UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001
Commission File Number 1-13253

THE PEOPLES HOLDING COMPANY
-------------------------------------------------------
(Exact name of the registrant as specified in its charter)

MISSISSIPPI 64-0676974
------------------------ --------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)

209 Troy Street, P. O. Box 709, Tupelo, Mississippi 38802-0709
------------------------------------------------------------
(Address of principal executive offices)

Registrant's telephone number including area code 662-680-1001

Indicate by check 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, and (2) has been subject to such filing requirements
for the past 90 days.
YES__X__NO_____

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

Common stock, $5 Par Value, 5,722,741 shares outstanding
as of November 9, 2001

THE PEOPLES HOLDING COMPANY
INDEX

PART 1. FINANCIAL INFORMATION PAGE

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000............. 3

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

Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000........ 5

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

Item 2.

Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 9

Item 3.

Quantitative and Qualitative Disclosures
About Market Risk.................................... 13

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings........................................ 14

Item 2.

Changes in Securities.................................... 14

Item 6.(a) and (b)

Exhibits and Reports on Form 8-K......................... 14

Signatures................................................... 14

THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

SEPTEMBER 30 DECEMBER 31
2001 2000
------------ -----------
(Unaudited) (Note 1)

Assets
Cash and due from banks .................. $ 44,710 $ 27,676
Interest-bearing balances with banks ..... 29,369 29,141
---------- ---------
Cash and Cash Equivalents ... 74,079 56,817

Securities available-for-sale ............ 286,001 192,916

Securities held-to-maturity (fair
value - $0 and $85,981 at
September 30, 2001 and December 31,
2000, respectively) ................... 85,658

Loans, net of unearned income ............ 827,041 815,854
Allowance for loan losses ............. (11,166) (10,536)
---------- ---------
Net Loans ................... 815,875 805,318

Premises and equipment, net .............. 28,862 30,105
Other assets ............................. 58,687 41,126
---------- ---------
Total Assets .................... $ 1,263,504 $ 1,211,940
========== =========
Liabilities
Deposits:
Noninterest-bearing ................... $ 160,687 $ 131,718
Interest-bearing ...................... 926,912 914,887
---------- ---------
Total Deposits .............. 1,087,599 1,046,605

Treasury tax and loan note account ....... 6,731 4,603
Advances from the Federal Home Loan Bank . 24,424 19,946
Other liabilities ........................ 19,451 19,125
---------- ---------
Total Liabilities ........... 1,138,205 1,090,279

Shareholders' Equity
Common Stock, $5 par value - 15,000,000
shares authorized, 6,212,284 shares
issued; 5,757,799 and 6,056,899 shares
outstanding at September 30, 2001 and
December 31, 2000, respectively ........ 31,061 31,061
Treasury stock, at cost .................. (11,078) (3,688)
Additional paid-in capital ............... 39,850 39,931
Retained earnings ........................ 60,962 54,423
Accumulated other comprehensive income ... 4,504 (66)
---------- ---------
Total Shareholders' Equity .. 125,299 121,661
---------- ---------
Total Liabilities and
Shareholders' Equity ......... $ 1,263,504 $ 1,211,940
========== =========

See Notes to Condensed Consolidated Financial Statements

THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)

NINE MONTHS ENDED SEPTEMBER 30 THREE MONTHS ENDED SEPTEMBER 30
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited) (Unaudited)

Interest Income
Loans ................................ $ 53,919 $ 54,145 $ 17,773 $ 18,704
Securities:
Taxable ......................... 9,380 8,949 3,030 3,019
Tax-exempt ...................... 3,004 3,099 991 1,017

Other ................................ 669 269 83 3
------- ------- ------- -------
Total interest income ...... 66,972 66,462 21,877 22,743

Interest Expense
Deposits ............................. 31,276 30,707 9,548 10,891
Borrowings .......................... 1,090 1,581 359 554
------- ------- ------- -------
Total interest expense ..... 32,366 32,288 9,907 11,445
---------- ---------- ---------- ----------
Net interest income ........ 34,606 34,174 11,970 11,298

Provision for loan losses .................. 3,475 4,068 1,225 1,389
--------- --------- --------- ---------
Net interest income after
provision for loan losses .. 31,131 30,106 10,745 9,909

Noninterest income:
Service charges on deposit accounts .. 8,569 7,302 2,961 2,479
Fees and commissions ................. 5,276 3,640 1,842 1,468
Trust revenue ........................ 660 802 130 267
Gains on sale of securities .......... 87 42
Other ................................ 3,156 2,053 1,197 678
------- ------- ------- -------
Total noninterest income ... 17,748 13,797 6,172 4,892

Noninterest expenses:
Salaries and employee benefits ....... 19,285 16,811 6,862 5,860
Data processing....................... 2,629 2,414 902 788
Net occupancy ........................ 2,402 2,305 797 840
Equipment ............................ 2,195 2,181 733 720
Other ................................ 7,792 7,893 2,579 2,566
--------- --------- --------- ---------
Total noninterest expenses . 34,303 31,604 11,873 10,774
---------- ---------- ---------- ----------

Income before income taxes ................. 14,576 12,299 5,044 4,027
Income taxes ............................... 3,845 3,401 1,202 1,113
--------- --------- --------- ---------
Net income ................. $ 10,731 $ 8,898 $ 3,842 $ 2,914
========== ========== ========== ==========

Basic and diluted earnings per share ...... $ 1.81 $ 1.45 $ 0.66 $ 0.48
====== ====== ====== ======

Weighted average shares outstanding ....... 5,925,326 6,121,553 5,793,822 6,082,559
========= ========= ========= =========

See Notes to Condensed Consolidated Financial Statements

THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)

NINE MONTHS ENDED SEPTEMBER 30
2001 2000
---- ----
(Unaudited)

Operating Activities
Net Cash Provided (Used) by Operating
Activities ..................... $ (2,071) $ 10,778

Investing Activities
Purchases of securities
available-for-sale .................. (71,398) (26,031)
Proceeds from sales of securities
available-for-sale .................. 13,208
Proceeds from calls/maturities of
securities available-for-sale ....... 58,214 11,133
Purchases of securities held-to-maturity . (2,000)
Proceeds from calls/maturities of
securities held-to-maturity ......... 2,858
Net increase in loans .................... (69,181) (55,038)
Proceeds from sales of loans ............. 53,544 27,404
Proceeds from sales of premises
and equipment ....................... 33 297
Purchases of premises and equipment ...... (1,023) (3,239)
Business combinations .................... (518)
---------- ----------
Net Cash Used in Investing
Activities ..................... (16,603) (45,134)

Financing Activities
Net increase (decrease) in
noninterest-bearing deposits ......... 28,969 (3,581)
Net increase in
interest-bearing deposits ............ 12,025 61,116
Net increase in
short-term borrowings ................ 2,128 1,668
Proceeds from other borrowings ........... 6,000 2,104
Repayments of other borrowings ........... (1,522) (21,398)
Acquisition of treasury stock ............ (7,390) (4,791)
Cash dividends paid ...................... (4,193) (4,007)
Other financing activities ............... (81)
---------- ----------
Net Cash Provided by Financing
Activities ..................... 35,936 31,111
---------- ----------
Increase (Decrease) in Cash
and Cash Equivalents ........... 17,262 (3,245)

Cash and Cash Equivalents at
beginning of period ................. 56,817 43,871
---------- ----------
Cash and Cash Equivalents at
end of period ....................... $ 74,079 $ 40,626
============ ============
Supplemental Disclosures:
Non-cash transactions:
Transfer of loans to other real estate .... $ 2,104 $ 1,458
Transfer of premises and equipment to
other assets ........................... 181
============ ============

See Notes to Condensed Consolidated Financial Statements

THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2001
(in thousands, except share data)

Note 1 Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended September 30,
2001 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2001.

For further information, refer to the consolidated financial statements and
footnotes thereto included in The Peoples Holding Company and Subsidiary's
(collectively, the Company) annual report on Form 10-K for the year ended
December 31, 2000.

Note 2 Comprehensive Income

For the quarters ended September 30, 2001 and 2000, total comprehensive income
amounted to $5,613 and $4,187, respectively. For the nine month periods ended
September 30, 2001 and 2000, total comprehensive income amounted to $15,301 and
$9,931, respectively. Total comprehensive income consists of net income and the
change in the unrealized gain (loss) on securities available for sale.

Note 3 Segment Reporting

The operating segments for the three months ended and the nine months ended
September 30, 2001 are the same as prior years. However, we changed our internal
reporting mechanism to more closely match expenses with the revenues generated
by each segment. Accordingly, prior periods' segment information has been
adjusted to reflect the current method of management reporting as though it had
been in place for all periods presented.

Segment information for the nine months ended September 30, 2001 and 2000, is
presented below.

Nine Months Ended September 30, 2001
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 32,481 $ 1,269 $ 856 $ 34,606
Provision for loan loss .... 3,399 0 76 3,475
------- ------- ------- -------
Net interest income after
provision for loan loss .. 29,082 1,269 780 31,131

Non-interest income ........ 11,033 5,792 923 17,748
Non-interest expense ....... 23,071 5,186 6,046 34,303
------- ------- ------- -------
Income (loss) before taxes . 17,044 1,875 (4,343) 14,576
Income taxes ............... 0 0 3,845 3,845
------- ------- ------- -------
Net income (loss)........... $ 17,044 $ 1,875 $ (8,188) $ 10,731
======= ======= ======= =======

Nine Months Ended September 30, 2000
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 32,306 $ 923 $ 945 $ 34,174
Provision for loan loss .... 3,659 82 327 4,068
------- ------- ------- -------
Net interest income after
provision for loan loss .. 28,647 841 618 30,106

Non-interest income ........ 9,509 3,917 371 13,797
Non-interest expense ....... 21,400 3,884 6,320 31,604
------- ------- ------- -------
Income (loss) before taxes . 16,756 874 (5,331) 12,299
Income taxes ............... 0 0 3,401 3,401
------- ------- ------- -------
Net income (loss)........... $ 16,756 $ 874 $ (8,732) $ 8,898
======= ======= ======= =======

Segment information for the three months ended September 30, 2001 and 2000, is
presented below.

Three Months Ended September 30, 2001
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 11,278 $ 434 $ 258 $ 11,970
Provision for loan loss .... 1,203 0 22 1,225
------- ------- ------- -------
Net interest income after
provision for loan loss .. 10,075 434 236 10,745

Non-interest income ........ 3,699 1,990 483 6,172
Non-interest expense ....... 7,902 1,686 2,285 11,873
------- ------- ------- -------
Income (loss) before taxes . 5,872 738 (1,566) 5,044
Income taxes ............... 0 0 1,202 1,202
------- ------- ------- -------
Net income (loss) .......... $ 5,872 $ 738 $ (2,768) $ 3,842
======= ======= ======= =======

Three Months Ended September 30, 2000
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 10,961 $ 148 $ 189 $ 11,298
Provision for loan loss .... 1,250 28 111 1,389
------- ------- ------- -------
Net interest income after
provision for loan loss .. 9,711 120 78 9,909

Non-interest income ........ 3,257 1,555 80 4,892
Non-interest expense ....... 7,303 1,536 1,935 10,774
------- ------- ------- -------
Income (loss) before taxes . 5,665 139 (1,777) 4,027
Income taxes ............... 0 0 1,113 1,113
------- ------- ------- -------
Net income (loss) .......... $ 5,665 $ 139 $ (2,890) $ 2,914
======= ======= ======= =======

Note 4 Other Accounting Pronouncements

On January 1, 2001, we adopted Financial Accounting Standards Board Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities." As
permitted with the adoption of this Statement, we transferred our
held-to-maturity securities to securities available-for-sale on January 1, 2001.
At the time of the transfer, the held-to-maturity securities had a carrying
value of $85,658 and a market value of $85,981. The adoption of the new
Statement did not have a material impact on our earnings or financial position.

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," and No. 142,
"Goodwill and Other Intangible Assets," effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill will no longer be
amortized but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives.

We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. We have evaluated the impact of
the application of the nonamortization provisions of the Statement. The effect
of these provisions will be an increase to income before taxes of approximately
$785 for the year ended December 31, 2002. During 2002, we will perform the
first of the required impairment tests of goodwill as of January 1, 2002, and
have not yet determined what the effect of these tests will be on our earnings
and financial position.

Note 5 Subsequent Events

As of September 30, 2001, we had repurchased 299,100 shares of our common stock
during the year. Subsequent to that time, we purchased an additional 35,058
shares of our common stock. As of November 9, 2001, we had repurchased a total
of 334,158 shares of our common stock during the year.

THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(in thousands, except share data)

This Form 10-Q may contain, or incorporate by reference, statements which may
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Prospective investors are cautioned that any such
forward-looking statements are not guarantees for future performance and involve
risks and uncertainties, and that actual results may differ materially from
those contemplated by such forward-looking statements. Important factors
currently known to management that could cause actual results to differ
materially from those in forward-looking statements include significant
fluctuations in interest rates, inflation, economic recession, significant
changes in the federal and state legal and regulatory environment, significant
underperformance in our portfolio of outstanding loans, and competition in our
markets. We undertake no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time.

Financial Condition

Total assets of The Peoples Holding Company increased from $1,211,940 on
December 31, 2000, to $1,263,504 on September 30, 2001, or 4.25% for the nine
month period. On September 30, 2001, average earning assets were $1,116,677, or
90.95% of total average assets, compared to $1,104,549, or 92.26% of total
average assets on December 31, 2000. Increases in other real estate owned and
the purchase of bank owned life insurance contributed to the reduction of
average earning assets as a percentage of average total assets.

The securities portfolio is utilized as a means of liquidity, an alternative
earning source for excess funds, and collateral on pledges for certain types of
deposits. Securities increased from $278,574 on December 31, 2000, to $286,001
on September 30, 2001. During the first quarter, we changed the investment
strategy lessening the percentage of the portfolio being held in Treasury
securities. This change afforded us the opportunity to increase our yield by
moving from Treasury securities into other agency and mortgage-backed
securities. In order to provide more liquidity and asset-liability management
flexibility, and as permitted by Financial Accounting Standards Board Statement
No. 133, upon adoption, we moved all held-to-maturity securities to
available-for-sale.

The loan portfolio represents the largest component of our assets. Loans, net of
unearned income, increased $11,187, or 1.37%, from $815,854 at December 31,
2000, to $827,041 at September 30, 2001. Due to a slowing economy and despite
the efforts by the Federal Reserve in substantially dropping interest rates,
loan demand remains soft in our market. The third quarter, however, experienced
the largest loan growth for the year primarily due to commercial loans. Consumer
debt continues to decrease principally as the result of curtailing the indirect
loan portfolio. The average loan to average deposit ratio has declined from
79.44% at September 30, 2000, to 76.85% at September 30, 2001.

Our primary source of funding continues to be deposits generated in the
communities served by the Bank. Total deposits for the first nine months of 2001
increased from $1,046,605 on December 31, 2000, to $1,087,599 on September 30,
2001, or an increase of 3.92%. Due to the low interest rates being paid on
deposits, and the consumer perception that interest rates have reached their
bottom, depositors are keeping their accounts very liquid. Our deposit growth
has occurred in both money market and interest-bearing transaction accounts as a
result of this customer behavior.

Total shareholders' equity increased from $121,661 on December 31, 2000, to
$125,299 on September 30, 2001, or 2.99% for the nine month period. Equity
capital to total assets was 9.92% and 10.04% at September 30, 2001, and December
31, 2000, respectively. The growth in capital from increased earnings and
increased unrealized portfolio gains related to recent declines in interest
rates has been offset by the repurchase of approximately 300,000 shares of
common stock during 2001. In the second quarter, we made a tender offer that
resulted in the acquisition of approximately 221,000 shares of our common stock.
Cash dividends declared increased from $.23 per share for the first quarter of
2001 to $.24 per share for the second and third quarters of 2001, marking the
15th consecutive year of cash dividend increases.

Results of Operations

For the three month periods ended September 30, 2001 and 2000, net income was
$3,842 and $2,914, respectively, up 31.84%. Earnings per share for the third
quarter of 2001 were $0.66 , an increase of 37.50% from $0.48 for the comparable
period a year ago. Our net income for the nine month period ended September 30,
2001, was $10,731, representing an increase of $1,833, or 20.60% over net income
for the nine month period ended September 30, 2000, which totaled $8,898.
Earnings per share for the nine-month period ended September 30, 2001, increased
24.83% to $1.81 from $1.45 for the comparable period a year ago. The increase in
net income for the three and nine month periods ended September 30, 2001,
compared to the same periods for 2000, resulted from continued emphasis on
improving net interest margin and loan quality, diversifying sources of
noninterest income, and maintaining noninterest expense control. Earnings per
share were also positively impacted by a decrease in our average shares
outstanding due to our 2001 share repurchases. The annualized return on average
assets for the nine month periods ending September 30, 2001 and 2000, was 1.16%
and 1.00%, respectively, while the annualized return on average equity over the
same periods was 11.44% and 10.17%, respectively.

Net interest income, the difference between interest earned on assets and the
cost of interest-bearing liabilities, is the largest component of net income.
The primary concerns in managing net interest income are the mix and the
repricing of rate-sensitive assets and liabilities. Recent changes in the
pricing environment coupled with the pricing strategies enacted by management
have improved net interest margin, which was 4.58% for the three month period
ended September 30, 2001, compared to 4.37% for the same period in 2000. Net
interest margin for the nine month period ended September 30, 2001, was 4.44%
compared to 4.43% for the same period during 2000. Net interest income has
improved each quarter during 2001 primarily as a result of the risk-based
pricing of loans, the change in the investment mix, and the falling of interest
rates paid on deposit accounts. The improvement in net interest margin
contributed to a higher net interest income for the three month period ended
September 30, 2001, of $11,970, compared to $11,298 for the same period of 2000.
Net interest income for the nine month periods ended September 30, 2001 and
2000, was $34,606 and $34,174, respectively.

The provision for loan losses charged to operating expense is an amount which,
in the judgement of management, is necessary to maintain the allowance for loan
losses at a level that is adequate to meet the inherent risks of losses on our
current portfolio of loans. The appropriate level of the allowance is based on a
quarterly analysis of the loan portfolio including consideration of such factors
as the risk rating of individual credits, size and diversity of the portfolio,
economic conditions, prior loss experience, and the results of periodic credit
reviews by internal loan review and regulators. For the three month periods
ended September 30, 2001 and 2000, the provision for loan losses totaled $1,225
and $1,389, respectively. The provision for loan losses totaled $3,475 and
$4,068 for the nine month periods ended September 30, 2001 and 2000,
respectively. An additional $700 was charged to the provision for loan losses
during the second quarter of 2000 to improve the allowance for loan losses,
which had fallen below desirable levels due to loan growth and some credit
deteriorations. The allowance for loan losses as a percentage of loans
outstanding was 1.35% and 1.29% as of September 30, 2001 and December 31, 2000,
respectively. Net charge-offs to average loans was .35% and .36% for the nine
month periods ending September 30, 2001 and 2000, respectively. The level of
non-performing loans declined from 1.09% at September 30, 2000, to 0.62% at
September 30, 2001, resulting in the coverage ratio improving from 124.75% to
218.20% at September 30, 2000 and 2001, respectively.

Significant effort has been directed toward improving noninterest income. For
the three month periods ended September 30, 2001 and 2000, noninterest income,
excluding gains from the sales of securities, was $6,130 and $4,892,
respectively, up 25.30%. Noninterest income, excluding gains from the sales of
securities, was $17,661 for the nine month period ending September 30, 2001,
compared to $13,797 for the same period in 2000, or an increase of 28.01%. Our
continued emphasis on sales of specialized products and services accounted for
the majority of the increase in noninterest income between 2001 and 2000. The
increase also reflects insurance commissions that were not recognized until the
second and fourth quarters of 2000 with the acquisitions of The Southern
Insurance Group and The Dominion Insurance Agency, respectively. Excluding gains
from the sales of securities and the additional fee income related to the
insurance companies, growth in noninterest income was 20.86% for the nine month
period ended September 30, 2001, compared to the same period in 2000.
Non-sufficient fund fees accounted for the majority of the increase in service
charges. Improvements within fees and commissions included mortgage loan fees,
loan document preparation fees, PC banking fees, and cash management fees. Other
noninterest income reflects increases in value from the June 2001 purchase of
bank owned life insurance and gains on the sale of mortgage loans.

Noninterest expense for the three month period ended September 30, 2001, was
$11,873, compared to $10,774 for the same period during 2000. Noninterest
expense was $34,303 for the nine month period ended September 30, 2001, compared
to $31,604 for the same period in 2000, or an increase of 8.54%. Excluding the
impact of the acquisition of the insurance companies, we experienced a 5.72%
growth in noninterest expense, which was due largely to the employee incentive
plan and normal salary increases. The remaining components of noninterest
expense reflect normal increases for banking related expenses and general
inflation in the cost of services and supplies purchased by us.

Income tax expense was $3,845 for the nine month period ended September 30,
2001, (with an effective tax rate of 26.38%) compared to $3,401 (with an
effective tax rate of 27.65%) for the same period in 2000. We have been able to
achieve this lower effective tax rate by investing in tax-exempt securities and
assets. We have also invested in assets that provide tax credits. We continue to
monitor our tax position and its impact on future earnings.

Liquidity Risk

Liquidity management is the ability to meet the cash flow requirements of
customers who may be either depositors wishing to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs.

Core deposits are a major source of funds used to meet cash flow needs.
Maintaining the ability to acquire these funds as needed in a variety of money
markets is a key to assuring liquidity. When evaluating the movement of these
funds even during times of large interest rate changes, it is apparent that the
Company continues to attract deposits that can be used to meet cash flow needs.
Management continues to monitor the liquidity and potentially volatile
liabilities ratios to ensure compliance with Asset-Liability Committee targets.
These targets are set to ensure that we meet the liquidity requirements deemed
appropriate by management and regulators.

Another source available for meeting liquidity needs is available-for-sale
securities. The available-for-sale portfolio is composed of securities with a
readily available market that can be used to convert to cash if the need arises.
In addition, we maintain a federal funds position that provides day-to-day funds
to meet liquidity needs and may also obtain advances from the Federal Home Loan
Bank (FHLB) or the treasury tax and loan note account. Historically, we have not
relied upon these sources to meet long-term liquidity needs. Funds obtained from
the FHLB are used primarily to match mortgage loan originations in order to
minimize interest rate risk, but may be used to provide short-term funding.

On April 16, 2001, a tender offer was announced to repurchase up to 604,312
shares of our common stock at $23.00 per share. On May 15, 2001, we funded the
repurchase of approximately 221,000 shares of our common stock under this tender
offer from cash and the liquidation of short-term investments.

Capital Resources

We are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on our
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, we must meet specific capital guidelines
that involve quantitative measures of our assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. Our
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require us to maintain minimum balances and ratios. All banks are required to
have core capital (Tier I) of at least 4% of risk-weighted assets (as defined),
4% of average assets (as defined), and total capital of 8% of risk-weighted
assets (as defined). As of September 30, 2001, we met all capital adequacy
requirements to which we are subject.

As of September 30, 2001, the most recent notification from the Federal Deposit
Insurance Corporation (FDIC) categorized us as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, we must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios of 10%, 6%, and 5%, respectively. In the opinion of
management, there are no conditions or events since the last notification that
have changed the institution's category. The Bank's actual capital amounts and
applicable ratios are as follows and do not differ materially from that of the
Company.

Actual
Amount Ratio
------ -----
(in thousands)
As of September 30, 2001
Total Capital .................... $ 121,101 14.4%
(to Risk Weighted Assets)
Tier I Capital ................... $ 110,555 13.1%
(to Risk Weighted Assets)
Tier I Capital ................... $ 110,555 9.0%
(to Adjusted Average Assets)

As of December 31, 2000
Total Capital .................... $ 122,165 15.1%
(to Risk Weighted Assets)
Tier I Capital ................... $ 112,022 13.8%
(to Risk Weighted Assets)
Tier I Capital ................... $ 112,022 9.4%
(to Adjusted Average Assets)

Management recognizes the importance of maintaining a strong capital base. As
the above ratios indicate, we exceed the requirements for a well capitalized
bank.

Book value per share was $21.76 and $20.09 at September 30, 2001, and December
31, 2000, respectively.

Our capital policy is to evaluate future needs based on growth, earnings trends
and anticipated acquisitions.

THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes to our disclosure on quantitative and
qualitative disclosures about market risk since December 31, 2000. For
additional information, see our Form 10-K for the year ended December 31, 2000.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material proceedings against us during the
quarter ending September 30, 2001.

Item 2. Changes in Securities

On April 16, 2001, we filed Form SC TO-I with the Securities
and Exchange Commission announcing a tender offer to repurchase
up to 604,312 shares of our common stock at $23.00 per share.
We repurchased 220,556 shares of our common stock on May 15,
2001, through the tender offer.

Excluding the shares of common stock repurchased through the
tender offer, we have repurchased an additional 113,602
shares of our common stock through November 9, 2001, at an
average price of $30.69 per share.

These transactions reduced the outstanding shares of our common
stock from 6,056,899 at December 31, 2000, to 5,722,741 at
November 9, 2001.

Item 6.(b) Reports on Form 8-K

There were no reports filed on Form 8-K during the third quarter
of 2001.

SIGNATURES

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

THE PEOPLES HOLDING COMPANY
---------------------------
Registrant

DATE: November 13, 2001 /s/ E. Robinson McGraw
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E. Robinson McGraw
President & Chief Executive Officer