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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

               Quarterly Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934

                        For the quarterly period ended:

                                 JUNE 30, 2001

                        Commission file number: 1-10853

                               BB&T CORPORATION
            (Exact name of registrant as specified in its charter)

            North Carolina                           56-0939887
       (State of Incorporation)         (I.R.S. Employer Identification No.)

        200 West Second Street
     Winston-Salem, North Carolina                      27101
    (Address of Principal Executive                  (Zip Code)
               Offices)

                                (336) 733-2000
             (Registrant's Telephone Number, Including Area Code)

   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 [_]

 At July 31, 2001, 424,136,157 shares of the registrant's common stock, $5 par
                           value, were outstanding.

       This Form 10-Q has 35 pages. The Exhibit Index begins on page 31.

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                                BB&T CORPORATION

                                   FORM 10-Q

                                 June 30, 2001

                                     INDEX



                                                                                                 Page No.
                                                                                                 --------
                                                                                           
Part I. FINANCIAL INFORMATION

 Item 1. Financial Statements (Unaudited).......................................................     2

         Consolidated Financial Statements......................................................     2

         Notes to Consolidated Financial Statements.............................................     6

 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..    15

         Analysis of Financial Condition........................................................    15

         Market Risk Management.................................................................    19

         Capital Adequacy and Resources.........................................................    22

         Analysis of Results of Operations......................................................    23

 Item 3. Quantitative and Qualitative Disclosures About Market Risk.............................    19

Part II. OTHER INFORMATION

 Item 1. Legal Proceedings......................................................................    30

 Item 4. Submission of Matters to a Vote of Security Holders....................................    30

 Item 6. Exhibits and Reports on Form 8-K.......................................................    31

SIGNATURES......................................................................................    35


                                       1


                         Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

                       BB&T CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                 (Dollars in thousands, except per share data)



                                                       June 30,     December
                                                         2001       31, 2000
                                                      -----------  -----------
                                                      (unaudited)
                                                             
                       Assets
Cash and due from banks.............................. $ 1,448,252  $ 1,562,745
Interest-bearing deposits with banks.................     116,899       57,006
Federal funds sold and securities purchased under
 resale agreements or similar arrangements...........     193,022      263,706
Trading securities...................................     120,381       96,719
Securities available for sale........................  14,490,894   14,495,830
Securities held to maturity (approximate market
 values of $38,235 at June 30, 2001, and $89,440 at
 December 31, 2000)..................................      38,249       88,578
Loans held for sale..................................   1,685,185      846,830
Loans and leases, net of unearned income.............  42,869,163   41,679,591
  Allowance for loan and lease losses................    (588,926)    (550,599)
                                                      -----------  -----------
   Loans and leases, net.............................  42,280,237   41,128,992
                                                      -----------  -----------
Premises and equipment, net..........................     875,846      834,119
Other assets.........................................   3,484,804    3,200,608
                                                      -----------  -----------
    Total assets..................................... $64,733,769  $62,575,133
                                                      ===========  ===========
        Liabilities and Shareholders' Equity
Deposits:
  Noninterest-bearing deposits....................... $ 5,643,208  $ 5,480,778
  Savings and interest checking......................   2,421,322    2,580,923
  Money rate savings.................................  12,349,867   11,505,630
  Time deposits......................................  20,970,361   20,945,956
                                                      -----------  -----------
    Total deposits...................................  41,384,758   40,513,287
                                                      -----------  -----------
Short-term borrowed funds............................   5,553,996    7,139,003
Long-term debt.......................................  10,864,249    8,625,100
Accounts payable and other liabilities...............   1,488,974    1,263,909
                                                      -----------  -----------
    Total liabilities................................  59,291,977   57,541,299
                                                      -----------  -----------
Shareholders' equity:
  Preferred stock, $5 par, 5,000,000 shares
   authorized, none issued and outstanding...........          --           --
  Common stock, $5 par, 1,000,000,000 shares
   authorized; issued and outstanding 424,987,963 at
   June 30, 2001, and 423,049,641 at December 31,
   2000..............................................   2,124,940    2,115,248
  Additional paid-in capital.........................     421,070      417,048
  Retained earnings..................................   2,655,397    2,408,383
  Unearned income and unvested restricted stock......      (4,600)      (7,071)
  Accumulated other comprehensive income, net of
   deferred income taxes of $160,285 at June 30, 2001
   and $69,618 at December 31, 2000..................     244,985      100,226
                                                      -----------  -----------
    Total shareholders' equity.......................   5,441,792    5,033,834
                                                      -----------  -----------
    Total liabilities and shareholders' equity....... $64,733,769  $62,575,133
                                                      ===========  ===========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       2


                       BB&T CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (Unaudited)
                 (Dollars in thousands, except per share data)



                                For the Three Months      For the Six Months
                                   Ended June 30,           Ended June 30,
                               -----------------------  -----------------------
                                  2001        2000         2001        2000
                               ----------- -----------  ----------- -----------
                                                        
Interest Income
  Interest and fees on loans
   and leases................  $   913,376 $   905,644  $ 1,863,918 $ 1,763,684
  Interest and dividends on
   securities................      236,401     217,459      477,347     431,618
  Interest on short-term
   investments...............        3,619       6,088        8,451      12,357
                               ----------- -----------  ----------- -----------
   Total interest income.....    1,153,396   1,129,191    2,349,716   2,207,659
                               ----------- -----------  ----------- -----------
Interest Expense
  Interest on deposits.......      394,369     378,092      812,792     731,046
  Interest on short-term
   borrowed funds............       58,465     106,510      146,455     207,648
  Interest on long-term
   debt......................      152,050     104,890      300,288     195,926
                               ----------- -----------  ----------- -----------
   Total interest expense....      604,884     589,492    1,259,535   1,134,620
                               ----------- -----------  ----------- -----------
Net Interest Income..........      548,512     539,699    1,090,181   1,073,039
  Provision for loan and
   lease losses..............       43,898      29,076       84,924      56,526
                               ----------- -----------  ----------- -----------
Net Interest Income After
 Provision for Loan and Lease
 Losses......................      504,614     510,623    1,005,257   1,016,513
                               ----------- -----------  ----------- -----------
Noninterest Income
  Service charges on deposit
   accounts..................       83,893      67,788      159,372     131,056
  Investment banking and
   brokerage fees and
   commissions...............       42,584      41,653       85,930      87,585
  Mortgage banking income....       49,774      25,173       55,040      52,524
  Trust income...............       23,000      19,639       47,143      38,385
  Agency insurance
   commissions...............       42,796      32,579       82,261      64,118
  Other insurance
   commissions...............        3,444       3,785        6,194       7,145
  Other nondeposit fees and
   commissions...............       44,519      36,864       85,949      70,161
  Securities gains (losses),
   net.......................       16,777     (41,114)      88,771     (41,137)
  Other income...............       26,400      26,419       41,405      45,094
                               ----------- -----------  ----------- -----------
   Total noninterest income..      333,187     212,786      652,065     454,931
                               ----------- -----------  ----------- -----------
Noninterest Expense
  Personnel expense..........      274,303     241,798      540,746     485,951
  Occupancy and equipment
   expense...................       73,186      67,975      150,482     138,886
  Amortization of
   intangibles...............       17,729      15,774       34,967      31,530
  Other noninterest expense..      153,445     140,029      296,778     270,497
                               ----------- -----------  ----------- -----------
   Total noninterest
    expense..................      518,663     465,576    1,022,973     926,864
                               ----------- -----------  ----------- -----------
Earnings
  Income before income
   taxes.....................      319,138     257,833      634,349     544,580
  Provision for income
   taxes.....................       88,333      83,737      181,221     175,620
                               ----------- -----------  ----------- -----------
  Net income.................  $   230,805 $   174,096  $   453,128 $   368,960
                               =========== ===========  =========== ===========
Per Common Share
  Net income:
  Basic......................  $       .55 $       .41  $      1.08 $       .88
                               =========== ===========  =========== ===========
  Diluted....................  $       .54 $       .41  $      1.06 $       .87
                               =========== ===========  =========== ===========
  Cash dividends paid........  $       .23 $       .20  $       .46 $       .40
                               =========== ===========  =========== ===========
Average Shares Outstanding
  Basic......................  420,692,786 421,190,364  421,294,032 420,911,258
                               =========== ===========  =========== ===========
  Diluted....................  426,623,357 426,399,394  427,515,463 425,867,326
                               =========== ===========  =========== ===========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       3


                       BB&T CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                For the Six Months Ended June 30, 2001 and 2000
                                  (Unaudited)
                             (Dollars in thousands)



                                                                           Accumulated
                           Shares of               Additional  Retailed       Other         Total
                            Common       Common     Paid-In    Earnings   Comprehensive Shareholders'
                             Stock       Stock      Capital   and Other*     Income        Equity
                          -----------  ----------  ---------- ----------  ------------- -------------
                                                                      
Balance, December 31,
 1999, as restated......  419,772,712  $2,098,864   $388,670  $2,124,271    $(322,336)   $4,289,469
Add (Deduct)
 Other comprehensive
  income:
 Net income.............           --          --         --     368,960           --       368,960
  Unrealized holding
   gains (losses)
   arising during the
   period...............           --          --         --          --      (20,400)      (20,400)
  Less: reclassification
   adjustment, net of
   tax of ($14,398).....           --          --         --          --      (26,739)      (26,739)
                          -----------  ----------   --------  ----------    ---------    ----------
 Net unrealized gains
  (losses) on
  securities............           --          --         --          --        6,339         6,339
                          -----------  ----------   --------  ----------    ---------    ----------
 Total other
  comprehensive income..           --          --         --     368,960        6,339       375,299
                          -----------  ----------   --------  ----------    ---------    ----------
 Common stock issued....    1,930,611       9,653     30,212          --           --        39,865
 Redemption of common
  stock.................     (344,000)     (1,720)    (7,335)         --           --        (9,055)
 Cash dividends declared
  on common stock.......           --          --         --    (180,621)          --      (180,621)
 Other..................           --          --         --      (1,574)          --        (1,574)
                          -----------  ----------   --------  ----------    ---------    ----------
Balance, June 30, 2000..  421,359,323  $2,106,797   $411,547  $2,311,036    $(315,997)   $4,513,383
                          ===========  ==========   ========  ==========    =========    ==========
Balance, December 31,
 2000, as restated......  423,049,641  $2,115,248   $417,048  $2,401,312    $ 100,226    $5,033,834
Add (Deduct)
 Other comprehensive
  income:
 Net income.............           --          --         --     453,128           --       453,128
  Unrealized holding
   gains (losses)
   arising during the
   period...............           --          --         --          --      197,644       197,644
  Less: reclassification
   adjustment, net of
   tax of $31,070.......           --          --         --          --       57,701        57,701
                          -----------  ----------   --------  ----------    ---------    ----------
 Net unrealized gains
  (losses) on
  securities............           --          --         --          --      139,943       139,943
 Unrecognized gain on
  cash flow hedge, net
  of tax of $2,593......           --          --         --          --        4,816         4,816
                          -----------  ----------   --------  ----------    ---------    ----------
 Total other
  comprehensive income..           --          --         --     453,128      144,759       597,887
                          -----------  ----------   --------  ----------    ---------    ----------
 Common stock issued....   10,683,122      53,416    259,817          --           --       313,233
 Redemption of common
  stock.................   (8,744,800)    (43,724)  (272,203)         --           --      (315,927)
 Cash dividends declared
  on common stock.......           --          --         --    (206,596)          --      (206,596)
 Other..................           --          --     16,408       2,953           --        19,361
                          -----------  ----------   --------  ----------    ---------    ----------
Balance, June 30, 2001..  424,987,963  $2,124,940   $421,070  $2,650,797    $ 244,985    $5,441,792
                          ===========  ==========   ========  ==========    =========    ==========

--------
*  Other includes unearned income and unvested restricted stock.

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       4


                       BB&T CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                For the Six Months Ended June 30, 2001 and 2000
                                  (Unaudited)
                             (Dollars in thousands)



                                                            2001        2000
                                                         ----------  ----------
                                                               
 Cash Flows From Operating Activities:
 Net income...........................................   $  453,128  $  368,960
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Provision for loan and lease losses.................       84,924      56,526
  Depreciation of premises and equipment..............       56,034      47,684
  Amortization of intangibles.........................       34,967      31,530
  Accretion of negative goodwill......................       (3,121)     (3,122)
  Amortization of unearned stock compensation.........        7,287       3,278
  Discount accretion and premium amortization on
   securities, net....................................       (3,354)     (2,338)
  Net decrease (increase) in trading account
   securities.........................................      (23,662)    (34,123)
  Loss (gain) on sales of securities, net.............      (88,771)    (41,137)
  Loss (gain) on disposals of premises and equipment,
   net................................................       (6,182)      2,621
  Proceeds from sales of loans held for sale..........    3,243,488     922,182
  Purchases of loans held for sale....................   (1,014,445)   (250,245)
  Origination of loans held for sale, net of principal
   collected..........................................   (3,038,973)   (568,658)
  Decrease (increase) in:
   Accrued interest receivable........................       23,297     (49,093)
   Other assets.......................................      706,306    (266,949)
  Increase (decrease) in:
   Accrued interest payable...........................      (26,634)      3,450
   Accounts payable and other liabilities.............      151,567     200,340
  Other, net..........................................      (26,611)      2,758
                                                         ----------  ----------
   Net cash provided by (used in) operating
    activities........................................      529,245     423,664
                                                         ----------  ----------
 Cash Flows From Investing Activities:
  Proceeds from sales of securities available for
   sale...............................................      668,832   1,113,803
  Proceeds from maturities, calls and paydowns of
   securities available for sale......................      874,068   1,238,120
  Purchases of securities available for sale..........   (1,026,880) (2,047,693)
  Proceeds from maturities, calls and paydowns of
   securities held to maturity........................        1,100      44,559
  Purchases of securities held to maturity............       (4,510)     (6,715)
  Leases made to customers............................      (68,499)    (61,827)
  Principal collected on leases.......................       51,119      45,068
  Loan originations, net of principal collected.......   (1,207,219) (2,455,538)
  Purchases of loans..................................      (66,200)   (273,386)
  Net cash acquired (paid) in transactions accounted
   for under the purchase method......................      109,000     (12,611)
  Purchases and originations of mortgage servicing
   rights.............................................     (102,945)    (11,842)
  Proceeds from disposals of premises and equipment...       10,168       6,996
  Purchases of premises and equipment.................      (95,045)    (59,398)
  Proceeds from sales of foreclosed property..........       21,213      13,183
  Proceeds from sales of other real estate held for
   development or sale................................        3,688       1,033
  Other, net..........................................           --        (210)
                                                         ----------  ----------
   Net cash used in (provided by) investing
    activities........................................     (832,110) (2,466,458)
                                                         ==========  ==========
 Cash Flows From Financing Activities:
  Net increase (decrease) in deposits.................       53,751   2,328,657
  Net increase (decrease) in short-term borrowed
   funds..............................................   (1,585,007) (1,597,629)
  Proceeds from long-term debt........................    2,576,795   4,570,457
  Repayments of long-term debt........................     (390,969) (3,296,670)
  Net proceeds from common stock issued...............       28,872      11,572
  Redemption of common stock..........................     (315,927)     (9,055)
  Cash dividends paid on common stock.................     (189,934)   (158,103)
  Other, net..........................................           --      (6,133)
                                                         ----------  ----------
   Net cash provided by (used in) financing
    activities........................................      177,581   1,843,096
                                                         ==========  ==========
 Net Increase (Decrease) in Cash and Cash
  Equivalents.........................................     (125,284)   (199,698)
 Cash and Cash Equivalents at Beginning of Period.....    1,883,457   2,134,481
                                                         ----------  ----------
 Cash and Cash Equivalents at End of Period...........   $1,758,173  $1,934,783
                                                         ==========  ==========
 Supplemental Disclosure of Cash Flow Information:
 Cash paid during the period for:
   Interest...........................................   $1,202,242  $1,014,705
   Income taxes.......................................       22,369      74,497
 Noncash financing and investing activities:
   Transfer of securities held to maturity to
    available for sale................................       53,739      21,445
   Transfer of loans to foreclosed property...........       19,793      13,561
   Transfer of other real estate owned to fixed
    assets............................................          143       3,616
   Transfer of fixed assets to other real estate
    owned.............................................        4,413         735
   Tax benefit from exercise of stock options.........       12,967       3,088
   Securitization of mortgage loans...................      122,616     493,269


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       5


                       BB&T CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 June 30, 2001
                                  (Unaudited)

A. Basis of Presentation

   In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
consolidated balance sheets of BB&T Corporation and subsidiaries (referred to
herein as "BB&T", "the Corporation" or "the Company") as of June 30, 2001, and
December 31, 2000; the consolidated statements of income for the three and six
months ended June 30, 2001 and 2000; the consolidated statements of changes in
shareholders' equity for the six months ended June 30, 2001 and 2000; and the
consolidated statements of cash flows for the six months ended June 30, 2001
and 2000.

   The consolidated financial statements and notes are presented in accordance
with the instructions for Form 10-Q. The information contained in the
footnotes included in BB&T's 2000 Annual Report on Form 10-K, as restated in
BB&T's Current Report on Form 8-K filed on July 25, 2001, amended on July 27,
2001, should be referred to in connection with the reading of these unaudited
interim consolidated financial statements. In certain instances, amounts
reported in the 2000 financial statements have been reclassified to conform to
the 2001 statement presentation. Such reclassifications had no effect on
shareholders' equity or net income.

 Use of Estimates

   The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

 Forward-Looking Statements

   This report contains forward-looking statements with respect to the
financial condition, results of operations and business of BB&T. These
forward-looking statements involve risks and uncertainties and are based on
the beliefs and assumptions of the management of BB&T, and on the information
available to management at the time that these disclosures were prepared.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities: (1) competitive pressures among depository and other
financial institutions may increase significantly; (2) changes in the interest
rate environment may reduce margins; (3) general economic conditions, either
nationally or regionally, may be less favorable than expected, resulting in,
among other things, a deterioration in credit quality and / or a reduced
demand for credit; (4) legislative or regulatory changes, including changes in
accounting standards, may adversely affect the businesses in which BB&T is
engaged; (5) costs or difficulties related to the integration of the
businesses of BB&T and its merger partners may be greater than expected; (6)
expected cost savings associated with pending mergers may not be fully
realized or realized within the expected time frame; (7) deposit attrition,
customer loss or revenue loss following pending mergers may be greater than
expected; (8) competitors may have greater financial resources and develop
products that enable such competitors to compete more successfully than BB&T;
and (9) adverse changes may occur in the securities markets.

B. Nature of Operations

   BB&T is a financial holding company headquartered in Winston-Salem, North
Carolina. BB&T conducts its operations primarily through its commercial
banking subsidiaries which do business in North Carolina, South Carolina,
Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Alabama and
Washington, D.C. BB&T's principal banking subsidiaries, Branch Banking and
Trust Company ("BB&T-NC"), Branch Banking

                                       6


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)

and Trust Company of South Carolina ("BB&T-SC") and Branch Banking and Trust
Company of Virginia ("BB&T-VA"), provide a wide range of traditional banking
services to individuals and commercial customers. At June 30, 2001, BB&T was
the parent company for 16 subsidiary banks acquired through mergers with
BankFirst Corporation, FirstSpartan Financial Corp., Century South Banks, Inc.
and Virginia Capital Bancshares, Inc. These banks are expected to be merged
with and into BB&T-NC, BB&T-SC or BB&T-VA, as appropriate, based on the
location of their operations. Substantially all of BB&T's loans are to
individuals residing in the market areas described above or to businesses that
are located in this geographic area. Subsidiaries of BB&T's commercial banking
units offer lease financing to commercial businesses and municipal
governments, investment services (including discount brokerage services,
annuities, mutual funds and government and municipal bonds), life insurance
and property and casualty insurance on an agency basis and insurance premium
financing. Direct nonbank subsidiaries of BB&T provide a variety of financial
services including automobile lending, equipment financing, factoring, full-
service securities brokerage, investment banking and corporate finance
services.

C. New Accounting Pronouncements

   The Company adopted Statement of Financial Accounting Standards No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities," on January 1, 2001. SFAS No. 133 established accounting and
reporting standards that require every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. In conjunction
with the adoption of SFAS No. 133, BB&T recorded a transition adjustment of
$7.9 million, after taxes, to accumulated other comprehensive income on
January 1, 2001. There was no material impact on net income at the date of
adoption. Substantially all of the transition adjustment is expected to be
reversed into net income during 2001.

   The notional amount of derivative financial instruments held by BB&T at
June 30, 2001, was $3.4 billion with unrealized net gains of $8.7 million,
compared to a total notional value of $2.2 billion with unrealized net losses
of $12.3 million at December 31, 2000. The transition adjustment and second
quarter 2001 impact of the statement are based on the interpretive guidance
issued thus far by the Financial Accounting Standards Board ("FASB"). However,
the FASB continues to issue guidance that could affect BB&T's application of
the statement and require adjustments to the transition amount or amounts and
disclosures in the consolidated financial statements. See "Derivative
Financial Instruments" herein for additional disclosures related to the
adoption of SFAS No. 133.

   In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
replaces SFAS No. 125. SFAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but it carries over most of SFAS No. 125's
provisions without reconsideration. The statements provide accounting and
reporting standards for such transactions based on consistent application of a
financial components approach that focuses on control. Under this approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes
liabilities when extinguished. Certain portions of the statement became
effective for transactions occurring after March 31, 2001. The adoption of
these provisions did not have a material impact on BB&T's consolidated
financial position or consolidated results of operations.

                                       7


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)

   In June 2001, the FASB issued SFAS No. 141, "Business Combinations," which
supersedes Accounting Principles Board ("APB") Opinion No. 16, "Business
Combinations," and SFAS No. 38, " Accounting for Preacquisition Contingencies
of Purchased Enterprises." The provisions of the Statement apply to all
business combinations initiated after June 30, 2001. SFAS No. 141 requires
that all business combinations be accounted for by the purchase method of
accounting. This method requires the accounts of an acquired institution to be
included with the acquirer's accounts as of the date of acquisition with any
excess of purchase price over the fair value of the net assets acquired to be
capitalized as goodwill. The Statement also requires that the assets of an
acquired institution be recognized as assets apart from goodwill if they meet
specific criteria presented in the Statement. The Statement ends the use of
the pooling-of-interests method of accounting for business combinations, which
required the restatement of all prior period information for the accounts of
the acquired institution. BB&T has historically been a frequent acquirer and
has used both the pooling-of-interests and purchase methods of accounting.
Following the adoption of the Statement, BB&T will account for all future
acquisitions using the purchase method.

   In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which supersedes APB Opinion No. 17, "Intangible Assets." SFAS 142
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition, and addresses
how goodwill and other intangible assets should be accounted for after they
have been initially recognized in the financial statements. The Statement
eliminates the requirement to amortize goodwill and other intangible assets
that have indefinite useful lives, instead requiring the assets be tested at
least annually for impairment based on the specific guidance in the Statement.
BB&T will adopt the provisions of the Statement effective January 1, 2002, as
required, and apply the provisions of the Statement to all goodwill and other
intangible assets recognized in the financial statements. The Statement
requires a transition impairment test of goodwill and other intangibles in
conjunction with the initial application of the Statement. Any resulting
impairment loss will be reflected as a change in accounting principle. As of
June 30, 2001, BB&T had unamortized goodwill totaling $795.2 million,
unamortized other intangible assets of $14.8 million, and unamortized negative
goodwill of $11.1 million, all of which will be subject to the transition
provisions of Statement Nos. 141 and 142. Amortization expense related to
goodwill was $62.9 million and $35.0 million for the year ended December 31,
2000, and the six months ended June 30, 2001, respectively. Management has not
yet determined the impact of adopting SFAS No. 142, including whether any
transitional impairment losses will be required to be recognized as the
cumulative effect of a change in accounting principle.

                                       8


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)


D. Mergers and Acquisitions

   The following table presents summary information with respect to mergers
and acquisitions completed by BB&T Corporation during 2000 and thus far during
2001:

                 Summary of Completed Mergers and Acquisitions
                             (Dollars in millions)



                                                                                                                  Goodwill
     Date of                                                                           Accounting   Goodwill    Amortization
   Acquisition             Acquired Company             Headquarters     Total Assets    Method     Recorded       Period
   -----------     --------------------------------- ------------------ -------------- ---------- ------------- ------------
                                                                                              
  June 27, 2001    Virginia Capital Bancshares, Inc. Fredericksburg, VA $532.7 million  Purchase  $15.2 million   15 years
   June 7, 2001        Century South Banks, Inc.       Alpharetta, GA      1.7 billion  Pooling             N/A        N/A
  March 2, 2001      FirstSpartan Financial Corp.     Spartanburg, SC    591.0 million  Purchase   42.0 million   15 years
 January 8, 2001              FCNB Corp.               Frederick, MD       1.6 billion  Pooling             N/A        N/A
----------------------------------------------------------------------------------------------------------------------------
   December 27,
       2000              BankFirst Corporation         Knoxville, TN    $929.5 million  Purchase  $71.0 million   15 years
   November 15,
       2000              Edgar M. Norris & Co.         Greenville, SC      3.7 million  Purchase            N/A        N/A
  September 29,
       2000             Laureate Capital Corp.         Charlotte, NC      13.8 million  Purchase            N/A        N/A
   July 6, 2000        One Valley Bancorp, Inc.      Charleston, W.Va.     6.4 billion  Pooling             N/A        N/A
  June 15, 2000        First Banking Company of
                           Southeast Georgia           Statesboro, GA    420.0 million  Pooling             N/A        N/A
  June 13, 2000        Hardwick Holding Company          Dalton, GA      507.2 million  Pooling             N/A        N/A
 January 13, 2000      Premier Bancshares, Inc.         Atlanta, GA        2.0 billion  Pooling             N/A        N/A

                   BB&T Common
                      Shares
                    Issued to
     Date of         Complete
   Acquisition     Transaction
   -----------     ------------
                
  June 27, 2001     4.7 million
   June 7, 2001    12.7 million
  March 2, 2001     3.8 million
 January 8, 2001    8.7 million
----------------------------------------------------------------------------------------------------------------------------
   December 27,
       2000         5.3 million
   November 15,
       2000                 N/A
  September 29,
       2000                 N/A
   July 6, 2000    43.1 million
  June 15, 2000
                    4.1 million
  June 13, 2000     3.9 million
 January 13, 2000  16.8 million


N/A--Not applicable or terms not disclosed.

   The table above does not include mergers and acquisitions of acquired
companies prior to their acquisition by BB&T or insurance agency acquisitions,
which are summarized below.

   During the six months ended June 30, 2001, BB&T acquired two insurance
agencies that were accounted for as purchases. In conjunction with these two
transactions, BB&T issued approximately 229,000 shares of common stock and
recorded $7.7 million in goodwill, which is being amortized using the
straight-line method over 15 years. BB&T acquired six insurance agencies
during 2000, which were accounted for as purchases. In conjunction with these
2000 transactions, BB&T issued 1.4 million shares of common stock and recorded
$38.9 million in goodwill, which is being amortized using the straight-line
method over 15 years.

   BB&T typically provides an allocation period, not to exceed one year, to
identify and quantify the assets acquired and liabilities assumed in business
combinations accounted for as purchases. Management currently does not
anticipate any material adjustments to the assigned values of the assets and
liabilities of acquired companies.

 Pending Mergers and Acquisitions

   On January 24, 2001, BB&T announced plans to merge with F&M National
Corporation ("F&M") of Winchester, Virginia. F&M has $4 billion in assets and
operates 163 banking offices, 13 mortgage banking offices, three trust offices
and six insurance agencies. Shareholders of F&M will receive 1.09 shares of
BB&T common stock in exchange for each share of F&M common stock held. The
transaction, which was accounted for as a pooling of interests, closed on
August 9, 2001.

   On July 10, 2001, BB&T announced plans to acquire Community First Banking
Company ("CFBC") of Carrollton, Georgia. CFBC has $548.1 million in assets and
operates nine banking offices, a consumer finance company, an insurance

                                       9


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)

agency and a full-service brokerage subsidiary. Shareholders of CFBC will
receive .98 shares of BB&T common stock in exchange for each share of CFBC
common stock held. The transaction, which is expected to be accounted for as a
purchase, is planned for completion in the fourth quarter of 2001.

E. Calculation of Earnings Per Common Share

   BB&T's basic and diluted earnings per common share amounts were calculated
as follows:

                       BB&T CORPORATION AND SUBSIDIARIES
                       COMPUTATION OF EARNINGS PER SHARE
                         For the Periods as Indicated



                                For the Three Months     For the Six Months
                                   Ended June 30,          Ended June 30,
                               ----------------------- -----------------------
                                  2001        2000        2001        2000
                               ----------- ----------- ----------- -----------
                                (Dollars in thousands, except per share data)
                                                       
Basic Earnings Per Share:
Weighted average number of
 common shares outstanding
 during the period............ 420,692,786 421,190,364 421,294,032 420,911,258
                               ----------- ----------- ----------- -----------
Net income.................... $   230,805 $   174,096 $   453,128 $   368,960
                               ----------- ----------- ----------- -----------
Basic earnings per share...... $       .55 $       .41 $      1.08 $       .88
                               =========== =========== =========== ===========
Diluted Earnings Per Share:
Weighted average number of
 common shares................ 420,692,786 421,190,364 421,294,032 420,911,258
Add:
  Dilutive effect of
   outstanding options (as
   determined by application
   of treasury stock method)..   5,930,571   5,209,030   6,221,431   4,956,068
                               ----------- ----------- ----------- -----------
Weighted average number of
 common shares, as adjusted... 426,623,357 426,399,394 427,515,463 425,867,326
                               ----------- ----------- ----------- -----------
Net income.................... $   230,805 $   174,096 $   453,128 $   368,960
                               =========== =========== =========== ===========
Diluted earnings per share.... $       .54 $       .41 $      1.06 $       .87
                               =========== =========== =========== ===========


F. Segment Disclosures

   BB&T's operations are divided into six reportable business segments: the
Banking Network, Mortgage Banking, Trust Services, Agency Insurance,
Investment Banking and Brokerage, and Treasury. These operating segments have
been identified based primarily on BB&T's existing organizational structure.
The segments require unique technology and marketing strategies and offer
different products and services. While BB&T is managed as an integrated
organization, individual executive managers are held accountable for the
operations of the business segments that report to them.

   BB&T's strategies for revenue growth are focused on developing and
expanding client relationships through quality service delivery and an
effective sales culture. The segment results presented herein are based on
internal

                                      10


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)

management accounting policies that are designed to support these strategic
objectives. Unlike financial accounting, there is no comprehensive
authoritative body of guidance for management accounting equivalent to
generally accepted accounting principles. Therefore, the performance of the
individual segments is not comparable with BB&T's consolidated results or with
similar information presented by any other financial institution.
Additionally, because of the interrelationships of the various segments, the
information presented is not necessarily indicative of the segments' financial
performance if they operated as independent entities.

   Please refer to BB&T's Annual Report on Form 10-K, as restated in BB&T's
Current Report on Form 8-K, filed on July 25, 2001, and amended on July 27,
2001, for a description of internal accounting policies and the basis of
segmentation, including a description of the segments presented in the
accompanying tables. There have been no significant changes from the methods
used to develop the segment disclosures contained therein.

                                      11


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)

  The following tables disclose selected financial information for BB&T's
reportable business segments for the periods as indicated:

                               BB&T Corporation

                              Reportable Segments
               For the Three Months Ended June 30, 2001 and 2000



                                                                                                        Investment
                                                                                                        Banking and
                      Banking Network       Mortgage Banking      Trust Services    Agency Insurance     Brokerage
                  ----------------------- ----------------------  ----------------  ---------------- -----------------
                     2001        2000        2001        2000      2001     2000      2001    2000     2001     2000
                  ----------- ----------- ----------  ----------  -------  -------  -------- ------- -------- --------
                                                                                          (Dollars in thousands)
                                                                                
Net interest
income (expense)
from external
customers.......  $   332,870 $   423,137 $  153,116  $  115,083  $(9,086) $(9,752) $    303 $     9 $  2,295 $ 2 ,982
Net intersegment
interest income
(expense).......      167,279     117,317   (118,117)    (91,391)  12,367   13,298        --      --       --       --
                  ----------- ----------- ----------  ----------  -------  -------  -------- ------- -------- --------
Net interest
income..........      500,149     540,454     34,999      23,692    3,281    3,546       303       9    2,295    2,982
                  ----------- ----------- ----------  ----------  -------  -------  -------- ------- -------- --------
Provision for
loan and lease
losses..........       47,995      35,556        819         675       --       --        --      --       --       --
Noninterest
income from
external
customers.......      126,646      68,600     43,351       6,933   24,288   12,629    41,218  23,025   46,319   41,516
Intersegment
noninterest
income..........       55,162      31,459         --          --       --       --        --      --       --       --
Noninterest
expense.........      259,939     262,009     14,109       1,000   13,767    9,255    29,495  16,384   46,624   40,780
Intersegment
noninterest
expense.........      129,037      82,237      6,235       4,787      776      871     1,057   1,025      380      378
                  ----------- ----------- ----------  ----------  -------  -------  -------- ------- -------- --------
Income before
income taxes....      244,986     260,711     57,187      24,163   13,026    6,049    10,969   5,625    1,610    3,340
Provision for
income taxes....       73,225      77,863     16,238       6,371    4,602    2,008     4,321   2,241    1,439    1,728
                  ----------- ----------- ----------  ----------  -------  -------  -------- ------- -------- --------
Net income......  $   171,761 $   182,848 $   40,949  $   17,792  $ 8,424  $ 4,041  $  6,648 $ 3,384 $    171 $  1,612
                  =========== =========== ==========  ==========  =======  =======  ======== ======= ======== ========
Identifiable
segment assets..  $35,482,959 $37,653,222 $8,511,201  $6,074,890  $50,404  $31,367  $112,581 $76,974 $658,067 $673,325
                  =========== =========== ==========  ==========  =======  =======  ======== ======= ======== ========

                         Treasury         All Other Segments(1)     Total Segments
                  ----------------------- --------------------- -----------------------
                     2001        2000        2001       2000       2001        2000
                  ----------- ----------- ---------- ---------- ----------- -----------
                                                          
Net interest
income (expense)
from external
customers.......  $    47,746 $    20,210 $   70,587 $   90,989 $   597,831 $   642,658
Net intersegment
interest income
(expense).......        8,806      19,091         --         --      70,335      58,315
                  ----------- ----------- ---------- ---------- ----------- -----------
Net interest
income..........       56,552      39,301    70, 587     90,989     668,166     700,973
                  ----------- ----------- ---------- ---------- ----------- -----------
Provision for
loan and lease
losses..........           34          31     16,390     13,693      65,238      49,955
Noninterest
income from
external
customers.......        9,331       7,105     23,088     52,959     314,241     212,767
Intersegment
noninterest
income..........           --          --         --         --      55,162      31,459
Noninterest
expense.........        1,783       1,833     22,681     25,125     388,398     356,386
Intersegment
noninterest
expense.........          486         138      2,850      3,780     140,821      93,216
                  ----------- ----------- ---------- ---------- ----------- -----------
Income before
income taxes....       63,580     44 ,404     51,754    101,350     443,112     445,642
Provision for
income taxes....       16,977      12,701     4 ,612     29,093     121,414     132,005
                  ----------- ----------- ---------- ---------- ----------- -----------
Net income......  $    46,603 $    31,703 $   47,142 $   72,257 $   321,698 $   313,637
                  =========== =========== ========== ========== =========== ===========
Identifiable
segment assets..  $19,304,014 $14,266,529 $4,212,077 $3,017,242 $68,331,303 $61,793,549
                  =========== =========== ========== ========== =========== ===========

----
(1) Financial data from segments below the quantitative thresholds requiring
    disclosure are attributable to nonbank consumer finance operations,
    factoring, commercial lawn care equipment financing, leasing and other
    smaller subsidiaries.

                                       12


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)

                               BB&T Corporation

                              Reportable Segments
                For the Six Months Ended June 30, 2001 and 2000



                                                                                                          Investment
                                                                                                          Banking and
                      Banking Network       Mortgage Banking       Trust Services     Agency Insurance     Brokerage
                  ----------------------- ----------------------  ------------------  ---------------- -----------------
                     2001        2000        2001        2000       2001      2000      2001    2000     2001     2000
                  ----------- ----------- ----------  ----------  --------  --------  -------- ------- -------- --------
                                                                                           (Dollars in thousands)
                                                                                  
Net interest
income (expense)
from external
customers.......  $   669,146 $   797,972 $  299,831  $  224,176  $(19,007) $(19,252) $    327 $    -- $  4,667 $  6,030
Net intersegment
interest income
(expense).......      314,394     211,448   (231,066)   (165,199)   25,260    25,855        --      --       --       --
                  ----------- ----------- ----------  ----------  --------  --------  -------- ------- -------- --------
Net interest
income..........      983,540   1,009,420     68,765      58,977     6,253     6,603       327      --    4,667    6,030
                  ----------- ----------- ----------  ----------  --------  --------  -------- ------- -------- --------
Provision for
loan and lease
losses..........       88,359      66,542      1,519       1,380        --        --        --      --       --       --
Noninterest
income from
external
customers.......      239,352     189,986     47,785      35,653    48,861    32,185    79,509  53,458   89,253   85,999
Intersegment
noninterest
income..........       93,577      56,324         --          --        --        --        --      --       --       --
Noninterest
expense.........      473,012     512,120     32,792      22,453    29,115    22,032    59,631  38,030   88,847   84,531
Intersegment
noninterest
expense.........      243,707     155,423     13,052      10,484     1,551     1,814     2,114   2,049      761      752
                  ----------- ----------- ----------  ----------  --------  --------  -------- ------- -------- --------
Income before
income taxes....      511,391     521,645     69,187      60,313    24,448    14,942    18,091  13,379    4,312    6,746
Provision for
income taxes....      142,668     161,988     20,297      18,599     6,802     5,023     7,167   5,310    2,487    3,299
                  ----------- ----------- ----------  ----------  --------  --------  -------- ------- -------- --------
Net income......  $   368,723 $   359,657 $   48,890  $   41,714  $ 17,646  $  9,919  $ 10,924 $ 8,069 $  1,825 $  3,447
                  =========== =========== ==========  ==========  ========  ========  ======== ======= ======== ========
Identifiable
segment assets..  $35,482,959 $37,653,222 $8,511,201  $6,074,890  $ 50,404  $ 31,367  $112,581 $76,974 $658,067 $673,325
                  =========== =========== ==========  ==========  ========  ========  ======== ======= ======== ========

                         Treasury         All Other Segments(1)     Total Segments
                  ----------------------- --------------------- -----------------------
                     2001        2000        2001       2000       2001        2000
                  ----------- ----------- ---------- ---------- ----------- -----------
                                                          
Net interest
income (expense)
from external
customers.......  $    80,787 $    45,938 $  141,546 $  128,034 $ 1,177,297 $ 1,182,898
Net intersegment
interest income
(expense).......       21,838      33,686         --         --     130,426     105,790
                  ----------- ----------- ---------- ---------- ----------- -----------
Net interest
income..........      102,625      79,624    141,546    128,034   1,307,723   1,288,688
                  ----------- ----------- ---------- ---------- ----------- -----------
Provision for
loan and lease
losses..........           67          61     29,006     19,482     118,951      87,465
Noninterest
income from
external
customers.......       15,730      13,231     63,504     61,786     583,994     472,298
Intersegment
noninterest
income..........           --          --         --         --      93,577      56,324
Noninterest
expense.........       3, 553       2,588     50,777     41,706     737,727     723,460
Intersegment
noninterest
expense.........          972         276      5,700     4 ,456     267,857     175,254
                  ----------- ----------- ---------- ---------- ----------- -----------
Income before
income taxes....      113,763      89,930    119,567    124,176     860,759     831,131
Provision for
income taxes....       27,391      20,299     14,710     36,573     221,522     251,091
                  ----------- ----------- ---------- ---------- ----------- -----------
Net income......  $    86,372 $    69,631 $  104,857 $   87,603 $   639,237 $   580,040
                  =========== =========== ========== ========== =========== ===========
Identifiable
segment assets..  $19,304,014 $14,266,529 $4,212,077 $3,017,242 $68,331,303 $61,793,549
                  =========== =========== ========== ========== =========== ===========

----
(1) Financial data from segments below the quantitative thresholds requiring
    disclosure are attributable to nonbank consumer finance operations,
    factoring, commercial lawn care equipment financing, leasing and other
    smaller subsidiaries.

                                       13


                       BB&T CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                 June 30, 2001
                                  (Unaudited)


   The following table presents a reconciliation of total segment results to
consolidated results:



                               For the Three Months      For the Six Months
                                  Ended June 30,           Ended June 30,
                             -------------------------  ----------------------
                                 2001         2000         2001        2000
                             ------------  -----------  ----------  ----------
                                                        
Net Interest Income
  Net interest income from
   segments................. $    668,166  $   700,973  $1,307,723  $1,288,688
  Other net interest
   income(1)................       33,629       34,674      69,720      55,523
  Elimination of net
   intersegment interest
   income(2)................     (153,283)    (195,948)   (287,262)   (271,172)
                             ------------  -----------  ----------  ----------
    Consolidated net
     interest income........ $    548,512  $   539,699  $1,090,181  $1,073,039
                             ============  ===========  ==========  ==========
Net income
  Net income from segments.. $    321,698  $   313,637  $  639,237  $  580,040
  Other net income
   (loss)(1)................      335,208       45,590     333,129      13,837
  Elimination of
   intersegment net
   income(2)................     (426,101)    (185,131)   (519,238)   (224,917)
                             ------------  -----------  ----------  ----------
    Consolidated net
     income................. $    230,805  $   174,096  $  453,128  $  368,960
                             ============  ===========  ==========  ==========


                               June 30,     June 30,
                                 2001         2000
                             ------------  -----------
                                                        
Total Assets
  Total assets from
   segments................. $ 68,331,303  $61,793,549
  Other assets(1)...........    9,824,948    2,591,720
  Elimination of
   intersegment assets(2)...  (13,422,482)  (6,147,182)
                             ------------  -----------
    Consolidated total
     assets................. $ 64,733,769  $58,238,087
                             ============  ===========

--------
(1) Other net interest income, other net income (loss) and other assets
    include amounts associated with BB&T's support functions not allocated to
    the various reportable segments.
(2) BB&T's reconciliation of total segment results to consolidated results
    requires the elimination of internal management accounting practices.
    These adjustments include the elimination of funds transfer pricing
    credits and charges and the elimination of intersegment noninterest income
    and noninterest expense, which are allocated to the various segments using
    BB&T's internal accounting methods.

                                      14


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

ANALYSIS OF FINANCIAL CONDITION

   BB&T's total assets at June 30, 2001, were $64.7 billion, a $2.2 billion,
or 3.4%, increase from December 31, 2000. The asset category that produced the
majority of the increase was loans and leases, including loans held for sale,
which grew $2.0 billion, or 4.8%.

   Total deposits at June 30, 2001, increased $871.5 million, or 2.2%, from
December 31, 2000. Short-term borrowed funds declined $1.6 billion, or 22.2%,
while long-term debt increased $2.2 billion, or 26.0%, during the first six
months of 2001. Total shareholders' equity increased $408.0 million, or 8.1%,
during the same time frame.

   The factors causing the fluctuations in the major balance sheet categories
are further discussed in the following sections.

Loans and Leases

   BB&T had strong loan growth during the second quarter and first six months
of 2001 compared to the previous year. Average total loans for the quarter
ended June 30, 2001, increased 12.0% compared to the same period of 2000.
Average total loans for the six months ended June 30 were $43.5 billion, or
12.2% greater than the average for the first six months of 2000.

   Management continues to emphasize commercial lending in order to improve
the profitability of the overall loan portfolio. As a result, BB&T has become
the leading small business lender in the Carolinas. BB&T is a frequent
acquirer of community banks and thrift institutions, which results in a
significant percentage of the consolidated loan portfolio being composed of
mortgage loans. Additionally, BB&T is the largest originator of mortgage loans
in the Carolinas, with second quarter 2001 originations totaling $2.7 billion.
On a relative basis, mortgage loans are less profitable than commercial or
consumer loans. For this reason, management utilizes securitization programs
and sells fixed-rate mortgage loans to improve the profitability of the
overall loan portfolio. However, due to the low interest rate environment and
resulting high volumes of mortgage loan originations and the inventory of
mortgage loans held for sale, the mix of loans in the portfolio was very
similar to that of one year ago. Average mortgage loans increased 12.3% during
the first six months of 2001 compared to the same period of 2000 and
represented 19.6% of average total loans and leases at June 30, 2001, compared
to 19.6% a year ago. Average commercial loans, including lease receivables,
increased 14.4% during the first six months of 2001, and now compose 53.9% of
the loan portfolio compared to 52.9% in the second quarter of 2000. Average
consumer loans, which include sales finance, revolving credit and direct
retail, increased 7.9% for the six months ended June 30, 2001, compared to the
same period in 2000 and compose the remaining 26.5% of average loans, as
compared to 27.5% for the same period in 2000.

   These trends are also evident in the second quarter of 2001. For the second
quarter of 2001, average loans totaled $44.0 billion, an increase of $4.7
billion, or 12.0%, compared to the second quarter of 2000. Average commercial
loans and leases increased 13.5% in the second quarter of 2001 to a total of
$23.6 billion, an increase of $2.8 billion, compared to the second quarter of
2000; average consumer loans increased 6.9% in the second quarter of 2001 to a
total of $11.6 billion, an increase of $747.1 million, compared to the second
quarter of 2000; and average mortgage loans increased 15.1% in the second
quarter of 2001 to a total of $8.8 billion, an increase of $1.2 billion,
compared to the second quarter of 2000.

   The growth rates of average loans are affected by loan portfolios held by
companies that were acquired in purchase transactions during the last six
months of 2000 and the first six months of 2001. The securitization of $984.5
million of mortgage loans during 2000 and $122.6 million thus far in 2001 also
affected the reported growth in average mortgage loans. During the first six
months of 2001, loans totaling $502.3 million and $451.9 million were acquired
through the purchase of FirstSpartan Financial Corp. ("FirstSpartan") and
Virginia Capital Bancshares, Inc. ("VCAP"), respectively. Excluding the effect
of purchase accounting transactions completed

                                      15


during 2000 and 2001 and mortgage loan securitizations, average "internal"
loan growth for the three months ended June 30, 2001, was 11.0% compared to
the second quarter of 2000. By category, excluding the effects of purchase
accounting transactions and loan securitizations, average mortgage loans,
including loans held for sale, increased 19.9%, commercial loans and leases
grew 10.8%, and consumer loans increased 4.3% in the second quarter of 2001
compared to the same period of 2000.

   The average annualized fully taxable equivalent ("FTE") yields on
commercial, consumer and mortgage loans for the first six months of 2001 were
8.83%, 10.01%, and 7.50%, respectively, resulting in an average annualized
yield on the total loan portfolio of 8.88%. This reflects a decrease of 33
basis points over the 9.21% annualized yield on total average loans during the
first six months of 2000. The decrease in yields resulted from a lower average
prime rate during 2001, as well as generally lower interest rates produced by
aggressive action from the Federal Reserve Board during 2001. During 2001, the
Federal Reserve has reduced the target Federal funds rate six times for a
total of 2.75%, with reductions of 1.25% occurring in the second quarter. As a
result of the Federal Reserve Board's actions, the average prime rate, which
is the basis for pricing many commercial and consumer loans, declined to 7.34%
during the three months ended June 30, 2001, compared to 9.25% for the
comparable period of 2000. For the first half of 2001, the prime rate averaged
7.98%, compared to 8.97% during the first six months of 2000. The growth in
the overall loan portfolio and the decrease in the yield of the portfolio,
from 9.33% in the second quarter and 9.21% in the first six months of 2000 to
8.59% in the second quarter and 8.88% in the first half of 2001, resulted in a
relatively flat effect on interest income from loans and leases in the current
quarter and a 5.7% increase in interest income from loans and leases during
the first six months of 2001 compared to the 2000 periods.

Securities

   Securities available for sale totaled $14.5 billion at June 30, 2001, a
decrease of $4.9 million from December 31, 2000. Securities available for sale
had net unrealized gains, net of deferred income taxes, of $240.2 million at
June 30, 2001, compared to net unrealized gains, net of deferred income taxes,
of $100.2 million at December 31, 2000. Securities held to maturity totaled
$38.2 million, down $50.3 million, or 56.8%, from year-end 2000. Trading
securities totaled $120.4 million, an increase of $23.7 million, or 24.5%,
compared to the balance at December 31, 2000.

   Average total securities for the first six months amounted to $14.5
billion, up 3.2% from the average during the first half of 2000. For the
second quarter of 2001, average securities totaled $14.4 billion, or 2.5%
higher than the average balance for the second quarter of 2000.

   The mix of the investment portfolio has changed significantly during 2001
compared to 2000. This change is a result of a restructuring of the securities
portfolio in the second and third quarters of 2000. The restructuring was
undertaken in order to improve the overall yield of the portfolio, improve the
liquidity, and reduce the average duration of the portfolio. As part of the
restructuring, BB&T sold $5.9 billion in securities and reinvested the
proceeds in higher yielding securities, primarily U.S. Government securities.
At June 30, 2001, average U.S. Government securities composed 72.4% of the
total portfolio compared to 58.8% in 2000. Mortgage-backed securities composed
19.7% at June 30, 2001, and state and municipal securities made up 7.0%,
compared to 32.9% and 7.5%, respectively, in 2000.

   The annualized FTE yield on the average total securities portfolio for the
first half of 2001 was 7.26%, an increase of 57 basis points from the yield
earned in the first half of 2000. This increase resulted primarily from the
restructuring of the securities portfolio.

Other Interest Earning Assets

   Federal funds sold and securities purchased under resale agreements or
similar arrangements totaled $193.0 million at June 30, 2001, a decrease of
$70.7 million, or 26.8%, compared to December 31, 2000. Interest-bearing
deposits with banks increased $59.9 million from December 31, 2000. These
categories of earning assets

                                      16


are subject to large daily fluctuations based on the availability of these
types of funds. The average yield on other interest-earning assets for the
first six months of 2001 was 5.22%, a decrease from the 6.25% earned during
the first six months of 2000. The decrease in the yield on other interest-
earning assets is principally the result of the decrease in the average
Federal funds rate from 5.98% for the first six months of 2000 to 4.96% for
the first six months of 2001.

Other Assets

   BB&T's other noninterest-earning assets, excluding premises and equipment
and noninterest-bearing cash and due from banks, increased $284.2 million from
December 31, 2000, to June 30, 2001. The increase results primarily from the
purchases of additional bank-owned life insurance, which is used as a funding
source for certain post-retirement benefits, at a cost of $199.8 million.
Additionally, goodwill from purchase acquisitions increased $34.9 million and
capitalized mortgage servicing rights increased $56.3 million.

Deposits

   Total end of period deposits increased $871.5 million, or 2.2%, from
December 31, 2000, to June 30, 2001. Average deposits for the first six months
of 2001 increased $2.7 billion, or 7.1%, compared to the first six months of
2000. The categories of deposits with the highest average rates of growth in
2001 compared to 2000 were: certificates of deposit and other time deposits,
which grew $1.5 billion, or 8.0%, and money rate savings accounts, including
investor deposit accounts, which increased $1.9 billion, or 19.2%. The growth
realized in these deposit categories was partially offset by declines of
$754.7 million, or 22.2%, in average savings and interest checking.

   For the second quarter, average deposits increased $3.0 billion, or 7.8%.
Total transaction accounts, which include noninterest-bearing deposits,
savings, interest checking and money rate savings, totaled $20.0 billion for
the second quarter, an increase of $1.3 billion, or 7.1%, compared to the
second quarter of 2000. Average time deposits for the second quarter totaled
$21.1 billion, an increase of $1.7 billion, or 8.5%, compared to the second
quarter of 2000.

   The growth in average deposits for 2001 includes the effect of deposits
acquired in purchase accounting transactions completed during the last six
months of 2000 and the first six months of 2001. The purchase of FirstSpartan
and VCAP resulted in the addition of $436.1 million and $381.6 million in
deposits, respectively. Growth rates for noninterest-bearing deposits are also
affected by an official check outsourcing program, which improves fee income,
but reduces the balance of noninterest-bearing deposits. Excluding the effects
of purchase accounting transactions and official check outsourcing, average
deposits for the six months ended June 30, 2001, would have increased 5.0%
compared to the same time period one year ago. Excluding purchase accounting,
transaction account deposits would have increased 4.7% compared to the six
months ended June 30, 2000. Certificate accounts and other time deposits would
have increased 5.2%, excluding purchase accounting transactions. For the
second quarter, total average deposits, excluding the effects of purchase
accounting transactions and official check outsourcing, would have increased
5.4% compared to the second quarter of 2000.

   The annualized average cost of total interest-bearing deposits during the
first six months of 2001 was 4.67%, an increase of 14 basis points compared to
2000.

Other Borrowings

   The growth in loans, securities and other assets in recent years have
exceeded the growth of total deposits. As a result, cost-effective alternative
funding sources, such as Federal Home Loan Bank ("FHLB") advances, master
notes, purchases of Federal funds and sales of securities under repurchase
agreements have been increasingly utilized to support balance sheet growth.

   At June 30, 2001, short-term borrowed funds totaled $5.6 billion, a
decrease of $1.6 billion, or 22.2%, compared to December 31, 2000. For the
second quarter of 2001, average short-term borrowed funds totaled

                                      17


$5.5 billion, a decrease of $1.6 billion, or 22.8%, from the comparable period
of 2000. For the six months ended June 30, 2001, total average short-term
borrowed funds totaled $6.0 billion, a decrease of $1.3 billion, or 17.7%,
compared to the first half of 2000. The average annualized rate paid on short-
term borrowed funds was 4.25% for the second quarter of 2001, a decrease of
174 basis points from the average rate of 5.99% paid in the second quarter of
2000. This decrease in the cost of short-term borrowed funds resulted from the
lower interest rate environment that has existed during 2001 compared to 2000,
which included a 194 basis point decrease in the average Federal funds rate
from the second quarter of 2000 to the second quarter of 2001.

   Long-term debt consists primarily of FHLB advances, medium term bank notes
and corporate subordinated debt. These borrowings provide BB&T with the
flexibility to structure borrowings in a manner that aids in the management of
interest rate risk and liquidity. Long-term debt totaled $10.9 billion at June
30, 2001, an increase of $2.2 billion, or 26.0%, from the balance at December
31, 2000. For the second quarter of 2001, average long-term debt totaled $10.9
billion, an increase of $3.9 billion, or 56.6%, compared to the prior year.
For the six months ended June 30, 2001, total average long-term borrowed funds
totaled $10.6 billion, an increase of $4.0 billion, or 59.7%, compared to the
first half of 2000. Long-term debt has been utilized for a variety of funding
needs, including the repurchase of common stock in conjunction with certain
acquisitions. The substantial increase in long-term borrowings during the year
reflects BB&T's efforts to take advantage of declining interest rates and lock
in lower funding costs for a longer period of time. The average annualized
rate paid on long-term borrowed funds was 5.60% for the second quarter of
2001, a decrease of 46 basis points from the average rate of 6.06% paid in the
second quarter of 2000.

Asset Quality

   Nonperforming assets, composed of foreclosed real estate, repossessions,
nonaccrual loans and restructured loans, totaled $281.8 million at June 30,
2001, compared to $214.0 million at December 31, 2000. Nonperforming assets,
as a percentage of loan-related assets, were .63% at June 30, 2001, compared
to .50% at December 31, 2000. Loans 90 days or more past due and still
accruing interest totaled $82.5 million at June 30, 2001, compared to $75.2
million at year-end 2000.

   BB&T's net charge-offs totaled $38.3 million for the second quarter and
amounted to .35% of average loans and leases, on an annualized basis, compared
to $24.3 million, or .25% of average loans and leases, on an annualized basis,
in the corresponding period in 2000. For the six months ended June 30, 2001,
net charge-offs totaled $66.2 million, or .31% of average loans and leases,
compared to $44.6 million, or .23% of average loans and leases, in 2000.

   The increases in nonperforming assets and net charge-offs during the second
quarter reflect the slowdown in the economy. However, BB&T's asset quality, as
measured by relative levels of nonperforming assets and net charge-offs, has
remained favorable compared to published industry averages.

   The allowance for loan and lease losses was $588.9 million, or 1.32% of
loans and leases, at June 30, 2001, compared to $550.6 million, or 1.29% of
loans and leases, at December 31, 2000. The slight increase in the allowance
as a percentage of loans and leases reflects higher provisions for loan and
lease losses given the economic slowdown and the impact of acquiring
institutions with higher allowance to loan ratios.

   The provision for loan and lease losses for the second quarter of 2001 was
$43.9 million, compared to $29.1 million in the comparable quarter of 2000.
For the six months, the provision for loan and lease losses totaled $84.9
million compared to $56.5 million in 2000. The increased provision during 2001
was necessary to cover higher net charge-offs, maintain the allowance at a
level considered adequate to absorb losses inherent in the loan portfolio at
the balance sheet date and to provide additional allowances for acquired
entities to align their collection and charge-off policies and procedures with
those of BB&T.

   Asset quality statistics for the last five calendar quarters are presented
in the accompanying table.

                                      18


                            ASSET QUALITY ANALYSIS

                            (Dollars in thousands)



                                       For the Three Months Ended
                              ------------------------------------------------
                              6/30/01   3/31/01   12/31/00  9/30/00   6/30/00
                              --------  --------  --------  --------  --------
                                                       
Allowance For Loan & Lease
 Losses
  Beginning balance.........  $573,877  $550,599  $532,344  $515,806  $511,066
  Allowance for acquired
   loans....................     9,470    10,084    12,934        --        --
  Provision for loan and
   lease losses.............    43,898    41,026    46,398    39,303    29,076
  Net charge-offs...........   (38,319)  (27,832)  (41,077)  (22,765)  (24,336)
                              --------  --------  --------  --------  --------
    Ending balance..........  $588,926  $573,877  $550,599  $532,344  $515,806
                              ========  ========  ========  ========  ========
Risk Assets
  Nonaccrual loans and
   leases...................  $236,387  $189,642  $167,249  $138,192  $134,650
  Foreclosed real estate....    24,989    31,325    29,324    22,831    19,585
  Other foreclosed
   property.................    20,068    22,681    16,903    16,042    13,694
  Restructured loans........       324     2,261       492       445       501
                              --------  --------  --------  --------  --------
    Total nonperforming
     assets.................  $281,768  $245,909  $213,968  $177,510  $168,430
                              --------  --------  --------  --------  --------
  Loans 90 days or more past
   due and still accruing...  $ 82,507  $ 79,780  $ 75,191  $ 77,108  $ 64,767
                              ========  ========  ========  ========  ========
Asset Quality Ratios
Nonaccrual loans and leases
 as a percentage of total
 loans and leases*..........       .53%      .44%      .39%      .34%      .34%
Total nonperforming assets
 as a percentage of:
  Total assets..............       .44       .39       .34       .30       .29
  Loans and leases plus
   foreclosed property*.....       .63       .56       .50       .44       .42
Annualized net charge-offs
 as a percentage of average
 loans and leases*..........       .35       .26       .40       .23       .25
Allowance for loan and lease
 losses as a percentage of
 loans and leases*..........      1.32      1.31      1.29      1.31      1.29
  Ratio of allowance for
   loan and lease losses to:
  Net charge-offs...........      3.83x     5.08x     3.37x     5.88x     5.27x
Nonaccrual and restructured
 loans and leases...........      2.49      2.99      3.28      3.84      3.82

--------
* All items referring to loans and leases include loans held for sale and are
  net of unearned income.

MARKET RISK MANAGEMENT

   As a financial institution, BB&T's most significant market risk exposure is
interest rate risk. The primary objective of interest rate risk management is
to minimize the effect that changes in interest rates have on net interest
income. This is accomplished through active management of asset and liability
portfolios with a focus on the strategic pricing of asset and liability
accounts and management of maturity mixes for assets and liabilities. The goal
of these activities is the development of appropriate maturity and repricing
opportunities in BB&T's portfolios of assets and liabilities that will produce
consistent net interest income during periods of changing interest rates.
BB&T's Asset / Liability Management Committee ("ALCO") monitors loan,
investment and liability portfolios to ensure comprehensive management of
interest rate risk.

   The asset/liability management process is designed to achieve relatively
stable net interest margins and assure liquidity by coordinating the volumes,
maturities or repricing opportunities of earning assets, deposits and borrowed
funds. It is the responsibility of the ALCO to determine and achieve the most
appropriate volume and mix of earning assets and interest-bearing liabilities,
as well as ensure an adequate level of liquidity and capital, within the
context of corporate performance goals. The ALCO also sets policy guidelines
and establishes long-

                                      19


term strategies with respect to interest rate risk exposure and liquidity. The
ALCO meets regularly to review BB&T's interest rate risk and liquidity
positions in relation to present and prospective market and business
conditions, and adopts funding and balance sheet management strategies that
are intended to ensure that the potential impact on earnings and liquidity as
a result of fluctuations in interest rates is within acceptable standards.

   The majority of assets and liabilities of financial institutions are
monetary in nature and differ greatly from most commercial and industrial
companies that have significant investments in fixed assets and inventories.
Fluctuations in interest rates and actions of the Board of Governors of the
Federal Reserve System ("FRB") to regulate the availability and cost of credit
have a greater effect on a financial institution's profitability than do the
effects of higher costs for goods and services. Through its balance sheet
management function, BB&T is positioned to respond to changing interest rates
and inflationary trends.

   Management uses Interest Sensitivity Simulation Analysis ("Simulation") to
measure the sensitivity of projected earnings to changes in interest rates.
Simulation takes into account the current contractual agreements that BB&T has
made with its customers on deposits, borrowings, loans, investments and any
commitments to enter into those transactions. Management monitors BB&T's
interest sensitivity by means of a computer model that incorporates the
current volumes, average rates and scheduled maturities and payments of asset
and liability portfolios, together with multiple scenarios of projected
prepayments, repricing opportunities and anticipated volume growth. Using this
information, the model projects earnings based on projected portfolio balances
under multiple interest rate scenarios. This level of detail is needed to
simulate the effect that changes in interest rates and portfolio balances may
have on the earnings of BB&T. This method is subject to the accuracy of the
assumptions that underlie the process, however, it provides a better
illustration of the sensitivity of earnings to changes in interest rates than
other analyses such as static or dynamic gap.

   The asset/liability management process requires a number of key
assumptions. Management determines the most likely outlook for the economy and
interest rates by analyzing external factors, including published economic
projections and data, the effects of likely monetary and fiscal policies as
well as any enacted or prospective regulatory changes. BB&T's current and
prospective liquidity position, current balance sheet volumes and projected
growth, accessibility of funds for short-term needs and capital maintenance
are also considered. This data is combined with various interest rate
scenarios to provide management with information necessary to analyze interest
sensitivity and to aid in the development of strategies to reach performance
goals.

   The following table shows the effect that the indicated changes in interest
rates would have on net interest income as projected for the next twelve
months under the "most likely" interest rate scenario incorporated into the
Interest Sensitivity Simulation computer model. Key assumptions in the
preparation of the table include prepayment speeds of mortgage-related assets;
cash flows and maturities of derivative financial instruments, changes in
market condition, loan volumes and pricing, deposit sensitivity; customer
preferences and capital plans. The resulting change in net interest income
reflects the level of sensitivity that net interest income has in relation to
changing interest rates.

                   Interest Sensitivity Simulation Analysis
                                 June 30, 2001



                                                                                       Annualized
             Interest Rate Scenario                                                   Hypothetical
      ---------------------------------------                                          Percentage
        Linear                                                                         Change in
      Change in                        Prime                                          Net Interest
      Prime Rate                       Rate                                              Income
      ----------                       -----                                          ------------
                                                                                
        +3.00%                         9.75%                                             -0.54%
        +1.50                          8.25                                              -0.17
        -1.50                          5.25                                              -1.88
        -3.00                          3.75                                              -3.20


                                      20


   Management has established parameters for asset/liability management which
prescribe a maximum impact on net interest income of 3% for a 150 basis point
parallel change in interest rates over six months from the most likely
interest rate scenario, and a maximum of 6% for a 300 basis point change over
12 months. It is management's ongoing objective to effectively manage the
impact of changes in interest rates and minimize the resulting effect on
earnings as evidenced by the preceding table. At June 30, 2001, the
sensitivity of BB&T's net interest income to changes in interest rates was
within management's targets, as illustrated in the accompanying table.

Derivative Financial Instruments

   BB&T utilizes a variety of financial instruments to aid in the management
of interest rate risk. These instruments, commonly referred to as derivatives,
primarily consist of interest rate swaps, caps, floors, collars, financial
forward and futures contracts and options written and purchased. A derivative
is a financial instrument that derives its cash flows, and therefore its
value, by reference to an underlying instrument, index or referenced interest
rate. BB&T uses derivatives to hedge business loans, forecasted sales of
mortgage loans and certificates of deposit.

   Credit risk related to derivatives arises when amounts receivable from a
counterparty exceed those payable. The risk of loss with any counterparty is
limited to a small fraction of the notional amount. BB&T deals only with
national market makers with strong credit ratings in its derivatives
activities. BB&T further controls the risk of loss by subjecting
counterparties to credit reviews and approvals similar to those used in making
loans and other extensions of credit. All of the derivative contracts to which
BB&T is a party settle monthly, quarterly or semiannually. Further, BB&T has
netting agreements with the dealers with which it does business. Because of
these factors, BB&T's credit risk exposure at June 30, 2001, was not material.

   Derivative contracts are written in amounts referred to as notional
amounts. Notional amounts only provide the basis for calculating payments
between counterparties and do not represent amounts to be exchanged between
parties and are not a measure of financial risks. On June 30, 2001, BB&T had
derivative financial instruments outstanding with notional amounts totaling
$3.4 billion. The estimated fair value of open contracts reflected net
unrealized gains of $8.7 million at June 30, 2001.

   BB&T classifies its derivative financial instruments as either (1) a hedge
of an exposure to changes in the fair value of a recorded asset or liability
("fair value hedge"), (2) a hedge of an exposure to changes in the cash flows
of a recognized asset, liability or forecasted transaction ("cash flow
hedge"), (3) a hedge of a foreign currency exposure ("foreign currency
hedge"), of which BB&T has none, or (4) derivatives not designated as hedges.
For a qualifying fair value hedge, changes in the value of the derivatives
that have been highly effective as hedges are recognized in current period
earnings along with the corresponding changes in the value of the designated
hedged item attributable to the risk being hedged. For a qualifying cash flow
hedge, the effective portion of changes in the value of the derivatives that
have been highly effective are recognized in other comprehensive income until
the related cash flows from the hedged item are recognized in earnings. For
either fair value hedges or cash flow hedges, net income may be affected to
the extent that changes in the value of the derivative instruments do not
perfectly offset changes in the value of the hedged items. During the first
six months of 2001, there was no impact on net income resulting from hedge
ineffectiveness.

   As of June 30, 2001, BB&T had recorded unrecognized gains on cash flow
hedges of $4.8 million as a separate component increasing shareholders'
equity. Substantially all of this amount is attributable to forward
commitments and options hedging the cash flows from forecasted sales of
mortgage loans. The ultimate sale of the related loans will result in
reclassification of these unrecognized amounts into earnings. If the cash flow
hedge is discontinued because the forecasted transactions do not occur, these
amounts will be immediately reclassified into earnings. BB&T expects to
reclassify substantially all of the $4.8 million of unrecognized gains into
earnings within the next 12 months.

   BB&T has a notional amount of $892.7 million of derivatives that do not
meet the requirements for hedge accounting treatment under SFAS No. 133.
Accordingly, these derivatives have been recorded at fair value in

                                      21


accordance with the statement. The related net gains or losses for these
derivatives are recorded in current period earnings as other noninterest
income. The impact on earnings for the first six months of 2001 was not
material.

   The following table sets forth certain information concerning BB&T's
derivative financial instruments at June 30, 2001:

                       Derivative Financial Instruments
                                 June 30, 2001
                            (Dollars in thousands)



                                                     Average Average Estimated
                                           Notional  Receive   Pay     Fair
   Type                                     Amount    Rate    Rate     Value
   ----                                   ---------- ------- ------- ---------
                                                         
   Receive fixed swaps................... $  104,950  5.67%   4.16%   $  533
   Pay fixed swaps.......................     75,317  4.21    5.05      (120)
   Caps, floors & collars................     98,550    --      --        --
   Foreign exchange contracts............    154,212    --      --       665
   Forward contracts on mortgage loans...  2,305,700    --      --     8,165
   Mortgage loan commitments.............    562,567    --      --      (479)
   Options on mortgage lending
    commitments..........................     60,000    --      --       (97)
                                          ----------                  ------
   Total................................. $3,361,296                  $8,667
                                          ==========                  ======


CAPITAL ADEQUACY AND RESOURCES

   The maintenance of appropriate levels of capital is a management priority
and is monitored on an ongoing basis. BB&T's principal goals related to
capital are to provide an adequate return to shareholders while retaining a
sufficient base to support future growth and comply with all regulatory
standards.

   Total shareholders' equity was $5.4 billion at June 30, 2001, and $5.0
billion at December 31, 2000. BB&T's book value per common share at June 30,
2001, was $12.80 compared to $11.90 at December 31, 2000.

   Financial holding companies and their subsidiaries are subject to
regulatory requirements with respect to risk-based capital adequacy. Risk-
based capital ratios measure capital as a percentage of a combination of risk-
weighted balance sheet and off-balance sheet risk. The risk-weighted values of
both balance sheet and off-balance sheet items are determined in accordance
with risk factors specified by Federal regulatory pronouncements.

   Tier 1 capital (total shareholders' equity excluding unrealized gains or
losses on debt securities available for sale, net of tax effect, plus certain
mandatorily redeemable capital securities, less nonqualifying intangible
assets) is required to be at least 4% of risk-weighted assets, and total
capital (Tier 1 capital, a qualifying portion of the allowance for loan and
lease losses and qualifying subordinated debt) must be at least 8% of risk-
weighted assets, with one half of the minimum consisting of Tier 1 capital.

   In addition to the risk-based capital measures described above, regulators
have also established minimum leverage capital requirements for banking
organizations. This is the primary measure of capital adequacy used by BB&T's
management, and is calculated by dividing period-end Tier 1 capital by average
tangible assets for the most recent quarter. The minimum required Tier 1
leverage ratio ranges from 3% to 5% depending upon Federal bank regulatory
agency evaluation of an organization's overall safety and soundness.

                                      22


   BB&T's capital adequacy ratios at the end of the last five quarters are
presented in the accompanying table:

                            CAPITAL ADEQUACY RATIOS



                                            2001                2000
                                       --------------- -----------------------
                                       Second   First  Fourth   Third  Second
                                       Quarter Quarter Quarter Quarter Quarter
                                       ------- ------- ------- ------- -------
                                                        
   Risk-based capital ratios:
     Tier 1 capital...................   9.5%    9.3%    9.4%    9.5%   10.1%
     Total capital....................  11.9    11.9    12.1    12.2    12.9
   Tier 1 leverage ratio..............   7.1     6.9     7.2     7.0     7.3


ANALYSIS OF RESULTS OF OPERATIONS

   Net income for the second quarter of 2001 totaled $230.8 million, an
increase of 32.6% compared to the $174.1 million earned during the comparable
quarter of 2000. On a diluted per share basis, earnings for the three months
ended June 30, 2001, were $.54, compared to $.41 for the same period in 2000,
an increase of 31.7%. BB&T's operating results for the second quarter of 2001
produced an annualized return on average assets of 1.45% and an annualized
return on average shareholders' equity of 17.66% compared to prior year ratios
of 1.22% and 15.70%, respectively.

   BB&T incurred significant special expenses, charges, income and securities
losses related principally to the consummation of mergers and acquisitions
during both 2001 and 2000, which significantly affected net income during both
years. For the second quarter of 2001, BB&T recorded $24.3 million in net
after-tax special charges primarily associated with the merger of Century
South Banks, Inc. of Alpharetta, Georgia, and systems conversion costs related
to other mergers. During the second quarter of 2000, BB&T incurred $46.1
million in after-tax special charges primarily associated with the
acquisitions of Premier Bancshares, Inc., of Atlanta, Georgia; Hardwick
Holding Company of Dalton, Georgia; First Banking Company of Southeast
Georgia, Statesboro, Georgia, as well as losses incurred in restructuring the
company's debt securities portfolio. Merger-related charges typically include,
but are not limited to, personnel-related expenses such as staff relocation,
early retirement packages and contract settlements; occupancy, furniture and
equipment expenses including branch consolidation; and other costs, such as
operational charge-offs, professional fees, etc.

   Excluding the effect of the above-described special items on 2001 and 2000
operating results, BB&T's net income for the second quarter of 2001 would have
totaled $255.1 million, an increase of 15.9% over the $220.2 million that
would have been earned during the second quarter of 2000. On a diluted per
share basis, earnings for the three months ended June 30, 2001, excluding
merger charges, were $.60, compared to $.52 for the same period in 2000, an
increase of 15.4%. BB&T's operating results for the first quarter of 2001,
excluding the items described above, produced an annualized return on average
assets of 1.60% and an annualized return on average shareholders' equity of
19.52% compared to prior year ratios of 1.54% and 19.85%, respectively.

   For the six months ended June 30, 2001, BB&T incurred $49.3 million in net
after-tax special charges related to the mergers with Century South Banks,
Inc. and FCNB Corp. of Frederick, Maryland, as well as a one-time gain from
the sale of the Company's investment in an electronic payment processing
company. During the first six months of 2000, BB&T incurred $65.8 million in
after-tax merger-related charges associated primarily with the 2000
acquisitions noted above and the bond portfolio restructuring.

   FTE net interest income increased 6.6% during the second quarter and 6.2%
for the six months of 2001 compared to the 2000 periods due to growth in
average earning assets, partially offset by a decline in the net yield on
interest-earning assets. Fluctuations in net interest income, noninterest
income and noninterest expenses will be further discussed in the following
paragraphs.

                                      23


   The following table sets forth selected financial ratios for the last five
calendar quarters:

                            PROFITABILITY MEASURES



                                            2001                2000
                                       --------------- -----------------------
                                       Second   First  Fourth   Third  Second
                                       Quarter Quarter Quarter Quarter Quarter
                                       ------- ------- ------- ------- -------
                                                        
   Return on average assets...........   1.45%   1.43%   1.45%  0.40%    1.22%
   Return on average equity...........  17.66   17.73   18.52   5.01    15.70
   Net interest margin................   4.10    4.10    4.18   4.17     4.21
   Fee income ratio (taxable
    equivalent)*......................   34.4    32.9    31.1   31.3     31.0
   Efficiency ratio (taxable
    equivalent)*......................   51.4    51.1    49.9   51.9     53.6

--------
*  Excludes securities gains (losses), foreclosed property expense and special
   items.

Net Interest Income and Net Interest Margin

   Net interest income on an FTE basis was $601.6 million for the second
quarter of 2001 compared to $564.6 million for the same period in 2000, an
increase of $37.0 million, or 6.6%. For the three months ended June 30, 2001,
average earning assets increased $5.0 billion, or 9.3%, compared to the same
period of 2000, while average interest-bearing liabilities increased by $5.3
billion, or 11.3%, and the net interest margin decreased from 4.21% in the
second quarter of 2000 to 4.10% in the current quarter. The 11 basis point
decline in the net interest margin resulted primarily from increased
investments in bank owned life insurance, which add to funding costs but
produce revenue that is classified as noninterest income, and BB&T's share
repurchase program.

   For the six months ended June 30, 2001, FTE net income income increased
6.2%. Average interest earning assets for the six months ended June 30, 2001,
increased $5.1 billion, or 9.6%, while interest-bearing liabilities increased
$5.4 billion, or 11.6%, compared to the first half of 2000. The net interest
margin for the six months ended June 30, 2001, was 4.10%, down from 4.23% in
the first six months of 2000. The decrease resulted from the same factors that
affected the quarterly margin.

                                      24


 The following tables set forth the major components of net interest income
and the related yields for the second quarter and first half of 2001 compared
to the same periods in 2000, and the variances between the periods caused by
changes in interest rates versus changes in volumes.

 Net Interest Income and Rate/Volume Analysis For the Three Months Ended June
                               30, 2001 and 2000



                               Average Balances     Yield/Rate      Income/Expense                 Change due to
                            ----------------------- ------------  -------------------            ------------------
Fully Taxable Equivalent--                                                             Increase
  (Dollars in thousands)       2001        2000     2001   2000     2001      2000    (Decrease)   Rate     Volume
--------------------------  ----------- ----------- -----  -----  --------- --------- ---------- --------  --------
                                                                                
Assets
Securities(1):
 U.S. Treasury, government
 and other (5)............  $13,419,692 $13,034,611  7.20%  6.66% $ 241,676 $ 216,884  $ 24,792  $ 18,281  $  6,511
 States and political
 subdivisions.............    1,000,489   1,040,155  7.50   7.48     18,763    19,454      (691)       49      (740)
                            ----------- ----------- -----  -----  --------- ---------  --------  --------  --------
 Total securities (5).....   14,420,181  14,074,766  7.17   6.72    260,439   236,338    24,101    18,330     5,771
Other earning assets (2)..      317,206     359,098  4.58   6.82      3,619     6,088    (2,469)   (1,830)     (639)
Loans and leases, net of
unearned income
(1)(3)(4)(5)..............   43,982,044  39,268,042  8.59   9.33    942,418   911,624    30,794   (75,983)  106,777
                            ----------- ----------- -----  -----  --------- ---------  --------  --------  --------
 Total earning assets.....   58,719,431  53,701,906  8.23   8.63  1,206,476 1,154,050    52,426   (59,483)  111,909
                            ----------- ----------- -----  -----  --------- ---------  --------  --------  --------
 Non-earning assets.......    5,302,007   3,730,089
                            ----------- -----------
   Total assets...........  $64,021,438 $57,431,995
                            =========== ===========

Liabilities and
Shareholders' Equity
Interest-bearing deposits:
 Savings and interest-
 checking.................  $ 2,585,498 $ 3,297,466  1.52   1.76      9,766    14,420    (4,654)   (1,803)  ( 2,851)
 Money rate savings.......   12,042,107   9,984,073  2.79   3.56     83,804    88,363    (4,559)  (21,082)   16,523
 Time deposits............   21,092,464  19,437,476  5.72   5.70    300,799   275,309    25,490     1,135    24,355
                            ----------- ----------- -----  -----  --------- ---------  --------  --------  --------
 Total interest-bearing
 deposits.................   35,720,069  32,719,015  4.43   4.65    394,369   378,092    16,277   (21,750)   38,027
Short-term borrowed
funds.....................    5,518,060   7,146,093  4.25   5.99     58,465   106,510   (48,045)  (27,041)  (21,004)
Long-term debt............   10,877,561   6,945,887  5.60   6.06    152,050   104,890    47,160    (8,609)   55,769
                            ----------- ----------- -----  -----  --------- ---------  --------  --------  --------
 Total interest-bearing
 liabilities..............   52,115,690  46,810,995  4.65   5.06    604,884   589,492    15,392   (57,400)   72,792
                            ----------- ----------- -----  -----  --------- ---------  --------  --------  --------
 Noninterest-bearing
 deposits.................    5,340,196   5,365,422
 Other liabilities........    1,323,553     794,438
 Shareholders' equity.....    5,241,999   4,461,140
                            ----------- -----------
 Total liabilities and
 shareholders' equity.....  $64,021,438 $57,431,995
                            =========== ===========
Average interest rate
spread....................                           3.58   3.57
Net yield on earning
assets....................                           4.10%  4.21% $ 601,592 $ 564,558  $ 37,034  $ (2,083) $ 39,117
                                                    =====  =====  ========= =========  ========  ========  ========
Taxable equivalent
adjustment................                                        $  53,080 $  24,859
                                                                  ========= =========

----
(1) Yields related to securities, loans and leases exempt from income taxes
    are stated on a taxable equivalent basis assuming tax rates in effect for
    the periods presented.
(2) Includes Federal funds sold and securities purchased under resale
    agreements or similar arrangements.
(3) Loan fees, which are not material for any of the periods shown, have been
    included for rate calculation purposes.
(4) Nonaccrual loans have been included in the average balances. Only the
    interest collected on such loans has been included as income.
(5) Includes assets which were held for sale or available for sale at
    amortized cost and trading securities at estimated fair value.

                                       25


 Net Interest Income and Rate / Volume Analysis For the Six Months Ended June
                               30, 2001 and 2000



                               Average Balances     Yield/Rate       Income/Expense                 Change due to
                            ----------------------- ------------  ---------------------            ----------------
Fully Taxable Equivalent--                                                               Increase
  (Dollars in thousands)       2001        2000     2001   2000      2001       2000    (Decrease)  Rate    Volume
--------------------------  ----------- ----------- -----  -----  ---------- ---------- ---------- -------  -------
                                                                                 
Assets
Securities(1):
 U.S. Treasury, government
 and other (5)............  $13,462,405 $12,976,899  7.25%  6.62% $  488,271 $  429,502  $58,769   $42,358  $16,411
 States and political
 subdivisions.............    1,015,649   1,053,167  7.40   7.53      37,556     39,650   (2,094)     (706)  (1,388)
                            ----------- ----------- -----  -----  ---------- ----------  -------   -------  -------
 Total securities (5).....   14,478,054  14,030,066  7.26   6.69     525,827    469,152   56,675    41,652   15,023
Other earning assets (2)..      326,652     397,569  5.22   6.25       8,451     12,357   (3,906)   (1,891)  (2,015)
Loans and leases, net of
unearned income
(1)(3)(4)(5)..............   43,457,795  38,740,170  8.88   9.21   1,917,121  1,775,459  141,662   (63,376) 205,038
                            ----------- ----------- -----  -----  ---------- ----------  -------   -------  -------
 Total earning assets.....   58,262,501  53,167,805  8.46   8.52   2,451,399  2,256,968  194,431   (23,615) 218,046
                            ----------- ----------- -----  -----  ---------- ----------  -------   -------  -------
 Non-earning assets.......    5,199,966   3,643,742
                            ----------- -----------
   Total assets...........  $63,462,467 $56,811,547
                            =========== ===========

Liabilities and
Shareholders' Equity
Interest-bearing deposits:
 Savings and interest-
 checking.................  $ 2,641,991 $ 3,396,733  1.64   1.82      21,495     30,773   (9,278)   (2,910)  (6,368)
 Money rate savings.......   11,739,360   9,844,975  3.16   3.48     183,727    170,228   13,499   (16,702)  30,201
 Time deposits............   20,753,287  19,210,761  5.90   5.55     607,570    530,045   77,525    35,137   42,388
                            ----------- ----------- -----  -----  ---------- ----------  -------   -------  -------
 Total interest-bearing
 deposits.................   35,134,638  32,452,469  4.67   4.53     812,792    731,046   81,746    15,525   66,221
Short-term borrowed
funds.....................    5,994,985   7,282,625  4.93   5.73     146,455    207,648  (61,193)  (27,357) (33,836)
Long-term debt............   10,616,315   6,647,988  5.69   5.91     300,288    195,926  104,362    (7,622) 111,984
                            ----------- ----------- -----  -----  ---------- ----------  -------   -------  -------
 Total interest-bearing
 liabilities..............   51,745,938  46,383,082  4.91   4.92   1,259,535  1,134,620  124,915   (19,454) 144,369
                            ----------- ----------- -----  -----  ---------- ----------  -------   -------  -------
 Noninterest-bearing
 deposits.................    5,225,668   5,231,789
 Other liabilities........    1,326,266     790,910
 Shareholders' equity.....    5,164,595   4,405,766
                            ----------- -----------
 Total liabilities and
 shareholders' equity.....  $63,462,467 $56,811,547
                            =========== ===========
Average interest rate
spread....................                           3.55   3.60
Net yield on earning
assets....................                           4.10%  4.23% $1,191,864 $1,122,348  $69,516   $(4,161) $73,677
                                                    =====  =====  ========== ==========  =======   =======  =======
Taxable equivalent
adjustment................                                        $  101,683 $   49,309
                                                                  ========== ==========

----
(1) Yields related to securities, loans and leases exempt from income taxes
    are stated on a taxable equivalent basis assuming tax rates in effect for
    the periods presented.
(2) Includes Federal funds sold and securities purchased under resale
    agreements or similar arrangements.
(3) Loan fees, which are not material for any of the periods shown, have been
    included for rate calculation purposes.
(4) Nonaccrual loans have been included in the average balances. Only the
    interest collected on such loans has been included as income.
(5) Includes assets which were held for sale or available for sale at
    amortized cost and trading securities at estimated fair value.

                                       26


Noninterest Income

   Noninterest income for the three months ended June 30, 2001, was $333.2
million compared to $212.8 million for the same period in 2000, an increase of
$120.4 million, or 56.6%. This increase was driven by substantially higher
mortgage banking income, growth in service charges on deposits, increased
trust revenue, growth in insurance commissions from BB&T's agency network, as
well as a gain from the sale of the Company's investment in an electronic
payment processing company. Excluding special items of the type described
above and the growth in noninterest income that resulted from the timing of
purchase accounting transactions, noninterest income would have increased
19.6% in the second quarter of 2001 compared to the second quarter of 2000.
For the six months, noninterest income was $652.1 million, an increase of
$197.1 million, or 43.3%, compared to the same period in 2000. Excluding
special items and growth due to purchase accounting transactions, noninterest
income would have increased 17.0% for the period end June 30, 2001.

   Noninterest income, excluding special items, as a percentage of net
interest income plus noninterest income excluding special items, or the "fee
income ratio", was 34.4% for the second quarter of 2001, compared to 31.0% in
the second quarter of 2000. This increase indicates that BB&T is deriving a
greater percentage of its revenues from noninterest income sources.

   Service charges on deposits totaled $83.9 million for the second quarter of
2001, an increase of $16.1 million, or 23.8%, compared to the second quarter
of 2000. For the six months, service charges on deposits totaled $159.4
million, an increase of $28.3 million, or 21.6%, compared to the first six
months of 2000. The largest components of the growth within service charges on
deposits in the 2001 period were NSF and overdraft charges on personal and
commercial accounts, which contributed $8.8 million to the increase in the
second quarter of 2001 compared to 2000, as well as higher transaction volume.
Account analysis fees on commercial transaction accounts contributed $5.4
million. BankFirst Corporation of Knoxville, Tennessee ("BankFirst"), was
acquired and accounted for as a purchase on December 27, 2000, which
contributed $1.2 million to the increase in service charges on deposits in the
second quarter of 2001 compared to the prior year quarter. Additionally,
FirstSpartan was acquired and accounted for as a purchase on March 2, 2001,
and contributed .7 million. The 21.6% increase in service charges on deposits
for the six months of 2001 was driven by the same factors that affected
quarterly growth.

   Trust income totaled $23.0 million for the current quarter, an increase of
$3.4 million, or 17.1%, compared to the same period a year ago. For the six
months, trust income totaled $47.1 million, an increase of $8.8 million, or
22.8%, compared to the same period in 2000. The increase in trust income for
both the quarter and the six months reflects healthy growth in personal and
corporate trust fees compared to 2000. Assets under management totaled $15.5
billion at June 30, 2001, up from $14.6 billion at June 30, 2000.

   Investment banking and brokerage fees and commissions totaled $42.6 million
during the second quarter of 2001, an increase of $.9 million, or 2.2%,
compared to the second quarter of 2000. For the six months, investment banking
and brokerage fees and commissions totaled $85.9 million, a decrease of $1.7
million, or 1.9%, compared to the same period in 2000. The increase in income
for the second quarter resulted primarily from revenue generated by Edgar M.
Norris & Co., an independent broker/dealer based in Greenville, South
Carolina, which was purchased on November 15, 2000. This acquisition was
accounted for as a purchase; therefore its operating results were only
included in BB&T's accounts in periods following the acquisition. The decrease
in year to date income resulted from a decline in trading income and fee
income at BB&T's full-service brokerage operation.

   Agency insurance commissions totaled $42.8 million for the second quarter
of 2001, an increase of $10.2 million, or 31.4%, compared to the same three-
month period of 2000. For the six months, agency insurance commissions totaled
$82.3 million, an increase of $18.1 million, or 28.3%, compared to the same
period in 2000. This substantial growth in revenue resulted from the purchase
of additional agencies during 2000 and 2001, as well as internal growth.
During the second quarter of 2001, property and casualty insurance commissions
increased $5.6 million, contingent insurance commissions, group health, surety
and other miscellaneous fees and

                                      27


commissions increased a collective $4.6 million. The 28.3% increase in agency
insurance commissions for the six months of 2001 was driven by the same
factors that affected quarterly growth.

   Income from mortgage banking activities totaled $49.8 million for the
second quarter of 2001, an increase of $24.6 million, or 97.7%, compared to
the same period of 2000. For the six months, mortgage banking activities
totaled $55.0 million, an increase of $2.5 million, or 4.8%, compared to the
same period in 2000. This increase resulted from higher volumes of mortgage
loan originations in 2001 as a result of lower interest rates, and the
recapture of $5.9 million in valuation allowances related to capitalized
mortgage servicing rights. Additionally, servicing fee income increased $1.7
million; origination fees on loans sold increased $2.4 million; mortgage loan
wholesale and underwriting fees increased $2.4 million; commercial loan
servicing income increased $3.5 million; and gains from loan sales increased
$9.5 million.

   Other nondeposit fees and commissions totaled $44.5 million for the second
quarter of 2001, an increase of $7.7 million, or 20.8%, compared to the three
months ended June 30, 2000. For the six months, other nondeposit fees and
commissions totaled $85.9 million, an increase of $15.8 million, or 22.5%,
compared to the same period in 2000. The principal drivers of the increase
were: higher income from the outsourcing of official checks, which added $5.1
million to revenue for the quarter; ATM network fees and debit card income,
which increased $1.6 million; commercial standby letter of credit fees, which
increased $.7 million; and bankcard income, which increased $.4 million. The
22.5% increase in other nondeposit fees and commissions for the six months of
2001 was driven by the same factors that affected quarterly growth.

   BB&T realized a $16.8 million gain from sales of securities in the second
quarter of 2001 compared to a loss of $41.1 million in the second quarter last
year. For the six months, BB&T recorded an $88.8 million gain in 2001,
compared to a loss of $41.1 million in 2000. The 2001 gain includes a $76.1
million gain from the sale of BB&T's ownership interest in an electronic
payment processing company. The loss recorded in 2000 includes $40.8 million
related to the previously discussed restructuring.

   Other income totaled $26.4 million in the second quarter of 2001 and 2000,
reflecting minimal change. For the six months ended 2001 and 2000, other
income totaled $41.4 million and $45.1 million, respectively.

Noninterest Expense

   Noninterest expenses totaled $518.7 million for the second quarter of 2001
compared to $465.6 million for the same period a year ago, an increase of
$53.1 million, or 11.4%. Noninterest expense for the second quarter of 2001
includes $45.2 million of special expenses principally associated with the
acquisition of Century South and costs to integrate other acquisitions.
Excluding these costs, noninterest expenses would have totaled $473.5 million,
an increase of $33.8 million, or 7.7%, over the same period one year ago.
Excluding the effects of business combinations accounted for as purchases that
were completed in the second half of 2000 and first half of 2001, and the
aforementioned special expenses, noninterest expenses for the second quarter
of 2001 would have increased 1.8% from the comparable period of 2000. For the
six months ended June 30, 2001, noninterest expenses totaled $1.0 billion, an
increase of $96.1 million, or 10.4%, over the same period one year ago.
Noninterest expense for the first six months of 2001 includes $99.0 million of
special merger-related charges. Excluding these costs, noninterest expenses
would have totaled $924.0 million, an increase of $53.6 million, or 6.2%, over
the first half of 2000. Excluding the effects of business combinations
accounted for as purchases and the effect of special charges, noninterest
expenses for the first half of 2001 would have actually increased .9% from the
comparable period of 2000.

   BB&T's efficiency ratio (noninterest expenses, excluding the special
expenses referred to above and costs related to foreclosed assets, as a
percentage of FTE net interest income plus noninterest income excluding
special items and securities gains and losses) improved to 51.4% for the
second quarter of 2001 compared to 53.6% for the second quarter of 2000. For
the six months, the efficiency ratio improved to 51.3% compared to 53.7% in
2000.

                                      28


   Personnel expense, the largest component of noninterest expense, was $274.3
million for the second quarter of 2001 compared to $241.8 million for the same
period in 2000, an increase of $32.5 million, or 13.4%. These amounts include
merger-related costs of $13.7 million in the second quarter of 2001 and $6.8
million in the second quarter of 2000. Excluding the merger-related charges,
personnel expense in the 2001 quarter would have increased $25.6 million, or
10.9%, from the 2000 period. This growth included the effect of acquisitions
completed in the last two quarters of 2000 and first two quarters of 2001 that
were accounted for as purchases. Excluding the effects of the merger-related
charges and purchase acquisitions, personnel expense for the second quarter of
2001 would have increased $13.4 million, or 5.7%, over the second quarter of
2000. This increase was primarily the result of a 4% average annual salary
adjustment for exempt and non-exempt employees, an increase of approximately
300 full-time equivalent employees compared to 2000, higher mortgage loan
incentive compensation resulting from significantly higher volumes of mortgage
loan originations, and higher social security taxes. For the six months,
personnel expense totaled $540.7 million, an increase of $54.8 million, or
11.3%, compared to 2000. Excluding merger-related charges, personnel expense
for the first half of 2001 would have increased $42.5 million, or 9.0%,
compared to 2000. Excluding merger-related charges and purchase accounting
transactions, personnel expense would have increased only 4.1% for the reasons
outlined above.

   Occupancy and equipment expense for the three months ended June 30, 2001,
totaled $73.2 million, an increase of $5.2 million, or 7.7%, compared to 2000.
These amounts include merger-related charges of $3.4 million in the second
quarter of 2001 and $3.0 million in the second quarter of 2000. Excluding the
merger-related charges, occupancy and equipment expense would have been $69.8
million, an increase of $4.8 million, or 7.4%, compared to the same period in
2000. This growth included the effect of acquisitions completed in the last
two quarters of 2000 and first two quarters of 2001 that were accounted for as
purchases. Excluding the effects of the merger-related charges and purchase
acquisitions, occupancy and equipment expense for the second quarter of 2001
would have increased $2.3 million, or 3.5%, over the second quarter of 2000.
The increase was principally the result of higher rent expense and an increase
in information technology equipment expense. For the six months, occupancy and
equipment expense totaled $150.5 million, an increase of $11.6 million, or
8.3%, compared to 2000. These amounts include merger-related charges of $10.8
million and $8.6 million for 2001 and 2000, respectively. Excluding the
merger-related charges, occupany and equipment expense would have been $139.7
million and $130.2 million for 2001 and 2000, respectively, reflecting growth
of 7.2%. This growth included the effect of acquisitions completed in the last
two quarters of 2000 and first two quarters of 2001 that were accounted for as
purchases. Excluding the effects of the merger-related charges and purchase
acquisitions, occupancy and equipment expense for the six months of 2001 would
have increased $4.7 million, or 3.6%, over the six months of 2000.

   The amortization of intangible assets totaled $17.7 million for the three
months ended June 30, 2001, an increase of $2.0 million, or 12.4%, from the
amount incurred in the second quarter of 2000. For the six months,
amortization of intangible assets totaled $35.0 million, an increase of $3.4
million, or 10.9%, compared to 2000. This increase is primarily due to the
acquisitions of BankFirst in the fourth quarter of 2000, FirstSpartan in the
first quarter of 2001 and VCAP in the second quarter, consummated using
purchase accounting. These acquisitions added $128.2 million in goodwill,
which is being amortized over 15 years.

   Other noninterest expenses for the second quarter of 2001 totaled $153.4
million, an increase of $13.4 million, or 9.6%, compared to 2000. These
amounts include merger-related costs of $28.0 million in the second quarter of
2001 and $16.0 million in the second quarter of 2000. Excluding these costs,
other noninterest expenses for the three months ended June 30, 2001 would have
been $125.4 million, an increase of $1.4 million, or 1.1%, from the comparable
2000 period. This increase is due to amortization of mortgage servicing
rights, which increased $5.4 million, and the acquisitions of FirstSpartan and
BankFirst, consummated using purchase accounting, which generated a collective
increase of $2.3 million. Offsets to this increase include reductions in
expenses relating to advertising, public relations and professional services,
which decreased a collective $6.5 million. For the six months ended 2001,
other noninterest expenses totaled $296.8 million, an increase of $26.3
million, or 9.7%, over 2000. These amounts include merger-related charges of
$62.5 million for 2001, and $34.4 million for 2000. Excluding these costs,
other noninterest expenses for the six months ended June 30, 2001, would have
been $234.2 million, a decrease of $2.3 million from the comparable 2000
period.

                                      29


Provision for Income Taxes

   The provision for income taxes totaled $88.3 million for the second quarter
of 2001, an increase of $4.6 million, or 5.5%, compared to the second quarter
of 2000. For the first six months of 2001, the provision for income taxes
totaled $181.2 million, an increase of $5.6 million, or 3.2%, compared to
2000. Excluding the tax benefits associated with merger-related charges and
other special items from all periods presented, the provision for income taxes
would have been $101.2 million during the second quarter and $205.7 million
for the six months ended June 30, 2001. These amounts represent a decrease of
$6.9 million, or 6.4%, compared to the second quarter of 2000, and a decrease
of $6.9 million, or 3.3%, compared to the first six months of 2000. The
effective tax rates on pretax income were 27.7% and 32.5% for the three months
ended June 30, 2001 and 2000, respectively, and 28.6% and 32.2% for the six
months of 2001 and 2000, respectively. Excluding the effect of merger-related
charges and other special items on pretax income and the income tax provision,
BB&T's effective income tax rates were 28.4% and 32.9% for the three months
ended June 30, 2001 and 2000, respectively, and 29.0% and 32.8% for the six
months of 2001 and 2000, respectively. During the first and second quarters of
2001, BB&T transferred responsibility for the management of certain operations
to a subsidiary in a tax-advantaged jurisdiction, thereby lowering the
effective income tax rate applicable to certain lease investments. In
accordance with SFAS No. 13, "Accounting for Leases", the net income from the
affected leases was recalculated from inception based on the new effective
income tax rate. The recalculation had the effect of reducing net interest
income and the tax provision for 2001, as reflected in the lower effective tax
rates. BB&T intends to permanently reinvest the earnings of this subsidiary
and, therefore, in accordance with the provisions of SFAS No. 109, "Accounting
for Income Taxes", deferred income taxes associated with the current year's
income tax benefit have not been provided.

                          PART II. OTHER INFORMATION

Item 1. Legal Proceedings

   The nature of the business of BB&T's banking subsidiaries ordinarily
results in a certain amount of litigation. The subsidiaries of BB&T are
involved in various legal proceedings, all of which are considered incidental
to the normal conduct of business. Management believes that the liabilities
arising from these proceedings will not have a materially adverse effect on
the consolidated financial position or consolidated results of operations of
BB&T.

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

   BB&T held its annual meeting of the shareholders on April 24, 2001, to
consider and vote upon the following matters:

  (1) To elect seven Directors for three-year terms expiring in 2004 and one
      Director for a two-year term expiring in 2003. Of shares represented by
      proxy, votes in favor were 311,503,546; and votes withheld were
      2,513,100.

  (2) To approve the Corporation's Amended and Restated 1996 Short-Term
      Incentive Plan. Of shares represented by proxy, votes in favor were
      293,081,788; votes opposed were 17,029,373; and abstentions were
      3,913,675.

  (3) To approve an amendment to the Corporation's Articles of Incorporation
      to increase its authorized Common Stock from 500,000,000 shares to
      1,000,000,000 shares. Of shares represented by proxy, votes in favor
      were 295,888,723; votes opposed were 14,822,637; and abstentions were
      3,319,755.

  (4) To ratify the reappointment of Arthur Andersen LLP as the Corporation's
      independent auditors for 2001. Of shares represented by proxy, votes in
      favor were 310,432,746; votes opposed were 1,644,416; and abstentions
      were 2,006,349.

                                      30


Item 6. Exhibits and Reports on Form 8-K

   (a)



  Exhibit
    No.                 Description                          Location
  -------               -----------                          --------
                                             
  2(a)     Agreement and Plan of Reorganization    Incorporated herein by
           dated as of July 29, 1994 and amended   reference to Registration
           and restated as of October 22, 1994     No. 33-56437.
           between the Registrant and BB&T
           Financial Corporation.

  2(b)     Plan of Merger as of July 29, 1994 as   Incorporated herein by
           amended and restated on October 22,     reference to Registration
           1994 between the Registrant and BB&T    No. 33-56437.
           Financial Corporation.

  2(c)     Agreement and Plan of Reorganization    Incorporated herein by
           dated as of November 1, 1996 between    reference to Exhibit 3(a)
           the Registrant and United Carolina      filed in the Annual Report
           Bancshares Corporation, as amended.     on Form 10-K, filed
                                                   March 17, 1997.

  2(d)     Agreement of Plan of Reorganization     Incorporated herein by
           dated as of October 29, 1997 between    reference to Registration
           the Registrant and Life Bancorp, Inc.   No. 33-44183.

  2(e)     Agreement and Plan of Reorganization    Incorporated herein by
           dated as of February 6, 2000 between    reference to Exhibit 99.1
           the Registrant and One Valley           filed in the Current Report
           Bancorp, Inc.                           on Form 8-K, dated February
                                                   9, 2000.

  3(a)(i)  Amended and Restated Articles of        Incorporated herein by
           Incorporation of the Registrant, as     reference to Exhibit 3(a)
           amended.                                filed in the Annual Report
                                                   on Form 10-K, filed
                                                   March 17, 1997.

  3(a)(ii) Articles of Amendment of Articles of    Incorporated herein by
           Incorporation.                          reference to Exhibit
                                                   3(a)(ii) filed in the Annual
                                                   Report on Form 10-K, filed
                                                   March 18, 1998.

  3(b)     Bylaws of the Registrant, as amended.   Incorporated herein by
                                                   reference to Exhibit 3(b)
                                                   filed in the Annual Report
                                                   on Form 10-K, filed
                                                   March 18, 1998.

  4(a)     Articles of Amendment to Amended and    Incorporated herein by
           Restated Articles of Incorporation of   reference to Exhibit 3(a)
           the Registrant related to Junior        filed in the Annual Report
           Participating Preferred Stock.          on Form 10-K, filed
                                                   March 17, 1997.

  4(b)     Rights Agreement dated as of December   Incorporated herein by
           17, 1996 between the Registrant and     reference to Exhibit 1 filed
           Branch Banking and Trust Company,       under Form 8-A, filed
           Rights Agent.                           January 10, 1997.

  4(c)     Subordinated Indenture (including       Incorporated herein by
           Form of Subordinated Debt Security)     reference to Exhibit 4(d) of
           between the Registrant and State        Registration No. 333-02899.
           Street Bank and Trust Company,
           Trustee, dated as of May 24, 1996.

  4(d)     Senior Indenture (including Form of     Incorporated herein by
           Senior Debt Security) between the       reference to Exhibit 4(c) of
           Registrant and State Street Bank and    Registration No. 333-02899.
           Trust company, Trustee, dated as of
           May 24, 1996.



                                       31




 Exhibit
   No.                 Description                           Location
 -------               -----------                           --------
                                             
 10(a)*  Death Benefit Only Plan, Dated April      Incorporated herein by
         23, 1990, by and between Branch Banking   reference to Registration
         and Trust Company (as successor to        No. 33-33984.
         Southern National Bank of North
         Carolina)
         and L. Glenn Orr, Jr.

 10(b)*  BB&T Corporation Non-Employee             Incorporated herein by
         Directors' Deferred Compensation and      reference to Exhibit 10(b)
         Stock Option Plan.                        of the Annual Report on Form
                                                   10-K, filed March 17, 1997.

 10(c)*  BB&T Corporation 1994 Omnibus Stock       Incorporated herein by
         Incentive Plan.                           reference to Registration
                                                   No. 33-57865.

 10(d)*  Settlement and Non-Compete Agreement,     Incorporated herein by
         dated February 28, 1995, by and between   reference to Registration
         the Registrant and L. Glenn Orr, Jr.      No. 33-56437.

 10(e)*  Settlement Agreement, Waiver and          Incorporated herein by
         General Release dated September 19,       reference to Registration
         1994, by and between the Registrant,      No. 33-56437.
         Branch Banking and Trust Company (as
         successor to Southern National Bank of
         North Carolina) and Gary E. Carlton.

 10(f)   BB&T Corporation 401(k) Savings Plan      Incorporated herein by
         (amended effective January 1, 2000).      reference to Exhibit 10(f)
                                                   in BB&T Corporation's Annual
                                                   Report on Form 10-K filed on
                                                   March 16, 2001.

 10(g)*  BB&T Corporation 1995 Omnibus Stock       Incorporated herein by
         Incentive Plan.                           reference to Exhibit 10(g)
                                                   filed in the Annual Report
                                                   on Form 10-K, filed
                                                   March 17, 1997.

 10(h)*  Form of Branch Banking and Trust          Incorporated by reference to
         Company Long-Term Incentive Plan.         the identified exhibit under
                                                   the Quarterly Report on Form
                                                   10-Q, filed May 14, 1991.

 10(i)*  Form of Branch Banking and Trust          Incorporated by reference to
         Company Executive Incentive               the identified exhibit under
         Compensation Plan.                        the Annual Report on Form
                                                   10-K, filed February 22,
                                                   1985.

 10(j)*  Southern National Deferred Compensation   Incorporated herein by
         Plan for Key Employees.                   reference to Exhibit 10(j)
                                                   filed in the Annual Report
                                                   on Form 10-K, filed
                                                   March 17, 1997.

 10(k)*  BB&T Corporation Target Pension Plan.     Incorporated herein by
                                                   reference to Exhibit 10(k)
                                                   filed in the Annual Report
                                                   on Form 10-K, filed
                                                   March 17, 1997.

 10(l)*  BB&T Corporation Supplemental Executive   Incorporated herein by
         Retirement Plan.                          reference to Exhibit 10(l)
                                                   filed in the Annual Report
                                                   on Form 10-K, filed
                                                   March 17, 1997.



                                       32




 Exhibit
   No.                 Description                           Location
 -------               -----------                           --------
                                             
 10(m)*  Settlement and Noncompetition             Incorporated herein by
         Agreement, dated July 1, 1997, by and     reference to Exhibit 10(m)
         between the Registrant and E. Rhone       filed in the Annual Report
         Sasser.                                   on Form 10-K, filed
                                                   March 18, 1998.

 10(n)*  BB&T Corporation Supplemental Defined     Incorporated herein by
         Contribution Plan for Highly              reference to Registration
         Compensated Employees.                    No. 333-69823.

 10(o)*  Scott & Stringfellow, Inc. Executive      Incorporated herein by
         and Employee Retention Plan.              reference to Registration
                                                   No. 333-81471.

 10(p)*  BB&T Corporation Non-Qualified Defined    Incorporated herein by
         Contribution Plan.                        reference to Registration
                                                   No. 333-50035.

 10(q)*  BB&T Corporation Amended and Restated     Incorporated herein by
         1996 Short-term Incentive Plan.           reference to Exhibit 10(q)
                                                   in BB&T Corporation's
                                                   Quarterly Report on Form 10-
                                                   Q filed on May 11, 2001.

 10(r)*  Amendment to 1995 Omnibus Stock           Incorporated herein by
         Incentive Plan.                           reference to Registration
                                                   No. 333-36540.

 10(s)*  Employment Agreement dated February 6,    Incorporated herein by
         2000, by and between the Registrant and   reference to Exhibit 10(s)
         J. Holmes Morrison.                       in BB&T Corporation's Annual
                                                   Report on Form 10-K filed on
                                                   March 16, 2001.

 10(t)   BB&T Corporation Pension Plan (amended    Incorporated herein by
         effective January 1, 2000).               reference to Exhibit 10(t)
                                                   in BB&T Corporation's Annual
                                                   Report on Form 10-K filed on
                                                   March 16, 2001.

 10(u)*  Amendment to BB&T Corporation             Incorporated herein by
         Nonqualified Defined Contribution Plan.   reference to Exhibit 10(u)
                                                   in BB&T Corporation's Annual
                                                   Report on Form 10-K filed on
                                                   March 16, 2001.

 10(v)*  Amendment to BB&T Corporation Non-        Incorporated herein by
         Employee Directors' Deferred              reference to Exhibit 10(v)
         Compensation and Stock Option Plan.       in BB&T Corporation's Annual
                                                   Report on Form 10-K filed on
                                                   March 16, 2001.

 10(w)*  Amendment to the BB&T Corporation         Incorporated herein by
         Supplemental Defined Contribution Plan    reference to Exhibit 10(w)
         for Highly Compensated Employees.         in BB&T Corporation's Annual
                                                   Report on Form 10-K filed on
                                                   March 16, 2001.

 11      Statement re Computation of Earnings      Filed herewith as Note E.
         Per Share.

 22      Proxy Statement for the 2001 Annual       Incorporated herein by
         Meeting of Shareholders.                  reference to BB&T
                                                   Corporation's Proxy
                                                   Statement filed on March 16,
                                                   2001.

--------
*  Management compensatory plan or arrangement.

                                       33


   (b) Current Reports on Form 8-K during and following the quarter ended June
30, 2001.

     On April 11, 2001, BB&T filed a Current Report on Form 8-K under Item 5
  to report the results of operations for the first quarter of 2001. On April
  27, 2001, BB&T filed a Current Report on Form 8-K under Item 5 to report
  BB&T's operations and financial condition restated for the accounts of FCNB
  Corp., which merged into BB&T on January 8, 2001. On July 10, 2001, BB&T
  filed a Current Report on Form 8-K under Item 5 to announce that BB&T had
  entered into a definitive agreement to acquire Community First Banking
  Company of Carrollton, Georgia, and to file certain presentation material
  related to this transaction. On July 12, 2001, BB&T filed a Current Report
  on Form 8-K under Item 5 to report the results of operations for the second
  quarter of 2001. On July 25, 2001, BB&T filed a Current Report on Form 8-K
  under Item 5, which was amended on July 27, 2001, to report BB&T's results
  of operations and financial condition restated for the accounts of Century
  South Banks, Inc., which merged into BB&T on June 7, 2001. On July 31,
  2001, BB&T filed a Current Report on Form 8-K under Item 5 to announce a
  public offering of debt securities and to file the related underwriting
  agreement.

                                      34


                                   SIGNATURES

   Pursuant to 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.

                                          BB&T CORPORATION
                                              (Registrant)


Date: August 13, 2001                              /s/ Scott E. Reed
  ___________________________             By: _________________________________
                                              Scott E. Reed, Senior Executive
                                                  Vice President and Chief
                                                     Financial Officer

Date: August 13, 2001                            /s/ Sherry A. Kellett
  ___________________________             By: _________________________________
                                                 Sherry A. Kellett, Senior
                                                Executive Vice President and
                                              Controller (Principal Accounting
                                                          Officer)

                                       35