absence of other factors, the yield or return associated with the
Company's earning assets generally will increase from existing levels when
interest rates rise over an extended period of time and, conversely, interest
income will decrease when interest rates decline. In general, interest expense
will increase when interest rates rise over an extended period of time and,
conversely, interest expense will decrease when interest rates decline.

Interest Rate Gap Analysis. As a part of its interest rate risk management
policy, the Company calculates an interest rate "gap." Interest rate "gap"
analysis is a common, though imperfect, measure of interest rate risk, which
measures the relative dollar amounts of interest-earning assets and
interest-bearing liabilities which reprice within a specific time period, either
through maturity or rate adjustment. The "gap" is the difference between the
amounts of such assets and liabilities that are subject to repricing. A
"positive" gap for a given period means that the amount of interest-earning
assets maturing or otherwise repricing within that period exceeds the amount of
interest-bearing liabilities maturing or otherwise repricing within the same
period. Accordingly, in a declining interest rate environment, an institution
with a positive gap would generally be expected, absent the effects of other
factors, to experience a decrease in the yield on its assets greater than the
decrease in the cost of its liabilities and its income should be negatively
affected. Conversely, the cost of funds for an institution with a positive gap
would generally be expected to increase more slowly than the yield on its assets
in a rising interest rate environment, and such institution's net interest
income generally would be expected to be positively affected by rising interest
rates. Changes in interest rates generally have the opposite effect on an
institution with a "negative gap."

The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at March 31, 2004, which are projected
to reprice or mature in each of the future time periods shown. Except as stated
below, the amounts of assets and liabilities shown which reprice or mature
within a particular period were determined in accordance with the contractual
terms of the assets or liabilities. Loans with adjustable rates are shown as
being due at the end of the next upcoming adjustment period. The interest rate
sensitivity of the Company's assets and liabilities illustrated in the following
table would vary substantially if different assumptions were used or if actual
experience differs from that indicated by such assumptions.

<TABLE>
<CAPTION>
                                                               TERMS TO REPRICING AT MARCH 31, 2004
                                    1-90 Days     91-180 Days     181-365 Days    Total One Year    Non-Sensitive         Total
                                   -----------------------------------------------------------------------------------------------
<S>                                  <C>          <C>             <C>               <C>               <C>             <C>
Interest-earning assets:
Interest bearing deposits          $   335,507             --               --      $    335,507               --     $    335,507
Federal funds sold                  11,312,000             --               --        11,312,000               --       11,312,000
Investment securities                3,501,594    $ 2,501,962     $  2,503,188         8,506,744      $ 9,977,904       18,484,648
Federal Home Loan Bank stock                --             --               --                --          272,000          272,000
Loans (1)                           57,397,123      3,116,463        2,627,040        63,140,626       14,591,761       77,732,387
Total interest-earning assets       72,546,224      5,618,425        5,130,228        83,294,877       24,841,665      108,136,542

Interest-bearing liabilities:
Time deposits                        6,274,518      8,741,423       16,453,434        31,469,375        2,360,283       33,829,658
All other deposits                  48,189,565             --               --        48,189,565               --       48,189,565
Borrowings                                  --             --               --                --        2,000,000        2,000,000
Trust preferred securities           4,000,000             --               --         4,000,000               --        4,000,000
Total interest-bearing
liabilities                         58,464,083      8,741,423       16,453,434        83,658,940        4,360,283       88,019,223

Interest sensitivity gap           $14,082,141   ($ 3,122,998)   ($ 11,323,206)    ($    364,063)     $20,481,382       20,117,319
Cumulative interest sensitivity
Gap                                $14,082,141    $10,959,143    ($    364,063)
Cumulative ratio of interest -
earning assets as a percent
of interest sensitive
liabilities                              124.1%          64.3%            31.2%             99.6%
</TABLE>


                                                                              14
<PAGE>

(1)   Non-accrual loans have been excluded.

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

                                  ASSET QUALITY

Management considers Weststar's asset quality to be of primary importance. We
maintain an allowance for loan losses to absorb probable losses inherent in the
loan portfolio. The loan portfolio is analyzed monthly in an effort to identify
potential problems before they actually occur. The allowance for loan losses is
established as losses are estimated to have occurred through a provision for
loan losses charged to earnings. The provision for loan losses is based upon
management's best estimate of the amount needed to maintain the allowance for
loan losses at an adequate level. Loan losses are charged against the allowance
when management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.

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

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

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


                                                                              15
<PAGE>

dependent. Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately identify
individual consumer and residential loans for impairment disclosures.

The provision for loan losses represents a charge against income in an amount
necessary to maintain the allowance at an appropriate level. The monthly
provision for loan losses may fluctuate based on the results of this analysis.
The allowance for loan losses at March 31, 2004, 2003 and December 31, 2003 and
2002 was $1,255,715, $1,019,736, $1,174,003 and $1,020,198 or 1.60%, 1.51%,
1.57% and 1.50%, respectively, of gross loans outstanding. The ratio of net
charge-offs to average loans outstanding was .31%, .53%, 1.82% and 1.26%, at
March 31, 2004 and 2003, and December 2003 and 2002, respectively. Improved
asset quality and fewer charge-offs resulted in a lower provision to the loan
loss reserve during 2004 compared to the same period in 2003. Primarily because
of a recessionary economy, charge-offs for the years ended 2003 and 2002 totaled
$1,357,614 and $889,565.

The following table contains an analysis for the allowance for loan losses,
including the amount of charge-offs and recoveries by loan type, for the
three-months ended March 31, 2004 and 2003, and for the years ended December 31,
2003 and 2002.

Summary of Allowance for Loan Losses

<TABLE>
<CAPTION>
                                                     For the three months                       For the years ended
                                                        ended March 31,                             December 31,
                                                    2004                 2003                2003                 2002
                                                    ----                 ----                ----                 ----
<S>                                             <C>                  <C>                  <C>                  <C>
Balance, beginning of period                    $ 1,174,003          $ 1,020,198          $ 1,020,198          $   978,467
  Charge-offs:
  Commercial, financial and agricultural           (235,134)            (319,999)          (1,075,792)            (568,710)
  Real estate:
    Construction                                         --                   --                   --             (127,810)
    Mortgage                                             --              (11,000)            (157,142)             (33,574)
  Consumer                                          (18,994)             (33,364)            (124,680)            (159,471)
                                                -----------          -----------          -----------          -----------
Total charge-offs                                  (254,128)            (364,363)          (1,357,614)            (889,565)
Recoveries
  Commercial, financial and agricultural              2,948                2,407               71,942               19,753
  Real estate:
    Construction                                         --                   --                   --                1,531
    Mortgage                                             --                   --                   --               13,322
  Consumer                                           10,092                6,494               33,677               18,770
                                                -----------          -----------          -----------          -----------
Total recoveries                                     13,040                8,901              105,619               53,376
                                                -----------          -----------          -----------          -----------
Net (charge-offs) recoveries                       (241,088)            (355,462)          (1,251,995)            (836,189)
                                                -----------          -----------          -----------          -----------
Provision charged to operations                     322,800              355,000            1,405,800              877,920
                                                -----------          -----------          -----------          -----------
Balance, end of period                          $ 1,255,715          $ 1,019,736          $ 1,174,003          $ 1,020,198
                                                ===========          ===========          ===========          ===========

Percentage of net charge-offs to
  average loans                                         .31%                 .53%                1.82%                1.26%
Percentage of allowance to
  period-end loans                                     1.60%                1.51%                1.57%                1.50%
</TABLE>

The following table allocates the allowance for loan losses by loan category at
the dates indicated. The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.


                                                                              16
<PAGE>

<TABLE>
<CAPTION>
                                     March 31, 2004              December 31, 2003
                                  Amount of    Percent of      Amount of     Percent of
                                  Allowance    Total Loans     Allowance     Total Loans
<S>                              <C>               <C>         <C>               <C>
TYPE OF LOAN:
Real estate                      $  882,539         75%        $  863,606         72%
Commercial and industrial
  loans                             293,426         23%           267,584         25%
Consumer                             50,529          2%            23,722          3%
Unallocated                          29,221         --             19,091         --
                                 ----------        ---         ----------        ---
Total allowance                  $1,255,715        100%        $1,174,003        100%
                                 ==========        ===         ==========        ===
</TABLE>

The Company does not have any significant loan concentrations. During the
period, loan quality demonstrated improvement over March 31, 2003 and December
31, 2003.

During 2004, there were no changes in estimation methods or assumptions that
affected our methodology for assessing the appropriateness of the formula and
specific allowance for credit losses. Changes in estimates and assumptions
regarding the effect of economic and business conditions on borrowers affect the
assessment of the allowance.

                                CAPITAL RESOURCES

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

During October 2003, the Company raised $4,000,000 in trust preferred
securities. The Company used funds from the trust preferred securities to inject
approximately $3.8 million of capital into the Bank. Additional capital allows
the bank to support growth within its existing offices and through opening
additional offices within its market.


                                                                              17
<PAGE>

                               REGULATORY CAPITAL

<TABLE>
<CAPTION>
                                                                                                      To Be Well
                                                                                                   Capitalized Under
                                                                                                   Prompt Corrective
                                                        Actual               For Capital           Action Provisions
                                                                          Adequacy Purposes
                                                  Amount      Ratio       Amount       Ratio      Amount       Ratio
                                                  ------      -----       ------       -----      ------       -----
                                                                        (Dollars in Thousands)
<S>                                              <C>          <C>         <C>           <C>        <C>         <C>
As of March 31, 2004
Total Capital (to Risk Weighted Assets)
  Consolidated                                   $14,487      17.08%      $6,785        8.00%      $8,482      10.00%
  Bank                                           $14,032      16.57%      $6,774        8.00%      $8,468      10.00%

Tier 1 Capital (to Risk Weighted Assets)
  Consolidated                                   $12,565      14.81%      $3,393        4.00%      $5,089       6.00%
  Bank                                           $12,971      15.32%      $3,387        4.00%      $5,081       6.00%

Tier 1 Capital (to Average Assets)
  Consolidated                                   $12,565      11.74%      $4,282        4.00%      $5,353       5.00%
  Bank                                           $12,971      12.13%      $4,277        4.00%      $5,347       5.00%
</TABLE>

                                    LIQUIDITY

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

As of March 31, 2004 liquid assets (cash due from banks, interest-earning bank
deposits and federal funds sold) were approximately $14.7 million, which
represents 12.7% of total assets and 15.1% of total deposits. Supplementing this
liquidity, Weststar has available lines of credit from correspondent banks of
approximately $14.6 million. At March 31, 2004, outstanding commitments to
extend credit and available lines of credit were $20.4 million. Management
believes that the combined aggregate liquidity position of the Company is
sufficient to meet the funding requirements of loan demand and deposit
maturities and withdrawals in the near term.

Certificates of deposit represented approximately 34.6% of Weststar's total
deposits at March 31, 2004. The Company's growth strategy will include efforts
focused on increasing the relative volume of transaction deposit accounts, as
the branch network is expanded, making it more convenient for our banking
customers. Certificates of deposit of $100,000 or more represented 5.7% of the
Company's total deposits at March 31, 2004. These deposits are generally
considered rate sensitive, but management believes most of them are
relationship-oriented. While the Company will need to pay competitive rates to
retain these deposits at maturity, there are other subjective factors that will
determine the Company's continued retention of these deposits.


                                                                              18
<PAGE>

                              INVESTMENT ACTIVITIES

At March 31, 2004, Weststar's investments consisted of U.S. Government agency
securities, and North Carolina municipal bonds. The investments, with aggregate
amortized cost of $18.5 million, are classified as available for sale and are
presented in the consolidated financial statements at their market values of
$18.5 million at March 31, 2004. These securities have tax equivalent yields of
3.4% and 4.7% respectively, with an aggregate remaining term of approximately
70.1 months. The Company's investment in stock of the Federal Home Loan Bank,
which is required of every member and is redeemable only by the Federal Home
Loan Bank, was $272,000 with a yield of 3.5% at March 31, 2004. Because the
investment is redeemable only by the Federal Home Loan Bank, it is listed
separately rather than a component of the Company's investment portfolio.

                     IMPACT OF INFLATION AND CHANGING PRICES

A financial institution has assets and liabilities that are distinctly different
from those of a company with substantial investments in plant and inventory
because the major portion of its assets is monetary in nature. As a result, a
bank's performance may be significantly influenced by changes in interest rates.
Although the banking industry is more affected by changes in interest rates than
by inflation in the prices of goods and services, inflation is a factor, which
may influence interest rates. However, the frequency and magnitude of interest
rate fluctuations do not necessarily coincide with changes in the general
inflation rate. Inflation does affect operating expenses in that personnel
expenses, cost of supplies and outside services tend to increase more during
periods of high inflation.

Item 3. Controls and Procedures

The Company carried out an evaluation as of the end of the period covered by
this report under the supervision and with the participation of the company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Securities and Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
Filings. There were no significant changes in the Company's internal controls or
in other factors that could significantly affect the controls during the most
recent quarter.


                                                                              19
<PAGE>

Part II. OTHER INFORMATION

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

      None.

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits.

            31.1 - Certification of the Chief Executive 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

            31.2 - Certification of the 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 pursuant to
                   18 U.S.C. 1350 as adopted pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002

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

      (b)   Reports on Form 8-K.

            None.


                                                                              20
<PAGE>

SIGNATURES

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

                                    WESTSTAR FINANCIAL SERVICES CORPORATION


Date: May 4, 2004               By: /s/ G. Gordon Greenwood
                                    --------------------------------------------

                                    G. Gordon Greenwood
                                    President and Chief Executive Officer


Date: May 4, 2004               By: /s/ Randall C. Hall
                                    --------------------------------------------

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


                                                                              21