SCHEDULE 14A INFORMATION

  Proxy Statement Pursuant to Section 14(a) of the Securities
                     Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ]  Preliminary Proxy Statement    [ ]  Confidential, for Use
                                         of the Commission Only
                                         (as permitted by
                                         Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule
       14a-12

                  THE PEOPLES HOLDING COMPANY
      ---------------------------------------------------
        (Name of Registrant as Specified in its Charter)

                           THE PEOPLES HOLDING COMPANY
                                 209 Troy Street
                            Tupelo, Mississippi 38802

                                 March 10, 2003

Dear Shareholder:

     On behalf of the Board of Directors,  we cordially invite you to attend the
2003  Annual  Meeting  of  Shareholders  of The  Peoples  Holding  Company  (the
"Company").  The annual  meeting will be held  beginning  at 2:00 p.m.,  Central
time, on Tuesday,  April 15, 2003, at the principal office of The Peoples Bank &
Trust Company, 209 Troy Street, Tupelo,  Mississippi 38802. The formal notice of
the annual meeting appears on the next page.

     At the annual meeting, you will be asked:

     1.   To elect four Class 1 directors, each to serve for a three-year term;

     2.   To ratify the Board of Directors'  appointment of Ernst & Young LLP as
          the Company's independent auditors for the fiscal year ending December
          31, 2003;

     3.   To approve the Company's 2001 Long-Term Incentive Plan; and

     4.   To transact such other business as may properly come before the annual
          meeting or any adjournments thereof.

     The accompanying proxy statement provides detailed  information  concerning
the matters to be acted upon at the annual  meeting.  We urge you to review this
proxy statement and each of the proposals  carefully.  It is important that your
views be represented  at the annual  meeting  regardless of the number of shares
you own or whether you are able to attend the annual meeting in person.  We urge
you to mark, sign, date and mail the enclosed proxy card in the  postage-prepaid
envelope.

     On  behalf  of the  Board  of  Directors,  I  would  like  to  express  our
appreciation for your continued interest in the Company.

                                              Sincerely,

                                             /s/ E. Robinson McGraw
                                             ----------------------
                                               E. Robinson McGraw
                                       President and Chief Executive Officer

                           THE PEOPLES HOLDING COMPANY
                                 209 Troy Street
                            Tupelo, Mississippi 38802

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TIME ...................  2:00 p.m., Central time, on Tuesday, April 15, 2003

PLACE ..................  The Peoples Bank & Trust Company
                          209 Troy Street
                          Tupelo, Mississippi 38802

ITEMS OF BUSINESS ......  1.  To elect four Class 1 directors  who will each
                              serve a three-year  term expiring in 2006.

                          2.  To consider  and act upon a proposal to ratify
                              the  selection  of Ernst & Young LLP as the
                              Company's  independent  auditors for the fiscal
                              year ending December 31, 2003.

                          3.  To approve the Company's 2001 Long-Term Incentive
                              Plan.

                          4.  To transact such other business as may properly
                              come before the annual meeting or any adjournments
                              thereof.

RECORD DATE ............  You can vote if you are a shareholder of record as of
                          the close of business on February 26, 2003.

ANNUAL REPORT ..........  Our 2003 Summary  Annual Report and our Annual  Report
                          on Form 10-K,  which are not part of the proxy
                          solicitation material, are enclosed.

PROXY VOTING ...........  It is important that your shares  be represented  and
                          voted at the annual meeting.  Please mark, sign, date
                          and promptly  return the enclosed proxy card in the
                          postage paid envelope. Any proxy may be revoked at any
                          time prior to its exercise at the annual meeting.

                                       By Order of the Board of Directors

                                             /s/ E. Robinson McGraw
                                             ----------------------
                                               E. Robinson McGraw
                                       President and Chief Executive Officer

Tupelo, Mississippi
March 10, 2003

                           THE PEOPLES HOLDING COMPANY
                               ___________________

                                 PROXY STATEMENT
                              ____________________

                         ANNUAL MEETING OF SHAREHOLDERS
                       TO BE HELD TUESDAY, APRIL 15, 2003

     This proxy  statement  is  furnished  to the  shareholders  of The  Peoples
Holding Company (the  "Company") in connection with the  solicitation of proxies
by its board of directors,  for use at the Annual Meeting of  Shareholders to be
held at 2:00 p.m.,  Central time,  on Tuesday,  April 15, 2003, at the principal
office of The  Peoples  Bank & Trust  Company  (the  "Bank"),  209 Troy  Street,
Tupelo,  Mississippi  38802, and any adjournments or  postponements.  This proxy
statement  and  accompanying  proxy  card are  first  being  distributed  to the
shareholders of the Company on or about March 10, 2003.

Proxy Solicitation

     The board is soliciting the enclosed proxy so that each shareholder has the
opportunity to vote on the proposals presented at the annual meeting, whether or
not the shareholder attends the meeting.  When a proxy card is returned properly
signed  and  dated,  the  shares  represented  by the  proxy  will be  voted  as
instructed  on the card at the annual  meeting,  including any  adjournments  or
postponements  of the meeting.  If the proxy card is signed but no  instructions
are  given,  the  shares  represented  by the proxy  will be voted at the annual
meeting and any adjournments or postponements as follows:

     1.   "FOR" the election of nominees  George H. Booth,  II, Frank B. Brooks,
          Robert C. Leake, and C. Larry Michael as Class 1 directors;

     2.   "FOR" the  ratification of the appointment of Ernst & Young LLP as the
          Company's independent auditors for the fiscal year ending December 31,
          2003; and

     3.   "FOR" the approval of the Company's 2001 Long-Term Incentive Plan.

     A  shareholder  who  gives a proxy may  revoke it at any time  before it is
voted by giving written notice to the secretary of the Company before the annual
meeting, by granting a subsequent proxy, or if the shareholder,  rather than his
or her  broker,  is a record  holder of our stock,  by  appearing  in person and
voting at the annual meeting.

     The Company  generally bears all costs of soliciting  proxies.  The Company
has  retained and pays a fee to  Registrar  and  Transfer  Company to act as its
registrar and transfer agent and to assist in the  solicitation of proxies,  but
the  Company  pays no separate  compensation  for the  solicitation  of proxies.
Directors,  officers  and  employees  of the  Company  may  solicit  proxies  by
telephone,  mail,  facsimile,  via the Internet or overnight  delivery  service.
Directors, officers and employees do not receive separate compensation for these
services.

Record Date and Voting Rights

     The  board of  directors  has fixed the  close of  business  on  Wednesday,
February 26, 2003, as the record date for the annual meeting.  Only shareholders
of record  on that date are  entitled  to  receive  notice of and to vote at the
annual meeting. As of February 26, 2003, the Company's only outstanding class of
securities  was  common  stock,  $5.00 par value per share;  on that  date,  the
Company had 15,000,000 shares authorized,  of which 6,212,284 shares were issued
and 5,572,751 were outstanding.

     The enclosed proxy provides the  opportunity  for  shareholders  to specify
approval, disapproval, or abstention for the following proposals:

     1.   The election of four Class 1 directors  to serve until the  expiration
          of their  respective  three-year  term or until their  successors  are
          elected and qualified;

     2.   The  ratification  of the  appointment  of  Ernst &  Young  LLP as the
          Company's independent auditors for the fiscal year ending December 31,
          2003; and

     3.   The approval of the Company's 2001 Long-Term Incentive Plan.

     The proxy card also gives the proxy holders discretionary authority to vote
the  shares  represented  by the  proxy on any  matter,  other  than  the  above
proposals, that is properly presented for action at the annual meeting.

     A  majority  of  the  votes  entitled  to be  cast  at the  annual  meeting
constitutes a quorum.  A share,  once  represented for any purpose at the annual
meeting,  is  deemed  present  for  purposes  of  determining  a quorum  for the
remainder  of the meeting and for any  adjournment,  unless a new record date is
set for the  adjourned  meeting.  This is true  even if the  holder of the share
abstains  from  voting  with  respect  to any matter  brought  before the annual
meeting.

     Shareholders  are  entitled to one vote for each share  held,  which may be
given in person  (if the  shareholder,  rather  than his or her  broker,  is the
record holder of the stock) or by proxy,  except that  shareholders may cumulate
their votes to elect directors. Cumulative voting entitles a shareholder to give
one  nominee a number of votes  equal to the number of  directors  to be elected
multiplied  by the number of shares held by that  shareholder,  or to distribute
the total votes, computed on the same principle,  among all or several nominees.
For example,  if the number of  directors  to be elected is four, a  shareholder
owning ten shares may cast ten votes for each of four nominees, cast forty votes
for one nominee,  or allocate the forty votes among several nominees.  Directors
are elected by plurality vote;  candidates receiving the highest number of votes
cast are elected.

                                       2

     For all proposals brought before the annual meeting, except the election of
directors,  each proposal is approved if the votes cast in favor of the proposal
exceed the votes cast opposing the proposal.

     Under Mississippi law, an abstention by a shareholder who is either present
in person at the annual meeting or represented by proxy is not a vote "cast" and
is counted  neither "for" nor "against"  the matter  subject to the  abstention.
Broker  non-votes  on matters are treated as shares as to which voting power has
been withheld by the beneficial holders of those shares and therefore, as shares
not entitled to vote.

     Employees of the Company who  participate in the Company's  401(k) plan may
vote the number of shares of common stock equal to their interest in the Company
stock fund as of the close of business on February 26, 2003, the record date for
the annual  meeting.  Employees who  participate in the employee stock ownership
plan vote the number of shares of common  stock  allocated to their plan account
as of the record  date.  The  trustees  for the 401(k) plan and  employee  stock
ownership plan act as proxies and actually vote the shares.  If an employee does
not  send  instructions   within  the  time  required,   that  employee's  share
equivalents will not be voted.

                               BOARD OF DIRECTORS

General

     Below is  information  concerning the four nominees for election as Class 1
directors and the continuing Class 2 and Class 3 directors.  Effective as of the
annual  meeting,  the board of  directors  has fixed the number of  directors at
sixteen.  All of the nominees and  directors  listed  below  currently  serve as
directors of the Company. Mr. J. Heywood Washburn,  who has served as a director
since  1982,  will retire from the board of  directors  effective  at the annual
meeting of shareholders.

Class 1 Directors and Nominees (to be elected at the 2003 annual meeting,  terms
of office expire in 2006):

     -    George H. Booth, II is co-owner of Tupelo Hardware Company,  a closely
          held  family  business  primarily  engaged  in  wholesale  and  retail
          hardware sales. Mr. Booth is currently  serving as president of Tupelo
          Hardware  Company,  having  served as vice  president  from 1976 until
          2000.  Mr.  Booth,  who is 49 years old,  has been a  director  of the
          Company since 1994.

     -    Frank B. Brooks has been a cotton  farmer since 1959 and  president of
          Yalobusha Gin Company, Inc., a cotton gin located in Yalobusha County,
          Mississippi,  since 1992. Mr. Brooks,  who is 59 years old, has been a
          director of the Company since 1989.

                                       3

     -    Robert C. Leake has served as chairman of the Company's  board and the
          Bank's board since 1989.  Mr. Leake has also been  principal  owner of
          Leake &  Goodlett,  Inc.,  a closely  held family  business  primarily
          engaged in full service retail building  material and supplies,  since
          1957.  Mr.  Leake is  currently  serving as vice  president of Leake &
          Goodlett,  Inc.,  having served as president from 1974 until 2002. Mr.
          Leake,  who is 70 years old, has been a director of the Company  since
          1973.

     -    C. Larry Michael has served as president of Transport Trailer Service,
          Inc., a company  primarily  engaged in semi-trailer  sales and repair,
          Rent-A-Box, Inc., a company primarily engaged in semi-trailer leasing,
          and  Precision  Machine  and Metal  Fabrication,  a company  primarily
          engaged in  customized  machining  of metal  parts,  since  1972.  Mr.
          Michael, who is 57 years old, has been a director of the Company since
          1997.

Class 2 Directors (terms of office expire in 2004):

     -    John M.  Creekmore  has been engaged in the practice of law since 1987
          as the owner of the law firm Creekmore Law Office. Mr. Creekmore,  who
          is 47 years old, has been a director of the Company since 1997.

     -    E. Robinson McGraw has served as president and chief executive officer
          of both the  Company  and the Bank since 2000.  Mr.  McGraw  served as
          executive vice president of the Bank prior to becoming chief executive
          officer.  Mr. McGraw,  who is 56 years old, has been a director of the
          Company since 2000.

     -    Theodore  S. Moll has been  with MTD  Products,  a  company  primarily
          engaged in the production of outdoor power equipment,  since 1965. Mr.
          Moll  presently  serves as executive  vice  president of its worldwide
          operations.  Mr. Moll, who is 60 years old, has been a director of the
          Company since 2002.

     -    John W. Smith, who is retired, served as president and chief executive
          officer of the Company and the Bank from 1993 until 2000.  Mr.  Smith,
          who is 67 years old, has been a director of the Company since 1978.

     -    Robert H. Weaver, who is retired,  engaged in the practice of law as a
          partner of Watkins Ludlam Winter & Stennis, P.A. from 1959 until 2000.
          Since his retirement, he has been serving as of counsel for that firm.
          Mr.  Weaver,  who is 71 years old,  has been a director of the Company
          since 1980.

     -    J. Larry Young has been employed as a part-time pharmacist with Fred's
          Pharmacy in Pontotoc, Mississippi since 1998. Prior to 1998, Mr. Young
          was a  pharmacist  for and a partner  in  Ramsey-Young  Pharmacy.  Mr.
          Young,  who is 64 years old, has been a director of the Company  since
          1982.

                                       4

Class 3 Directors (terms of office expire in 2005):

     -    William  M.  Beasley  has been  engaged  in the  practice  of law as a
          partner  of the law firm of Phelps  Dunbar  LLP since  1999.  Prior to
          1999,  Mr.  Beasley was a partner of the law firm of  Mitchell,  Voge,
          Beasley and Corban.  He has also served as vice  chairman of the board
          of directors of the Company since 2001. Mr.  Beasley,  who is 51 years
          old, has been a director of the Company since 1989.

     -    Marshall  H.  Dickerson  has been the owner and  manager of  Dickerson
          Furniture   Company,  a  company  primarily  engaged  in  retail  home
          furnishings,  since 1978. Mr. Dickerson, who is 53 years old, has been
          a director of the Company since 1996.

     -    Eugene B.  Gifford,  Jr. has been engaged in the practice of law since
          1960 as a partner in the law firm of Gifford, Allred and Tennison. Mr.
          Gifford, who is 68 years old, has been a director of the Company since
          1987.

     -    Richard L. Heyer,  Jr. has served as a physician and partner of Tupelo
          Anesthesia Group, P.A. since 1989. Dr. Heyer, who is 46 years old, has
          been a director of the Company since 2002.

     -    J. Niles  McNeel has been  engaged in the practice of law as a partner
          of the law firm of McNeel and Ballard since 1983. Mr.  McNeel,  who is
          56 years old, has been a director of the Company since 1999.

     -    H. Joe  Trulove is  presently  a partner of  Landmark  Enterprises,  a
          company primarily engaged in real estate and investments.  Mr. Trulove
          has been chairman of the board of directors of Rose Hill Manufacturing
          Company, a company primarily engaged in the manufacture of upholstered
          furniture,  since  2002.  Prior to 2001,  Mr.  Trulove was senior vice
          president of York Casket Company,  a company  primarily engaged in the
          manufacture of caskets.  Mr. Trulove,  who is 65 years old, has been a
          director of the Company since 1999.

     All of the directors and nominees  listed above also presently serve on the
board of the Bank, the Company's  wholly owned  subsidiary.  There are no family
relationships  between any director,  executive  officer or person  nominated to
become a director.

                                       5

                    COMPENSATION, MEETINGS AND COMMITTEES OF
                             THE BOARD OF DIRECTORS

Compensation of Directors

     Directors  who  are   employees  of  the  Company   receive  no  additional
compensation  for their  service as directors.  The board of directors  sets the
compensation for non-employee directors.  Currently,  each non-employee director
is paid an  annual  fee of  $4,800  and $300 for each  board  meeting  attended.
Non-employee  directors are also paid $300 for each committee  meeting attended.
The  chairman  of the board is paid an annual fee of  $26,600  and $300 for each
committee meeting attended.

     The Company  maintains two types of deferred  compensation  arrangements in
which directors may participate. Under one arrangement, deferred fees are deemed
invested in units representing shares of the Company's common stock and credited
with dividend equivalent units as and when the Company pays dividends. Under the
other  arrangement,  deferred  fees are  credited  with an interest  rate.  Fees
deferred  between 1985 and 1988 accrue interest  annually at 130% of the Moody's
Average  Corporate  Bond Rate for the month of October for the  preceding  year;
fees deferred  after January 1, 1989, are credited with interest at 100% of such
rate. Amounts held under either plan are payable when a director ceases to serve
as a member of the board or attains a specified age.

Meetings and Attendance; Committees

     The board of directors of the Company held seven meetings  during 2002. All
directors  attended  at least 75% of the total  number of  meetings  held by the
board and all  committees  on which they  served.  The board of directors of the
Bank met twelve times during 2002.

     The  board  of  directors  has   established  an  audit   committee  and  a
compensation  committee.  The board has not  formally  established  a nominating
committee; the full board generally performs the functions of this committee.

Audit Committee

     Frank B. Brooks,  Marshall H. Dickerson,  J. Heywood  Washburn and J. Larry
Young are the members of the audit committee. Each member of the audit committee
is an "independent  director" as defined in Section 121(A) of the American Stock
Exchange's  listing  standards.  The audit  committee  operates  under a written
charter;  the charter  was most  recently  amended and  restated by the board of
directors on December  17,  2002. A copy of the restated  charter is attached as
Appendix A.

                                       6

     The audit committee is responsible for the  appointment,  compensation  and
oversight of the Company's independent auditors, monitoring the integrity of the
Company's   financial   reporting  process  and  system  of  internal  controls,
monitoring  the  independence  and  performance  of  the  Company's  independent
auditors and internal auditing  department,  pre-approving all auditing services
provided by the  Company's  independent  auditors,  and  providing  an avenue of
communication among the Company's independent auditors, management, the internal
auditing  department,  and the  board of  directors.  The audit  committee  also
recommends  to the  board of  directors  an  independent  accounting  firm to be
engaged as the Company's independent auditors.  During 2002, the audit committee
held twelve meetings.

Compensation Committee

     William  M.  Beasley,  Frank B.  Brooks,  John M.  Creekmore,  Marshall  H.
Dickerson,  Robert  C.  Leake  and  J.  Niles  McNeel  are  the  members  of the
compensation  committee.  The compensation  committee  establishes,  reviews and
administers  the  Company's  executive   compensation  programs  and  determines
executive compensation. During 2002, the compensation committee met four times.

                    PROPOSAL I: ELECTION OF CLASS 1 DIRECTORS

     Four Class 1 directors will be elected at the annual meeting, each to serve
a three-year term. The board has nominated George H. Booth, II, Frank B. Brooks,
Robert C. Leake and C. Larry  Michael for election as Class 1 directors to serve
until the 2006 annual  meeting or until their  successors  are duly  elected and
qualified. All of these nominees currently serve as directors of the Company.

Vote Required and Board Recommendation

     For the election of directors, shareholders are entitled to cast four votes
for  each  share  held  and may  cumulate  votes.  Directors  are  elected  by a
plurality.  The four Class 1 nominees receiving the highest number of votes cast
will be elected to serve as Class 1 directors.

     If the proxy card is signed but no  instructions  are given with respect to
the election of directors,  the proxy holders will vote the proxies  received by
them for the nominees listed above,  and reserve the right to cumulate votes and
distribute them among the nominees,  in their discretion.  If for any reason one
or  more of the  nominees  named  above  is not  available  as a  candidate  for
director,  an event that the board of directors does not  anticipate,  the proxy
holders will vote,  in their  discretion,  for another  candidate or  candidates
nominated by the board.  If shareholders  attending the annual meeting  cumulate
their votes such that all of the  nominees  above  cannot be elected,  the proxy
holders will  cumulate  votes to elect as many of the  nominees  listed above as
possible.

The  Company's  board of  directors  unanimously  recommends  a vote  "FOR"  the
election of each of the nominees for Class 1 director of the board of directors.

                                       7

            SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND MANAGEMENT

     The following table includes information about all directors,  nominees and
named  executive  officers,  as of  December  31,  2002,  including  their name,
position  and  beneficial  ownership  of  the  Company's  common  stock.  Unless
otherwise  noted,  the named persons have sole voting power and investment power
with  respect to the  shares  indicated  (subject  to any  applicable  community
property laws).

                                                 Amount and Nature of Beneficial Ownership
                                                 -----------------------------------------
                                                        Options
                                                      Exercisable                   Percent of
                                        Direct      Within 60 Days      Other          Class
                                     ------------   --------------   -----------   ------------
                                                                       
Directors and Nominees:
   William M. Beasley                   20,344                          1,993(1)         *
   George H. Booth, II                   5,132                                           *
   Frank B. Brooks                      13,468                             30(2)         *
   John M. Creekmore                     1,408                            265(3)         *
   Marshall H. Dickerson                 5,322                            469(4)         *
   Eugene B. Gifford, Jr.               44,561                         19,644(5)       1.15%
   Richard L. Heyer, Jr.                 1,364                                           *
   Robert C. Leake                      17,357                          5,772(6)         *
   J. Niles McNeel                      12,626                          3,617(7)         *
   C. Larry Michael                      7,104                                           *
   Theodore S. Moll                      2,000                          1,400(8)         *
   John W. Smith                        18,289                          7,826(9)         *
   H. Joe Trulove                       13,789                                           *
   J. Heywood Washburn                  26,000                         24,000(10)        *
   Robert H. Weaver                     87,267                         10,872(11)      1.76%
   J. Larry Young                        3,295                            262(12)        *
Named Executive Officers:
   E. Robinson McGraw(13)               11,822(13)       10,000           482(13)        *
   James W. Gray                         5,026(14)        1,167           231(14)        *
   Stuart R. Johnson                     5,903(15)        1,167                          *
All directors, nominees and
  executive officers as a group        302,077           12,334        76,863          7.00%
  (19 persons, listed)

*    Less than 1% of the outstanding common stock.

(1)  Includes 1,993 shares held by Mr. Beasley's spouse.

(2)  Includes 30 shares  held by Mr.  Brooks'  daughter  as to which Mr.  Brooks
     disclaims beneficial ownership.

(3)  Includes 265 shares held by Mr. Creekmore's children.

                                       8

(4)  Includes  469  shares  held  by  Mr.  Dickerson's  children  of  which  Mr.
     Dickerson's spouse serves as custodian.

(5)  Includes  19,644 shares held by Mr.  Gifford's  grandchildren  of which Mr.
     Gifford's spouse serves as custodian.

(6)  Includes 5,772 shares held in trust.

(7)  Includes  617 shares held by Mr.  McNeel's  spouse and 3,000 shares held by
     Mr. McNeel's children of which Mr. McNeel serves as custodian.

(8)  Includes 1,400 shares held by Mr. Moll's  children of which Mr. Moll serves
     as custodian.

(9)  Includes 7,826 shares held by Mr. Smith's spouse.

(10) Includes 24,000 shares held by Mr. Washburn's spouse.

(11) Includes 10,872 shares held by Mr. Weaver's spouse,  as to which Mr. Weaver
     disclaims beneficial ownership.

(12) Includes 262 shares held by Mr. Young's spouse.

(13) Mr. McGraw is also a director of the Company. His direct ownership includes
     5,192 shares  allocated  under the Company's  employee stock ownership plan
     and 1,477  shares  allocated  under the 401(k)  plan;  under both plans Mr.
     McGraw has voting power.  His other  ownership  includes 482 shares held by
     Mr. McGraw's children of which Mr. McGraw serves as custodian.

(14) Direct ownership includes 541 shares allocated under the Company's employee
     stock  ownership  plan and 1,209  shares  allocated  under the 401(k) plan;
     under both plans Mr. Gray has voting power.  Other  ownership  includes 231
     shares held by Mr. Gray's spouse.

(15) Direct  ownership  includes  5,015  shares  allocated  under the  Company's
     employee  stock  ownership plan and 818 shares  allocated  under the 401(k)
     plan; under both plans Mr. Johnson has voting power.

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     As of February 26, 2003, the Company had approximately  2,600  shareholders
of record.  To the knowledge of management of the Company,  no shareholder  owns
beneficially more than 5% of the Company's issued and outstanding  common stock.
As of December  31, 2002,  the  Company's  employee  stock  ownership  plan held
311,756  shares  or  5.59%  of  Company  common  stock.  Shares  in the plan are
allocated to individual participant accounts.  Participants direct the voting of
their allocated shares and benefits are distributed according to plan terms.

                                       9

                             EXECUTIVE COMPENSATION

     The following Summary Compensation Table describes individual  compensation
information for the chief executive  officer and other named executive  officers
for services rendered for the three fiscal years ended December 31, 2002.

                           Summary Compensation Table

                                              Annual Compensation       Long-Term Compensation
                                            -----------------------   --------------------------
                                                                      Securities
                                                                      Underlying     All Other
   Name and Principal Position      Year      Salary      Bonus (1)   Options (#)   Compensation
- --------------------------------   ------   ----------   ----------   -----------   ------------
                                                                     
E. Robinson McGraw President and    2002     $290,000     $199,157        10,000      $33,491(2)
  Chief Executive Officer           2001      270,000      106,137        10,000       21,928
                                    2000      183,820            0             0       20,649

James W. Gray                       2002     $172,795     $ 72,720         3,500      $24,954(3)
  Executive Vice President          2001      161,462       47,615             0       17,790
                                    2000      149,402            0             0       19,473

Stuart R. Johnson                   2002     $160,000     $ 67,328         3,500      $26,000(4)
  Chief Financial Officer           2001      148,000       43,645             0       16,952
                                    2000      133,484            0             0       17,190

(1)  Payments from the Performance Based Rewards Plan, an annual cash bonus plan
     that provides for awards based upon the  performance of the Company and the
     Bank.

(2)  Includes  term life  insurance  premiums  in the amount of $1,140,  Company
     matching  contributions  to the  401(k)  plan in the  amount of $8,000  and
     Company  contributions to the money purchase plan in the amount of $15,755.
     Includes $5,880 in Company credits to a deferred  compensation  plan during
     2002, to replace a split dollar life insurance  arrangement.  Also includes
     $2,716 in  above-market  earnings  credited  on amounts  held in a deferred
     compensation plan.

(3)  Includes  term life  insurance  premiums  in the  amount  of $988,  Company
     matching  contributions  to the  401(k)  plan in the  amount of $8,000  and
     Company  contributions to the money purchase plan in the amount of $15,755.
     Also includes $211in  above-market  earnings  credited on amounts held in a
     deferred compensation plan.

(4)  Includes  term life  insurance  premiums  in the  amount  of $912,  Company
     matching  contributions  to the  401(k)  plan in the  amount of $7,990  and
     Company  contributions to the money purchase plan in the amount of $15,730.
     Also includes $1,368 in above-market earnings credited on amounts held in a
     deferred compensation plan.

                                       10

Stock Option Plan

     The Company  maintains a stock option plan,  the 2001  Long-Term  Incentive
Plan, which was adopted in November 2001, and most recently amended effective as
of January 21, 2003.  An  aggregate  of 250,000  shares of common stock has been
reserved  for  issuance  under the plan.  As of December  31,  2002,  options to
purchase 41,000 shares were outstanding;  209,000 shares of Company common stock
remained  available  for  grant or  issuance.  The plan is  being  submitted  to
shareholders for approval at the annual meeting, see Proposal III.

     Stock options were granted only to Mr.  McGraw  during 2001.  The following
table  provides  information  about  stock  option  grants  made  to  the  named
executives during 2002.

                              Option Grants In 2002

                                                                               Potential Realizable Value at
                      Number of     % of Total                                    Assumed Annual Rates of
                     Securities      Options                                     Stock Price Appreciation
                     Underlying    Granted to      Exercise                       for Option Term ($)(3)
                       Options      Employees       Price       Expiration   ----------------------------------
       Name          Granted (1)     in 2002     ($/Share)(2)      Date          0%          5%          10%
- ------------------   -----------   -----------   ------------   ----------   ----------  ----------  ----------
                                                                                
E. Robinson McGraw    10,000          32.26%        $35.20       01/01/12     $18,000     $250,690    $607,684
James W. Gray          3,500          11.29%         35.20       01/01/12       6,300       87,741     212,689
Stuart R. Johnson      3,500          11.29%         35.20       01/01/12       6,300       87,741     212,689

(1)  The options are exercisable in three equal  installments,  beginning on the
     first  anniversary of the date of grant  provided the executive  remains an
     employee  of the  Company.  All  options  expire ten years from the date of
     grant.  The  options  immediately  vest  and  become  exercisable  upon the
     occurrence of a change in control.  The events that constitute a "change in
     control" are described under Proposal III.

(2)  The exercise price is the average of the closing sales prices of a share of
     the Company's common stock for the 20 consecutive  trading days immediately
     preceding the effective  date of the grant.  The exercise price may be paid
     in cash, by delivery of common stock or a combination of both.

(3)  Potential  realizable  value assumes that common stock  appreciates  at the
     rates shown (compounded  annually) from the grant date until the expiration
     date. The  calculation is based upon rates  specified by the Securities and
     Exchange  Commission  and does not represent  the  estimated  growth of the
     future stock price by the Company.

                                       11

     The following table provides information about the unexercised options held
by the named executive  officers on December 31, 2002. No options were exercised
by these persons during 2002.

                       Aggregated Option Exercises In 2002
                           and Year-End Option Values

                                                         Number of
                                                    Securities Underlying        Value of Unexercised
                       Number of                     Unexercised Options         In-The-Money Options
                         Shares                     at December 31, 2002       at December 31, 2002 (1)
                      Acquired on     Value      --------------------------   --------------------------
      Name             Exercised     Realized    Exercisable  Unexercisable   Exercisable  Unexercisable
- ------------------   ------------   ----------   -----------  -------------   -----------  -------------
                                                                         
E. Robinson McGraw        0            $0           3,333         16,667        $72,326       $200,174
James W. Gray             0             0               0          3,500              0         19,425
Stuart R. Johnson         0             0               0          3,500              0         19,425

(1)  Based upon the closing  sales  price of the  Company's  common  stock as of
     December  31,  2002 of $40.75 per share,  less the  option  exercise  price
     payable per share.

Retirement and Similar Plans

     The Company's  executive  officers are  participants  in four tax qualified
employee benefit plans: a 401(k) plan, a pension plan, a money purchase plan and
an employee stock ownership plan.  Company  contributions to the 401(k) plan and
money purchase plan for the benefit of the named  executive  officers are listed
in the Summary  Compensation  Table. No contributions  were made to the employee
stock ownership plan during 2002. Accruals under the pension plan were frozen as
of December  31, 1996.  Mr.  McGraw's  monthly  benefit from the pension plan is
$3,646,  Mr. Gray's monthly benefit is $338 and Mr. Johnson's monthly benefit is
$2,266, each payable at normal retirement age (age 65) in the form of a ten-year
certain and life annuity.

     The named  executive  officers  may elect to  participate  in two  deferred
compensation  arrangements.  Under one  arrangement,  deferred  compensation  is
credited to an individual account and deemed invested in common stock equivalent
units based upon the current fair market value of the Company's  common stock on
the date credited.  Dividend equivalent units are credited to the account as and
when dividends are paid by the Company.  Under the other  arrangement,  deferred
compensation is credited with interest;  amounts deferred from 1985 through 1988
accrue interest  annually at 130% of the Moody's Average Corporate Bond Rate for
the month of October for the preceding year (or 9.63% during 2002),  and amounts
deferred after January 1, 1989, accrue interest annually at 100% of the rate (or
7.41% during 2002).  Benefits  under both plans are equal to each  participant's
account  balance and are generally  payable on termination of employment or at a
specified age.

     During 2002,  the Company and Mr. McGraw agreed to terminate a split dollar
life insurance  arrangement that was established in 2001. Instead of the payment
of  premiums to that  arrangement,  the  Company  credited  $5,880 to a deferred
compensation arrangement for his benefit.

                                       12

Change in Control Agreements

     The Company has change in control agreements with Mr. McGraw, Mr. Gray, Mr.
Johnson and certain other  executives  of the Company.  The  agreements  provide
severance  benefits  in the event an  executive's  employment  is  involuntarily
terminated without cause or voluntarily terminated for good reason, each after a
change in control  occurs.  For this purpose,  a change in control is defined as
any  liquidation,  dissolution,  consolidation or merger of the Company in which
the Company is not a surviving  corporation.  The agreements provide for payment
of  severance  in an amount  equal to 2.99 times the sum of (a) the  executive's
annual  base  salary in effect  prior to  termination,  and (b) the  executive's
average annual incentive bonus for the two years prior to the change in control.
The  severance  amount is to be held in escrow and is  generally  payable,  with
accrued interest, in installments over a three-year period. Payments are reduced
if the executive  obtains other employment  during the payment period;  benefits
cease if the executive  becomes an employee of a competing  business  during the
period. The agreements also provide for the continuation of coverage under other
Company  benefits  for a period of three years.  Payments  and benefits  will be
reduced, to the extent necessary, to permit the Company to claim a deduction for
federal income tax purposes and to avoid any golden parachute excise tax payable
with respect to such payments.

     In the event of a change in control,  the approximate  aggregate  amount of
payments to be made over a three-year  period  based upon  current  compensation
would be $1,323,515 for Mr.  McGraw,  $696,558 for Mr. Gray and $644,305 for Mr.
Johnson.

Report of the Compensation Committee

     Six non-employee directors serve on the board's compensation committee. The
committee establishes and reviews the Company's executive compensation programs,
sets the chief executive  officer's  salary and approves salary  adjustments for
other executive  officers,  based upon a  recommendation  by the chief executive
officer. The committee met four times during 2002.

     Compensation  Goals  and  Program   Components.   The  Company's  executive
compensation  program consists of base salary,  short-term cash incentives,  and
long-term,  equity-based  incentive  awards.  The  program is intended to permit
flexibility in the Company's compensation  practices, to retain and motivate the
Company's key  executives,  and to align the short and long-term  performance of
the Company's key executives with the interests of its shareholders.

                                       13

     Base Salary.  The committee reviews and sets the chief executive  officer's
base salary annually after a review of his progress toward achieving  objectives
identified in the Company's strategic plan. These goals include profits,  growth
in assets,  cost control,  quality of loan portfolio,  technology  enhancements,
customer  service,  and expansion.  The committee  also makes peer  comparisons,
relying upon data obtained from the Mississippi  Bankers  Association survey and
surveys of other peer companies. During 2002, the chief executive officer's base
salary was $290,000, an increase of 7.4% from the prior year.

     Annual Cash Incentives. The Company has an annual bonus program under which
cash  incentives may be awarded to all employees,  including the chief executive
officer.  This plan is referred to as  "Performance  Based  Rewards."  The chief
executive  officer's  award is determined  on the basis of the Company's  annual
earnings measured against  performance  targets  established at the beginning of
each  fiscal  year.  The  Company's  earnings  must equal or exceed a  specified
threshold amount before any incentive can be awarded. After the threshold amount
is attained,  escalating target payout levels determine the amount of the annual
payment,  which is determined as a percentage of the chief  executive  officer's
base  salary.  Target  payout  levels  are set  after  a  review  of peer  group
short-term  incentives.  Based upon the Bank's earnings performance during 2002,
the chief executive officer received an incentive payment of $199,157.

     Long-Term Incentives. The Company also maintains a long-term,  equity-based
incentive plan, the 2001 Long-Term  Incentive Plan.  Grants and awards under the
plan are intended to align the interests of the key employees with  shareholders
and to serve as a  retention  device.  On January  1,  2002,  options to acquire
10,000 shares of the Company's  common stock were granted to the Company's chief
executive officer,  with an exercise price of $35.20 per share. The options vest
and  become  exercisable  in  three  annual  installments,  contingent  upon his
continued employment with the Company.

     Other  Compensation  and  Benefits.  The  Company  maintains  a  number  of
broad-based  benefit  plans,  in  which  the  executive  officers   participate,
including a group medical plan,  money  purchase  plan,  and 401(k) plan.  These
plans are intended to provide basic health and retirement benefits to all of the
Company's  employees.  Executive  officers  may elect to  supplement  retirement
benefits  by  making  voluntary  deferrals  to  one of  the  Company's  deferred
compensation plans.

     The Company also has change in control  agreements with E. Robinson McGraw,
the other named  executive  officers and four executive  vice-presidents  of the
Bank,  which are  effective  in the event of a change in control of the Company,
provided the executive is terminated for other than cause or elects to terminate
his  employment  for good  reason.  A  severance  amount of up to 2.99 times the
executive's  compensation  could  be  payable  as a result  of such  termination
subject to certain limitations.

                                       14

     Section 162(m) of the Internal Revenue Code of 1986, as amended,  limits to
$1  million  in  any  taxable  year  the  deduction  a  company  may  claim  for
compensation  paid to each of its chief  executive  and four other  highest paid
officers,  unless  certain  performance-based  conditions are met. The board has
reviewed this provision and does not anticipate the payment of any  compensation
to an executive officer that would be affected by the limit.

Compensation Committee:

         J. Niles McNeel, Chairman
         William M. Beasley
         Frank B. Brooks
         John M. Creekmore
         Marshall H. Dickerson
         Robert C. Leake

January 9, 2003

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The  members of the  compensation  committee  during  2002 were  William M.
Beasley,  Frank B. Brooks,  John M. Creekmore,  Marshall H. Dickerson,  J. Niles
McNeel, and Robert C. Leake. There are no members of the compensation  committee
who were officers or employees of the Company or any of its subsidiaries  during
2002, were formerly officers of the Company,  or had any relationship  requiring
disclosure hereunder.

                         INDEBTEDNESS OF RELATED PARTIES

     Certain  directors and officers of the Company,  businesses with which they
are  associated,  and members of their  immediate  families are customers of the
Bank and have had  transactions  with  the Bank in the  ordinary  course  of the
Bank's  business.  In the opinion of the board of directors,  such  transactions
were made in the ordinary  course of business,  were made on  substantially  the
same terms, including interest rates and collateral,  as those prevailing at the
time for comparable  transactions  with other  persons,  and do not involve more
than the normal risk of collectability or present other unfavorable features.

                       INTERESTS OF THE BOARD OF DIRECTORS

     During  2002,  the  Company  and the Bank  employed  the legal  services of
Mitchell,  Voge,  Corban and  Hendrix,  of which W. P.  Mitchell,  the  Chairman
Emeritus of the Board of Directors,  is a partner.  Mitchell,  Voge,  Corban and
Hendrix  represents  the  Company  and the Bank as their  general  counsel.  The
Company and its subsidiary  paid this firm fees and expenses  totaling  $216,060
during 2002.

     During 2002, the Bank employed the firm of Gifford,  Allred and Tennison as
local  counsel for its  community  bank at  Booneville,  Mississippi.  Eugene B.
Gifford,  Jr., a director of the Company and the Bank,  is a partner of Gifford,
Allred and Tennison.

                                       15

     During 2002, the Bank employed John M. Creekmore, a director of the Company
and the Bank, as local counsel for its community bank at Amory, Mississippi.

     During 2002, the Bank employed  McNeel and Ballard as local counsel for its
community bank at Louisville,  Mississippi.  J. Niles McNeel,  a director of the
Company and the Bank, is a partner of McNeel and Ballard.

     During 2002,  the Bank employed the law firm of Edwards,  Storey,  Marshall
and  Helveston  as  local  counsel  for  its  community   bank  at  West  Point,
Mississippi.  A. M. Edwards,  Jr., a Director Emeritus, is a partner of Edwards,
Storey, Marshall and Helveston.

     During  2002,  the Company  employed  the law firm of Phelps  Dunbar LLP to
provide advice in various legal areas  including  employee  benefits and general
corporate law. William M. Beasley,  a director of the Company and the Bank, is a
partner of Phelps Dunbar LLP.

     The Company expects that these firms will continue to represent the Company
and the Bank in similar matters in the future.

                             STOCK PERFORMANCE GRAPH

     The following  performance  graph compares the performance of the Company's
common stock to the AMEX Market  Index and to a peer group of 69 other  regional
southeast  bank  holding  companies  for the  Company's  reporting  period.  The
performance  graph  assumes that the value of the  investment  in the  Company's
common  stock,  the  AMEX  Market  Index  and the peer  group of other  regional
southeast  bank  holding  companies  was $100 at  January  1,  1998 and that all
dividends were reinvested.

                                       16

                               Performance Graph
                      January 1, 1998 - December 31, 2002

                                                       December 31
                               ----------------------------------------------------------
                                 1997      1998      1999      2000      2001      2002
                               --------  --------  --------  --------  --------  --------
                                                               
The Peoples Holding Company    $100.00   $ 92.43   $ 84.88   $ 55.22   $117.52   $132.99
MG Group Index(1)               100.00     95.24     79.21     80.87    101.70    108.85
AMEX Market Index               100.00     98.64    122.98    121.47    115.87    111.25

(1)  The bank holding  companies  included in the Regional  Southeast Banks peer
     group are:  Acadiana  Bancshares Inc.;  Admiralty  Bancorp,  Inc.;  Alabama
     National   BanCorporation;    AmSouth   Bancorporation;   Area   Bancshares
     Corporation;  Auburn National  Bancorporation,  Inc.; The Banc Corporation;
     BancorpSouth,  Inc.;  BancTrust  Financial Group, Inc.; Bank of the Ozarks,
     Inc.;  Beach First  National  Bancshares,  Inc.;  Britton & Koontz  Capital
     Corporation;   Capital  Bancorp,   Inc.;  Cardinal  Financial  Corporation;
     Centerstate Banks of Florida,  Inc.;  Chesapeake  Financial  Shares,  Inc.;
     Citizens  First  Corporation;   CNB  Florida  Bancshares,   Inc.;  Colonial
     BancGroup, Inc.; CommerceSouth, Inc.; CommonWealth Bank VA; Community First
     Bancorp;  Community  National;   Community  Trust  Bancorp,  Inc.;  Compass
     Bancshares,  Inc.;  Crescent Banking  Company;  Cumberland  Bancorp,  Inc.;
     Eastern  Virginia  Bankshares,  Inc.;  Farmers  Capital  Bank  Corporation;
     Fauquier Bankshares,  Inc.; First Bancshares,  Inc. MS; First Capital Bank;
     First  Community  Bancshares,  Inc.  VA;  First  M & F  Corporation;  First
     National Bancshares, Inc. FL; First Security Bancorp, Inc.; First Tennessee
     National  Corporation;   Florida  Banks,  Inc.;  FNB  Corporation  FL;  FNB
     Corporation VA; Four Oaks Fincorp, Inc.; Franklin Financial Corporation TN;
     Globe Bancorp, Inc.; Hancock Holding Company; Heritage Bankshares, Inc. VA;
     Hibernia Corporation;  Iberiabank  Corporation;  Madison Bancshares,  Inc.;
     MidSouth Bancorp,  Inc.;  National  Commerce  Financial  Corporation;  NB&T
     Financial Group, Inc.; NBC Capital Corporation;  Penseco Financial Services
     Corporation;  The Peoples BancTrust  Company;  The Peoples Holding Company;
     Pinnacle  Bancshares,  Inc.;  Pinnacle  Financial  Partners,  Inc.; Premier
     Financial Bancorp, Inc.; Regions Financial  Corporation;  Republic Bancorp,
     Inc.; S. Y. Bancorp,  Inc.; Simmons First National Corporation;  Southcoast
     Financial Corporation; SouthTrust Corporation; Trustmark Corporation; Union
     Planters  Corporation;  United Financial  Holdings,  Inc.;  United Security
     Bancshares, Inc.; and Whitney Holding Corporation.

Source: Media General Financial Services.

     There can be no assurance that the Company's common stock  performance will
continue  in the  future  with  the  same  or  similar  trends  depicted  in the
performance  graph above.  The Company will not make nor endorse any predictions
as to future stock performance.

                                       17

                PROPOSAL II: RATIFICATION OF INDEPENDENT AUDITORS

     The board of directors,  upon  recommendation  of the audit committee,  has
appointed  Ernst & Young LLP to serve as the Company's  independent  auditor for
the fiscal year  ending  December  31,  2003.  Although  the  appointment  of an
independent auditor does not require the approval of the Company's shareholders,
the  board  has  chosen  to  submit  its  selection  to  the   shareholders  for
ratification.  The board of directors, however, reserves the right to change the
independent  auditor  at  any  time,  notwithstanding  shareholder  approval.  A
representative of Ernst & Young LLP is expected to attend the annual meeting. If
present,  the  representative  will have the opportunity to make a statement and
will be available to respond to appropriate questions.

     Fees billed by Ernst & Young LLP for professional services rendered for the
fiscal year ending December 31, 2002 were as follows:

     Audit  Fees - Audit  fees of Ernst & Young LLP for  audit of the  Company's
     annual financial  statements for the most recent fiscal year and the review
     of those  financial  statements  included in the Company's  reports on Form
     10-Q are estimated to be $212,000.

     All Other Fees - Aggregate  fees billed to the Company by Ernst & Young LLP
     for  all  other  services   rendered  for  the  fiscal  year  2002  totaled
     approximately  $42,475. These fees include audit-related services of $9,600
     and tax services of $32,875.

     The audit  committee has considered the  compatibility  of these  non-audit
services with maintaining Ernst & Young LLP's independence.

Vote Required and Board Recommendation

     The  affirmative  vote by the holders of a majority of the shares of common
stock  voted at the  annual  meeting is  required  for the  ratification  of the
appointment of the independent auditors.

     The board of directors has unanimously  approved the appointment of Ernst &
Young LLP as independent  auditors and recommends a vote "FOR"  ratification  of
the appointment of Ernst & Young LLP as the Company's  independent  auditors for
the fiscal year December 31, 2003.

Report of the Audit Committee

     The audit committee oversees the Company's  financial  reporting process on
behalf of the board of directors.  Management has the primary responsibility for
the  financial  statements  and the reporting  process  including the systems of
internal controls. In fulfilling its oversight  responsibilities,  the committee
reviewed  the  audited  financial  statements  of the Company for the year ended
December 31, 2002, with management,  including a discussion of the quality,  not
just the  acceptability,  of the accounting  principles,  the  reasonableness of
significant  judgments,   and  the  clarity  of  disclosures  in  the  financial
statements.

                                       18

     The committee reviewed with the independent  auditors,  who are responsible
for  expressing  an  opinion  on  the  conformity  of  those  audited  financial
statements with generally accepted accounting principles,  their judgments as to
the quality of the Company's accounting principles and such other matters as are
required to be discussed with the committee  under generally  accepted  auditing
standards including, without limitation, the matters required to be discussed by
SAS 61  (Codification of Statements of Auditing  Standards,  AU Section 380). In
addition, the committee has received the written disclosures and the letter from
the  independent  auditors  required  by  Independence  Standards  Board  No.  1
(Independence  Discussions  with  Audit  Committees),  has  discussed  with  the
independent auditors the auditors' independence from management and the Company,
and has considered the  compatibility  of non-audit  services with the auditors'
independence.

     The  committee  discussed  with  the  Company's  internal  and  independent
auditors, the overall scope and plans for their respective audits. The committee
meets with the internal and independent  auditors,  with and without  management
present, to discuss the results of their examinations,  their evaluations of the
Company's internal controls,  and the overall quality of the Company's financial
reporting. The committee held twelve meetings during 2002.

     In reliance on the reviews and discussions referred to above, the committee
recommended  to the board of  directors  (and the board has  approved)  that the
audited financial  statements be included in the Company's Annual Report on Form
10-K for the year ended  December  31, 2002 for filing with the  Securities  and
Exchange Commission. The committee and the board have also recommended,  subject
to  shareholder  approval,  the selection of Ernst & Young LLP, as the Company's
independent auditors.

Audit Committee:

         Frank B. Brooks, Chairman
         J. Heywood Washburn
         Marshall H. Dickerson
         J. Larry Young

February 18, 2003

                                       19

             PROPOSAL III: APPROVAL OF 2001 LONG-TERM INCENTIVE PLAN

     On October 8, 2001,  the  Company's  board of  directors  adopted  the 2001
Long-Term  Incentive Plan (the "Plan").  It was most recently amended on January
21,  2003.  The  Plan was  adopted  to  permit  the  grant  or  award of  equity
compensation,  which  ensures that the Company's  officers and employees  have a
financial stake in the Company,  similar to that of its  shareholders.  The Plan
also permits the board to structure  the Company's  compensation  practices in a
manner  consistent  with  industry  practice and to structure a component of the
Company's compensation program as a retention device.

     In 2002, the board of directors  approved the expensing of options  granted
under the Plan in accordance  with Statement of Financial  Accounting  Standards
No. 123,  Accounting  for  Stock-Based  Compensation.  The  expensing of options
granted under the Plan has been reflected in the Company's financial  statements
for the fiscal year ended December 31, 2002.

     The board believes that  shareholder  approval of the Plan is desirable and
consistent with  appropriate  corporate  governance  practices,  but there is no
requirement that approval be obtained.  If shareholder approval is not obtained,
the board, in its  discretion,  may continue to make grants and awards under the
Plan.

Summary of the Plan

     Administration.  The Plan is ordinarily  administered  by the  compensation
committee of the Company's board of directors.  The board may act instead of the
committee,  and the committee may delegate certain of its administrative  duties
to officers of the Company.

     Affiliates;  Participation.  Entities  owned 50% or more by the Company are
defined as affiliates under the Plan, including such entities that may be formed
or acquired in the future.

     Employees of the Company and its  affiliates are eligible to receive grants
and awards under the Plan when  designated by the committee.  As of February 14,
2003, there were approximately 41 employees eligible to participate in the Plan;
21 have received grants under the Plan.

     Number of Shares.  A total of 250,000  shares of common  stock,  subject to
adjustment for changes in capitalization  of the Company,  has been reserved for
issuance  under the Plan.  As of December 31, 2002,  options to purchase  41,000
shares  of  the  Company's  common  stock  were  outstanding   under  the  plan,
representing annual option grants for 2001 and 2002.  Effective in January 2003,
the compensation committee made annual option grants to acquire 54,500 shares of
common  stock.  As of February 14, 2003,  154,500  shares  remain  available for
grant, award or issuance under the Plan.

                                       20

     Grants and Awards.  Nonqualified  stock options and/or restricted stock may
be granted or awarded  under the Plan.  Each grant or award is  evidenced  by an
agreement  between  the Company  and each  employee,  and each grant or award is
subject to the terms and conditions described below.

     Performance Objectives.  The committee may impose performance objectives as
a condition  of any grant or award  under the Plan.  The  committee  establishes
performance  objectives at the time of the grant or award or annually during the
term of the grant or award.  The  committee  also  designates  the period during
which  the  objectives  must  be  attained   (called  a  "performance   cycle").
Performance  objectives designated by the committee may relate to one or more of
the following:

 -  Earnings per share                         -  Return on assets
 -  Return on equity                           -  Market share
 -  Stock price appreciation                   -  Economic value added
 -  Efficiency ratio                           -  Operating income
 -  Return on or growth in                     -  Growth in noninterest revenue
      income (gross or net)                    -  Implementation of strategic
 -  Return on capital compared to the               initiatives
      cost of capital

Performance  objectives can be measured with reference to the  performance of an
employee,  a group of  employees,  a profit center or division of the Company or
the Bank or with reference to the Company or the Bank.

     Once  established,  performance  objectives  can be  changed,  adjusted  or
amended during a performance  cycle,  in the  discretion of the  committee.  The
committee may waive all or any portion of the performance  objectives  during or
after a  performance  cycle on  account  of a change  in  circumstances.  At the
conclusion  of each  performance  cycle,  the committee  determines  whether the
performance  objectives have been achieved, in whole or in part, and the portion
of any grant or award that is free of  restriction  on account of the attainment
of the  objectives.  The  committee is subject to  limitation  on its ability to
waive or modify  performance  objectives  when a grant or award is  intended  to
qualify as "performance based" compensation under Code Section 162(m).

     Options.  Nonqualified  stock  options can be granted  under the Plan.  The
committee designates the employees eligible to receive grants and determines the
terms and conditions of each option, which include:

- -    The exercise  price,  which is either the fair market value of common stock
     on the date of grant or the fair market value of the Company's common stock
     averaged over not more than the 20 trading days  immediately  preceding the
     date of grant. As of February 14, 2003, the fair market value of a share of
     common stock (as  determined  under the Plan) was $40.00 and the average of
     the closing  sales prices for the 20  consecutive  trading  days  preceding
     February 14, 2003, was $40.33 per share.

                                       21

- -    The number of shares of Company common stock subject to the option.

- -    The time or times at which the option is exercisable.

- -    The term of any option,  which  cannot be more than ten years from the date
     of grant.

- -    Any  additional  conditions  imposed on exercise (such as the attainment of
     performance objectives).

     Options are exercisable  when all conditions  imposed on exercise have been
satisfied or expire.  The  permissible  means of payment of the option price are
specified  in each option  agreement  and can include  cash,  cash  equivalents,
shares of common stock,  the  withholding  of shares  otherwise  issuable on the
exercise  of  an  option,   or  broker  assisted  same  day  sales  (subject  to
limitation).  Common  stock  issued on the  exercise of an option can be free of
restriction or subject to  limitations on transfer or alienation.  Before common
stock is issued upon the  exercise of an option,  an employee has no rights as a
shareholder with respect to the shares subject to the option.

     Restricted  Stock.  The Plan  permits  the  committee  to award  shares  of
restricted  stock,  which is an award of common stock subject to  restriction on
transfer or other disposition for a designated period. The committee  designates
the conditions that must be satisfied during the restriction period, such as the
completion  of a  specified  period  of  employment  and/or  the  attainment  of
specified performance objectives.

     Subject to any limitations imposed by the committee,  employees who receive
an award of  restricted  stock  generally  have all  rights  and  privileges  of
shareholders  during the  restriction  period,  including  voting rights and the
right to  receive  dividends.  Shares of common  stock  relating  to an award of
restricted stock are ordinarily issued at the time of the award, but may be held
by the Company in escrow until the end of the restriction  period.  Common stock
delivered at the end of the  restriction  period may be free of  restriction  or
subject to further restrictions and conditions.

     Lapse of  Restrictions  Upon Change in Control.  Upon the  occurrence  of a
change in control, all outstanding options become exercisable,  all restrictions
imposed on  restricted  stock lapse and all  performance  objectives  are deemed
satisfied. For this purpose, the Company's board of directors determines whether
a change in control has occurred based upon the following:

- -    The  acquisition  by any  person or group of  persons of 20% or more of the
     voting power of the Company's then outstanding securities;

- -    The Company sells or disposes of all or substantially  all of its assets or
     the assets of the Bank, in one or a series of transactions;

                                       22

- -    The Company consummates a merger,  consolidation or share exchange in which
     the  Company  is  not  the  surviving  entity,  or if  the  Company  (or an
     affiliate)  is the  surviving  entity,  if less  than 80% of the  surviving
     corporation's  voting  securities  are owned in the aggregate by the former
     shareholders of the Company;

- -    The  shareholders of the Company approve a plan of complete  liquidation or
     dissolution of the Company; or

- -    During  any  period  of two  consecutive  calendar  years,  a change in the
     composition of the Company's board of directors,  which excludes a majority
     of the  continuing  board  without the  approval or  recommendation  of the
     board.

     Forfeiture  of Grants  and  Awards.  The Plan  generally  provides  for the
automatic  forfeiture  of any  outstanding  grant  or award  if an  employee  is
terminated  for cause.  The term "cause" is defined as the willful and continued
failure to perform  job  duties,  the  commission  of an act that is  materially
injurious to the Company (or an affiliate) or a material  breach of the terms of
an employment or similar agreement.

     Fair Market Value.  The Plan provides that the fair market value of a share
of common  stock is the closing  sales price as reported on the  American  Stock
Exchange on the  immediately  preceding date on which value is determined (or if
no sales are reported on that day, the immediately preceding day on which a sale
occurs).  As of February 14, 2003,  the closing  sales price of common stock was
$40.00 per share.

     Transferability of Grants and Awards.  Grants and awards under the Plan are
generally not subject to transfer,  assignment, pledge, alienation or other form
of encumbrance,  except in the event of death. The committee, in its discretion,
may permit the  transfer  of any grant or award  under the Plan to members of an
employee's  immediate family,  any trust for the benefit of such family members,
and/or a partnership or other entity in which the  beneficial  owners are family
members.  As a condition of any transfer,  all terms and conditions of the grant
or award continue to apply.

     Adjustments.  In the event of a  recapitalization,  stock  dividend,  stock
split,  combination of shares or other similar  change in the Company's  capital
structure   where  an  adjustment  is  necessary  to  prevent  the  dilution  or
enlargement  of rights with respect to grants or awards made under the Plan, the
committee adjusts the number of shares of stock subject to the Plan, adjusts the
number of shares issuable and the terms and conditions of any outstanding  grant
or award,  provides  for an  equivalent  award in respect of  securities  of the
surviving entity of any merger,  consolidation or similar transaction,  or makes
provision for a cash payment to the holder of an outstanding grant or award.

                                       23

     Amendment, Termination and Term. The Company's board of directors may amend
or terminate the Plan at any time to the extent permitted by law,  regulation or
stock  exchange  rules,  without  the  approval  or  consent  of  the  Company's
shareholders.  Prior to the occurrence of a change in control, the committee may
amend the terms of an  individual  grant or award,  provided that the consent of
any affected employee is obtained.

     No  additional  grants or awards  can be made  under the Plan more than ten
years after its initial effective date, or October 8, 2011.

Code Section 162(m)

     Under Code  Section  162(m),  compensation  in excess of $1 million that is
paid to each of the Company's chief executive  officer and four most highly paid
officers   (called   "covered   employees")   cannot  be  deducted.   Qualifying
performance-based compensation is exempt from the calculation of the limit.

     To preserve the  Company's  ability to deduct the  compensation  associated
with  grants  and  awards  made  under  the Plan,  grants  or awards  made to an
individual  employee in any calendar year cannot cover an aggregate of more than
25,000  shares of Company  common stock,  subject to  adjustment  for changes in
capitalization of the Company. The maximum aggregate amount distributable in the
form of cash awards under the Plan that may be paid to an individual employee in
any calendar year is $100,000.

     The Plan  permits (but does not  require)  the  committee to structure  any
grant or award made to a covered employee as performance-based compensation. The
particular  performance-based  objectives that may be imposed during a specified
performance  cycle  in  connection  with a grant  or  award  that  qualifies  as
performance-based  compensation  under Code Section 162(m) are summarized above.
Attainment of the  performance  objectives can be determined with respect to the
performance of the Company and its affiliates or such  performance when compared
to a designated peer group.

Federal Income Tax Consequences

     The  following  summary is based upon current  interpretations  of existing
federal  income tax laws.  It does not purport to be  complete,  and it does not
discuss the tax  consequences  arising in the context of the employee's death or
the  income  tax  laws of any  local,  state or  foreign  country  in which  the
employee's income or gain may be taxable.

     Options.  There are no  immediate  federal  income tax  consequences  to an
employee  on the grant of a  nonqualified  option.  Upon  exercise,  an employee
recognizes  taxable  income  in an amount  equal to the  excess of the then fair
market value of Company common stock over the exercise price. Any taxable income
recognized in connection with the exercise of a nonqualified  option is added to
the basis of the stock  acquired on the exercise of the option and is subject to
withholding  for  income and  employment  taxes.  When  shares  acquired  on the
exercise of the option are sold, any difference  between the sales price and the
employee's  basis is treated as  long-term or  short-term  capital gain or loss,
depending  upon the holding  period.

                                       24

     Restricted Stock. There are no immediate federal income tax consequences to
an employee or the Company upon the award of restricted stock. Upon the lapse of
restrictions on transfer,  an employee  recognizes  ordinary income in an amount
equal to the then fair  market  value of Company  common  stock.  The Company is
entitled  to a deduction  in the year of lapse in an amount  equal to the amount
the  employee is  required  to  recognize  as  ordinary  income,  subject to any
limitations  imposed  under Code Section  162(m).  Dividends  paid on restricted
stock are  taxable to the  employee  as ordinary  income and  deductible  by the
Company.

     An employee may elect to accelerate  the date on which he or she recognizes
ordinary  income and begins his or her capital gains holding period by filing an
election  within  30 days  after  the  award  of  restricted  stock  (an  "83(b)
election").  The ordinary  income  recognized on account of an 83(b) election is
equal to the fair market value of Company common stock on the date of the award.
Any ordinary income recognized by an employee on account of an 83(b) election is
subject to withholding for income and employment  taxes.  Unless limited by Code
Section  162(m),  the Company is entitled to a  corresponding  deduction at that
time.

     Tax  Payments.  The  committee  may grant to an  employee  a cash  award in
connection  with any  grant or award  made  under the Plan to  provide  all or a
portion of the funds  necessary  to pay any taxes  associated  with the grant or
award.

     Change in Control. The acceleration of the exercisability or the vesting of
a grant or award upon the  occurrence  of a change in  control  may result in an
"excess parachute payment" within the meaning of Code Section 280G. A "parachute
payment" occurs when an employee receives  payments  contingent upon a change in
control that exceed an amount equal to three times his or her "base amount." The
term "base amount" generally means the average annual  compensation paid to such
employee during the five-year period preceding the change in control. An "excess
parachute  payment" is the excess of all parachute payments made to the employee
on account of a change in control over the employee's base amount. If any amount
received by an employee is  characterized as an excess  parachute  payment,  the
employee  is subject to a 20%  excise tax on the amount of the  excess,  and the
Company is denied a deduction with respect to such excess.

                                       25

Additional Plan Information

     The  following  table  sets  forth the  information  concerning  the equity
compensation plans maintained by the Company as of December 31, 2002.

                                        Equity Compensation Plan Information
                                                                                                      (c)
                                                                                             Number of securities
                                            (a)                          (b)                remaining available for
                                Number of securities to be    Weighted-average exercise      future issuance under
                                  issued upon exercise of       price of outstanding       equity compensation plans
                                   outstanding options,        options, warrants and         (excluding securities
        Plan category               warrants and rights                rights               reflected in column (a)
- -----------------------------   --------------------------    -------------------------    -------------------------
                                                                                  
Equity compensation plans
approved by security holders                ___                          ___                          ___

Equity compensation plans not
approved by security holders
(1)                                       44,193                       $31.26                      26,807(1)
                                        ----------                   ----------                   ---------
Total                                     44,193                       $31.26                      26,807(1)
                                        ==========                   ==========                   =========

(1)  The plans are: the 2001 Long-Term  Incentive Plan, which is being submitted
     to the  shareholders  for  approval  at the 2003  annual  meeting,  and the
     Company's  deferred  compensation  plan that  permits  investment  in units
     representing shares of the Company's common stock.

     -    Under the 2001  Long-term  Incentive  Plan,  250,000  shares of common
          stock have been authorized for issuance, and options to acquire 41,000
          shares are  outstanding as of December 31, 2002,  representing  annual
          option  grants for 2001 and 2002.  Effective in January  2003,  annual
          option  grants to acquire  54,500 shares were made. As of February 14,
          2003, 154,500 shares remain available for issuance under the plan.

     -    Under the deferred  compensation  plan,  30,000 shares of common stock
          are  authorized  for issuance.  As of December 31, 2002,  common stock
          equivalent  units  relating  to 3,193  shares  have been  credited  to
          participant accounts.  Shares of common stock are not issued until the
          participant  receives a distribution  from the plan,  ordinarily  upon
          termination of employment or  retirement.  As of December 31, 2002, no
          shares have been issued.

                                       26

Incorporation by Reference

     The  foregoing  is only a  summary  of the  Plan  and is  qualified  in its
entirety by reference  to its full text,  a copy of which is attached  hereto as
Appendix B.

Vote Required and Board Recommendation

     The  affirmative  vote by the holders of a majority of the shares of common
stock voted at the annual  meeting is  required  to approve  the 2001  Long-Term
Incentive Plan.

     The Company's  board of directors  unanimously  recommends a vote "FOR" the
approval of the 2001 Long-Term Incentive Plan.

                              SHAREHOLDER PROPOSALS

     Shareholders  having  proposals  that they desire to present at next year's
annual meeting of shareholders  of the Company should,  if they desire that such
proposals be included in the Company's proxy statement relating to such meeting,
submit such  proposals to the Company no later than  November  18,  2003.  To be
included in the Company's proxy statement,  all submissions must comply with the
requirements  of Rule 14a-8  promulgated  under the  Securities  Exchange Act of
1934, as amended. The board of directors directs interested shareholders to that
rule.  Proposals should be addressed to E. Robinson McGraw,  The Peoples Holding
Company, 209 Troy Street, Tupelo, Mississippi 38802.

     If a shareholder of the Company wishes to present a proposal at next year's
annual meeting,  but does not wish to have the proposal considered for inclusion
in the Company's proxy  statement,  the shareholder  must give written notice to
the Company at the address noted above.  The Company must receive the notice not
later than February 2, 2004. If a shareholder  fails to provide timely notice of
a proposal to be presented at next year's annual meeting, the proxies designated
by the board of directors of the Company  will have  discretionary  authority to
vote on such proposal.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors,  and persons who own more than 10% of a registered class
of the  Company's  equity  securities,  to file  with  the  Securities  Exchange
Commission  and the  American  Stock  Exchange  reports of  ownership of Company
securities and changes in reported  ownership.  Officers,  directors and greater
than 10%  shareholders  are  required by SEC rules to furnish  the Company  with
copies of all Section 16(a) reports they file.

                                       27

     Based  solely upon a review of the reports  furnished  to the  Company,  or
written  representations from reporting persons that all reportable transactions
were  reported,  the Company  believes that during 2002 the Company's  officers,
directors  and  greater  than 10%  owners  timely  filed all  reports  they were
required to file under Section 16(a), except that: three reports,  each covering
a single transaction,  were inadvertently filed late by Mr. Gifford;  one report
covering two transactions was inadvertently  filed late by Dr. Heyer; one report
covering one transaction was inadvertently  filed late by Mr. McGraw; one report
covering one  transaction  was  inadvertently  filed late by Mr. Leake;  and one
report covering two transactions was inadvertently  filed late by Mr. Weaver. In
addition, the following individuals each inadvertently filed one late report for
one or more acquisitions of common stock equivalent units occurring after August
28, 2002, credited under a deferred compensation plan maintained by the Company:
Mr. Beasley, two acquisitions;  Mr. Brooks, two acquisitions; Mr. Creekmore, two
acquisitions;  Mr. Dickerson,  two acquisitions;  Mr. Gifford, two acquisitions;
Dr. Heyer, one  acquisition;  Mr. McGraw,  six  acquisitions;  Mr. Michael,  two
acquisitions;  Mr. Moll, one acquisition;  Mr. Trulove,  two  acquisitions;  Mr.
Waycaster,  six acquisitions;  Mr. Weaver, two acquisitions;  and Mr. Young, two
acquisitions.

                                  OTHER MATTERS

     As of the time this proxy statement was printed,  management of the Company
was unaware of any other matters to be brought  before the annual  meeting other
than those set forth herein.  However, if any other matters are properly brought
before the annual meeting,  the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.

                   AVAILABILITY OF ANNUAL REPORT ON FORM 10-K

     The Company's  Summary  Annual Report for the year ended December 31, 2002,
and the  Company's  Annual  Report on Form 10-K for the year ended  December 31,
2002,  as filed with the  Securities  Exchange  Commission,  have been mailed to
shareholders prior to or with this proxy statement.

     Upon written  request of any record  holder or  beneficial  owner of shares
entitled  to vote at the annual  meeting,  the  Company,  without  charge,  will
provide an additional  copy of the Company's  Annual Report on Form 10-K for the
year ended  December 31, 2002.  Requests  should be mailed to James W. Gray, The
Peoples Holding Company, 209 Troy Street, Tupelo, Mississippi 38802.

                                             By Order of the Board of Directors

                                             /s/ E. Robinson McGraw
                                             ----------------------
                                               E. Robinson McGraw
                                       President and Chief Executive Officer

                                       28

                                   APPENDIX A

                         CHARTER OF THE AUDIT COMMITTEE
                          OF THE BOARD OF DIRECTORS OF
                           THE PEOPLES HOLDING COMPANY

I.   Audit Committee Purpose

     The Audit  Committee  is appointed by the Board of Directors of The Peoples
     Holding Company ("Company") to assist the Board in fulfilling its oversight
     responsibilities.  The Audit  Committee  is  directly  responsible  for the
     appointment,  compensation  and  oversight  of the  work of any  registered
     public  accounting  firm employed by the Company  (including  resolution of
     disagreements  between  management  and  the  auditor  regarding  financial
     reporting)  for the  purpose of  preparing  or  issuing an audit  report or
     related work.  Each such  registered  public  accounting  firm shall report
     directly to the Audit Committee.  The Audit Committee's  primary duties and
     responsibilities include:

     -    Monitoring the integrity of the Company's  financial reporting process
          and systems of internal controls  regarding finance,  accounting,  and
          legal compliance.

     -    Monitoring  the   independence   and   performance  of  the  Company's
          registered public accounting firm and internal auditing department.

     -    Providing  an avenue of  communication  among  the  registered  public
          accounting firm, management, the internal auditing department, and the
          Board of Directors.

     -    Establishing  procedures for (1) the receipt,  retention and treatment
          of complaints received by the Company regarding  accounting,  internal
          accounting  controls  or auditing  matters  and (2) the  confidential,
          anonymous submission by employees of the Company of concerns regarding
          questionable accounting or auditing matters.

     The  Audit  Committee  has  the  authority  to  conduct  any  investigation
     appropriate to fulfilling its responsibilities, and it has direct access to
     the  registered   public   accounting   firm  as  well  as  anyone  in  the
     organization.  The Audit  Committee  has the  authority  to retain,  at the
     Company's  expense and without the  approval or  oversight  of the Board of
     Directors of the Company, special legal,  accounting,  or other advisors or
     experts it deems necessary in the performance of its duties.

II.  Audit Committee Composition and Meetings

     Audit Committee  members shall be a member of the Board of Directors of the
     Company and shall meet the requirements of the American Stock Exchange. The
     Audit Committee shall be comprised of not less than three nor more than six
     directors as determined by the Board,  each of whom shall be independent as
     defined in the Securities  Exchange Act of 1934, as amended,  and the rules
     promulgated  thereunder and as provided in the requirements of the American
     Stock   Exchange.   All  members  of  the  Committee  shall  have  a  basic
     understanding  of finance and accounting and be able to read and understand
     fundamental  financial  statements.  At  least  one  member  of  the  Audit
     Committee shall be a financial expert as defined in the Securities Exchange
     Act of 1934, as amended (the  "Exchange  Act"),  and the rules  promulgated
     thereunder. Audit Committee members shall not serve on the Audit Committees
     of more than two other public companies.

                                      A-1

     Audit Committee members shall be appointed by the Board of Directors of the
     Company.  If an Audit Committee Chairman is not designated or present,  the
     members of the  Committee  may designate a Chairman by majority vote of the
     Committee membership.

     The Committee shall meet at least four times  annually,  or more frequently
     as circumstances dictate. The Audit Committee Chairman shall prepare and/or
     approve an agenda in advance of each  meeting.  The  Committee  should meet
     privately in  executive  session at least  annually  with  management,  the
     director  of  the  internal  auditing  department,  the  registered  public
     accounting  firm,  and as a  committee  to  discuss  any  matters  that the
     committee or each of these groups believe should be discussed. In addition,
     the Committee, or at least its Chairman, should communicate with management
     and the registered public accounting firm quarterly to review the Company's
     financial  statements  and  significant  findings  based upon the auditors'
     limited review  procedures.  The Audit Committee may request any officer or
     employee of the Company or the Company's  outside Counsel or the registered
     public accounting firm to attend a meeting of the Committee or to meet with
     any members of, or consultants to, the Committee.

III. Audit Committee Responsibilities and Duties

     Review Procedures

     A.   Review and reassess the adequacy of this Charter at least annually and
          recommend any proposed  changes to the Board for approval.  Submit the
          charter to the Board of  Directors  for approval and have the document
          published  at  least  every  three  years  in   accordance   with  SEC
          regulations.

     B.   Review the Company's  annual  audited  financial  statements  prior to
          filing  or  distribution.   Review  should  include   discussion  with
          management and registered public accounting firm of significant issues
          regarding   accounting  and  auditing   principles,   practices,   and
          judgments.

     C.   In consultation  with  management,  the registered  public  accounting
          firm,  and  the  internal  auditors,  consider  the  integrity  of the
          Company's  financial  reporting  processes  and  controls  that  could
          materially   affect  the  Company's   financial   statement.   Discuss
          significant  financial  risk  exposures and the steps  management  has
          taken to monitor, control, and report such exposures.  Review material
          findings  prepared by the registered  public  accounting  firm and the
          internal auditing  department  together with  management's  responses,
          including an update on the status of previous recommendations.

                                      A-2

     D.   Review with financial  management and the registered public accounting
          firm the Company's quarterly financial results prior to the release of
          earnings and/or the Company's quarterly financial  statements prior to
          filing  or  distribution.  Discuss  any  significant  changes  to  the
          Company's   accounting   principles  and  any  items  required  to  be
          communicated  by the registered  public  accounting firm in accordance
          with  Statement  of  Auditing  Standards  No. 61. The  Chairman of the
          Committee  may  represent  the entire Audit  Committee for purposes of
          this review.

     E.   Audit Committee members may not accept consulting,  advisory, or other
          compensatory fees from the Company and may not be an affiliated person
          with the Company or subsidiary.  Director's  compensation  must be the
          sole remuneration from the Company for Audit Committee members.

     F.   The Audit  Committee  must  establish  procedures  for (1)  complaints
          received  by the Company  regarding  accounting,  internal  accounting
          controls  or  auditing   matters  and  (2)   confidential,   anonymous
          submissions by employees regarding questionable accounting or auditing
          matters.

     G.   Pay compensation to the registered public accounting firm and advisers
          employed by Audit Committee.

     H.   Review the  written  disclosures  and the letter  from the  registered
          public  accounting  firm  required  by  Independent   Standards  Board
          Standard No. 1 and discuss with the registered  public accounting firm
          its independence.

     Registered public accounting firm

     I.   The registered  public  accounting firm reports  directly to the Audit
          Committee and the Board of Directors. The Audit Committee shall review
          the   independence  and  performance  of  the  auditors  and  annually
          recommend to the Board of Directors the  appointment of the registered
          public  accounting  firm or approve any  discharge  of the  registered
          public accounting firm when circumstances warrant.

          The  Audit  Committee  is  directly   responsible   for   appointment,
          compensation,  and oversight of the registered public accounting firm.
          All auditing services and non-audit  services,  other than as provided
          in the DeMinimus  exceptions  below,  provided by the auditor shall be
          preapproved by the Audit Committee.

          The preapproval requirement is waived with respect to the provision of
          nonaudit services if:

          1.   The aggregate  amount of all such nonaudit  services  provided to
               the  Company  constitutes  not more than 5  percent  of the total
               amount of revenues paid by the Company to its auditor  during the
               fiscal year in which the nonaudit services are provided;

          2.   Such services  were not  recognized by the Company at the time of
               the engagement to be nonaudit services; and

                                      A-3

          3.   Such services are promptly  brought to the attention of the Audit
               Committee of the Company and approved  prior to the completion of
               the audit by the Audit Committee or by one or more members of the
               Audit Committee who are members of the Board of Directors to whom
               authority to grant such approvals has been delegated by the Audit
               Committee.

     J.   Approval by the Audit Committee of a nonaudit  service to be performed
          by the auditor of the  Company  shall be  disclosed  to  investors  in
          periodic reports.

     K.   The Audit Committee may delegate to one or more designated  members of
          the Audit  Committee  who are  independent  directors  of the Board of
          Directors,  the authority to grant  preapprovals  described in Section
          10A of the Securities Exchange Act of 1934, as amended.  The decisions
          of any member to whom authority is delegated to preapprove an activity
          shall  be  presented  to the  full  Audit  Committee  at  each  of its
          scheduled meetings.

     L.   In carrying out its duties,  if the Audit Committee  approves an audit
          service within the scope of the engagement of the auditor,  such audit
          service shall be deemed to have been preapproved.

     M.   The registered  public accounting firm must timely report to the Audit
          Committee (1) all critical accounting  policies/practices  to be used;
          (2) all alternative  treatments of financial  information  within GAAP
          that have been discussed with management,  ramifications of the use of
          such   alternative   disclosures  and  treatments  and  the  treatment
          preferred by the registered  public accounting firm; and (3) any other
          material  written   communications   between  the  registered   public
          accounting  firm  and  management,  including  management  letters  or
          schedules of unadjusted differences.

     N.   On an annual basis,  the Committee  should review and discuss with the
          registered  public  accounting firm all significant  relationships the
          auditors  have with the Company that could  impair their  independence
          and, if so determined by the Committee,  recommend that the Board take
          appropriate  action  to  satisfy  itself  of the  independence  of the
          auditor.

     O.   Review the registered public accounting firm audit plan and engagement
          letter-discuss scope, staffing,  locations,  reliance upon management,
          and internal audit and general audit approach.

     P.   Prior to releasing the year-end  earnings,  discuss the results of the
          audit with the registered  public  accounting  firm.  Discuss  certain
          matters  required to be communicated to Audit Committees in accordance
          with Statement of Auditing Standards No. 61.

     Q.   Consider the registered  public  accounting firm's judgments about the
          quality and appropriateness of the Company's accounting  principles as
          applied in its financial reporting.

                                      A-4

     R.   Evaluate  together with the Board the  performance  of the  registered
          public  accounting firm and, if so determined by the Audit  Committee,
          recommend  that the Board  replace the  registered  public  accounting
          firm.

     Internal Audit Department and Legal Compliance

     S.   Review the budget, plan, changes in plan,  activities,  organizational
          structure,  and  qualifications of the internal audit  department,  as
          needed.

     T.   Review the  appointment,  performance,  and  replacement of the senior
          internal  audit  executive.  The internal  audit  department  shall be
          responsible  to  senior   management  but  have  a  direct   reporting
          responsibility  to the Board of Directors through the Audit Committee.
          Changes in the senior  internal  audit  executive  shall be subject to
          Audit Committee approval.

     U.   Review  significant  reports prepared by the internal audit department
          together with management's response and follow up to these reports.

     V.   On at least an annual basis,  review with the Company's legal counsel,
          any  legal   matters  that  could  have  a  material   impact  on  the
          organization's  financial  statements,  the Company's  compliance with
          applicable  laws and  regulations,  and material  reports or inquiries
          received from regulators or governmental agencies.  Review all reports
          concerning  any  significant  fraud or regulatory  noncompliance  that
          occurs at the Company. This review should include consideration of the
          internal  controls that should be strengthened to reduce the risk of a
          similar event in the future.

     Other Audit Committee Responsibilities

     W.   Annually   prepare  a  report  to  shareholders  as  required  by  the
          Securities and Exchange  Commission.  The report should be included in
          the Company's annual proxy statement.

     X.   Perform  any  other  activities  consistent  with  this  Charter,  the
          Company's  by-laws,  and governing law, as the Audit  Committee or the
          Board deems necessary or appropriate.

     Y.   Maintain minutes of meetings and  periodically  report to the Board of
          Directors on significant results.

     Z.   Establish,  review, and update  periodically a Code of Ethical Conduct
          and ensure that  management  has  established a system to enforce this
          Code.  Advise  the Board  with  respect  to the  Company's  procedures
          regarding  compliance  with  this  Code and with  applicable  laws and
          regulations.

     AA.  Periodically perform self-assessment of Audit Committee performance.

                                      A-5

     BB.  Review financial and accounting  personnel  succession planning within
          the Company.

     CC.  Annually  review  policies  and  procedures  as well as audit  results
          associated  with  directors'  and  officers'   expense   accounts  and
          perquisites.  Annually  review a summary of  directors'  and officers'
          related party transactions and potential conflicts of interest.

     DD.  Obtain reports from management, the Company's senior internal auditing
          executive   and   the   independent   auditor   that   the   Company's
          subsidiary/affiliated entities are in conformity with applicable legal
          requirements and the Company's Code of Conduct.

     EE.  Review with the  registered  public  accounting  firm any  problems or
          difficulties  the  auditor  may have  encountered  and any  management
          letter  provided  by the auditor  and the  Company's  response to that
          letter. Such review should include:

          -    Any  difficulties  encountered  in the course of the audit  work,
               including any  restrictions  on the scope of activities or access
               to required information.

          -    Any changes required in the planned scope of the internal audit.

          -    The  internal  audit  department  responsibilities,   budget  and
               staffing.

     FF.  Meet at least annually with the chief  executive  officer,  the senior
          internal auditing  executive,  and the independent auditor in separate
          executive sessions.

     Acknowledgment

     GG.  The  Audit  Committee  recognizes  that it  shall  be  unlawful  for a
          registered  public  accounting  firm that performs for the Company any
          audit required by the Securities  Exchange Act of 1934, as amended, or
          the  rules  promulgated   thereunder,   to  provide  to  the  Company,
          contemporaneously with the audit, any nonaudit service, including:

          -    bookkeeping or other services  related to the accounting  records
               or financial statements of the Company and its subsidiaries;

          -    financial information systems design and implementation;

          -    appraisal   or   valuation   services,   fairness   opinions   or
               contribution-in-kind reports;

          -    actuarial services;

          -    internal audit outsourcing services;

          -    management functions or human resources;

                                      A-6

          -    broker  or  dealer,  investment  advisor  or  investment  banking
               services;

          -    legal services and expert services unrelated to the audit; and

          -    any other service that the Public  Company  Accounting  Oversight
               Board determines, by regulation, is impermissible.

While the Audit Committee has the  responsibilities and powers set forth in this
Charter,  it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's  financial  statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent  auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.

                                      A-7

                                   APPENDIX B

                           THE PEOPLES HOLDING COMPANY

                          2001 LONG-TERM INCENTIVE PLAN

                           THE PEOPLES HOLDING COMPANY
                          2001 LONG-TERM INCENTIVE PLAN
                                TABLE OF CONTENTS

                                                                    Page

PURPOSE..............................................................  1

DEFINITIONS..........................................................  1

SHARES AVAILABLE UNDER THE PLAN......................................  4
   Number and Type of Shares.........................................  4
   Cancellation and Certain Payments.................................  4
   Limitation on Grants..............................................  4
   Maximum Awards....................................................  5

ADJUSTMENTS..........................................................  5

ADMINISTRATION OF THE PLAN...........................................  5
   Composition of Committee..........................................  5
   Power and Authority...............................................  6

PARTICIPATION........................................................  6
   Eligibility.......................................................  6
   No Continued Employment...........................................  6

OPTIONS..............................................................  6
   Terms and Conditions..............................................  6
   Cessation of Employment...........................................  7
   Exercise..........................................................  7
   Delivery of Common Stock..........................................  8
   Rights as Shareholder.............................................  8

RESTRICTED STOCK.....................................................  8
   General Provisions................................................  8
   Enforcement of Restrictions.......................................  8
   Lapse of Forfeiture Restrictions..................................  8
   Rights as a Shareholder...........................................  9
   Cessation of Employment...........................................  9

PERFORMANCE OBJECTIVES...............................................  9

GENERAL PROVISIONS................................................... 10
   Transferability................................................... 10
   Fractional Shares................................................. 10

                                      B-i

   Withholding....................................................... 10
   Cash Payments..................................................... 10
   Amendment and Termination......................................... 10
   Governing Law..................................................... 11
   Lapse of Restrictions Upon Change in Control...................... 11
   Share Certificates................................................ 11
   Agreements........................................................ 11
   No Limit on Other Compensation Arrangements....................... 11
   Severability...................................................... 11
   Headings.......................................................... 11
   Duration; Term.................................................... 11
   Section 162(m).................................................... 12

                                      B-ii

                           THE PEOPLES HOLDING COMPANY

                          2001 LONG-TERM INCENTIVE PLAN

1.   PURPOSES:

     The  purposes of this 2001  Long-Term  Incentive  Plan (the  "Plan") are to
attract and retain key employees of The Peoples  Holding Company (the "Company")
and its Affiliates (as defined  below),  to provide such persons with incentives
and rewards for superior  performance,  and to increase  shareholder  value. The
Plan was initially  approved by the Board of Directors of the Company on October
8,  2001,  to be  effective  as of that  date,  and was  amended by the Board of
Directors, effective November 19, 2002, and January 21, 2003.

2.   DEFINITIONS:

     2.1 Affiliate means any  corporation or other form of entity,  with respect
to which the Company owns,  from time to time,  directly or  indirectly,  50% or
more of the total combined  voting power of all classes of stock or other equity
interests.

     2.2 Board  or Board of  Directors  means  the  Board of  Directors  of  the
Company.

     2.3 Unless otherwise  provided in a separate  agreement between the Company
(or an Affiliate),  as the same may be amended from time to time,  Cause means a
termination of employment that is based upon:

     a.   A  Participant's  willful and continued  failure to perform his or her
          duties  with the  Company or an  Affiliate  (other than as a result of
          Disability),  after demand for substantial performance is delivered to
          the Participant by the Chief  Executive  Officer of the Company or the
          Board;

     b.   A Participant's willful misconduct that is materially injurious to the
          Company or an Affiliate, whether monetarily or otherwise; or

     c.   A Participant's material breach of terms of any separate employment or
          similar  agreement  between  the  Participant  and the  Company  or an
          Affiliate.

For purposes of this section 2.3, no act or failure to act on the  Participant's
part shall be considered  "willful" unless done, or omitted to be done,  without
good faith and without  reasonable  belief  that the act or omission  was in the
best  interests of the Company or an Affiliate.  Notwithstanding  the foregoing,
the Participant shall not be deemed to have been terminated for Cause unless and
until:

     a.   The Participant  receives a notice of termination  from the Company or
          an Affiliate (whether orally or in writing);

                                      B-1

     b.   The  Participant  (or his or her  representative)  has been  given the
          opportunity  to be heard  before  the Board  (or the  Chief  Executive
          Officer of the Company with respect to any Participant  other than the
          Company's Chief Executive Officer,  President, Chief Financial Officer
          and any Executive Vice President); and

     c.   The Board (or the Chief Executive  Officer of the Company with respect
          to any Participant  other than the Company's Chief Executive  Officer,
          President,  Chief Financial  Officer and any Executive Vice President)
          finds, in good faith, that Cause has occurred.

     2.4 Unless otherwise provided in a separate agreement between a Participant
and the Company or an  Affiliate,  as the same may be amended from time to time,
Change in Control means and shall be deemed to occur if:

     a.   A person,  including  a "group" as defined in Section  13(d)(3) of the
          Exchange  Act  (excluding  the  Company  or any of its  Affiliates,  a
          trustee or any fiduciary holding  securities under an employee benefit
          plan sponsored by the Company or any of its Affiliates, an underwriter
          temporarily  holding  securities  pursuant  to  an  offering  of  such
          securities  or  a  corporation  owned,  directly  or  indirectly,   by
          stockholders  of the Company in  substantially  the same proportion as
          their  ownership of the Company),  becomes the  beneficial  owner,  as
          defined in Rule 13d-3 of the  Exchange  Act (other than as a result of
          the  acquisition  of  shares by the  Company  or an  Affiliate  of the
          Company)  of  shares  of the  Company  having  20% or more of the then
          outstanding voting power of the Company;

     b.   The  Company  sells or  disposes  of all or  substantially  all of its
          assets or substantially all of its assets of its principal subsidiary,
          The Peoples Bank & Trust Company,  in one or a series of  transactions
          to a party that is not  controlled by or under common control with the
          Company;

     c.   The Company  consummates a merger,  consolidation or share exchange in
          which (i) the Company (or an Affiliate)  is not the surviving  entity,
          or (ii) if the  Company (or an  Affiliate)  is the  surviving  entity,
          immediately  after  the  transaction,   less  than  80%  of  the  then
          outstanding  shares of voting  securities of the surviving  company is
          beneficially  owned,  directly or indirectly,  by all or substantially
          all of the  individuals or entities who were the beneficial  owners of
          the outstanding voting securities of the Company  immediately prior to
          such  transaction in substantially  the same  proportions  relative to
          each other;

     d.   The shareholders of the Company approve a plan of complete liquidation
          or dissolution of the Company; or

     e.   During any period of two consecutive  calendar years,  the individuals
          who, at the  beginning of such period,  constitute  the members of the
          Board of Directors of the Company  cease for any reason to  constitute
          at least a majority thereof,  unless the election of each new director
          was  approved by a vote of at least a majority of the  directors  then
          still in office who were  directors at the  beginning of the period or
          persons nominated or elected by such directors.

                                      B-2

The Board of  Directors,  in good  faith,  shall  determine  whether a Change in
Control has occurred hereunder.

     2.5 Code means the Internal Revenue Code of 1986, as amended.

     2.6 Committee  means a committee of persons  appointed in  accordance  with
section 5.1 hereof to administer the Plan.

     2.7 Common  Stock means $5.00 par value  voting  common stock issued by the
Company.

     2.8  Disability  or Disabled  means that an Employee is actually  receiving
long-term  benefits under the Company's (or an Affiliate's)  separate  long-term
disability plan.

     2.9  Employee  means a  common  law  employee  of the  Company  and/or  its
Affiliates,  including officers and directors, determined in accordance with the
Company's standard personnel policies and practices,  but excluding  individuals
who are  classified  by the Company as leased or  otherwise  employed by a third
party,  independent contractors or intermittent or temporary employees,  even if
any  such  classification  is  modified  by  audit,  administrative  proceeding,
litigation or otherwise.

     2.10  Exchange Act means the  Securities  Exchange Act of 1934,  as amended
from time to time.

     2.11 Fair Market Value means,  with  respect to Common  Stock,  the closing
sales  price of a share  of  Common  Stock as  reported  on the  American  Stock
Exchange composite  transactions  reporting system on the immediately  preceding
date on which such value is being  determined  or, if no sales  occurred on such
day, such value  determined as of the immediately  preceding date on which there
were such sales.

     2.12 Incentive means a right to purchase or receive Common Stock or cash in
accordance  with the terms of the Plan.  An Incentive may be granted in the form
of Options, Restricted Stock or a combination thereof.

     2.13 Option means the right to purchase  shares of Common Stock  hereunder;
Options granted under the Plan shall be nonqualified options.

     2.14 Option Price means the exercise price of an Option  granted  hereunder
which shall be  determined  in the  discretion  of the  Committee as either Fair
Market  Value as of the date of grant or the average of such prices for a period
immediately  preceding  the date on which such value is  determined,  but not in
excess of 20 consecutive trading days.

                                      B-3

     2.15 Participant  means an  Employee  who is selected by the  Committee  to
receive a grant or award under the Plan.

     2.16 Performance  Objectives means performance  criteria  designated by the
Committee to be achieved  during a designated  period (a  "Performance  Cycle").
Such  objectives  may relate to the  business  and  affairs of the  Company,  an
Affiliate or a division,  department, unit or profit center of the Company or an
Affiliate,  including,  without  limitation,  the attainment of goals related to
earnings per share, return on equity, return on investment,  return on or growth
in income  (gross or net),  market  share,  appreciation  in the price of Common
Stock, return on assets, operating income, efficiency ratio, noninterest revenue
growth,  the  implementation  of strategic  initiatives,  economic  value added,
operating  performance  and/or  return on capital  when  compared to the cost of
capital.  Objectives  may relate to any  Participant or any Employee or group of
Participants  or Employees and may be determined with respect to the performance
of  the  Company  and/or  its  Affiliates  or  such  performance  compared  to a
designated peer group.

     2.17  Restricted  Stock  means an award of Common  Stock that is subject to
restrictions on transfer or other limitations for a designated period.

     2.18 Unless otherwise determined by the Committee,  Retirement means that a
Participant has ceased to provide services to the Company and its Affiliates, in
his or her capacity as an Employee  thereof,  after the  completion  of not less
than ten years of service and the attainment of age 55.

3.   SHARES AVAILABLE UNDER THE PLAN:

     3.1 Number and Type of Shares. Subject to adjustment as provided in section
4 hereof, 250,000 shares of Common Stock shall be reserved for grant or issuance
hereunder.  Common Stock hereunder may be of original issuance, held in treasury
or acquired by the Company,  whether on the open market or by private  purchase.
Except as provided in section 3.2  hereof,  the number of shares  available  for
grant,  transfer,  issuance or other  payment under the Plan shall be reduced by
the number of shares actually granted, transferred, issued or paid hereunder.

     3.2  Cancellation  and  Certain  Payments.  If  an  Incentive  expires,  is
forfeited or terminates for other reason,  without being exercised in full or is
satisfied  without the issuance of Common Stock, or Common Stock issued pursuant
to an Incentive is forfeited or  reacquired  by the Company,  or is  surrendered
upon  exercise of an  Incentive,  such Common Stock shall again be available for
grant or issuance  hereunder.  Shares of Common Stock tendered as payment on the
exercise of an Option or to satisfy a  Participant's  obligations  under section
10.3 hereof shall also be available for grant or issuance under the Plan.

     3.3  Limitation  on  Grants.  For any year in which  this Plan has not been
approved by the  shareholders  of the Company (a) the number of shares of Common
Stock  authorized  for issuance with respect to such year shall not exceed 5% of
the Company's  issued and outstanding  Common Stock, and (b) with respect to all
arrangements  adopted without shareholder  approval in any five-year period, the
aggregate  Common Stock  authorized under all such plans shall not exceed 10% of
the Company's  issued and  outstanding  Common Stock.  This section 3.3 shall be
interpreted  and construed by the Committee in a manner  intended to comply with
any limitations imposed by the American Stock Exchange or such other exchange or
listing service as may be applicable to the Company, from time to time.

                                      B-4

     3.4 Maximum Awards.  The maximum aggregate number of shares of Common Stock
that may be  granted  or awarded  to an  individual  Participant  in the form of
Incentives  hereunder during any calendar year shall not exceed 25,000 shares of
Common  Stock  (subject to  adjustment  as  provided  in section 4 hereof).  The
maximum amount  distributable  in the form of cash hereunder that may be paid as
an award under the Plan to an individual  Participant in any calendar year shall
not exceed $100,000.

4.   ADJUSTMENTS:

     If any dividend or other distribution  (whether in the form of cash, Common
Stock,  other  securities,  or other property),  recapitalization,  stock split,
reverse stock split, reorganization,  merger, consolidation, split-up, spin-off,
combination,  repurchase,  exchange of Common Stock for other  securities of the
Company,  issuance of warrants or other rights to purchase Common Stock or other
securities  of the Company,  or other  similar  corporate  transaction  or event
affects  Common Stock and an  adjustment is necessary to prevent the dilution or
enlargement  of  rights  of an  Incentive  granted  or  awarded  hereunder,  the
Committee  shall (a) adjust the aggregate  number of shares of Common Stock with
respect to which Incentives may be granted under the Plan, (b) adjust the number
of shares of  Common  Stock  subject  to and the  terms  and  conditions  of any
outstanding  Incentive  granted or awarded under the Plan, or (c) provide for an
equivalent award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect.

5.   ADMINISTRATION OF THE PLAN:

     5.1  Composition  of  Committee.  This  Plan  shall  be  administered  by a
committee  appointed by the Board of Directors  consisting  of not less than two
persons,  which shall  ordinarily  be the  Compensation  Committee of the Board,
provided that:

     a.   To the extent the grant or award of an  Incentive is intended to be an
          exempt  transaction  under Rule 16b-3  promulgated  under the Exchange
          Act,  each acting  member of the  Committee  shall be a  "non-employee
          director" within the meaning of such rule.

     b.   To the extent the grant or award of an Incentive hereunder is intended
          to constitute  "performance-based  compensation" within the meaning of
          Code Section  162(m),  each acting member of the Committee shall be an
          "outside director" within the meaning of such section.

Notwithstanding  the  foregoing,  the Board of Directors  may act in lieu of the
Committee hereunder.

                                      B-5

     5.2 Power and Authority.  The Committee shall have the discretionary  power
and  authority to (a) designate  Participants  hereunder,  (b) award  Incentives
under the Plan, including the determination of the terms and conditions thereof,
(c)  amend or  modify  the terms and  conditions  of any  outstanding  Incentive
granted or awarded hereunder,  subject to the provisions of section 10.5 hereof,
(d) construe and interpret the  provisions of the Plan and any form or agreement
related thereto,  (e) establish and adopt  additional  rules,  regulations,  and
procedures relating to the Plan and the grant or award of Incentives  hereunder,
including,  without  limitation,  procedures  for the  crediting  of  periods of
employment with an Affiliate  and/or during any period of part-time  employment,
and (f) make any other  determination  which it believes  necessary or advisable
for the proper administration of the Plan.

     Decisions,  interpretations and actions of the Committee concerning matters
related to the Plan shall be final and conclusive on the Company, its Affiliates
and Participants and their beneficiaries.  The Committee may make determinations
selectively among Participants who receive or are eligible to receive Incentives
hereunder, whether or not such Participants are similarly situated.

     The   Committee  may  delegate   some  or  all  of  its   ministerial   and
administrative  duties  hereunder  to officers  and  Employees  of the  Company,
including,  without  limitation,  the  preparation  and  issuance  of  documents
evidencing  the grant or award of an  Incentive  hereunder  and the  issuance of
shares of Common Stock and the withholding of taxes in connection therewith.

6.   PARTICIPATION:

     6.1 Eligibility.   Employees  of the  Company and its  Affiliates  shall be
eligible  to  receive  Incentives  under  this  Plan,  when  designated  by  the
Committee.  Employees may be designated for participation hereunder individually
or by groups or categories, in the discretion of the Committee.

     6.2 No  Continued  Employment.  No  Participant  shall  have  any  right to
continue in the employ of the Company or an Affiliate  for any period of time or
any right to continue  his or her present or any other rate of  compensation  on
account of the grant or award of an Incentive or the issuance of Common Stock or
other form of payment hereunder.

7.   OPTIONS:

     7.1 Terms and  Conditions.  The  Committee  may,  from time to time,  grant
Options  hereunder,  subject to such terms and  conditions  as the Committee may
determine are necessary or appropriate in accordance with the following:

     a.   The Committee shall designate the Option Price.

     b.   The number of shares of Common  Stock  subject  to an Option  shall be
          designated by the Committee at the time of grant.

                                      B-6

     c.   The term of each Option shall be determined by the Committee as of the
          date of grant and shall not be longer  than ten years,  measured  from
          the date of grant.

     d.   The  exercise  of an Option  granted  hereunder  shall be  subject  to
          restrictions  or  limitations  as  the  Committee  deems  appropriate,
          including the imposition of Performance Objectives.

     e.   Each Option shall be exercisable at such time or times during its term
          as may be determined by the Committee.

     7.2 Cessation of Employment.  Unless  otherwise  provided by the Committee,
Options granted  hereunder shall be exercisable only while the Participant is an
Employee  of the  Company or an  Affiliate,  and,  after the  cessation  of such
employment,  Options granted  hereunder shall be exercisable  only to the extent
vested and  exercisable  as of the  Participant's  cessation of  employment,  as
follows:

     a.   Until the earlier of (i) the one-year period following the date of the
          Participant's  Retirement,  death or  Disability,  or (ii) the date on
          which such Options otherwise expire in accordance with their terms;

     b.   Until the earlier of (i) the 60-day period following the Participant's
          involuntary termination of employment, other than on account of Cause,
          or (ii) the date on which such Options  otherwise expire in accordance
          with their terms; or

     c.   Until the earlier of (i) the 60-day period following the Participant's
          voluntary  cessation of employment for any reason, or (ii) the date on
          which such Options otherwise expire in accordance with their terms.

Unless  otherwise  provided by the Committee,  if a Participant's  employment is
terminated  for Cause,  then  notwithstanding  any provision of this Plan or any
related form or agreement to the contrary,  Options  granted  hereunder shall be
deemed  canceled  and  forfeited  as of the  date of such  termination,  without
additional notice or the payment of compensation.

     7.3 Exercise.  Each Option granted hereunder may be exercised,  in whole or
in part, by delivery of written notice to the Company, accompanied by payment in
full of the Option Price of the shares.  Such  consideration  may consist of (a)
cash or cash  equivalents,  (b) shares of Common Stock  previously  owned by the
Participant,  or (c) if permitted by the Committee in any document providing for
the grant of such Option,  the withholding of shares  otherwise  issuable on the
exercise of an Option. Common Stock tendered in consideration of the exercise of
an  Option  hereunder  shall be valued  at Fair  Market  Value as of the date of
exercise.

     A Participant may exercise  Options and  contemporaneously  sell the Common
Stock acquired thereby pursuant to a brokerage or similar arrangement,  provided
that the proceeds  thereof are applied to the payment of the  purchase  price of
the  Common  Stock.  Any  such  transaction  shall be with  the  consent  of the
Committee  and, as to any  Participant  subject to Section 13(k) of the Exchange
Act, the use of such  arrangement  shall be  prohibited or limited to the extent
required to comply with applicable federal and state securities laws.

                                      B-7

     7.4 Delivery of Common Stock.  As soon as practicable  after the receipt of
written  notification  of exercise and the payment of the option price, in full,
the Committee  shall cause the Company to issue and deliver to the  Participant,
registered in the Participant's name (or in the name of such other person as the
Participant may designate),  certificates representing shares of Common Stock in
the  appropriate  amount,  which  may  be  subject  to  such  additional  terms,
limitations  on transfer or other  restrictions  and conditions as the Committee
deems appropriate.

     7.5 Rights as Shareholder.  Prior to the issuance of shares of Common Stock
upon the  exercise  of an  Option,  a  Participant  shall  have no  rights  as a
shareholder with respect to the shares subject to such Option.

8.   RESTRICTED STOCK:

     8.1 General Provisions.  The Committee may award shares of Restricted Stock
to such  Participants  as it may  designate,  from time to time,  subject to the
following terms and conditions:

     a.   The  number  of  shares  of  Common  Stock  to  be  transferred  to  a
          Participant shall be determined in the discretion of the Committee.

     b.   Restricted  Stock  awarded  hereunder  shall be subject to such terms,
          conditions  and  restrictions  for  such  period  or  periods  as  the
          Committee,  in  its  discretion,  may  determine  (including,  without
          limitation,  restrictions on transfer or other disposition, forfeiture
          provisions,   and/or   restrictions  based  upon  the  achievement  of
          Performance Objectives) ("Forfeiture Restrictions").

     8.2  Enforcement  of  Restrictions.  In order  to  enforce  any  Forfeiture
Restrictions imposed hereunder,  a Participant  receiving an award of Restricted
Stock  shall  enter  into an  agreement  with the  Committee  setting  forth the
conditions of such award.  Each  certificate  issued with respect to an award of
Restricted Stock hereunder shall bear such legends as the Committee, in its sole
discretion,   shall  deem  necessary  or  appropriate.  The  Committee,  in  its
discretion,  may additionally require that shares of Restricted Stock registered
in the  name of the  Participant  be  deposited,  together  with a  stock  power
endorsed in blank, with the Company pending the lapse of such restrictions.

     8.3  Lapse of  Forfeiture  Restrictions.  The  Committee  shall  notify  an
affected  Participant  at the end of any  period  during  which  the  shares  of
Restricted Stock are subject to Forfeiture Restrictions. Such restrictions shall
be deemed satisfied or lapsed,  and each affected  Participant shall be entitled
to receive a certificate  representing the number of shares of Common Stock with
respect to which the lapse has occurred free of  restriction  or subject to such
additional  terms,  conditions,  limitations  and  restrictions as the Committee
deems appropriate.

                                      B-8

     8.4 Rights as a  Shareholder.  Subject to any  restrictions  or limitations
imposed by the  Committee,  each  Participant  receiving an award of  Restricted
Stock hereunder shall have the full voting rights of a shareholder  with respect
to such shares  during any period in which the shares are subject to  Forfeiture
Restrictions.  During any such period,  dividends  paid in cash or property with
respect  to the  underlying  Common  Stock  shall  be  paid  to the  Participant
currently,  accrued by the Company as a  contingent  obligation  or converted to
additional shares of stock, in the discretion of the Committee.

     8.5 Cessation of Employment. Unless otherwise provided by the Committee, if
an Employee  ceases his or her  employment  with the Company and its  Affiliates
prior to the date on which Forfeiture Restrictions have lapsed:

     a.   If such cessation is on account of death,  Disability or Retirement or
          such  cessation  is  involuntary,  but not on account  of Cause,  such
          restrictions  shall  lapse and such  Performance  Objectives  shall be
          deemed  satisfied  as to the  number  of shares  of  Restricted  Stock
          determined by multiplying  (i) the total number of shares then subject
          to  Forfeiture  Restrictions,  by (ii) the ratio of the number of days
          lapsed in the restriction  period or Performance  Cycle over the total
          number of days in such period.

     b.   If  such  cessation  is on  account  of  Cause  or  the  Participant's
          cessation is not otherwise  described in  subparagraph a hereto,  then
          Restricted Stock subject to Forfeiture  Restrictions as of the date of
          such cessation  shall be deemed  canceled and  forfeited,  without the
          requirement of notice or the payment of compensation.

9.   PERFORMANCE OBJECTIVES:

     In addition to any other limitation  imposed hereunder,  the Committee,  in
its discretion, may impose Performance Objectives as a condition of the grant or
award  of  Incentives  hereunder,  such  objectives  to  be  achieved  during  a
Performance Cycle. The Committee shall establish  Performance  Objectives at the
time of grant or award or annually during the term of such grant or award.  Once
established, Performance Objectives may be changed, adjusted or amended during a
Performance  Cycle, in the discretion of the Committee.  The Committee may waive
all or any portion of the Performance Objectives during or after the term of the
grant or award on account of a change in circumstances.

     At the conclusion of the term of an affected  Incentive or any  Performance
Cycle,  the  Committee  shall  determine the portion of such grant or award that
shall  be  deemed  free of  restriction  on  account  of the  attainment  of the
applicable  Performance  Objectives.  The  Committee  shall notify each affected
Participant as to whether the  Performance  Objectives  have been  achieved,  in
whole or in part,  and the number of shares of Common Stock free of  restriction
on account of the attainment of such objectives.

                                      B-9

10.  GENERAL PROVISIONS:

     10.1  Transferability.  No Incentive  granted  under this Plan may be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed
of by a Participant  other than by will or the laws of descent and distribution,
and Options shall be  exercisable  during a  Participant's  lifetime only by the
Participant  or,  in the event of the  Participant's  legal  incapacity,  by his
guardian or legal representative acting in a fiduciary capacity on behalf of the
Participant under state law and court supervision.

     The Committee may expressly provide in an agreement evidencing the grant or
award of an Incentive  hereunder (or an amendment to such an  agreement)  that a
Participant  may transfer  such  Incentive to a spouse or lineal  descendant  (a
"Family  Member"),  a trust  for the  exclusive  benefit  of Family  Members,  a
partnership  or other  entity  in which all the  beneficial  owners  are  Family
Members,  or any  other  entity  affiliated  with  the  Participant  that may be
approved  by the  Committee.  All terms and  conditions  of any such  Incentive,
including provisions relating to the termination of the Participant's employment
or service with the Company or its Affiliates, shall continue to apply following
a transfer made in accordance with this section.

     10.2 Fractional Shares. No fractional share of Common Stock shall be issued
or delivered pursuant to the Plan or any Incentive granted or awarded hereunder.

     10.3  Withholding.  The Company  shall have the right to withhold  from any
payment  made under the Plan or to collect as a condition  of any such  payment,
any taxes  required  by law to be  withheld.  To the  extent  permitted  under a
specific  grant or award of an Incentive  hereunder,  a Participant  may satisfy
this  obligation,  in whole or in part, by (a) directing the Company to withhold
such taxes from the payment of shares of Common Stock,  or (b) tendering  shares
of Common Stock held by such Participant.  In either case, Common Stock tendered
in satisfaction of such  obligations  shall have a Fair Market Value of not more
than an amount equal to the rate applicable to supplemental  wage payments under
Code Section 3402.  Common Stock tendered or withheld  hereunder shall be valued
at Fair  Market  Value,  determined  as of the date that the amount of tax to be
withheld shall be determined.

     10.4 Cash Payments.  The Committee may, but shall not be required to, award
cash payment to a Participant  hereunder in an amount sufficient to pay all or a
portion of  Participant's  tax liability  attributable to the vesting,  exercise
and/or payment of an Incentive hereunder, which payment may be determined taking
into account the value of such tax payment.

     10.5  Amendment  and  Termination.  The  Board of  Directors  may  amend or
terminate  this Plan at any  time;  any such  action  may be taken  without  the
approval of the Company's shareholders,  but only to the extent that shareholder
approval is not required under applicable  Federal or state law or regulation or
stock exchange rules.

     Prior to the occurrence of a Change in Control,  the Committee or the Board
of Directors, as the case may be, shall possess the authority to amend the terms
of an Incentive granted or awarded hereunder;  provided,  however,  that no such
amendment shall materially  impair any such Incentive without the consent of the
affected Participant.

                                      B-10

     10.6 Governing Law. The validity,  construction and effect of this Plan and
any  Incentive  hereunder  shall  be  determined  in  accordance  with  the laws
(including those governing contracts) of the State of Mississippi.

     10.7  Lapse of  Restrictions  Upon  Change  in  Control.  Unless  otherwise
provided by the Committee or unless otherwise  provided in a separate  agreement
between the Company or an Affiliate and a Participant hereunder, in the event of
a Change  in  Control  (a) all  outstanding  Options  shall  become  and  remain
exercisable  during the six-month  period  following  such change or such longer
period as may be permitted under the individual  agreement  evidencing the grant
thereof, and (b) all Performance Objectives,  Forfeiture Restrictions, and other
limitations imposed upon Incentives otherwise granted or awarded hereunder shall
be deemed to be satisfied or lapsed.

     10.8  Share  Certificates.  All  certificates  for  shares of Common  Stock
delivered under the Plan pursuant to any Incentive or the exercise thereof shall
be subject to such stop transfer orders and other  restrictions as the Committee
may deem  advisable and the Committee may cause a legend or legends to be put on
any such  certificates  to make  appropriate  reference to such  restrictions or
other limitations contained hereunder.

     10.9  Agreements.  Each  Incentive  hereunder  shall  be  evidenced  by  an
agreement that shall be delivered to the Participant and shall specify the terms
and conditions of the Incentive and any rules applicable  thereto.  In the event
of a conflict between the terms of the Plan and any such agreement, the terms of
the Plan shall govern.

     10.10 No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall  prevent the Company or an Affiliate  from  adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of Incentives  provided for hereunder (subject to stockholder  approval as
such approval may be required),  and such  arrangements  may be either generally
applicable or applicable only in specific cases.

     10.11 Severability. If any provision of the Plan or any Incentive hereunder
is, or becomes,  or is deemed to be invalid,  illegal,  or  unenforceable in any
jurisdiction  or as to any Person,  such provision  shall be construed or deemed
amended to conform  to the  applicable  laws,  or if it cannot be  construed  or
deemed  amended  without,  in the  determination  of the  Committee,  materially
altering  the  intent of the Plan or such  Incentive,  such  provision  shall be
stricken as to such  jurisdiction  or Person.  The remainder of the Plan and any
such Incentive shall remain in full force and effect.

     10.12  Headings.  Headings are provided  herein solely as a convenience  to
facilitate  reference.  Such headings shall not be deemed in any way material or
relevant to the  construction  or  interpretation  of the Plan or any  provision
thereof.

                                      B-11

     10.13  Duration;  Term.  This Plan  commenced on October 8, 2001, and shall
remain in effect until (a) all Incentives have been satisfied by the issuance of
shares of Common Stock or cash  payments or a  combination  thereof or have been
terminated or forfeited,  or (b) restrictions or Performance  Objectives imposed
on shares of Common Stock have lapsed.  No Incentive shall be granted  hereunder
ten years after such date.

     10.14 Section 162(m).  The Committee,  in its  discretion,  shall determine
whether any  specific  Incentive  granted or awarded to a  Participant  who is a
Covered   Employee   shall  be  structured   to  constitute   "performance-based
compensation"  within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended.

     THIS PLAN was first approved by the Board  Directors of The Peoples Holding
Company on October 8, 2001, to be effective as of such date.

                                       THE PEOPLES HOLDING COMPANY

                                      B-12

                                REVOCABLE PROXY
                          THE PEOPLES HOLDING COMPANY
[X] PLEASE MARK VOTE
    AS IN THIS EXAMPLE

                         ANNUAL MEETING OF STOCKHOLDERS
                                 APRIL 15, 2003

     The undersigned hereby appoints William M. Beasley,  Marshall H. Dickerson,
H.  Joe  Trulove,  and J.  Larry  Young,  and each of them,  acting  singly,  as
attorneys and proxies of the undersigned,  with full power of  substitution,  to
vote all shares of stock which the undersigned is entitled to vote at the Annual
Meeting of  Stockholders  of The Peoples  Holding Company to be held on Tuesday,
April 15,  2003 at 2:00  p.m.,  Central  time,  at the  principal  office of The
Peoples Bank & Trust Company, 209 Troy Street, Tupelo,  Mississippi,  38802, and
at any and all  adjournments  thereof.  The proxies are  authorized  to vote all
shares  of  stock  in  accordance  with  the  following  instructions  and  with
discretionary authority upon such other business as may properly come before the
meeting or any adjournment thereof.

     The proxies are also authorized to cumulate all votes which the undersigned
is entitled to cast at the Annual Meeting for, and to allocate such votes among,
one or more of the nominees for Class 1 director  listed  hereon as such proxies
shall determine, in their sole and absolute discretion, in order to maximize the
number of such nominees elected as Class 1 directors.

(1)  To elect four Class 1 directors for a                    WITH-    FOR ALL
     three year term ending in 2006:                 FOR      HOLD     EXCEPT
                                                    [___]     [___]     [___]
                   George H. Booth, II
                   Frank B. Brooks
                   Robert C. Leake
                   C. Larry Michael

     INSTRUCTION: To withhold authority to vote for any individual nominee(s),
     mark "FOR ALL EXCEPT" and write that nominee's name in the space provided
     below.
     ________________________________________________________________________

(2)  To consider and act upon a proposal             FOR     AGAINST   ABSTAIN
     to ratify the selection of Ernst &             [___]     [___]     [___]
     Young LLP as the Company's independent
     auditors for the fiscal year ending
     December 31, 2003.

(3)  To approve the Company's 2001                   FOR     AGAINST   ABSTAIN
     Long-Term Incentive Plan.                      [___]     [___]     [___]

(4)  To transact such other business as may properly come before the annual
     meeting or any adjournments thereof.

     THIS PROXY, IF PROPERLY  EXECUTED,  WILL BE VOTED AS SPECIFIED OR, WHERE NO
DIRECTION IS GIVEN,  WILL BE VOTED TO ELECT THE  NOMINEES AS  DIRECTORS  AND FOR
PROPOSALS 2 AND 3, AND AT THE  DISCRETION  OF THE  PROXIES ON ANY OTHER  MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.

     THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

     THE BOARD OF  DIRECTORS  RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
AS DIRECTORS AND FOR PROPOSALS 2 AND 3.

Please be sure to date and sign this Proxy in the box below.
 _____________________________________________________________________________
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|_____________________________________________________________________________|
  Stockholder sign above       Co-holder (if any) sign above        Date

- -------------------------------------------------------------------------------
   Detach above card, date, sign and mail in postage paid envelope provided.

                          THE PEOPLES HOLDING COMPANY

Please sign exactly as your name(s)  appear(s) on this proxy card.  When signing
in a representative capacity, please give full title.

                              PLEASE ACT PROMPTLY
                   DATE, SIGN AND MAIL YOUR PROXY CARD TODAY

IF YOUR ADDRESS HAS CHANGED,  PLEASE  CORRECT THE ADDRESS IN THE SPACE  PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

________________________________________

________________________________________

________________________________________