EXHIBIT (99)(a)

NEWS RELEASE

            October 18, 2004

Contact:  Tony Wolfe

 President and Chief Executive Officer

 A. Joseph Lampron

 Executive Vice President and Chief Financial Officer

828-464-5620, Fax 828-465-6780

For Immediate Release

PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS

Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank, reported net income of $1.1 million, or $0.35 basic and diluted net income per share, for the three months ended September 30, 2004 as compared to $319,000 or $0.10 basic and diluted net income per share, for the same period one year ago. Net income from recurring operations for the three months ended September 30, 2004 was $1.1 million, or $0.36 basic and diluted net income per share, as compared to third quarter 2003 net income from recurring operations of $355,000, or $0.11 basic and diluted net income per share.

Tony W. Wolfe, President and Chief Executive Officer, attributed the increase in recurring third quarter earnings to a decrease in the provision for loan losses and an increase in net interest income, which were partially offset by an increase in non-interest expense and a decrease in recurring non-interest income.

The provision for loan losses for the three months ended September 30, 2004 was $931,000 as compared to $1.6 million for same period one year ago. This decrease is due to a reduction in classified loans of $8.4 million. Net interest income increased 11% to $6.0 million for the three months ended September 30, 2004 compared to $5.4 million for the same period one year ago. This increase is attributable to an increase in interest income due to increases in the prime rate resulting from Federal Reserve interest rate increases. This increase is also due to an increase in the average outstanding balance of investment securities available for sale and loans combined with a reduction in interest expense resulting from a lower cost of funds. Net interest income after the provision for loan losses increased 32% to $5.1 million for the three months ended September 30, 2004 compared to $3.9 million for the same period one year ago.

Non-interest expense increased 4% to $5.0 million for the three months ended September 30, 2004, as compared to $4.8 million for the same period last year. The increase in non-interest expense included an increase of $249,000 or 10% in salaries and benefits expense primarily due to normal salary increases and increased incentive expense. This increase in non-interest expense was partially offset by a decrease in non-interest expenses other than salary and benefits expense of $79,000 resulting primarily from a decrease in other taxes of $119,000 primarily due to a decrease in franchise tax expense.

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PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE TWO

Recurring non-interest income amounted to $1.6 million for the three months ended September 30, 2004, as compared to $1.7 million for the same period one year ago. The decease in recurring non-interest income is primarily due to a reduction in mortgage banking income resulting from less refinancing activity caused by higher interest rates.

Year-to-date net income as of September 30, 2004 was $3.4 million, or $1.07 basic net income per share and $1.06 diluted net income per share as compared to $1.8 million, or $0.58 basic and diluted net income per share, for the same period one year ago. Net income from recurring operations for the nine months ended September 30, 2004 was $3.4 million or $1.08 basic net income per share and $1.07 diluted net income per share, representing a 78% increase over net income from recurring operations of $1.9 million, or $0.61 basic and diluted net income per share for the nine months ended September 30, 2003. In the nine months ended September 30, 2004 the Company had net non-recurring losses on the disposition of assets of $59,000. This is a reduction from the net non-recurring losses on the disposition of assets for the nine months ended September 30, 2003 which amounted to $143,000 and were comprised of a $628,000 net loss on repossessed assets partially offset by a $479,000 gain associated with the sale of the Bank’s $3.7 million credit card portfolio during the first quarter of 2003.

The increase in the three months and year-to-date recurring earnings is primarily attributable to a decrease in the provision for loan losses and an increase in net interest income, which were partially offset by a decrease in recurring non-interest income and an increase in non-interest expense.

The year-to-date provision for loan losses decreased to $2.7 million for the nine months ended September 30, 2004, as compared to $4.6 million for the nine months ended September 30, 2003. This decrease is due to a reduction in classified loans. Year-to-date net interest income increased 9% to $17.7 million for the nine months ended September 30, 2004, as compared to $16.3 million for the same period one year ago. This increase is attributable to an increase in interest income due to an increase in the prime rate, as well as an increase in the average outstanding balance of loans combined with a reduction in interest expense resulting from a decrease in the cost of funds. Year-to-date net interest income after the provision for loan losses increased 29% to $15.1 million for the nine months ended September 30, 2004, as compared to $11.7 million for the same period one year ago.

Excluding non-recurring gains and losses on the disposition of assets, non-interest income decreased 3% to $4.6 million for the nine months ended September 30, 2004 as compared to $4.8 million for the same period last year. This decrease is primarily due to a decrease in mortgage banking income resulting from a reduction in refinancing activity due to increased interest rates. This decrease was partially offset by increases in service charges, due to an increase in deposit account related fees resulting from deposit growth, and miscellaneous non-interest income.

Non-interest expense increased 8% to $14.6 million for the nine months ended September 30, 2004, as compared to $13.4 million for the same period last year. The increase in year-to-date non-interest expense included an increase of $866,000 or 12% in salaries and benefits expense primarily due to normal salary increases, increased incentive expense and increased employee insurance costs, an increase of $152,000 or 6% in occupancy expense, primarily due to an increase in lease expense resulting from lease agreements for branch facilities entered into during 2003, and an increase of $122,000 or 4% in non-interest expenses other than salary, benefits and occupancy expenses.

6 

PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE THREE

Total assets as of September 30, 2004 amounted to $695.0 million, an increase of 4% compared to total assets of $668.5 million at September 30, 2003. This increase is primarily attributable to an increase in available for sale securities combined with an increase in loans. Available for sale securities increased 38% to $105.3 million as of September 30, 2004 compared to $76.4 million as of September 30, 2003. This increase is attributable to additionalsecurities purchases, which were partially offset by paydowns on mortgage-backed securities, calls and maturities.

Loans increased 1% to $545.8 million as of September 30, 2004 compared to $541.3 million as of September 30, 2003. Non-performing assets totaled $8.1 million at September 30, 2004 or 1.17% of total assets, compared to $9.5 million at September 30, 2003 or 1.43% of total assets. The allowance for loan losses at September 30, 2004 amounted to $9.5 million or 1.73% of total loans compared to $8.9 million or 1.64% of total loans at September 30, 2003.

Deposits amounted to $565.7 million as of September 30, 2004, representing an increase of 4% over deposits of $545.5 million at September 30, 2003. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $32.2 million to $407.8 million at September 30, 2004 as compared to $375.6 million at September 30, 2003. This increase is primarily due to an increase in the Bank’s retail checking products resulting from a retail marketing campaign started by the Bank in July 2003 designed to grow core deposits. Certificates of deposit in amounts greater than $100,000 or more totaled $157.9 million at September 30, 2004 as compared to $170.0 million at September 30, 2003.

Shareholders’ equity increased to $50.7 million, or 7.29% of total assets, at September 30, 2004 as compared to $48.7 million, or 7.29% of total assets, at September 30, 2003. This was primarily due to an increase in retained earnings resulting from an increase in net income in 2004.

Peoples Bank operates eleven offices throughout Catawba County, North Carolina, one office in Alexander County, North Carolina, three offices in Lincoln County, North Carolina and one office in Mecklenburg County, North Carolina. The office in Mecklenburg County was recently opened in Charlotte, NC under the name of Banco de la Gente to serve the Latino community. The Company’s common stock is publicly traded over the counter and is quoted on the Nasdaq National Market under the symbol “PEBK.” Scott and Stringfellow, Inc., Ryan, Beck & Co., Sterne Agee & Leach, Inc. and Trident Securities, Inc. are market makers for the Company’s shares.

(TABLES FOLLOW)

Statements made in this press release, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this release was prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate,” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, (1) competition in the markets served by Peoples Bank, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environment and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in the Company’s other filings with the Securities and Exchange Commission, including but not limited to those described in Peoples Bancorp of North Carolina, Inc.’s annual report on Form 10-K for the year ended December 31, 2003.

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PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE FOUR

CONSOLIDATED BALANCE SHEETS
September 30, 2004, December 31, 2003 and September 30, 2003
	September 30, 2004			December 31, 2003			September 30, 2003
	(Unaudited)						(Unaudited)
ASSETS:
Cash and due from banks	$	15,020,955		$	18,413,786		$	19,510,852
Federal funds sold		1,516,000			2,369,000			6,531,000
Cash and cash equivalents		16,536,955			20,782,786			26,041,852
Investment securities available for sale		105,321,647			79,460,452			76,402,762
Other investments		4,421,973			4,216,973			3,991,973
Total securities		109,743,620			83,677,425			80,394,735
Loans		545,835,699			552,126,189			541,334,155
Mortgage loans held for sale		4,440,815			587,495			4,811,700
Less: Allowance for loan losses		(9,453,135	)		(9,722,267	)		(8,887,322	)
Net loans		540,823,379			542,991,417			537,258,533
Premises and equipment, net		12,707,640			12,537,230			12,831,686
Accrued interest receivable and other assets		15,178,191			14,043,586			12,017,130
Total assets	$	694,989,785		$	674,032,444		$	668,543,936
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand	$	84,295,967		$	72,420,923		$	78,126,007
NOW, MMDA & Savings		189,215,995			158,677,445			155,290,700
Time, $100,000 or more		157,931,573			171,596,789			169,985,514
Other time		134,275,107			147,107,075			142,138,410
Total deposits		565,718,642			549,802,232			545,540,631
Demand notes payable to U.S. Treasury		974,727			443,384			413,043
FHLB borrowings		60,000,000			58,000,000			58,000,000
Junior subordinated debentures		14,433,000			14,433,000			14,000,000
Accrued interest payable and other liabilities		3,191,473			2,799,932			1,883,367
Total liabilities		644,317,842			625,478,548			619,837,041
Shareholders' Equity:
Preferred stock, no par value; authorized
5,000,000 shares; no shares issued
and outstanding		-			-			-
Common stock, no par value; authorized
20,000,000 shares; issued and
outstanding 3,148,265 shares in 2004
and 3,135,202 shares in 2003		35,301,274			35,121,510			35,097,773
Retained earnings		15,273,669			12,844,524			12,982,190
Accumulated other comprehensive income		97,000			587,862			626,932
Total shareholders' equity		50,671,943			48,553,896			48,706,895
Total liabilities and shareholders' equity	$	694,989,785		$	674,032,444		$	668,543,936

PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE FIVE

CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2004 and 2003
	Three months ended				Nine months ended
	September 30,				September 30,
	2004		2003		2004		2003
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
INTEREST INCOME:
Interest and fees on loans	$	8,045,561	$	7,865,767	$	24,012,533	$	23,473,128
Interest on federal funds sold		16,473		10,123		25,900		54,220
Interest on investment securities:
U.S. Government agencies		796,006		474,404		2,078,090		1,658,519
States and political subdivisions		170,673		141,631		483,527		432,982
Other		96,361		117,756		293,348		335,553
Total interest income		9,125,074		8,609,681		26,893,398		25,954,402
INTEREST EXPENSE:
NOW, MMDA & Savings deposits		540,620		330,861		1,316,725		965,858
Time deposits		1,746,693		2,056,708		5,421,336		6,237,185
FHLB borrowings		651,243		646,070		1,940,067		1,947,993
Junior subordinated debentures		162,371		157,500		487,114		490,000
Other		2,465		2,113		5,624		5,796
Total interest expense		3,103,392		3,193,252		9,170,866		9,646,832
NET INTEREST INCOME		6,021,682		5,416,429		17,722,532		16,307,570
PROVISION FOR LOAN LOSSES		931,000		1,560,000		2,658,000		4,629,900
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,090,682		3,856,429		15,064,532		11,677,670
OTHER INCOME:
Service charges		907,946		825,408		2,592,301		2,416,487
Other service charges and fees		140,778		133,881		467,808		438,761
Mortgage banking income		107,585		206,071		277,590		610,179
Insurance and brokerage commission		82,622		106,411		338,825		305,603
Miscellaneous		320,020		318,771		926,412		859,883
Total other income		1,558,951		1,590,542		4,602,936		4,630,913
OTHER EXPENSES:
Salaries and employee benefits		2,792,716		2,543,962		8,339,784		7,473,472
Occupancy		914,119		890,391		2,692,955		2,540,557
Other		1,283,584		1,386,614		3,550,637		3,428,862
Total other expenses		4,990,419		4,820,967		14,583,376		13,442,891
INCOME BEFORE INCOME TAXES		1,659,214		626,004		5,084,092		2,865,692
INCOME TAXES		551,500		307,400		1,711,200		1,037,800
NET INCOME	$	1,107,714	$	318,604	$	3,372,892	$	1,827,892
PER SHARE AMOUNTS
Basic net income	$	0.35	$	0.10	$	1.07	$	0.58
Diluted net income	$	0.35	$	0.10	$	1.06	$	0.58
Cash dividends	$	0.10	$	0.10	$	0.30	$	0.30
Book value	$	16.10	$	15.54	$	16.10	$	15.54

PEOPLES BANCORP ANNOUNCES THIRD QUARTER EARNINGS RESULTS - PAGE SIX

FINANCIAL HIGHLIGHTS
For the three and nine months ended September 30, 2004 and 2003
	Three months ended							Nine months ended
	September 30,							September 30,
	2004			2003				2004			2003
	(Unaudited)			(Unaudited)				(Unaudited)			(Unaudited)
SELECTED AVERAGE BALANCES:
Available for Sale Securities	$	100,953,138		$	73,763,546			$	90,084,325		$	70,438,974
Loans		545,746,010			540,896,647				549,532,881			537,261,341
Earning Assets		657,185,987			633,745,404				648,645,782			623,146,268
Assets		691,711,032			667,608,720				682,014,502			658,686,746
Deposits		569,067,694			543,114,710				558,753,051			530,913,777
Shareholders' Equity		50,096,139			49,701,527				51,076,320			50,159,228
SELECTED KEY DATA:
Net Interest Margin (tax equivalent)		3.72%			3.44%				3.72%			3.55%
Return on Average Assets		0.64%			0.19%				0.66%			0.37%
Return on Average Shareholders' Equity		8.80%			2.54%				8.82%			4.87%
Shareholders' Equity to Total Assets (Period    End)		7.29%			7.29%				7.29%			7.29%
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	9,153,088		$	9,033,342			$	9,722,267		$	7,247,906
Provision for loan losses		931,000			1,560,000				2,658,000			4,629,900
Charge-offs		(682,560	)		(1,764,890	)			(3,101,263	)		(3,143,812	)
Recoveries		51,607			58,870				174,131			153,328
Balance, end of period	$	9,453,135		$	8,887,322			$	9,453,135		$	8,887,322
ASSET QUALITY:
Nonaccrual Loans								$	6,754,907		$	7,562,611
90 Days Past Due and still accruing									113,181			126,472
Other Real Estate Owned									1,239,346			1,556,697
Repossessed Assets									-			283,703
Total Nonperforming Assets								$	8,107,434		$	9,529,483
Nonperforming Assets to Total Assets									1.17%			1.43%
Allowance for Loan Losses to Nonperforming     Assets									116.60%			93.26%
Allowance for Loan Losses to Total Loans									1.73%			1.64%
LOAN RISK GRADE ANALYSIS:					Percentage of Loans				General Reserve
					By Risk Grade				Percentage
					9/30/2004		9/30/2003		9/30/2004			9/30/2003
Risk 1 (Excellent Quality)					12.64%		10.70%		0.15%			0.15%
Risk 2 (High Quality)					22.04%		28.10%		0.50%			0.50%
Risk 3 (Good Quality)					55.13%		50.88%		1.00%			1.00%
Risk 4 (Management Attention)					5.35%		3.87%		2.50%			2.50%
Risk 5 (Watch)					0.74%		2.38%		7.00%			7.00%
Risk 6 (Substandard)					2.05%		2.50%		12.00%			12.00%
Risk 7 (Low Substandard)					0.76%		0.16%		25.00%			25.00%
Risk 8 (Doubtful)					0.04%		0.00%		50.00%			50.00%
Risk 9 (Loss)					0.00%		0.00%		100.00%			100.00%

At September 30, 2004 there were no relationships exceeding $1 million in the Watch risk grade, five relationships exceeding $1 million each (which totaled $8.7 million) in the Substandard risk grade and two relationships exceeding $1 million each (which totaled $6.9 million) in the Low Substandard risk grade. Balances of individual relationships exceeding $1 million in these risk grades ranged from $1.3 million to $4.0 million. These customers continue to meet payment requirements and these relationships would not become non-performing assets unless they are unable to meet those requirements.

(END)