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:

September 30, 2003

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	27101
Winston-Salem, North Carolina	(Zip Code)
(Address of Principal Executive 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 [__]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ X ] No [__]

At October 31, 2003, 546,606,886 shares of the registrant's common stock, $5 par value, were outstanding.

This Form 10-Q has 58 pages. The Exhibit Index begins on page 50.

BB&T CORPORATION

FORM 10-Q

September 30, 2003

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 Condidion and Results of Operations	21

Analysis of Financial Condition	23

Market Risk Management	30

Capital Adequacy and Resources	35

Analysis of Results of Operations	36

Item 3. Quantitative and Qualitative Disclosures About Market Risk	49

Item 4. Controls and Procedures	49

Part II. OTHER INFORMATION

Item 1. Legal Proceedings	50

Item 6. Exhibits and Reports on Form 8-K	50

SIGNATURES	54

CERTIFICATIONS	55

BB&T Corporation Page 1 Third Quarter 2003 Form 10-Q

Item 1. Financial Statements

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)

	September 30,			December 31,
	2003			2002

Assets
Cash and due from banks	$	2,113,640		$	1,929,650
Interest-bearing deposits with banks		281,439			148,122
Federal funds sold and securities purchased under resale agreements or
similar arrangements		321,986			294,448
Trading securities at fair value		710,387			148,488
Securities available for sale at fair value		16,032,688			17,599,477
Securities held to maturity at amortized cost (fair value:$57,074 at September 30, 2003
and $55,512 at December 31, 2002)		57,076			55,523
Loans held for sale		1,419,173			2,377,707
Loans and leases, net of unearned income		59,753,304			51,140,306
Allowance for loan and lease losses		(791,527	)		(723,685	)

Loans and leases, net		58,961,777			50,416,621

Premises and equipment, net of accumulated depreciation		1,221,089			1,072,101
Goodwill		3,642,068			1,723,379
Core deposit and other intangible assets		422,716			148,824
Other assets		5,171,092			4,302,476

Total assets	$	90,355,131		$	80,216,816



Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing deposits	$	10,909,953		$	7,864,338
Savings and interest checking		4,217,404			3,071,551
Money rate savings		20,231,596			17,188,942
Certificates of deposit and other time deposits		25,936,345			23,155,185

Total deposits		61,295,298			51,280,016

Short-term borrowed funds		6,294,995			5,396,959
Long-term debt		9,837,910			13,587,841
Accounts payable and other liabilities		2,712,096			2,564,086

Total liabilities		80,140,299			72,828,902

Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares authorized, none issued or
outstanding at September 30, 2003 or at December 31, 2002		--			--
Common stock, $5 par, 1,000,000,000 shares authorized;
548,886,598 issued and outstanding at September 30, 2003, and
470,452,260 issued and outstanding at December 31, 2002		2,744,433			2,352,261
Additional paid-in capital		3,152,668			793,123
Retained earnings		4,180,674			3,912,320
Unvested restricted stock		(355	)		(499	)
Accumulated other comprehensive income, net of deferred income
taxes of $92,510 at September 30, 2003, and $208,008 at December 31, 2002		137,412			330,709

Total shareholders' equity		10,214,832			7,387,914

Total liabilities and shareholders' equity	$	90,355,131		$	80,216,816

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

BB&T Corporation Page 2 Third Quarter 2003 Form 10-Q

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,

	2003			2002			2003		2002

Interest Income
Interest and fees on loans and leases	$	920,451		$	881,761		$	2,609,083	$	2,582,257
Interest and dividends on securities		176,319			243,312			584,553		742,596
Interest on short-term investments		1,798			1,922			5,343		5,969

Total interest income		1,098,568			1,126,995			3,198,979		3,330,822


Interest Expense
Interest on deposits		184,168			254,248			584,297		772,037
Interest on short-term borrowed funds		14,651			24,140			43,809		77,053
Interest on long-term debt		93,291			146,515			368,817		442,343

Total interest expense		292,110			424,903			996,923		1,291,433


Net Interest Income		806,458			702,092			2,202,056		2,039,389
Provision for loan and lease losses		65,000			64,000			189,500		179,000

Net Interest Income After Provision for Loan and Lease Losses		741,458			638,092			2,012,556		1,860,389


Noninterest Income
Service charges on deposits		121,981			104,754			315,404		296,790
Mortgage banking income (loss)		117,463			(88,343	)		144,724		(30,261	)
Trust income		31,871			27,388			84,128		74,713
Investment banking and brokerage fees and commissions		65,306			47,912			177,309		156,844
Insurance commissions		103,592			80,401			293,750		225,818
Bankcard fees and merchant discounts		23,348			17,584			58,896		48,400
Other nondeposit fees and commissions		49,964			36,561			131,458		101,967
Securities gains (losses), net		(29,127	)		135,519			114,607		168,592
Other income		27,705			31,583			97,844		92,911

Total noninterest income		512,103			393,359			1,418,120		1,135,774


Noninterest Expense
Personnel expense		412,350			323,119			1,132,548		947,634
Occupancy and equipment expense		97,352			85,550			270,704		253,689
Amortization of intangibles		20,990			7,073			34,550		17,682
Professional services		17,309			17,958			50,921		50,516
Merger-related and restructuring charges		22,820			12,694			38,324		28,867
Loss on early extinguishment of debt		384,898			--			384,898		--
Other expense		161,247			130,779			460,029		367,504

Total noninterest expense		1,116,966			577,173			2,371,974		1,665,892


Earnings
Income before income taxes and cumulative effect of
change in accounting principle		136,595			454,278			1,058,702		1,330,271
Provision for income taxes		20,704			126,121			298,826		374,297

Income before cumulative effect of change in accounting principle		115,891			328,157			759,876		955,974
Cumulative effect of change in accounting principle		--			--			--		9,780

Net income	$	115,891		$	328,157		$	759,876	$	965,754




Per Common Share
Basic Earnings:
Income before cumulative effect of change in accounting principle	$	.21		$	.69		$	1.53	$	2.02
Cumulative effect of change in accounting principle		--			--			--		.02

Net income	$	.21		$	.69		$	1.53	$	2.04




Diluted Earnings:
Income before cumulative effect of change in accounting principle	$	.21		$	.68		$	1.51	$	2.00
Cumulative effect of change in accounting principle		--			--			--		.02

Net income	$	.21		$	.68		$	1.51	$	2.02




Cash dividends paid	$	.32		$	.29		$	.90	$	.81




Weighted Average Shares Outstanding
Basic		551,018,984			477,112,074			498,048,765		472,764,083



Diluted		555,543,993			482,325,535			502,026,007		478,363,530

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

BB&T Corporation Page 3 Third Quarter 2003 Form 10-Q

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
(Dollars in thousands)

													Accumulated
	Shares of						Additional			Retained			Other			Total
	Common			Common			Paid-In			Earnings			Comprehensive			Shareholders'
	Stock			Stock			Capital			and Other*			Income			Equity

Balance, December 31, 2001		455,682,560		$	2,278,413		$	418,565		$	3,145,832		$	307,399		$	6,150,209
Add (Deduct)
Comprehensive income:
Net income		--			--			--			965,754			--			965,754
Unrealized holding gains (losses) arising during the
period on securities available for sale, net of tax		--			--			--			--			154,954			154,954
Less: reclassification adjustment for losses (gains)
on securities available for sale included in net
income, net of tax of $59,007		--			--			--			--			(109,585	)		(109,585	)

Change in unrealized gains (losses) on securities, net of tax		--			--			--			--			45,369			45,369
Change in unrecognized gain (loss) on cash flow hedge,
net of tax of ($25,670)		--			--			--			--			(39,344	)		(39,344	)


Total comprehensive income		--			--			--			965,754			6,025			971,779


Common stock issued:
In purchase acquisitions		32,481,207			162,406			985,485			--			--			1,147,891
In connection with stock option
exercises and other employee benefits		2,769,934			13,850			35,609			--			--			49,459
Redemption of common stock		(10,493,900	)		(52,470	)		(344,740	)		--			--			(397,210	)
Cash dividends declared on common stock		--			--			--			(403,167	)		--			(403,167	)
Other, net		--			--			13,732			2,124			--			15,856

Balance, September 30, 2002		480,439,801		$	2,402,199		$	1,108,651		$	3,710,543		$	313,424		$	7,534,817




Balance, December 31, 2002		470,452,260		$	2,352,261		$	793,123		$	3,911,821		$	330,709		$	7,387,914
Add (Deduct)
Comprehensive income:
Net income		--			--			--			759,876			--			759,876
Unrealized holding gains (losses) arising during the
period on securities available for sale, net of tax		--			--			--			--			(161,046	)		(161,046	)
Less: reclassification adjustment for losses (gains)
on securities available for sale included in net
income, net of tax of $44,697		--			--			--			--			(69,910	)		(69,910	)


Change in unrealized gains (losses) on securities, net of tax		--			--			--			--			(230,956	)		(230,956	)
Change in unrecognized gain (loss) on cash flow hedge,
net of tax of $24,572		--			--			--			--			37,659			37,659


Total comprehensive income		--			--			--			759,876			(193,297	)		566,579


Common stock issued:
In purchase acquisitions		90,191,640			450,959			2,754,336			--			--			3,205,295
In connection with stock option
exercises and other employee benefits		1,834,498			9,172			21,884			--			--			31,056
Redemption of common stock		(13,591,800	)		(67,959	)		(426,607	)		--			--			(494,566	)
Cash dividends declared on common stock		--			--			--			(491,522	)		--			(491,522	)
Other, net		--			--			9,932			144			--			10,076

Balance, September 30, 2003		548,886,598		$	2,744,433		$	3,152,668		$	4,180,319		$	137,412		$	10,214,832

* Other includes unvested restricted stock.

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

BB&T Corporation Page 4 Third Quarter 2003 Form 10-Q

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

	For the Nine Months Ended
	September 30,
	2003			2002

Cash Flows From Operating Activities:
Net income	$	759,876		$	965,754
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		189,500			179,000
Depreciation of premises and equipment		107,677			106,352
Amortization of intangibles		34,550			17,682
Adjustment / accretion of negative goodwill		--			(9,780	)
Amortization of unearned stock compensation		144			2,124
Discount accretion and premium amortization on securities, net		22,746			1,441
Net decrease (increase) in trading account securities		(29,706	)		(23,850	)
Loss (gain) on sales of securities, net		(114,607	)		(168,592	)
Loss (gain) on sales of loans held for sale		(208,633	)		(74,863	)
Loss (gain) on disposals of premises and equipment, net		(185	)		(6,905	)
Proceeds from sales of loans held for sale		12,411,725			6,848,650
Purchases of loans held for sale		(2,374,351	)		(1,326,306	)
Origination of loans held for sale, net of principal collected		(8,870,207	)		(5,498,356	)
Tax benefit from exercise of stock options		9,932			13,732
Decrease (increase) in:
Accrued interest receivable		3,605			44,324
Other assets		(357,226	)		(506,463	)
Increase (decrease) in:
Accrued interest payable		(58,649	)		(1,388	)
Accounts payable and other liabilities		81,753			513,049
Other, net		2,972			27,904

Net cash provided by (used in) operating activities		1,610,916			1,103,509


Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale		13,138,964			3,297,501
Proceeds from maturities, calls and paydowns of securities available for sale		4,722,736			3,011,933
Purchases of securities available for sale		(13,229,791	)		(5,162,206	)
Proceeds from maturities, calls and paydowns of securities held to maturity		4,447			10
Purchases of securities held to maturity		(6,000	)		(10,915	)
Leases made to customers		(81,631	)		(139,637	)
Principal collected on leases		103,751			110,001
Loan originations, net of principal collected		(2,251,577	)		(1,250,928	)
Purchases of loans		(119,871	)		(193,155	)
Acquisitions, net of cash and cash equivalents acquired		920,783			765,694
Originations of mortgage servicing rights		(192,336	)		(143,935	)
Proceeds from disposals of premises and equipment		27,193			27,061
Purchases of premises and equipment		(145,203	)		(122,480	)
Proceeds from sales of foreclosed property		40,193			35,965
Proceeds from sales of other real estate held for development or sale		17,350			8,494

Net cash provided by (used in) investing activities		2,949,008			233,403


Cash Flows From Financing Activities:
Net increase (decrease) in deposits		289,280			821,788
Net increase (decrease) in short-term borrowed funds		199,738			(2,581,487	)
Proceeds from issuance of long-term debt		3,200,700			2,402,327
Repayment of long-term debt		(6,988,096	)		(1,046,451	)
Net proceeds from common stock issued		31,056			49,459
Redemption of common stock		(494,566	)		(397,210	)
Cash dividends paid on common stock		(453,191	)		(382,468	)

Net cash provided by (used in) financing activities		(4,215,079	)		(1,134,042	)


Net Increase (Decrease) in Cash and Cash Equivalents		344,845			202,870
Cash and Cash Equivalents at Beginning of Period		2,372,220			2,232,226

Cash and Cash Equivalents at End of Period	$	2,717,065		$	2,435,096




Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:
Interest	$	1,055,572		$	1,287,761
Income taxes		136,658			171,325
Noncash financing and investing activities:
Transfer of loans to foreclosed property		62,712			41,285
Transfer of fixed assets to other real estate owned		7,470			14,778
Transfer of other real estate owned to fixed assets		33			--
Transfer of securities available for sale to trading securities		532,193			--
Common stock issued in purchase accounting transactions		3,205,295			1,146,381

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

Back to Index

BB&T Corporation Page 5 Third Quarter 2003 Form 10-Q

BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
(Unaudited)

A. Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements 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 September 30, 2003 and December 31, 2002; the consolidated statements of income for the three and nine months ended September 30, 2003 and 2002; the consolidated statements of changes in shareholders’ equity for the nine months ended September 30, 2003 and 2002; and the consolidated statements of cash flows for the nine months ended September 30, 2003 and 2002. In the opinion of management, all adjustments necessary to fairly present the consolidated financial position and consolidated results of operations have been made. All such adjustments are of a normal, recurring nature.

The consolidated financial statements and notes thereto are presented in accordance with the instructions for Form 10-Q. The information contained in the footnotes included in BB&T’s 2002 Annual Report on Form 10-K should be referred to in connection with these unaudited interim consolidated financial statements. In certain instances, amounts reported in the 2002 financial statements were reclassified to conform to the 2003 financial statement presentation. Such reclassifications had no material effect on the Company’s reported consolidated financial position or consolidated results of operations.

The consolidated financial statements of BB&T include the accounts of BB&T Corporation and those subsidiaries that are wholly owned or majority-owned by BB&T and over which BB&T exercises control. In consolidation, all significant intercompany accounts and transactions have been eliminated. The results of operations of companies acquired in transactions accounted for as purchases are included only from the dates of acquisition. All wholly owned and majority-owned subsidiaries are consolidated unless control is temporary or does not rest with BB&T. At September 30, 2003, there were no significant wholly owned or majority-owned subsidiaries that were not consolidated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan and lease losses, valuation of mortgage servicing rights, valuation of goodwill, valuation of other intangible assets, purchase accounting adjustments, benefit plan obligations and expenses, and deferred tax assets and liabilities.

BB&T Corporation Page 6 Third Quarter 2003 Form 10-Q

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 have branches in North Carolina, South Carolina, Virginia, Maryland, West Virginia, Kentucky, Tennessee, Georgia, Florida, Alabama, Indiana and Washington, D.C. BB&T’s principal banking subsidiaries, Branch Banking and Trust Company (“Branch Bank”), Branch Banking 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 banking services to individuals and businesses. BB&T’s subsidiary banks offer a variety of loans to businesses and consumers, including an array of mortgage loan products. BB&T’s loans are primarily to individuals residing in the market areas described above or to businesses that are located in this geographic area. BB&T’s banking subsidiaries also market a wide range of deposit services to individuals and businesses. BB&T’s commercial banking units or their subsidiaries offer lease financing to businesses and municipal governments; discount brokerage services and sales of annuities and mutual funds; life insurance, property and casualty insurance, health insurance and commercial general liability insurance on an agency basis; insurance premium financing; arranging permanent financing for commercial real estate and providing loan servicing for third-party investors; direct consumer finance loans to individuals; and asset management. Direct nonbank subsidiaries of BB&T provide a variety of financial services including automobile financing, equipment financing, factoring, leasing, full-service securities brokerage and capital markets services.

C. New Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amends SFAS No. 123 to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. The provisions of the Statement were effective December 31, 2002. Management currently intends to continue to account for stock-based compensation under the intrinsic value method set forth in Accounting Principles Board (“APB”) Opinion 25 and related interpretations. For this reason, the transition guidance of SFAS No. 148 does not have an impact on BB&T’s consolidated financial position or consolidated results of operations. The Statement does amend existing guidance with respect to required disclosures, regardless of the method of accounting used. The revised disclosure requirements are presented herein.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). The Interpretation elaborates on the disclosures to be made by a guarantor in its financial statements under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of the Interpretation are effective and were adopted by BB&T as of December 31, 2002, and require disclosure of the nature of the guarantee, the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor’s obligations under the guarantee. Please refer to Note H herein for disclosures with respect to BB&T’s guarantees. The recognition requirements of the Interpretation were effective beginning January 1, 2003. The initial adoption of the Interpretation did not materially affect BB&T, and management does not anticipate that the recognition requirements of this Interpretation will have a materially adverse impact on either BB&T’s consolidated financial position or consolidated results of operations in the future.

BB&T Corporation Page 7 Third Quarter 2003 Form 10-Q

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). This Interpretation provides guidance with respect to the identification of variable interest entities and when the assets, liabilities, noncontrolling interests, and results of operations of a variable interest entity need to be included in a company’s consolidated financial statements. The Interpretation requires consolidation by business enterprises of variable interest entities in cases where the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity, or in cases where the equity investors lack one or more of the essential characteristics of a controlling financial interest, which include the ability to make decisions about the entity’s activities through voting rights, the obligations to absorb the expected losses of the entity if they occur, or the right to receive the expected residual returns of the entity if they occur. On October 9, 2003, the FASB issued Staff Position FIN 46-6, which effectively deferred the implementation of the provisions of FIN 46 to existing variable interest entities created before February 1, 2003 until the fourth quarter of 2003, if certain conditions are met. Management has determined that BB&T meets such conditions and will defer the adoption of FIN 46 until December 31, 2003. Management is currently evaluating BB&T’s investments in variable interest entities and potential variable interest entities or transactions, particularly in limited liability partnerships involved in low-income housing development and trust preferred securities structures. Depending on the ultimate applicability of the Interpretation to these entities or transactions, the most significant effect of the Interpretation is expected to be on BB&T’s balance sheet, as the potential consolidation of additional entities would increase BB&T’s consolidated assets and liabilities and thereby affect BB&T’s capital ratios. BB&T’s primary FIN 46 exposure relates to its investments in limited liability partnerships involved in low-income housing development. The consolidation of these limited partnerships during the current quarter would have affected BB&T’s financial position and results of operations by increasing total assets and liabilities by $209.0 million and $217.0 million, respectively, and reducing third quarter pre-tax income by $1.2 million. Management believes that the ultimate implementation of FIN 46 will not have a significant impact on either BB&T’s consolidated financial position or consolidated results of operations. Any consolidation of previously unconsolidated entities as a result of FIN 46 would represent an accounting change; however, it would not affect BB&T’s legal rights or obligations with respect to these entities. Interpretive guidance relating to FIN 46 is continuing to evolve and BB&T’s management will continue to assess various aspects of consolidations and variable interest entity accounting as additional guidance becomes available.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” The Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The Statement is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. In addition, the provisions of the Statement, with certain exceptions, are required to be applied prospectively. The initial implementation of the Statement did not have a material affect on BB&T’s consolidated financial position or consolidated results of operations.

BB&T Corporation Page 8 Third Quarter 2003 Form 10-Q

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 applies specifically to a number of financial instruments that companies have historically presented within their financial statements either as equity or between the liabilities section and the equity section, rather than as liabilities. On November 7, 2003, the FASB issued FASB Staff Position (“FSP”) 150-3, “Effective Date and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities.” FSP 150-3 defers the effective date of certain provisions of SFAS No. 150, specifically the provisions that apply to mandatorily redeemable noncontrolling interests. This deferral is expected to remain in effect indefinitely until the accounting for these interests is addressed in later guidance. The remaining provisions of SFAS No. 150 were effective for financial instruments entered into or modified after May 31, 2003, and otherwise were effective and adopted by BB&T on July 1, 2003. The implementation of these portions of the Statement did not have a material effect on BB&T”s consolidated financial position or consolidated results of operations. Management is currently evaluating the potential impact of the deferred portion of the Statement.

D. Mergers and Acquisitions

The following table presents summary information with respect to significant mergers and acquisitions of financial institutions and other significant financial services companies completed by BB&T Corporation during 2002 and through the end of the third quarter of 2003:

Summary of Completed Mergers and Acquisitions

									BB&T Common
							Total		Shares Issued
Date of			Total		Intangibles		Purchase		to Complete
Acquisition	Acquired Company	Headquarters	Assets		Recorded		Price		Transaction



July 1, 2003	First Virginia Banks, Inc.	Falls Church, Va.	$	11.3 billion	$	2.2 billion	$	3.1 billion		87.0 million
March 14, 2003	Equitable Bank	Wheaton, Md.		446.9 million		32.4 million		53.8 million		1.5 million




September 13, 2002	Regional Financial Corp.	Tallahassee, Fla.	$	1.5 billion	$	237.6 million	$	294.3 million		7.3 million
March 20, 2002	Area Bancshares Corporation	Owensboro, Ky.		2.6 billion		244.7 million		446.2 million		13.2 million
March 8, 2002	MidAmerica Bancorp	Louisville, Ky.		1.8 billion		216.0 million		378.5 million (1)		8.2 million
January 1, 2002	Cooney, Rikard & Curtin, Inc.	Birmingham, Al.		110.5 million		102.5 million		85.8 million		2.5 million

(1) Includes cash totaling $94.9 million.

The intangibles in the above table include $222.0 million of core deposit intangibles and $140.4 million of other identifiable intangibles, which are being amortized on an accelerated basis over their estimated useful lives.

BB&T Corporation Page 9 Third Quarter 2003 Form 10-Q

Acquisition of First Virginia Banks, Inc.

On July 1, 2003, BB&T completed its acquisition of First Virginia Banks, Inc. (“First Virginia”), a bank holding company headquartered in Falls Church, Virginia. The merger enabled the Company to substantially increase its market share and branch presence in Virginia, Maryland and Tennessee. BB&T issued 87.0 million common shares to consummate the transaction. The total purchase price of $3.1 billion was determined based on the average market price of BB&T’s common stock over the five-day period beginning two days before and ending two days after the terms of the acquisition were agreed to and announced. As required by purchase accounting rules, the balance sheet accounts and results of operations of First Virginia were included in BB&T’s Consolidated Financial Statements beginning on July 1, 2003. The estimated fair values of the significant asset balances acquired and significant liabilities assumed in connection with the acquisition of First Virginia are as follows: $859.2 million of cash and cash equivalents, $3.8 billion of securities, $6.3 billion of loans, $9.5 billion of deposits and $581.3 million of short-term borrowings.

The following unaudited pro forma financial information for the three and nine months ended September 30, 2003 and 2002 assumes that the First Virginia acquisition occurred as of January 1, 2002. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations which may occur in the future or that would have occurred had the First Virginia acquisition been consummated on the date indicated.

BB&T Corporation
First Virginia Banks, Inc.
Pro Forma Financial Information

	For the three months ended				For the nine months ended
	September 30,				September 30,

	2003		2002		2003		2002

	(dollars in thousands, except per share data)












Total Revenues*	$	1,318,561	$	1,246,107	$	3,915,250	$	3,620,753









Income before cumulative effect of change in
accounting principle	$	115,891	$	362,498	$	820,317	$	1,053,179









Net Income	$	115,891	$	362,498	$	820,317	$	1,062,959









Basic EPS	$	.21	$	.64	$	1.47	$	1.89









Diluted EPS	$	.21	$	.63	$	1.46	$	1.87

* Total revenues is composed of net interest income and noninterest income.

Insurance and Other Non-Bank Acquisitions

In addition to the financial institutions and other significant financial services companies acquired in the last two years, BB&T acquired six insurance agencies during the first nine months of 2003. In conjunction with these transactions, BB&T issued approximately 1.7 million shares of common stock and paid approximately $1.0 million in cash, recording approximately $28.4 million in goodwill and $20.8 million in other intangible assets with an average life of 10 years. The total purchase price of these insurance agencies was approximately $59.0 million. During 2002, BB&T acquired eight insurance agencies. In conjunction with these transactions, BB&T issued approximately 1.7 million shares of common stock and paid $1.9 million in cash, recording $43.7 million in goodwill and $30.4 million of other intangible assets with an average life of 10 years.

BB&T Corporation Page 10 Third Quarter 2003 Form 10-Q

On July 1, 2003, BB&T acquired Jackson, Mississippi-based Southern Cross Underwriters (“SCU”) and BB&T also acquired Kingsport Development Company Insurance Inc., Moore & Walker, Inc. and STHARCO, Inc., all of Kingsport, Tennessee, collectively referred to as “KDC”. SCU specializes in arranging insurance coverage on commercial transportation, property and casualty liability, marine liability and liability coverage for directors and officers. KDC is a full-service independent insurance agency specializing in coverage for hotels, restaurants and municipalities.

On September 2, 2003, BB&T Insurance Services acquired Cooper, Love & Jackson (“CLJ”) of Nashville, Tennessee, and Surety Land Title based in Raleigh, N.C. CLJ specializes in the insurance of commercial risk, employee benefits and personal lines in the metropolitan Nashville area.

On November 11, 2003, BB&T announced plans to acquire McGriff, Seibels & Williams, Inc., of Birmingham, Alabama (“McGriff”). McGriff is a privately held commercial insurance broker with projected 2003 premiums of $1.8 billion, making it the 13th largest insurance broker in the nation. Its specialty areas include energy, marine, financial services, commercial, construction, surety, employee benefits, healthcare and public entity. BB&T will issue $304 million of its common stock and $50 million in cash to complete the acquisition. The transaction also allows for an additional payment to McGriff’s shareholders of up to $102 million in cash over a five-year period if McGriff exceeds certain performance targets. The merger will create the sixth largest insurance broker in the nation and is expected to be completed in the first quarter of 2004.

The insurance acquisitions described above do not exceed the disclosure thresholds prescribed by the pro forma disclosure requirements of SFAS No. 141.

BB&T typically provides an allocation period for all purchase acquisitions to identify and quantify the fair value of the assets acquired and liabilities assumed in business combinations accounted for as purchases.

BB&T Corporation Page 11 Third Quarter 2003 Form 10-Q

Merger-Related and Restructuring Charges

In connection with the consummation of acquisitions and the completion of other requirements, BB&T typically accrues certain merger-related expenses related to estimated severance costs, costs to terminate lease contracts, costs related to the disposal of duplicate facilities and equipment, costs to terminate data processing contracts and other costs associated with the acquisitions. The following table summarizes BB&T’s merger-related accruals for the periods as indicated:

	Merger Accrual Activity


	(Dollars in thousands)

	Balance						Balance
	December 31,		Additions in		Utilized in		December 31,		Additions in		Utilized in		September 30,
	2001		2002		2002		2002		2003		2003		2003


Severance and personnel-related charges	$	31,371	$	40,014	$	54,556	$	16,829	$	31,305	$	14,072	$	34,062
Occupancy and equipment charges		37,063		31,668		26,978		41,753		33,522		31,619		43,656
Systems conversions and related charges		11,339		12,278		21,879		1,738		21,534		2,678		20,594
Other merger-related charges		15,110		21,438		25,267		11,281		18,289		16,875		12,695


Total	$	94,883	$	105,398	$	128,680	$	71,601	$	104,650	$	65,244	$	111,007

BB&T Corporation Page 12 Third Quarter 2003 Form 10-Q

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 Nine Months
	Ended September 30,				Ended September 30,

	2003		2002		2003		2002

	(Dollars in thousands, except per share data)
Basic Earnings Per Share:
Weighted average number of common shares		551,018,984		477,112,074		498,048,765		472,764,083




Income before cumulative effect of change in accounting principle	$	115,891	$	328,157	$	759,876	$	955,974
Cumulative effect of change in accounting principle		--		--		--		9,780




Net income	$	115,891	$	328,157	$	759,876	$	965,754




Basic earnings per share
Income before cumulative effect of change in accounting principle	$	.21	$	.69	$	1.53	$	2.02
Cumulative effect of change in accounting principle		--		--		--		.02


Net income	$	.21	$	.69	$	1.53	$	2.04




Diluted Earnings Per Share:
Weighted average number of common shares		551,018,984		477,112,074		498,048,765		472,764,083

Add:
Dilutive effect of outstanding options (as determined by
application of treasury stock method)		4,525,009		5,213,461		3,977,242		5,599,447

Weighted average number of diluted common shares		555,543,993		482,325,535		502,026,007		478,363,530



Income before cumulative effect of change in accounting principle	$	115,891	$	328,157	$	759,876	$	955,974
Cumulative effect of change in accounting principle		--		--		--		9,780


Net income	$	115,891	$	328,157	$	759,876	$	965,754




Diluted earnings per share
Income before cumulative effect of change in accounting principle	$	.21	$	.68	$	1.51	$	2.00
Cumulative effect of change in accounting principle		--		--		--		.02


Net income	$	.21	$	.68	$	1.51	$	2.02

F. Segment Disclosures

BB&T’s operations are divided into seven reportable business segments: the Banking Network, Mortgage Banking, Trust Services, Insurance Services, Specialized Lending, 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 management accounting policies that are designed to measure segment performance in relation to 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.

BB&T Corporation Page 13 Third Quarter 2003 Form 10-Q

Please refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2002, for a description of internal accounting policies and the basis of segmentation, including a description of the segments (other than the Specialized Lending segment described below) presented in the accompanying tables.

During the first quarter of 2003, management began disclosing Specialized Lending as a separate segment. BB&T’s Specialized Lending segment consists of seven wholly-owned subsidiaries that provide specialty finance alternatives to consumers and businesses including: commercial factoring services, indirect financing of equipment for both small businesses and consumers, commercial fleet vehicle and equipment leasing, direct consumer finance, insurance premium finance, nonconforming mortgage lending, indirect sub-prime automobile finance, and full service commercial mortgage banking. Bank clients as well as non-bank clients within and outside BB&T’s primary geographic market area are served by these companies. The Banking Network receives credit for referrals to these companies with the corresponding charge retained in the Corporate Office. These revenues and expenses are reflected in the accompanying tables as intersegment noninterest income and expense.

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

BB&T Corporation Page 14 Third Quarter 2003 Form 10-Q

Reportable Segments
For the Three Months Ended September 30, 2003 and 2002
(Dollars in thousands)

		Banking Network				Mortgage Banking				Trust Services				Insurance Services				Specialized Lending

		2003		2002		2003		2002		2003		2002		2003		2002		2003		2002


Net interest income (expense)	$	506,790	$	405,535	$	174,073	$	158,023	$	(3,848	) $	(5,235	) $	368	$	469	$	58,646	$	48,152
Net intersegment interest income (expense)		177,019		180,569		(78,370	)	(69,062	)	10,276		12,328		--		--		--		--


Net interest income		683,809		586,104		95,703		88,961		6,428		7,093		368		469		58,646		48,152


Provision for loan and lease losses		57,071		57,356		2,068		841		--		--		--		--		20,408		15,525
Noninterest income		272,038		213,916		95,446		(90,618	)	29,104		24,237		98,964		75,548		13,592		13,235
Intersegment noninterest income		130,314		88,349		--		--		--		--		--		--		--		--
Noninterest expense		373,650		265,080		14,967		10,798		21,074		17,707		69,967		56,944		29,823		27,618
Intersegment noninterest expense		123,966		154,601		2,906		7,339		2,039		1,958		3,724		3,197		2,256		2,731


Income before income taxes		531,474		411,332		171,208		(20,635	)	12,419		11,665		25,641		15,876		19,751		15,513

Income tax provision (benefit)		149,528		109,696		52,638		(7,127	)	3,750		3,322		10,687		6,301		5,839		5,933


Net income (loss)	$	381,946	$	301,636	$	118,570	$	(13,508	) $	8,669	$	8,343	$	14,954	$	9,575	$	13,912	$	9,580




Identifiable segment assets	$	62,150,117	$	48,720,890	$	11,679,332	$	9,864,161	$	80,035	$	75,265	$	642,527	$	664,379	$	2,012,796	$	1,720,986

		Investment Banking
		and Brokerage				Treasury				All Other Segments (1)				Total Segments

		2003		2002		2003		2002		2003		2002		2003		2002


Net interest income (expense)	$	1,957	$	1,772	$	42,617	$	54,852	$	40,179	$	44,264	$	820,782	$	707,832
Net intersegment interest income (expense)		--		--		1,107		2,218		--		--		110,032		126,053


Net interest income		1,957		1,772		43,724		57,070		40,179		44,264		930,814		833,885


Provision for loan and lease losses		--		--		39		35		10,587		8,132		90,173		81,889
Noninterest income		66,824		49,563		9,307		166,023		32,872		37,501		618,147		489,405
Intersegment noninterest income		--		--		--		--		--		--		130,314		88,349
Noninterest expense		56,195		46,530		4,024		3,625		15,204		12,772		584,904		441,074
Intersegment noninterest expense		3,383		3,692		247		422		3,433		3,432		141,954		177,372


Income before income taxes		9,203		1,113		48,721		219,011		43,827		57,429		862,244		711,304

Income tax provision (benefit)		3,555		539		10,079		61,080		11,041		11,387		247,117		191,131


Net income (loss)	$	5,648	$	574	$	38,642	$	157,931	$	32,786	$	46,042	$	615,127	$	520,173




Identifiable segment assets	$	1,084,749	$	931,953	$	16,386,171	$	20,030,487	$	4,078,667	$	6,633,813	$	98,114,394	$	88,641,934

(1) Includes financial data from subsidiaries below the qualitative and quantitative thresholds requiring disclosure.

BB&T Corporation Page 15 Third Quarter 2003 Form 10-Q

BB&T Corporation
Reportable Segments
For the Nine Months Ended September 30, 2003 and 2002
(Dollars in thousands)

		Banking Network				Mortgage Banking				Trust Services				Insurance Services				Specialized Lending

		2003		2002		2003		2002		2003		2002		2003		2002		2003		2002


Net interest income (expense)	$	1,318,913	$	1,138,766	$	501,023	$	466,271	$	(11,658	) $	(15,284	) $	1,107	$	1,110	$	165,406	$	135,370
Net intersegment interest income (expense)		514,327		484,996		(212,398	)	(256,399	)	33,444		35,277		--		--		--		--


Net interest income		1,833,240		1,623,762		288,625		209,872		21,786		19,993		1,107		1,110		165,406		135,370


Provision for loan and lease losses		165,621		160,638		4,886		2,329		--		--		--		--		62,019		45,334
Noninterest income		726,937		495,832		124,529		(37,542	)	85,181		76,577		277,068		208,434		37,829		39,899
Intersegment noninterest income		368,633		225,212		--		--		--		--		--		--		--		--
Noninterest expense		934,279		787,836		43,007		30,995		65,590		56,606		205,211		157,803		84,920		78,838
Intersegment noninterest expense		368,390		431,510		8,773		22,170		6,070		6,384		11,180		9,605		6,744		9,107


Income before income taxes		1,460,520		964,822		356,488		116,836		35,307		33,580		61,784		42,136		49,552		41,990

Income tax provision (benefit)		407,821		268,314		110,447		32,025		10,790		9,916		25,009		16,742		15,512		15,259


Net income (loss)	$	1,052,699	$	696,508	$	246,041	$	84,811	$	24,517	$	23,664	$	36,775	$	25,394	$	34,040	$	26,731




Identifiable segment assets	$	62,150,117	$	48,720,890	$	11,679,332	$	9,864,161	$	80,035	$	75,265	$	642,527	$	664,379	$	2,012,796	$	1,720,986

		Investment Banking
		and Brokerage				Treasury				All Other Segments (1)				Total Segments

		2003		2002		2003		2002		2003		2002		2003		2002


Net interest income (expense)	$	4,981	$	5,494	$	125,158	$	161,216	$	119,921	$	132,330	$	2,224,851	$	2,025,273
Net intersegment interest income (expense)		--		--		8,350		16,825		--		--		343,723		280,699


Net interest income		4,981		5,494		133,508		178,041		119,921		132,330		2,568,574		2,305,972


Provision for loan and lease losses		--		--		116		106		28,700		22,051		261,342		230,458
Noninterest income		181,371		160,788		188,791		230,917		135,928		98,042		1,757,634		1,272,947
Intersegment noninterest income		--		--		--		--		--		--		368,633		225,212
Noninterest expense		155,057		144,119		11,759		10,869		64,935		28,302		1,564,758		1,295,368
Intersegment noninterest expense		10,149		11,078		742		1,269		10,290		9,170		422,338		500,293


Income before income taxes		21,146		11,085		309,682		396,714		151,924		170,849		2,446,403		1,778,012

Income tax provision (benefit)		8,111		4,347		78,441		109,896		43,993		36,717		700,124		493,216


Net income (loss)	$	13,035	$	6,738	$	231,241	$	286,818	$	107,931	$	134,132	$	1,746,279	$	1,284,796




Identifiable segment assets	$	1,084,749	$	931,953	$	16,386,171	$	20,030,487	$	4,078,667	$	6,633,813	$	98,114,394	$	88,641,934

(1) Includes financial data from subsidiaries below the qualitative and quantitative thresholds requiring disclosure.

BB&T Corporation Page 16 Third Quarter 2003 Form 10-Q

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

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,

	2003			2002			2003			2002

	(Dollars in thousands)
Net Interest Income
Net interest income from segments	$	930,814		$	833,885		$	2,568,574		$	2,305,972
Other net interest income (expense) (1)		23,330			(80,766	)		202,090			(324,059	)
Elimination of net intersegment interest income (2)		(147,686	)		(51,027	)		(568,608	)		57,476

Consolidated net interest income	$	806,458		$	702,092		$	2,202,056		$	2,039,389




Net income
Net income from segments	$	615,127		$	520,173		$	1,746,279		$	1,284,796
Other net income (loss) (1)		(13,545	)		278,842			159,329			576,548
Elimination of intersegment net income (2)		(485,691	)		(470,858	)		(1,145,732	)		(895,590	)

Consolidated net income	$	115,891		$	328,157		$	759,876		$	965,754




								September 30,			September 30,
								2003			2002

Total Assets
Total assets from segments							$	98,114,394		$	88,641,934
Other assets (1)								11,520,784			28,653,295
Elimination of intersegment assets (2)								(19,280,047	)		(39,108,398	)

Consolidated total assets							$	90,355,131		$	78,186,831

(1)

Other net interest income (expense), 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.

G. Stock-Based Compensation

BB&T maintains various stock-based compensation plans. These plans provide for the granting of stock options (incentive and nonqualified), stock appreciation rights, restricted stock, performance units and performance shares to selected BB&T employees and directors. All of BB&T’s stock-based compensation plans have been presented to and approved by BB&T’s shareholders. BB&T accounts for its stock option plans based on the intrinsic value method set forth in APB Opinion No. 25 and related Interpretations, under which no compensation cost has been recognized for any of the periods presented, except with respect to restricted stock plans as disclosed in the accompanying table. The following table presents BB&T’s net income, basic earnings per share and diluted earnings per share as reported, and pro forma net income and pro forma earnings per share assuming compensation cost for BB&T’s stock option plans had been determined based on the fair value at the grant dates for awards under those plans granted after December 31, 1994, consistent with the method prescribed by SFAS No. 123 “Accounting for Stock-Based Compensation.”

BB&T Corporation Page 17 Third Quarter 2003 Form 10-Q

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,

	2003			2002			2003			2002

	(Dollars in thousands, except per share data)
Net income:
Net income as reported	$	115,891		$	328,157		$	759,876		$	965,754
Add: Stock-based compensation expense
included in reported net income, net of tax		133			193			441			1,204
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of tax		(6,540	)		(7,230	)		(22,485	)		(24,051	)




Pro forma net income	$	109,484		$	321,120		$	737,832		$	942,907




Basic EPS:
As reported	$	.21		$	.69		$	1.53		$	2.04
Pro Forma		.20			.67			1.48			1.99

Diluted EPS:
As reported		.21			.68			1.51			2.02
Pro Forma		.20			.67			1.47			1.98

The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions used for grants in 2003 and 2002, respectively: dividend yield of 3.0% in 2003 and 2002; expected volatility of 27% in 2003 and 2002; risk free interest rates of 3.7% and 3.1% for the third quarter and first nine months of 2003, respectively; risk free interest rates of 4.6% and 4.7% for the third quarter and first nine months of 2002, respectively; and expected lives of 6.8 years for options granted in both the third quarter of 2003 and the third quarter of 2002 and 6.0 years for options granted in the first nine months of both 2003 and 2002.

Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years.

H. Off-Balance Sheet Arrangements and Guarantees

BB&T’s off-balance sheet arrangements include certain investments in low-income housing and historic building rehabilitation projects throughout its market area. BB&T enters into such arrangements as a means of supporting local communities, and recognizes tax credits related to these investments. At September 30, 2003, and December 31, 2002, BB&T’s investments in such projects totaled $5.0 million and $14.2 million, respectively. BB&T typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships. BB&T’s subsidiary banks may provide financing during the construction and development of the properties; however, permanent financing is generally obtained from independent third parties upon completion of a project. BB&T’s outstanding commitments to fund low income housing investments totaled $214.8 million and $172.6 million at September 30, 2003 and 2002, respectively. Certain of these off-balance-sheet investments are currently being evaluated based on the consolidation provisions of FIN 46 as discussed in Note C.

BB&T Corporation Page 18 Third Quarter 2003 Form 10-Q

Guarantees

Standby letters of credit and financial guarantees written are unconditional commitments issued by BB&T to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper issuance, bond financing and similar transactions. The credit risk involved in issuing these guarantees is essentially the same as that involved in extending loans to clients and as such, is collateralized when necessary. As of September 30, 2003, BB&T had issued $1.4 billion in such guarantees predominately for terms of one year or less. Of these commitments, $767.5 million have been issued or renewed since December 31, 2002, and, in accordance with FIN 45, BB&T has recorded an immaterial liability on its balance sheet relating to these commitments.

In the ordinary course of business, BB&T enters into indemnification agreements with respect to legal proceedings against its directors and officers and those of acquired entities. BB&T also issues standard representations and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnifications provide similar indemnifications or representations and warranties to BB&T. Although these agreements often do not specify limitations, BB&T has not been required to act on the guarantees and it is not considered likely that any payments pursuant to them would materially change BB&T’s results of operations.

Agreements related to BB&T’s acquisitions of businesses other than financial institutions may include additional incentives to the acquired entities to offset the loss of future cash flows previously received through ownership positions. Typically, these incentives are based on the acquired entity’s contribution to BB&T’s earnings compared to agreed-upon amounts. When offered, these incentives are issued for terms of three to eight years. In the aggregate, the maximum potential contingent consideration included in these agreements is $15.9 million over the next five years.

BB&T Corporation Page 19 Third Quarter 2003 Form 10-Q

I. Goodwill and Other Intangibles

The changes in the carrying amount of goodwill attributable to each of BB&T’s operating segments for the nine months ended September 30, 2003, and the year ended December 31, 2002, are as follows:

Goodwill Activity by Operating Segment
(Dollars in thousands)

										Investment
	Banking			Mortgage		Trust		Insurance		Banking and			Specialized		All Other
	Network			Banking		Services		Services		Brokerage			Lending		Segments		Total

Balance, January 1, 2002	$	645,434		$	1,021	$	13,105	$	121,723	$	70,594		$	27,974	$	52	$	879,903
Acquired goodwill, net		713,938			6,438		14,225		106,000		311			--		2,564		843,476

Balance, December 31, 2002		1,359,372			7,459		27,330		227,723		70,905			27,974		2,616		1,723,379
Acquired goodwill, net		1,913,615			--		--		40,905		--			1,739		--		1,956,259
Adjustments to goodwill		(36,920	)		--		--		--		(650	)		--		--		(37,570	)

Balance, September 30, 2003	$	3,236,067		$	7,459	$	27,330	$	268,628	$	70,255		$	29,713	$	2,616	$	3,642,068

The following table presents the gross carrying amounts and accumulated amortization for BB&T’s intangible assets subject to amortization at the dates presented:

Acquired Intangible Assets
(Dollars in thousands)

	As of September 30, 2003					As of December 31, 2002

	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization


Amortizing intangible assets
Core deposit intangibles	$	321,851	$	(63,792	)	$	99,893	$	(41,601	)
Other (1)		187,321		(22,664	)		100,853		(10,321	)

Totals	$	509,172	$	(86,456	)	$	200,746	$	(51,922	)

(1) Other amortizing intangibles are primarily composed of insurance customer relationship intangibles.

During the nine months ended September 30, 2003 and 2002, BB&T recorded $34.6 million and $17.7 million, respectively, in pretax amortization expenses associated with identifiable intangible assets.

BB&T Corporation Page 20 Third Quarter 2003 Form 10-Q

The following table presents estimated amortization expense for each of the next five years:

Estimated Amortization Expense
(Dollars in thousands)

For the Year Ended December 31:
2003	$	58,478
2004		76,207
2005		67,962
2006		60,197
2007		51,499

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results ofOperations

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 certain 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 net interest margins and/or the values of loans made or held as well as the value of other financial assets held; (3) general economic or business 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 or other services; (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 or recently completed mergers may not be fully realized or realized within the expected time frame; (7) deposit attrition, customer loss or revenue loss following pending or recently completed mergers may be greater than expected; (8) competitors of BB&T 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.

BB&T Corporation Page 21 Third Quarter 2003 Form 10-Q

Critical Accounting Policies

The accounting and reporting policies of BB&T Corporation and its subsidiaries are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. BB&T’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in BB&T’s consolidated financial position and/or consolidated results of operations. The more critical accounting and reporting policies include BB&T’s accounting for the allowance for loan and lease losses, valuation of mortgage servicing rights, intangible assets associated with mergers and acquisitions, and income taxes. Understanding BB&T’s accounting policies is fundamental to understanding BB&T’s consolidated financial position and consolidated results of operations. BB&T’s significant accounting policies are discussed in detail in BB&T’s 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The following is a summary of BB&T’s more significant accounting policies that are highly dependent on estimates, assumptions and judgments.

The allowance for loan and lease losses is established and maintained at levels management deems adequate to cover probable losses inherent in the portfolio as of the balance sheet date, and is based on management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. Estimates of loan losses are determined by analyzing historical loan losses, current trends in delinquencies and charge-offs, plans for problem loan administration, the opinions of our regulators, and changes in the size, composition and risk assessment of the loan portfolio. Also included in management’s estimates of loan losses are considerations with respect to economic uncertainties. These events may include, but are not limited to, fluctuations in interest rates, political conditions, legislation that adversely affects lenders and economic conditions affecting specific geographical areas and industries in which BB&T conducts business.

BB&T has a significant mortgage loan servicing portfolio and related mortgage servicing rights. Mortgage servicing rights represent the present value of the future net servicing fees from the right to service loans acquired or originated by BB&T. The most critical accounting policy associated with mortgage servicing is the methodology used to determine the fair value of capitalized mortgage servicing rights, which requires the development of a number of assumptions, including anticipated loan principal amortization and prepayments of principal. The value of capitalized mortgage servicing rights is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining interest rates, the value of mortgage servicing assets declines due to increasing prepayments attributable to increased mortgage refinance activity. Conversely, during periods of rising interest rates, the value of servicing assets generally increases due to reduced refinance activity. BB&T amortizes mortgage servicing rights over the estimated period that servicing income is expected to be received based on projections of the amount and timing of future cash flows. The amount and timing of servicing asset amortization is adjusted periodically based on actual results and updated projections.

BB&T Corporation Page 22 Third Quarter 2003 Form 10-Q

BB&T’s growth in business, profitability and market share over the past several years has been enhanced significantly by mergers and acquisitions. Prior to 2002, BB&T’s mergers and acquisitions were accounted for using either the pooling-of-interests or purchase business combination methods of accounting. Effective July 1, 2001, BB&T adopted SFAS No. 141, “Business Combinations,” which allows only the use of the purchase method of accounting. For purchase acquisitions, BB&T is required to record the assets acquired, including identified intangible assets, and liabilities assumed, at their fair value, which in many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. The determination of the useful lives of intangible assets is subjective, as is the appropriate amortization period for such intangible assets. These estimates also include the establishment of various accruals and allowances based on planned facilities dispositions and employee severance considerations, among other acquisition-related items. In addition, purchase acquisitions typically result in goodwill, which is subject to ongoing periodic impairment tests based on the fair value of net assets acquired compared to the carrying value of goodwill.

The calculation of BB&T’s income tax provision is complex and requires the use of estimates and judgments in its determination. As part of the Company’s evaluation and implementation of business strategies, consideration is given to the tax laws and regulations that apply to the specific facts and circumstances for any transaction under evaluation. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments in order to evaluate the effect they may have on the Company’s overall tax position.

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ANALYSIS OF FINANCIAL CONDITION

BB&T's total assets at September 30, 2003, were $90.4 billion, an increase of $10.1 billion, or 12.6%, from December 31, 2002. The asset categories that produced the largest increases were loans and leases, including loans held for sale, goodwill, and other assets, which grew $7.7 billion, or 14.3%, $1.9 billion, or 111.3%, and $1.1 billion, or 25.7%, respectively. These increases were partially offset by a decline of $1.6 billion in securities available for sale compared to December 31, 2002.

Total deposits at September 30, 2003, increased $10.0 billion, or 19.5%, from December 31, 2002. Short-term borrowed funds increased $898.0 million, or 16.6%, and long-term debt decreased $3.7 billion, or 27.6%, during the first nine months of 2003. Total shareholders’ equity increased $2.8 billion, or 38.3%, during the same time frame.

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

BB&T Corporation Page 23 Third Quarter 2003 Form 10-Q

During the third quarter of 2003, management largely completed a balance sheet restructuring designed to enhance future earnings, reduce interest rate risk and exposure to market volatility, improve the net interest margin, and re-align the securities portfolio. The restructuring included transactions that affected mortgage loans, securities, long-term debt and repurchases of BB&T’s common stock. These transactions are discussed more fully in the sections that follow.

Loans and Leases

Management emphasizes commercial lending to small and medium-sized businesses, consumer lending and mortgage lending with an overall goal of maximizing the profitability of the loan portfolio while maintaining strong asset quality. For the first nine months of 2003, average total loans were $56.6 billion, an increase of $6.6 billion, or 13.3%, compared to the same period in 2002. During the first nine months of 2003, average commercial loans and leases totaled $29.8 billion, an increase of $2.0 billion, or 7.3%, compared to the same period in 2002 and composed 52.6% of the loan and lease portfolio compared to 55.6% for the first nine months of 2002. Average mortgage loans totaled $11.2 billion and composed 19.8% of the loan and lease portfolio compared to 18.3% for the first nine months of 2002. Average consumer loans, which include sales finance, revolving credit and direct retail, totaled $15.6 billion, an increase of $2.6 billion, or 19.9%, compared to the same period in 2002. Consumer loans composed the remaining 27.6% of the loan and lease portfolio compared to 26.1% for the first nine months of 2002. Aided by the very low interest rate environment and strong housing market, BB&T originated a record $17.1 billion of mortgage loans during the first nine months of 2003 compared to $8.6 billion during the same period of 2002. Consequently, mortgage loans comprised a slightly higher percentage of BB&T’s total loan portfolio compared to 2002 while commercial loans and leases decreased slightly due to lower commercial loan demand.

For the third quarter of 2003, average total loans were $61.5 billion, an increase of $9.9 billion, or 19.2%, compared to the same period in 2002. Average commercial loans and leases for the third quarter of 2003 totaled $30.8 billion, an increase of $2.3 billion, or 8.0% compared to the same period in 2002 and composed 50.1% of the loan and lease portfolio compared to 55.3% for the third quarter of 2002. Average mortgage loans totaled $11.8 billion and composed 19.1% of the loan and lease portfolio compared to 18.4% for the third quarter of 2002. Average consumer loans totaled $18.9 billion, an increase of $5.3 billion, or 39.4%, compared to the same period in 2002 and composed the remaining 30.8% of the loan and lease portfolio compared to 26.3% for the third quarter of 2002.

The growth rates of the average loans described above were affected by loan portfolios held by companies that were acquired in purchase transactions during 2002 and 2003.In particular, on July 1, 2003, loans totaling $6.2 billion were acquired through the purchase of First Virginia. Excluding the effect of purchase accounting transactions, the average “internal” loan growth for the three months ended September 30, 2003, was 3.8% compared to the third quarter of 2002. By category, excluding the effects of purchase accounting transactions, average mortgage loans, including loans held for sale, increased 11.4%, average commercial loans and leases grew 1.8%, and average consumer loans increased 2.7% in the third quarter of 2003 compared to the same period of 2002. These rates are lower than BB&T’s historical internal rates for loan growth reflecting the effects of weaker loan demand in BB&T’s core markets.

BB&T Corporation Page 24 Third Quarter 2003 Form 10-Q

The annualized fully taxable equivalent ("FTE") yields on commercial, consumer and mortgage loans for the first nine months of 2003 were 5.60%, 7.57%, and 6.11%, respectively, resulting in an annualized yield on the total loan portfolio of 6.24%. The FTE yields on commercial, consumer and mortgage loans for the first nine months of 2002 were 6.23%, 8.63%, and 7.16%, respectively, resulting in an annualized yield on the total loan portfolio of 7.02%. This reflects a decrease of 78 basis points in the annualized yield on the total loan portfolio during the first nine months of 2003 in comparison to 2002. The decrease in yield resulted from a lower average prime rate during the first nine months of 2003 compared to the same period in 2002, as well as the overall lower interest rate environment. At the beginning of 2002, after a series of interest rate reductions by the Federal Reserve during 2001, the federal funds target rate was 1.75%. During the fourth quarter of 2002 and immediately preceding the end of the second quarter of 2003, the Federal Reserve further reduced the targeted federal funds rate to 1.25% and 1.00%, respectively. As a result of the Federal Reserve Board’s actions, the prime rate, which is the basis for pricing many commercial and consumer loans, averaged 4.00% and 4.16% during the third quarter and first nine months of 2003, respectively, compared to 4.75% during the comparable periods of 2002. The slower internal growth in the overall loan portfolio, combined with the decrease in the yield of the loan portfolio from 6.91% in the third quarter and 7.02% in the first nine months of 2002 to 6.02% in the third quarter and 6.24% in the first nine months of 2003, was more than offset by the substantial increase in the overall loan portfolio as a result of the acquisition of First Virginia. As a result, interest income from loans and leases on an FTE basis in the current quarter and the first nine months of 2003 increased 3.8% and .7%, respectively, compared to the 2002 periods.

As part of the balance sheet restructuring discussed above, management plans to retain, rather than sell, $2.0 billion to $3.0 billion of mortgage loans from originations during 2003. BB&T plans to retain these mortgage loans, in addition to the mortgage loans BB&T normally holds in the portfolio, in an effort to improve net interest income. Through the end of the third quarter, BB&T had retained approximately $1.7 billion of mortgages in the loan portfolio pursuant to this strategy.

Securities

Securities available for sale totaled $16.0 billion at September 30, 2003, a decrease of $1.6 billion, or 8.9%, compared with December 31, 2002. Securities available for sale had net unrealized gains, net of deferred income taxes, of $98.2 million at September 30, 2003, compared to net unrealized gains, net of deferred income taxes, of $329.1 million at December 31, 2002. Securities held to maturity totaled $57.1 million, an increase of $1.6 million, or 2.8%, from year-end 2002. Trading securities totaled $710.4 million, up $561.9 million compared to the balance at December 31, 2002.

Average total securities for the first nine months amounted to $17.1 billion, down .7% from the average during the first nine months of 2002. For the third quarter of 2003, average securities totaled $17.4 billion, or .9% lower than the average balance for the third quarter of 2002.

BB&T Corporation Page 25 Third Quarter 2003 Form 10-Q

The decrease in securities available for sale and the increase in trading securities resulted from the sale of securities having a total par value of $453.0 million and the transfer of securities available for sale having a total par value of $522.5 million to the trading securities portfolio. These two transactions resulted in the recognition of $29.1 million of net securities losses, which were used to partially offset a recapture of the impairment of mortgage servicing rights during the third quarter of 2003. The transfer of securities available for sale to the trading portfolio was made pursuant to a change in management’s intent related to those securities, including more frequent trading activity as part of an economic hedging strategy related to mortgage servicing rights. During the third quarter of 2002, BB&T sold securities available for sale having a total par value of $2.0 billion, which created net gains totaling $135.9 million. These gains were taken principally to economically offset increases in the valuation allowance recorded to reduce the carrying value of BB&T’s mortgage servicing rights to estimated fair value during the third quarter of 2002.

The annualized FTE yield on the average total securities portfolio for the first nine months of 2003 was 4.95%, a decrease of 137 basis points from the annualized yield earned in the first nine months of 2002. This decrease in yield resulted principally from the prolonged low interest rate environment and purchases of lower-yielding securities. As BB&T’s higher yielding securities matured, sold, or were called, the resulting cash flows were reinvested in securities paying lower interest rates.

As part of the balance sheet restructuring undertaken in the second and third quarters of 2003, management used the proceeds from the second quarter sale or maturity of securities available for sale having a total par value of $4.0 billion and certain other funds to prepay $2.9 billion in FHLB long-term advances bearing high interest rates and to retain $2.0 billion to $3.0 billion in additional mortgage loans.

Other Interest Earning Assets

Federal funds sold and securities purchased under resale agreements or similar arrangements totaled $322.0 million at September 30, 2003, an increase of $27.5 million, or 9.4%, compared to December 31, 2002. Interest-bearing deposits with banks increased $133.3 million, or 90.0%, compared to year-end 2002. These categories of earning assets are subject to large daily fluctuations based on the availability of these types of funds and also reflect growth from the purchase of First Virginia. The average yield on other interest-earning assets for the first nine months of 2003 was 1.33%, a decrease of 56 basis points from the 1.89% earned on these assets during the first nine months of 2002. The decrease in the yield of other interest-earning assets is principally the result of the decline in the average federal funds rate as previously discussed.

BB&T Corporation Page 26 Third Quarter 2003 Form 10-Q

Goodwill and Other Assets

BB&T’s other noninterest-earning assets, excluding premises and equipment and noninterest-bearing cash and due from banks, increased $3.1 billion from December 31, 2002, to September 30, 2003. The increase was due primarily to additional goodwill and other intangibles resulting from the acquisition of First Virginia in the amount of $1.9 billion and $270.6 million, as well as increased bank owned life insurance and other assets, which grew $72.0 million and $287.3 million, respectively.

Other assets include mortgage servicing rights totaling $327.4 million, net of an allowance for impairment, which totaled $172.6 million at September 30, 2003. During the third quarter management evaluated BB&T’s mortgage servicing rights and the related valuation allowance to determine whether any portion of the valuation allowance was unrecoverable. As a result of this evaluation, mortgage servicing rights and an associated allowance in the amount of $102.5 million were determined to be unrecoverable and were written off. This reduction had no impact on BB&T’s consolidated results of operation other than a reduction of future amortization of mortgage servicing rights.

Deposits

Deposits at September 30, 2003, totaled $61.3 billion, an increase of $10.0 billion, or 19.5%, from December 31, 2002. Average deposits for the first nine months of 2003 increased $6.9 billion, or 14.3%, compared to the first nine months of 2002. The categories of deposits with the highest average rates of growth were money rate savings accounts, including investor deposit accounts, which increased $3.1 billion, or 21.3%, noninterest-bearing deposits, which increased $2.0 billion, or 28.4%, and CDs and other time deposits, which increased $1.5 billion, or 6.3%.

For the third quarter, average deposits increased $11.3 billion, or 22.4%. Average total transaction accounts, which include noninterest-bearing deposits, savings, interest checking and money rate savings, totaled $35.5 billion for the third quarter, an increase of $9.7 billion, or 37.5%, compared to the third quarter of 2002. Average time deposits for the third quarter totaled $26.4 billion, which represents an increase of $1.6 billion, or 6.6%, compared to the third quarter of 2002.

The growth in average deposits during the first nine months of 2003 compared to the corresponding period of 2002 includes the effect of deposits acquired in purchase accounting transactions completed during 2003 and 2002. In particular, the purchase of First Virginia at the beginning of the third quarter of 2003 added $9.4 billion in deposits. If the effects of purchase accounting transactions were excluded, average deposits for the nine months ended September 30, 2003, increased 3.6% compared to the same time period of 2002. For the third quarter of 2003, total average deposits, excluding the effects of purchase accounting transactions, increased 2.2% compared to the third quarter of 2002.

BB&T Corporation Page 27 Third Quarter 2003 Form 10-Q

The annualized average rate paid on total interest-bearing deposits during the first nine months of 2003 was 1.68%, a decrease of 81 basis points compared to 2002. The decrease in the average rate paid resulted from the lower interest rate environment that existed during 2003 compared to 2002, which included the previously discussed 75 basis point decrease in the average federal funds rate.

Borrowings

At September 30, 2003, short-term borrowed funds totaled $6.3 billion, an increase of $898.0 million, or 16.6%, compared to December 31, 2002. For the third quarter of 2003, average short-term borrowed funds totaled $5.8 billion, an increase of $518.9 million, or 9.9%, from the comparable period of 2002. For the nine months ended September 30, 2003, average short-term borrowed funds totaled $4.8 billion, a decrease of $803.0 million, or 14.2%, compared to the first nine months of 2002. The increase in short-term borrowed funds was primarily caused by the purchase of First Virginia at the beginning of the third quarter, which had $581.3 million in short-term borrowings at the time of the acquisition. The average annualized rate paid on short-term borrowed funds was 1.19% for the first nine months of 2003, a decrease of 63 basis points from the average rate of 1.82% paid in the comparable period of 2002. This decrease in the cost of short-term borrowed funds resulted from the lower interest rate environment that has existed during 2003 compared to 2002, which included a 75 basis point decrease in the average federal funds rate.

Long-term debt consists primarily of Federal Home Loan Bank (“FHLB”) advances to BB&T’s banking subsidiaries and corporate subordinated notes. Long-term debt has been utilized for a variety of funding needs, including the repurchase of common stock. Long-term debt totaled $9.8 billion at September 30, 2003, down $3.7 billion, or 27.6%, from the balance at December 31, 2002. For the third quarter of 2003, average long-term debt totaled $10.2 billion, a decrease of $2.1 billion, or 17.1%, compared to the third quarter of 2002. For the nine months ended September 30, 2003, average long-term borrowed funds were $12.3 billion, up $580.9 million, or 5.0%, compared to the first nine months of 2002. The average annualized rate paid on long-term borrowed funds was 3.96% for the first nine months of 2003, a decrease of 108 basis points from the average rate of 5.04% paid for the first nine months of 2002.

In connection with the aforementioned balance sheet restructuring, BB&T refinanced $3.0 billion of FHLB advances during the second quarter of 2003, lowering the current annual interest rate paid on these advances during the next five years, after which the FHLB has the option to increase the interest rate paid on such advances. Because the refinancing gave rise to substantially similar debt, the transaction resulted in no immediate gain or loss. During the third quarter of 2003, BB&T prepaid $2.9 billion in FHLB advances using funds from reducing the size of the securities portfolio. The transaction resulted in prepayment penalties totaling $384.9 million that reduced third quarter after-tax earnings by $248.5 million. The prepayment penalties are reflected in BB&T’s Consolidated Statements of Income as a category of noninterest expenses. The reduction in higher-cost long-term debt is intended to improve net interest income and net interest margins. In the third quarter of 2003, the long-term debt transactions contributed approximately 20 basis points to the net interest margin.

BB&T Corporation Page 28 Third Quarter 2003 Form 10-Q

Asset Quality

Nonperforming assets, composed of foreclosed real estate, repossessions, nonaccrual loans and restructured loans, totaled $447.1 million at September 30, 2003, compared to $451.7 million at December 31, 2002. As a percentage of loans and leases plus foreclosed property, nonperforming assets were .73% at September 30, 2003, down from .84% at December 31, 2002. Loans 90 days or more past due and still accruing interest totaled $121.9 million at September 30, 2003, compared to $115.0 million at year-end 2002.

BB&T’s net charge-offs totaled $61.8 million for the third quarter and amounted to .40% of average loans and leases, on an annualized basis, compared to $63.6 million, or .49% of average loans and leases, on an annualized basis, in the corresponding period in 2002. For the nine months ended September 30, 2003 and 2002, net charge-offs totaled $182.7 million and $177.9 million, respectively, and represented .43% and .48%, respectively, of average loans and leases on an annualized basis.

The allowance for loan and lease losses totaled $791.5 million at September 30, 2003, compared to $723.7 million at December 31, 2002, an increase of 9.4%. The allowance amounted to 1.29% of loans and leases outstanding at September 30, 2003, compared to 1.35% at year-end 2002. Excluding loans held for sale, the allowance for loan and lease losses was 1.32% and 1.42% of loans and leases at September 30, 2003 and December 31, 2002, respectively. The overall trends in the allowance for loan and lease losses were partially aided by the acquisition of First Virginia, which had strong credit quality including lower net charge-offs and lower nonperforming assets in recent quarters compared to BB&T. This strong credit history, combined with a post-acquisition loan portfolio mix with a lower risk profile and improvements in BB&T’s net charge-off ratio and ratio of nonperforming assets to total assets, led to the reduction in the allowance as a percentage of outstanding loans and leases.

During the first quarter of 2003, BB&T transferred $9.0 million, or 1.2% of the March 31, 2003 allowance for loan and lease losses to other liabilities. The amount transferred related to BB&T’s unfunded commitments. The transfer had no affect on BB&T’s consolidated results of operations.

The provision for loan and lease losses for the third quarter of 2003 was $65.0 million, compared to $64.0 million during the same period in 2002. For the nine months ended September 30, 2003, the provision for loan and lease losses totaled $189.5 million compared to $179.0 million in 2002.

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

BB&T Corporation Page 29 Third Quarter 2003 Form 10-Q

ASSET QUALITY ANALYSIS
(Dollars in thousands)

	For the Three Months Ended

	9/30/03			6/30/03			3/31/03			12/31/02			9/30/02

Allowance For Loan & Lease Losses
Beginning balance	$	719,576		$	716,276		$	723,685		$	723,688		$	706,446
Allowance for acquired loans, net		68,768			--			1,267			(16,075	)		16,861
Reclassification of allowance related
to unfunded commitments		--			--			(8,986	)		--			--
Provision for loan and lease losses		65,000			61,500			63,000			84,700			64,000
Net charge-offs		(61,817	)		(58,200	)		(62,690	)		(68,628	)		(63,619	)

Ending balance	$	791,527		$	719,576		$	716,276		$	723,685		$	723,688



Risk Assets
Nonaccrual loans and leases	$	355,420		$	363,524		$	392,701		$	374,842		$	358,823
Foreclosed real estate		70,178			64,347			60,110			55,448			46,378
Other foreclosed property		20,902			17,575			21,714			21,199			17,712
Restructured loans		613			145			175			175			2,358

Total nonperforming assets	$	447,113		$	445,591		$	474,700		$	451,664		$	425,271



Loans 90 days or more past due
and still accruing	$	121,907		$	97,479		$	93,609		$	115,047		$	100,147



Asset Quality Ratios
Nonaccrual and restructured loans and leases
as a percentage of total loans and leases*		.58	%		.66	%		.73	%		.70	%		.68	%
Total nonperforming assets as a percentage of:
Total assets		.49			.55			.60			.56			.54
Loans and leases plus foreclosed property*		.73			.81			.88			.84			.80
Net charge-offs as a percentage of
average loans and leases*		.40			.43			.47			.51			.49
Net charge-offs excluding specialized
lending as a percentage of average
loans and leases**		.30			.31			.35			.40			.39
Allowance for loan and lease losses as a
percentage of loans and leases*		1.29			1.31			1.33			1.35			1.36
Allowance for loan and lease losses as a
percentage of loans and leases
held for investment		1.32			1.39			1.39			1.42			1.42
Ratio of allowance for loan and lease losses to:
Net charge-offs		3.23	x		3.08	x		2.82	x		2.66	x		2.87	x
Nonaccrual and restructured loans and leases		2.22			1.98			1.82			1.93			2.00

* Includes loans held for sale and is net of unearned income. Applicable ratios are annualized.
** Excludes net charge-offs and average loans from BB&T's specialized lending operations.

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Market Risk Management

The effective management of market risk is essential to achieving BB&T’s strategic financial objectives. 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 appropriate maturity mixes of 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. These portfolios are analyzed for proper fixed-rate and variable-rate mixes under various interest rate scenarios.

BB&T Corporation Page 30 Third Quarter 2003 Form 10-Q

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 to ensure an adequate level of liquidity and capital, within the context of corporate performance goals. The ALCO also sets policy guidelines and establishes long-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 BB&T’s assets and liabilities are monetary in nature and, therefore, 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, which is monitored by the ALCO, BB&T is positioned to respond to changing needs for liquidity, 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 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 earned and paid, 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, but it provides a better illustration of the sensitivity of earnings to changes in interest rates than other analyses such as static or dynamic gap.

BB&T Corporation Page 31 Third Quarter 2003 Form 10-Q

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 conditions, 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

Interest Rate Scenario								Annualized Hypothetical

								Percentage Change in
Linear			Prime Rate					Net Interest Income

Change in			September 30,					September 30,

Prime Rate			2003			2002		2003			2002

	3.00			7.00	%		7.75		(1.65	) %		1.51
	1.50			5.50			6.25		(1.12	)		0.83
	(1.00	)		3.00			NA		(1.16	)		NA
	(1.50	)		NA			3.25		NA			(2.99	)
	(3.00	)		NA			1.75		NA			(3.47	)

NA = Not Applicable

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 any resulting negative effect on earnings.

Derivative Financial Instruments

BB&T utilizes a variety of financial instruments to manage various financial and market risks. These instruments, commonly referred to as derivatives, primarily consist of interest rate swaps, caps, floors, collars, financial forwards and futures contracts, interest rate lock commitments, 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 primarily to hedge business loans, mortgage loan origination activities, federal funds purchased, long-term debt and certificates of deposit. BB&T also used derivatives to facilitate transactions on behalf of its clients.

BB&T Corporation Page 32 Third Quarter 2003 Form 10-Q

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 or a measure of financial risk. On September 30, 2003, BB&T had derivative financial instruments outstanding with notional amounts totaling $9.6 billion. The estimated fair value of open contracts was $184.5 million at September 30, 2003.

Credit risk related to derivatives arises when notional 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 with national market makers with strong credit ratings and its clients 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 and, in certain instances, collateral agreements, with the dealers with which it does business. Because of these factors, BB&T’s credit risk exposure at September 30, 2003 was not material.

The following tables set forth certain information concerning BB&T’s derivative financial instruments at September 30, 2003:

Derivative Classifications and Hedging Relationships
(Dollars in thousands)

	September 30, 2003

	Notional		Fair Value
	Amount		Gain		Loss

Derivatives Designated as Cash Flow Hedges:
Hedging Business Loans	$	4,150,000	$	89,089	$	--
Hedging Short-term Borrowed Funds		1,250,000		5,270		--

Derivatives Designated as Fair Value Hedges:
Hedging Business Loans		22,216		--		437
Hedging Long-term Debt		1,400,000		98,777		--

Derivatives Not Designated as Hedges		2,802,819		28,188		36,420


Total	$	9,625,035	$	221,324	$	36,857

BB&T Corporation Page 33 Third Quarter 2003 Form 10-Q

Derivative Financial Instruments
September 30, 2003
(Dollars in thousands)

			Average			Average			Estimated
	Notional		Receive			Pay			Fair
	Amount		Rate			Rate			Value

Receive fixed swaps	$	6,122,938		4.54	%		1.83	%	$	207,885
Pay fixed swaps		595,155		1.19	%		3.72	%		(20,456	)
Caps, floors & collars		1,250,000		N/A			N/A			5,270
Foreign exchange contracts		174,832		N/A			N/A			706
Futures contracts		2,762		N/A			N/A			(40	)
Interest rate lock commitments		186,982		N/A			N/A			3,337
Forward mortgage loan contracts		1,145,900		N/A			N/A			(12,289	)
Options on contracts purchased		146,466		N/A			N/A			54


Total	$	9,625,035							$	184,467

N/A - not applicable.

Contractual Obligations, Contingent Liabilities and Other Commitments

BB&T utilizes a variety of financial instruments to meet the financial needs of its clients and to reduce exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, options written, standby letters of credit and financial guarantees, interest rate caps and floors written, interest rate swaps and forward and futures contracts. Please refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2002, for discussion with respect to BB&T’s quantitative and qualitative disclosures about its fixed and determinable contractual obligations. Items disclosed in the Annual Report on Form 10-K, with the exception of short and long-term debt, have not materially changed since that report was filed. BB&T’s total borrowings were affected by the acquisition of First Virginia on July 1, which resulted in the assumption of additional $581.3 million of short-term borrowings and $8.5 million in long-term debt, principally FHLB advances. In addition, as part of a balance sheet restructuring during the current quarter, BB&T prepaid and modified the terms of a portion of its outstanding long-term debt. Detailed discussion of the effects of the balance sheet restructuring on BB&T’s outstanding debt is included in the “Borrowings” section herein. A discussion of BB&T’s derivative financial instruments is included in the “Derivative Financial Instruments” section herein.

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BB&T Corporation Page 34 Third Quarter 2003 Form 10-Q

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 management are to provide an adequate return to shareholders while retaining a sufficient base from which to support future growth and to comply with all regulatory standards.

Total shareholders’ equity was $10.2 billion at September 30, 2003, and $7.4 billion at December 31, 2002. BB&T’s book value per common share at September 30, 2003 was $18.61 compared to $15.70 at December 31, 2002.

Bank 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 risks. The risk-weighted values of both balance sheet and off-balance sheet items are determined in accordance with risk factors specified by Federal bank regulatory pronouncements.

Tier 1 capital is calculated as common shareholders’ equity excluding unrealized gains or losses on debt securities available for sale, unrealized gains on equity securities available for sale and unrealized gains or losses on cash flow hedges, net of deferred income taxes; plus certain mandatorily redeemable capital securities, less nonqualifying intangible assets net of applicable deferred income taxes, and certain nonfinancial equity investments. Tier 1 capital is required to be at least 4% of risk-weighted assets, and total regulatory capital (the sum of 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, bank regulators have also established minimum leverage capital requirements for banking organizations. This is the primary measure of capital adequacy used by 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. BB&T’s regulatory capital and ratios are set forth in the following table:

BB&T Corporation Page 35 Third Quarter 2003 Form 10-Q

CAPITAL RATIOS

	2003									2002

	Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter

Risk-based capital ratios:
Tier 1 capital		9.6	%		9.7	%		9.5	%		9.2	%		9.7	%
Total capital		13.3			13.8			13.8			13.4			13.5
Tier 1 leverage ratio		7.2			7.2			7.2			6.9			7.3

During the first nine months of 2003 and 2002, BB&T repurchased 13.6 million and 10.5 million shares of BB&T common stock at a cost of $494.6 million and $397.6 million, respectively.

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ANALYSIS OF RESULTS OF OPERATIONS

Consolidated net income for the third quarter of 2003 totaled $115.9 million, a decrease of 64.7% compared to the $328.2 million earned during the comparable quarter of 2002. On a diluted per share basis, earnings for the three months ended September 30, 2003, were $.21, compared to $.68 for the same period in 2002, a decrease of 69.1%. BB&T’s results of operations for the third quarter of 2003 produced an annualized return on average assets of .51% and an annualized return on average shareholders’ equity of 4.50% compared to prior year ratios of 1.68% and 17.66%, respectively.

Net income for the nine months ended September 30, 2003, totaled $759.9 million, a decrease of $205.9 million, or 21.3%, compared to the $965.8 million earned during the comparable period of 2002. On a diluted per share basis, earnings for the first nine months of 2003 and 2002 were $1.51 and $2.02, respectively, which represents a 25.2% decrease. BB&T’s results of operations for the first nine months of 2003 produced an annualized return on average assets of 1.21% and an annualized return on average shareholders’ equity of 11.97% compared to prior year ratios of 1.72% and 18.44%, respectively.

The decreases in net income and diluted earnings per share during the three and nine month periods ending September 30, 2003 compared to the same periods in 2002 were primarily caused by prepayment penalties in the amount of $248.5 million, on an after-tax basis, resulting from an early extinguishment of debt completed in connection with the previously discussed balance sheet restructuring during the third quarter of 2003.

BB&T Corporation Page 36 Third Quarter 2003 Form 10-Q

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

ANNUALIZED
PROFITABILITY MEASURES

	2003									2002

	Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter

Return on average assets		.51	%		1.57	%		1.68	%		1.71	%		1.68	%
Return on average shareholders' equity		4.50			16.38			17.78			17.97			17.66
Net interest margin (taxable equivalent)		4.17			4.06			4.13			4.22			4.25

Merger-Related and Restructuring Charges

BB&T recorded certain merger-related and restructuring costs during both 2003 and 2002. For the third quarter of 2003, BB&T recorded $14.8 million in net after-tax charges primarily associated with the acquisition of First Virginia. During the third quarter of 2002, BB&T incurred $7.8 million in net after-tax charges primarily associated with the acquisitions of Regional Financial Corp. (“Regional”), Area Bancshares Corporation (“AREA”) and MidAmerica Bancorp (“MidAmerica”), as well as systems conversion costs related to other mergers. Merger-related and restructuring charges typically include, but are not limited to, personnel-related expenses such as staff relocation, severance benefits, early retirement packages and contract settlements; occupancy, furniture and equipment expenses including branch consolidation; and other costs, such as asset write-offs, professional fees, etc. For the nine months ended September 30, 2003 and 2002, BB&T incurred $24.9 million and $18.2 million, respectively, in net after-tax charges primarily associated with the same purchase acquisitions that affected the respective third quarters of 2003 and 2002.

During the third quarter of 2003, BB&T recorded pre-tax merger-related and restructuring charges of $22.8 million. These expenses were recorded in connection with the third quarter acquisition of First Virginia. For the nine months ended September 30, 2003, BB&T recorded pre-tax merger-related and restructuring charges of $38.3 million in connection with the first quarter acquisition and systems conversion of Equitable and the third quarter acquisition of First Virginia. The above expenses are reflected in BB&T’s Consolidated Statements of Income as a category of noninterest expenses.

During the third quarter of 2002, BB&T recorded pre-tax merger-related and restructuring charges of $12.7 million. These expenses were recorded in connection with the third quarter acquisition of Regional, as well as the third quarter systems conversions of AREA and MidAmerica. For the nine months ended September 30, 2002, BB&T recorded pre-tax merger-related and restructuring charges of $28.9 million. The above expenses are reflected in BB&T’s Consolidated Statements of Income as a category of noninterest expenses.

BB&T Corporation Page 37 Third Quarter 2003 Form 10-Q

The following table presents the components of merger-related and restructuring charges included in noninterest expenses. This table includes increases and decreases to previously recorded merger-related accruals as well as period expenses for merger-related items that must be expensed as incurred. Items that are required to be expensed as incurred include certain expenses associated with systems conversions, data processing, training, travel and other costs.

Summary of Merger-Related and Restructuring Charges
(Dollars in thousands)

	For the Nine Months Ended September 30,

	2003		2002

Severance and personnel-related costs	$	11,385	$	2,326
Occupancy and equipment charges		9,291		8,475
Marketing and public relations expenses		7,565		7,834
Systems conversions costs, asset write-offs,
charges to conform policies of an acquired
entity and other costs		10,083		10,232

Total	$	38,324	$	28,867

Severance and personnel-related costs include severance, employee retention, payments related to change-in-control provisions of employment contracts, outplacement services and other benefits associated with employee termination, which typically occurs in corporate support and data processing functions.

Occupancy and equipment charges represent merger-related costs associated with lease terminations, obsolete equipment write-offs, and the sale of duplicate facilities and equipment. Marketing and public relations costs represent direct media advertising related to the acquisitions. Systems conversions and related charges include expenses necessary to convert and combine the acquired branches and operations of merged companies. The other merger-related charges are composed of asset and supply inventory write-offs, which are primarily composed of unreconciled differences in an acquired institution’s accounts or unreconciled differences identified during systems conversions, litigation accruals, charges to conform an acquired institution’s accounting policies to those of BB&T and other similar charges.

In conjunction with the consummation of an acquisition and the completion of other requirements, BB&T typically accrues certain merger-related expenses related to estimated severance costs, costs to terminate lease contracts, costs related to the disposal of duplicate facilities and equipment, costs to terminate data processing contracts and other costs associated with the acquisition. The following tables present a summary of activity with respect to BB&T’s merger and restructuring accruals related to the mergers listed above, with the more significant mergers (F&M National Corporation and First Virginia) presented separately. These tables include costs reflected as expenses, as presented in the table above, and accruals recorded through purchase accounting adjustments.

BB&T Corporation Page 38 Third Quarter 2003 Form 10-Q

	F&M National Corporation


	(Dollars in thousands)

	Balance						Balance				Balance
	December 31,		Additions in		Utilized in		December 31,		Utilized in		September 30,
	2001		2002		2002		2002		2003		2003


Severance and personnel-related charges	$	11,055	$	1,417	$	11,592	$	880	$	633	$	247
Occupancy and equipment charges		10,992		--		797		10,195		3,590		6,605
Systems conversions and related charges		4,375		2,825		7,200		--		--		--
Other merger-related charges		3,110		--		2,113		997		10		987


Total	$	29,532	$	4,242	$	21,702	$	12,072	$	4,233	$	7,839

The remaining accruals at September 30, 2003, for F&M National Corporation are related primarily to costs to exit certain leases and to dispose of excess facilities and equipment. These liabilities will be utilized in the future upon termination of the various leases and sale of duplicate property. These accruals are expected to be substantially utilized in 2003 unless they relate to specific contracts expiring in later years.

	First Virginia Banks, Inc.


	(Dollars in thousands)

					Balance
	Additions in		Utilized in		September 30,
	2003		2003		2003

Severance and personnel-related charges	$	26,723	$	2,605	$	24,118
Occupancy and equipment charges		29,579		5,516		24,063
Systems conversions and related charges		20,594		--		20,594
Other merger-related charges		4,245		--		4,245


Total	$	81,141	$	8,121	$	73,020

Merger-related and restructuring accruals related to First Virginia are generally expected to be utilized over the next 12 months, unless they relate to specific contracts or legal obligations that expire in later years, or they relate to the disposal of duplicate facilities and equipment, which may take longer than 12 months to complete.

BB&T Corporation Page 39 Third Quarter 2003 Form 10-Q

Activity with respect to the merger and restructuring accruals for all other mergers, which are discussed above, is presented in the accompanying table:

	All Other Merger Activity


	(Dollars in thousands)

	Balance						Balance						Balance
	December 31,		Additions in		Utilized in		December 31,		Additions in		Utilized in		September 30,
	2001		2002		2002		2002		2003		2003		2003


Severance and personnel-related charges	$	20,316	$	38,597	$	42,964	$	15,949	$	4,582	$	10,834	$	9,697
Occupancy and equipment charges		21,431		31,668		22,269		30,830		3,943		21,785		12,988
Systems conversions and related charges		6,953		9,453		14,668		1,738		940		2,678		--
Other merger-related charges		12,000		21,438		23,154		10,284		14,044		16,865		7,463


Total	$	60,700	$	101,156	$	103,055	$	58,801	$	23,509	$	52,162	$	30,148

Liabilities for severance and personnel-related costs relate to severance liabilities that will be paid out based on such factors as expected termination dates, the provisions of employment contracts and the terms of BB&T’s severance plans. Occupancy and equipment accruals relate to costs to exit certain leases and to dispose of excess facilities and equipment. Such liabilities will be utilized upon termination of the various leases and sale of duplicate property. Liabilities associated with systems conversions relate to termination penalties on contracts with information technology service providers. Such liabilities will be utilized as the contracts are paid out and expire. Other merger-related liabilities typically relate to other miscellaneous accruals such as litigation, accruals to conform accounting policies, and other similar charges.

Because BB&T often has multiple merger integrations in process, and, due to limited resources, must schedule in advance significant events in the merger conversion and integration process, BB&T’s merger process and utilization of merger accruals may cover an extended period of time. In general, the majority of accrued costs are utilized in conjunction with or immediately following the systems conversion, when most of the duplicate staff positions are eliminated and the terminated employees begin to receive severance payments. Other accruals are utilized over time based on the sale, closing or disposal of duplicate facilities or equipment or the expiration of lease contracts. Merger accruals are re-evaluated periodically and adjusted as necessary.

The accruals utilized during 2003 in the table entitled “All Other Merger Accrual Activity” above include reversals of $24.2 million of previously recorded merger-related and restructuring accruals principally related to the finalization of estimates for employee terminations, contract cancellations and occupancy costs primarily in connection with the AREA and MidAmerica acquisitions. Of the above reversals, $21.4 million reflect adjustments to goodwill and had no effect on BB&T’s consolidated results of operations and the remaining $2.8 million are reflected as a reduction of merger-related and restructuring charges.

BB&T Corporation Page 40 Third Quarter 2003 Form 10-Q

Net Interest Income and Net Interest Margin

Net interest income on an FTE basis was $832.9 million for the third quarter of 2003 compared to $742.7 million for the same period in 2002, an increase of $90.3 million, or 12.2%. For the three months ended September 30, 2003, average earning assets increased $9.9 billion, or 14.2%, compared to the same period of 2002, while average interest-bearing liabilities increased by $6.2 billion, or 10.1%, and the net interest margin decreased from 4.25% in the third quarter of 2002 to 4.17% in the current quarter. This decrease in the net interest margin resulted primarily because of two factors. The reinvestment of proceeds from the sales, maturities and prepayments of securities, particularly sales of securities in previous quarters that produced gains to economically offset writedowns in mortgage servicing rights, and the additional interest expense incurred in connection with BB&T’s stock buy-back program negatively affected the net interest margin for the third quarter of 2003 by 6 basis points and 2 basis points, respectively.

For the nine months ended September 30, 2003, net interest income on an FTE basis was $2.3 billion compared to $2.2 billion for the same period in 2002, an increase of $131.6 million, or 6.1%. Average earning assets for the first nine months of 2003 increased $6.6 billion, or 9.8%, while average interest-bearing liabilities increased $4.7 billion, or 8.0%, compared to the first nine months of 2002. The net interest margin for the first nine months of 2002 compared to the same period in 2003 decreased 14 basis points from 4.26% to 4.12%. This decrease in margin was the result of several factors. During November 2002, the Federal Reserve reduced the targeted federal funds rate by 50 basis points to 1.25% where it remained until mid-June 2003, when it was further reduced by an additional 25 basis points to 1.00%. In the declining interest rate environment, the average yield on interest earning assets declined 90 basis points, while the average cost of funds over the same time frame declined 85 basis points, causing a reduction in the margin. In addition, the reinvestment of proceeds from the sales, maturities and prepayments of securities, particularly sales of securities taken to produce gains to economically offset writedowns in mortgage servicing rights, and the additional interest expense incurred in connection with BB&T’s stock buy-back program negatively affected the net interest margin for the first nine months of 2003 by 6 basis points and 3 basis points, respectively.

The following tables set forth the major components of net interest income and the related annualized yields and rates for the third quarter and first nine months of 2003 compared to the same periods in 2002, and the variances between the periods caused by changes in interest rates versus changes in volumes.

BB&T Corporation Page 41 Third Quarter 2003 Form 10-Q

Net Interest Income and Rate / Volume Analysis
For the Three Months Ended September 30, 2003 and 2002

	Average Balances				Annualized Yield / Rate						Income / Expense				Increase			Change due to

Fully Taxable Equivalent - (Dollars in thousands)	2003		2002		2003			2002			2003		2002		(Decrease)			Rate (6)			Volume (6)

Assets
Securities (1):
U.S. Treasury, government and other (5)	$	16,425,338	$	16,675,988		4.28	%		6.02	%	$	175,594	$	250,917	$	(75,323	)	$	(72,194	)	$	(3,129	)
States and political subdivisions		997,878		898,930		6.28			7.45			15,667		16,750		(1,083	)		(2,830	)		1,747


Total securities (5)		17,423,216		17,574,918		4.39			6.09			191,261		267,667		(76,406	)		(75,024	)		(1,382	)
Other earning assets (2)		633,744		456,474		1.13			1.67			1,798		1,922		(124	)		(738	)		614
Loans and leases, net
of unearned income (1)(3)(4)(5)		61,519,643		51,628,276		6.02			6.91			931,997		897,969		34,028			(124,743	)		158,771


Total earning assets		79,576,603		69,659,668		5.62			6.67			1,125,056		1,167,558		(42,502	)		(200,505	)		158,003


Non-earning assets		11,269,213		7,911,563


Total assets	$	90,845,816	$	77,571,231




Liabilities and Shareholders' Equity
Interest-bearing deposits:
Savings and interest-checking	$	4,535,667	$	3,350,476		0.26			0.77			3,000		6,518		(3,518	)		(5,293	)		1,775
Money rate savings		20,029,818		15,110,502		0.65			1.17			32,643		44,545		(11,902	)		(23,672	)		11,770
Certificates of deposit and other time deposits		26,350,439		24,708,799		2.24			3.26			148,525		203,185		(54,660	)		(67,419	)		12,759


Total interest-bearing deposits		50,915,924		43,169,777		1.43			2.34			184,168		254,248		(70,080	)		(96,383	)		26,303
Short-term borrowed funds		5,763,994		5,245,126		0.99			1.83			14,651		24,140		(9,489	)		(11,973	)		2,484
Long-term debt		10,205,592		12,313,297		3.60			4.73			93,291		146,515		(53,224	)		(31,683	)		(21,541	)


Total interest-bearing liabilities		66,885,510		60,728,200		1.73			2.78			292,110		424,903		(132,793	)		(140,040	)		7,247


Noninterest-bearing deposits		10,973,849		7,383,310
Other liabilities		2,771,315		2,089,417
Shareholders' equity		10,215,142		7,370,304


Total liabilities and
shareholders' equity	$	90,845,816	$	77,571,231



Interest rate spread						3.89			3.89
Net yield on earning assets						4.17	%		4.25	%	$	832,946	$	742,655	$	90,291		$	(60,465	)	$	150,756




Taxable equivalent adjustment											$	26,488	$	40,563


(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.
(6)	Changes in interest income and expense attributable to both changes in interest rates and changes in volumes are allocated proportionately.

BB&T Corporation Page 42 Third Quarter 2003 Form 10-Q

Net Interest Income and Rate / Volume Analysis
For the Nine Months Ended September 30, 2003 and 2002

	Average Balances				Annualized Yield / Rate						Income / Expense				Increase			Change due to

Fully Taxable Equivalent - (Dollars in thousands)	2003		2002		2003			2002			2003		2002		(Decrease)			Rate (6)			Volume (6)

Assets
Securities (1):
U.S. Treasury, government and other (5)	$	16,209,078	$	16,268,763		4.84	%		6.26	%	$	588,273	$	763,500	$	(175,227	)	$	(171,964	)	$	(3,263	)
States and political subdivisions		889,386		951,924		7.02			7.47			46,800		53,330		(6,530	)		(3,146	)		(3,384	)

Total securities (5)		17,098,464		17,220,687		4.95			6.32			635,073		816,830		(181,757	)		(175,110	)		(6,647	)
Other earning assets (2)		534,210		422,283		1.33			1.89			5,343		5,969		(626	)		(2,026	)		1,400
Loans and leases, net
of unearned income (1)(3)(4)(5)		56,565,028		49,923,043		6.24			7.02			2,643,228		2,623,786		19,442			(308,540	)		327,982


Total earning assets		74,197,702		67,566,013		5.91			6.81			3,283,644		3,446,585		(162,941	)		(485,676	)		322,735


Non-earning assets		9,516,151		7,320,021


Total assets	$	83,713,853	$	74,886,034




Liabilities and Shareholders' Equity
Interest-bearing deposits:
Savings and interest-checking	$	3,742,356	$	3,373,876		0.36			0.78			10,081		19,647		(9,566	)		(11,517	)		1,951
Money rate savings		17,568,757		14,488,268		0.81			1.15			105,907		124,205		(18,298	)		(41,435	)		23,137
Certificates of deposit and other time deposits		25,173,205		23,673,182		2.49			3.55			468,309		628,185		(159,876	)		(197,599	)		37,723


Total interest-bearing deposits		46,484,318		41,535,326		1.68			2.49			584,297		772,037		(187,740	)		(250,551	)		62,811
Short-term borrowed funds		4,849,076		5,652,086		1.19			1.82			43,809		77,053		(33,244	)		(24,127	)		(9,117	)
Long-term debt		12,308,015		11,727,122		3.96			5.04			368,817		442,343		(73,526	)		(99,157	)		25,631


Total interest-bearing liabilities		63,641,409		58,914,534		2.08			2.93			996,923		1,291,433		(294,510	)		(373,835	)		79,325


Noninterest-bearing deposits		9,008,067		7,016,475
Other liabilities		2,575,119		1,953,061
Shareholders' equity		8,489,258		7,001,964


Total liabilities and
shareholders' equity	$	83,713,853	$	74,886,034



Interest rate spread						3.83			3.88
Net yield on earning assets						4.12	%		4.26	%	$	2,286,721	$	2,155,152	$	131,569		$	(111,841	)	$	243,410




Taxable equivalent adjustment											$	84,665	$	115,763


(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.
(6)	Changes in interest income and expense attributable to both changes in interest rates and changes in volumes are allocated proportionately.

BB&T Corporation Page 43 Third Quarter 2003 Form 10-Q

Noninterest Income

Noninterest income for the three months ended September 30, 2003, was $512.1 million compared to $393.4 million for the same period in 2002, an increase of $118.7 million, or 30.2%. Noninterest income increased primarily due to substantial growth in mortgage banking income, growth in investment banking and brokerage fees and commissions, and in commissions generated by BB&T’s insurance agency network and insurance brokerage operations. These increases were partially offset by net losses on securities recognized in the third quarter of 2003 compared to gains from sales of securities recognized in the third quarter of 2002. For the nine months ended September 30, 2003, noninterest income totaled $1.4 billion, an increase of $272.6 million, or 23.8%, compared to the same period in 2002. The increase in noninterest income for the period ended September 30, 2003, was primarily driven by the same factors that affected quarterly growth.

Service charges on deposits totaled $122.0 million for the third quarter of 2003, up $17.2 million, or 16.4%, compared to the third quarter of 2002. For the first nine months of 2003, service charges on deposits totaled $315.4 million, an increase of $18.6 million, or 6.3%, compared to the same period in 2002. Both the quarterly and year-to-date growth resulted from the purchase of First Virginia at the beginning of the third quarter of 2003, which contributed $18.9 million in additional service charges on deposits in the current quarter. Excluding the effect of this acquisition, service charges on deposits decreased 1.1% and 1.2% for the three and nine month periods ended September 30, 2003, respectively, compared to the same periods in 2002. The decrease in service charges on deposits, excluding the effect of First Virginia, was the result of changes in deposit mix and competitive pricing pressure. In light of the low interest rate environment, many commercial customers are concentrating their deposit balances in transaction accounts instead of in traditional higher fee interest bearing commercial deposit accounts, which allows them to minimize commercial account analysis fees. In terms of retail deposits, pricing reductions of certain deposit-related services and new lower-fee deposit products were introduced during 2003 in response to market conditions and competition within BB&T’s footprint.

Trust income totaled $31.9 million for the current quarter, an increase of $4.5 million, or 16.4%, compared to the same period a year ago. For the first nine months of 2003, trust income totaled $84.1 million, up $9.4 million, or 12.6%, compared to the same period in 2002. The increase in trust income was partially due to the acquisition of First Virginia, which contributed $3.4 million of trust income during the current quarter, and to increases in mutual fund and estate management fees. Also, the value of trust assets under management, including custodial accounts, increased from $23.0 billion at September 30, 2002 to $25.8 billion at September 30, 2003. Total trust assets under management at September 30, 2003 includes $2.2 billion in trust assets from the acquisition of First Virginia and reflects a reduction of $2.4 billion in trust assets from the North Carolina state employees’ 401-K plan, which transferred to a successor trustee. The increase in trust income for the first nine months of 2003 compared to the same period in 2002 was primarily attributable to the same factors that affected the quarterly growth.

BB&T Corporation Page 44 Third Quarter 2003 Form 10-Q

Investment banking and brokerage fees and commissions totaled $65.3 million during the third quarter of 2003, an increase of $17.4 million, or 36.3%, compared to the third quarter of 2002. For the nine months, investment banking and brokerage fees and commissions totaled $177.3 million, an increase of $20.5 million, or 13.0%, compared to the same period in 2002. The increase in this category of revenue for the third quarter and the first nine months of 2003 resulted primarily from growth in brokerage commissions and other trading income at Scott & Stringfellow, BB&T’s wholly-owned investment banking and brokerage subsidiary, and commissions from sales of annuities, which contributed $17.0 million of the increase for the third quarter and $20.5 million of the increase for the nine months, respectively.

Insurance commissions totaled $103.6 million for the third quarter of 2003, an increase of $23.2 million, or 28.8%, compared to the same three-month period of 2002. For the first nine months of 2003, insurance commissions totaled $293.8 million, up $67.9 million, or 30.1%, compared to the same period last year. Internal growth combined with the expansion of BB&T’s insurance agency network and insurance brokerage operations generated this strong growth. Revenues from BB&T’s insurance brokerage operations contributed $8.5 million in revenue growth for the current quarter and $30.5 million for the first nine months of 2003. Furthermore, property and casualty insurance commissions increased $8.4 million and credit insurance commissions increased $2.0 million compared with the third quarter of 2002. In addition to the factors that influenced third quarter growth, the 30.1% increase in insurance commissions during for the first nine months of 2003 was driven by growth in employee benefits commissions, insurance fees and charges and accident and health insurance premium income, which increased $4.4 million, $4.2 million, and $6.0 million, respectively, compared to the same period of 2002.

Income from mortgage banking activities totaled $117.5 million for the third quarter of 2003, an increase of $205.8 million compared to a net loss of $88.3 million for the third quarter of 2002. The significant fluctuations in net mortgage banking revenues are primarily a function of high interest rate volatility that has affected the value of BB&T’s mortgage servicing rights. While the low interest rate environment during the last two years contributed to high mortgage origination volume, it also resulted in higher prepayment speed assumptions for existing serviced loans, which lowered the value of BB&T’s mortgage servicing rights causing writedowns in their value. During the third quarter of 2003, mortgage rates increased, producing an $88.9 million recapture of previous writedowns, which was recognized through a reduction of the impairment allowance. This recapture income compares to a writedown of the carrying value of BB&T’s mortgage servicing rights totaling $130.8 million during the third quarter of 2002. The recapture of the carrying value of mortgage servicing rights during the current quarter was substantially offset by losses from sales and transfers of securities available for sale, losses on mortgage banking-related derivatives, and a reduction in secondary marketing activities versus prior quarters. The mortgage servicing rights impairment recorded in the third quarter of 2002 was substantially offset by gains from sales of securities available for sale. During the current quarter, BB&T originated $5.9 billion of mortgage loans compared to $3.5 billion during the third quarter of 2002. Despite the increase in mortgage origination volume, mortgage production income declined by $10.9 million to $25.2 million during the third quarter of 2003 compared to $36.1 million for the same quarter of 2002. This decline was primarily attributable to a reduction in secondary marketing activities driven by a higher percentage of retained mortgage production. For the first nine months of 2003, income from mortgage banking activities totaled $144.7 million, up $175.0 million compared to the losses in the same period in 2002. The increase in year-to-date mortgage banking income primarily resulted from an increase in mortgage production income, a reduction in impairment of mortgage servicing rights offset in part by an increase in amortization expense. Mortgage production volume for the nine months ended September 30, 2003 was $17.1 billion versus $8.6 billion for the nine months ended September 30, 2002. This two-fold increase in mortgage production volume resulted in an increase of $112.5 million in mortgage production income to $207.6 million for the nine months ended September 30, 2003 as compared to $95.1 million for the first nine months of 2002. For the nine months ended September 30, 2003, BB&T recorded $57.3 million in net mortgage servicing rights impairment charges compared to $156.4 million of impairment charges recorded during the same period of 2002. Amortization expense associated with mortgage servicing rights increased by $61.4 million to $126.7 million for the nine months ended September 30, 2003 versus $65.3 million for the first nine months of 2002.

BB&T Corporation Page 45 Third Quarter 2003 Form 10-Q

Other nondeposit fees and commissions, including bankcard fees and merchant discounts, totaled $73.3 million for the third quarter of 2003, an increase of $19.2 million, or 35.4%, compared to the three months ended September 30, 2002. For the nine months ended September 30, 2003, other nondeposit fees and commissions, including bankcard fees and merchant discounts, totaled $190.4 million, an increase of $40.0 million, or 26.6%, compared to the same period in 2002. The principal drivers of the third quarter increase were check card interchange fees, ATM fees and bankcard income, which increased $1.2 million, $1.7 million and $5.8 million, respectively, compared to the same period in 2002. Furthermore, the July 1, 2003 acquisition of First Virginia contributed an additional $6.9 million in other nondeposit fees and commissions during the third quarter and first nine months of 2003. The 26.6% increase in other nondeposit fees and commissions, including bankcard fees and merchant discounts, for the first nine months of 2003 was also primarily driven by growth in check card interchange fees and bankcard income, which increased $9.1 million and $10.5 million, respectively, compared to the same period of 2002. In addition, fees from money orders, and official check outsourcing fees increased $2.9 million and $2.3 million, respectively, over the same time period.

BB&T recorded a net loss from sales and transfers of securities totaling $29.1 million during the current quarter compared with $135.5 million of net securities gains realized during the same period one year ago. For the nine months ended September 30, 2003 and 2002, securities gains totaled $114.6 million and $168.6 million, respectively. The net loss in the third quarter of 2003 resulted from the sale of securities available for sale and the transfer of securities available for sale to the trading securities portfolio. These losses economically offset the recapture of the impairment of BB&T’s mortgage servicing rights during the third quarter of 2003.

Other income totaled $27.7 million for the third quarter of 2003, a decrease of $3.9 million, or 12.3%, compared with the same period one year ago. This decrease was primarily caused by lower income from limited partnership investments, which declined $17.4 million compared to the third quarter of 2002, which was partially offset by gains from the sale of other miscellaneous investments, which increased $6.6 million. For the nine months ended September 30, 2003 and 2002, other income totaled $97.8 million and $102.7 million, respectively, with the decrease resulting principally from the same factors that affected the quarterly results.

BB&T Corporation Page 46 Third Quarter 2003 Form 10-Q

Noninterest Expense

Noninterest expenses totaled $1.1 billion for the third quarter of 2003 compared to $577.2 million for the same period a year ago, an increase of $539.8 million, or 93.5%. Noninterest expenses for the third quarter include $22.8 million of pretax merger-related and restructuring expenses principally associated with the acquisition of First Virginia and a loss from the early termination of FHLB advances totaling $384.9 million. For the nine months ended September 30, 2003, noninterest expenses totaled $2.4 billion, an increase of $696.3 million, or 41.6%, over the same period a year ago. Noninterest expenses for the first nine months of 2003 include $38.3 million of pretax merger-related and restructuring expenses, as well as the $384.9 million loss from the early extinguishment of debt.

Personnel expense, the largest component of noninterest expense, was $412.4 million for the third quarter of 2003 compared to $323.1 million for the same period in 2002, an increase of $89.2 million, or 27.6%. This increase was primarily attributable to the acquisition of First Virginia during the third quarter of 2003, which contributed approximately $48.0 million of the increase in personnel expenses. Additionally, during the current quarter, employee incentive and performance compensation expenses and employee benefit expenses increased $27.0 million and $14.1 million, respectively. For the nine months ended September 30, 2003, personnel expense totaled $1.1 billion, up $184.9 million, or 19.5%, compared to 2002. The increase resulted primarily from the same factors that produced the quarterly growth.

Occupancy and equipment expense for the three months ended September 30, 2003, totaled $97.4 million compared to $85.6 million for the third quarter of 2002. For the first nine months of 2003, occupancy and equipment expense totaled $270.7 million, an increase of $17.0 million, or 6.7%, compared to the same period last year. Both increases resulted primarily from the acquisition of First Virginia, which added $11.6 million in occupancy and equipment expenses during the third quarter of 2003. In addition, during the nine months ended September 30, 2003, building maintenance expenses and rent expenses increased $1.6 million and $3.5 million, respectively, which were substantially offset by a decrease in communication and information technology equipment expenses of $3.3 million.

The amortization of intangible assets totaled $21.0 million for the current quarter, an increase of $13.9 million, or 196.8%, from the amount incurred in the third quarter of 2002. For the nine months ended September 30, 2003, amortization of intangible assets totaled $34.6 million, an increase of $16.9 million, or 95.4%, compared to the same period in 2002. These increases were primarily due to acquisitions completed during the last quarter of 2002 and the first three quarters of 2003, the largest of which was the purchase of First Virginia, which contributed $13.9 million in amortization expenses during the third quarter of 2003. See Note D to the Consolidated Financial Statements herein for a summary of completed mergers and acquisitions.

BB&T Corporation Page 47 Third Quarter 2003 Form 10-Q

Other noninterest expenses, including professional services, totaled $178.6 million for the third quarter of 2003, an increase of $29.8 million, or 20.0%, compared to the same period of 2002. The principal reason for the increase was the purchase of First Virginia, which added other noninterest expenses totaling $16.3 million during the current quarter. For the first nine months of 2003, other noninterest expenses totaled $511.0 million, an increase of $83.2 million, or 19.4%, compared to the same period in 2002. In addition to the impact of the First Virginia acquisition, year-to-date other noninterest expenses were also affected by additional noninterest expenses from advertising and public relations expenses and loan and lease expenses, which resulted in increases of $4.7 million and $13.0 million, respectively.

Provision for Income Taxes

The provision for income taxes totaled $20.7 million for the third quarter of 2003, a decrease of $105.4 million, or 83.6%, compared to the third quarter of 2002 due to the substantial decrease in pretax income. For the nine months ended September 30, 2003, the provision for income taxes totaled $298.8 million, a decrease of $75.5 million, or 20.2%, compared to 2002. BB&T’s effective income tax rates were 15.2% and 27.8% for the three months ended September 30, 2003 and 2002, respectively, and 28.2% and 28.1% for the first nine months of 2003 and 2002, respectively.

BB&T has entered into option contracts which legally transferred part of the responsibility for the management of future residuals of certain leveraged lease investments including the future remarketing or re-leasing of these assets to a wholly-owned subsidiary in a foreign jurisdiction having a lower income tax rate, thereby lowering the effective income tax rate applicable to these lease investments. These option contracts provide that the foreign subsidiary may purchase the lease investments at expiration of the existing leveraged leases for a fixed price. As a result, a portion of the residual value included in the consolidated leveraged lease analysis should be taxed at a lower tax rate than originally anticipated, resulting in a change in the total net income from the lease. 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 by $2.4 million and $8.4 million, and the income tax provision by $9.6 million and $16.5 million for the first nine months of 2003 and 2002, respectively. BB&T intends to permanently reinvest the earnings of this subsidiary and, therefore, deferred income taxes associated with the foreign subsidiary arising from these transactions have not been provided.

During 2001, BB&T transferred certain securities and real estate secured loans to a subsidiary in exchange for additional common equity in the subsidiary. The transaction resulted in a difference between BB&T’s tax basis in the equity investment in the subsidiary and the assets transferred to the subsidiary. This difference in basis resulted in a net reduction in the provision for income taxes of $2.9 million and $26.0 million for the first nine months of 2003 and 2002, respectively.

BB&T Corporation Page 48 Third Quarter 2003 Form 10-Q

During the third quarter, the Internal Revenue Service (“IRS”) concluded its examination of BB&T’s federal income tax returns for the years ended December 31, 1996, 1997 and 1998. The examination related primarily to BB&T’s income tax treatment of certain leveraged lease investments, which were entered into during the years under examination. Following their examination, the IRS issued a Revenue Agent Report assessing BB&T taxes and interest in the amount of $59.3 million, which was paid by BB&T during the third quarter. The payment did not affect BB&T’s consolidated results of operations as the proposed adjustments related primarily to the timing of revenue recognition and amortization expense for which deferred taxes had been provided. Management continues to believe that BB&T’s treatment of these leveraged leases was appropriate and in compliance with existing tax laws and regulations for the years examined, and is currently evaluating its options regarding filing for a refund of this assessment.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Please refer to “Market Risk Management” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section herein.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company’s Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures in accordance with Rule 13a-15 under the Exchange Act. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures enable the Company to record, process, summarize and report in a timely manner the information that the Company is required to disclose in its Exchange Act reports.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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BB&T Corporation Page 49 Third Quarter 2003 Form 10-Q

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.

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Item 6. Exhibits and Reports on Form 8-K

(a)

EXHIBIT INDEX

Exhibit No.	Description	Location

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

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

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


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

BB&T Corporation Page 50 Third Quarter 2003 Form 10-Q

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


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

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


3(b)(i)	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


3(b)(ii)	Articles of Amendment of the Bylaws of the Registrant.	Incorporated herein by reference to Exhibit 3(b)(ii) filed in the Quarterly Report on Form 10-Q, filed May 13, 2002.

3(c)	Articles of Amendment dated May 1, 1998 to the Articles of Incorporation of the Company.	Incorporated herein by reference to Exhibit 3(c) filed in the Quarterly Report on Form 10-Q, filed May 15, 2003.


3(d)	Articles of Amendment dated April 30, 2001 to the Articles of Incorporation of the Company.	Incorporated herein by reference to Exhibit 3(d) filed in the Quarterly Report on Form 10-Q, filed May 15, 2003.

BB&T Corporation Page 51 Third Quarter 2003 Form 10-Q

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

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

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

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

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

22	Proxy Statement for the 2003 Annual Meeting of Shareholders.	Incorporated herein by reference to BB&T's Definitive Proxy Statement filed on Schedule 14A on March 17, 2003.


31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.


32.1	Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.

BB&T Corporation Page 52 Third Quarter 2003 Form 10-Q

32.2		Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Filed herewith.

(b) Current Reports on Form 8-K filed or furnished during and following the quarter ended September 30, 2003.

On July 2, 2003, BB&T filed a Current Report on Form 8-K under Item 5 to announce BB&T’s completion of the acquisition of First Virginia Banks, Inc. On July 8, 2003, BB&T filed a Current Report on Form 8-K under Item 5 to announce the retirement of Sherry A. Kellett, BB&T’s Corporate Controller and a member of BB&T’s Executive Management team, and to announce the appointment of Edward D. Vest as Corporate Controller effective with Ms. Kellett’s retirement. On July 15, 2003, BB&T furnished a Current Report on Form 8-K under Item 9 pursuant to Item 12 to report the results of operations for the second quarter of 2003. On August 27, 2003, BB&T filed a Current Report on Form 8-K under Item 5 to announce the approval of a new share repurchase program. On September 15, 2003, BB&T filed a Current Report on Form 8-K under Item 5 to reflect additional information with respect to BB&T’s operating segments that appeared in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2002. On October 14, 2003, BB&T furnished a Current Report on Form 8-K under Item 12 to report the results of operations for the third quarter of 2003. On November 12, 2003, BB&T furnished a Current Report on Form 8-K under Item 9 to announce plans to acquire McGriff, Seibels & Williams, Inc., a commercial insurance broker based in Birmingham, Alabama.

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BB&T Corporation Page 53 Third Quarter 2003 Form 10-Q

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: November 13, 2003		By: /s/ Scott E. Reed
		Scott E. Reed, Senior Executive Vice
		President and Chief Financial Officer

Date: November 13, 2003		By: /s/ Edward D. Vest
		Edward D. Vest, Senior Vice President
		and Corporate Controller
		(Principal Accounting Officer)

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BB&T Corporation Page 54 Third Quarter 2003 Form 10-Q