Exhibit (99)(a)

EXHIBIT (99)(a)

NEWS RELEASE

January 18, 2005

Contact: Tony W. 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 FOURTH QUARTER EARNINGS RESULTS

Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank, reported net income of $1.1 million, or $0.34 basic net income per share and $0.33 diluted net income per share, for the three months ended December 31, 2004 as compared to $176,000 or $0.06 basic and diluted net income per share, for the same period one year ago. Net income from recurring operations for the three months ended December 31, 2004 was $1.2 million, or $0.38 basic and diluted net income per share, as compared to fourth quarter 2003 net income from recurring operations of $369,000, or $0.12 basic and diluted net income per share.

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

The provision for loan losses for the three months ended December 31, 2004 was $598,000 as compared to $2.1 million for same period one year ago. This decrease is due to a $10.0 million reduction in classified loans as of December 31, 2004 when compared to December 31, 2003. Net interest income increased 7% to $6.2 million for the three months ended December 31, 2004 compared to $5.8 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 combined with an increase in the average outstanding balance of investment securities available for sale. Net interest income after the provision for loan losses increased 52% to $5.6 million for the three months ended December 31, 2004 compared to $3.7 million for the same period one year ago.

Recurring non-interest income amounted to $1.6 million for the three months ended December 31, 2004, as compared to $1.5 million for the same period one year ago. The increase in recurring non-interest income is primarily due to an increase of $42,000 in mortgage banking income and $67,000 in fee income from the Bank’s Banco de la Gente branch.

Non-interest expense increased 14% to $5.5 million for the three months ended December 31, 2004, as compared to $4.8 million for the same period last year. The increase in non-interest expense included an increase of $511,000 or 19% in salaries and benefits expense primarily due to normal salary increases and increased incentive expense and an increase of $130,000 or 15% in occupancy expense. The increase in occupancy expense is due to an


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PEOPLES BANCORP ANNOUNCES FOURTH QUARTER EARNINGS RESULTS - PAGE TWO

increase of $47,000 in building repair and maintenance expense, an increase of $68,000 in furniture and equipment expense and an $11,000 increase in lease expense due to the Bank’s new Banco de la Gente branch in Mecklenburg County.

Year-to-date net income as of December 31, 2004 was $4.4 million, or $1.41 basic net income per share and $1.39 diluted net income per share as compared to $2.0 million, or $0.64 basic net income per share and $0.63 diluted net income per share, for the same period one year ago. Net income from recurring operations for the year ended December 31, 2004 was $4.6 million or $1.46 basic net income per share and $1.44 diluted net income per share, representing a 106% increase over net income from recurring operations of $2.2 million, or $0.71 basic and diluted net income per share for the year ended December 31, 2003. In the year ended December 31, 2004, the Company had net non-recurring losses on the disposition of assets of $248,000. This is a reduction from the net non-recurring losses on the disposition of assets for the year ended December 31, 2003, which amounted to $355,000 and were comprised of a $747,000 net loss on repossessed assets and a $53,000 loss on sale of securities which were 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 Company’s increase in recurring earnings for 2004 is primarily attributable 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.

The year-to-date provision for loan losses decreased to $3.3 million for the year ended December 31, 2004 from $6.7 million for the year ended December 31, 2003. This decrease is due to a reduction in classified loans. Year-to-date net interest income increased 8% to $23.9 million for the year ended December 31, 2004, as compared to $22.1 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 available for sale securities and 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 35% to $20.7 million for the year ended December 31, 2004, as compared to $15.4 million for the same period one year ago.

Excluding non-recurring gains and losses on the disposition of assets, non-interest income was $6.3 million for the years ended December 31, 2004 and December 31, 2003.

Non-interest expense increased 10% to $20.1 million for the year ended December 31, 2004, as compared to $18.2 million for the same period last year. The increase in year-to-date non-interest expense included an increase of $1.4 million or 14% in salaries and benefits expense primarily due to normal salary increases, increased incentive expense and increased employee insurance costs. It also included an increase of $282,000 or 8% in occupancy expense, primarily due to an increase in repairs and maintenance expense and an increase in lease expense resulting from lease agreements for branch facilities entered into during 2003 and 2004, as well as an increase of $170,000 or 4% in non-interest expenses other than salary, benefits and occupancy expenses.

Total assets as of December 31, 2004 amounted to $686.3 million, an increase of 2% compared to total assets of $674.0 million at December 31, 2003. This increase is primarily attributable to an increase in available for sale securities, which was partially offset by a decrease in loans. Available for sale securities increased 33% to $105.6


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PEOPLES BANCORP ANNOUNCES FOURTH QUARTER EARNINGS RESULTS - PAGE THREE

million as of December 31, 2004 compared to $79.5 million as of December 31, 2003, the result of additional securities purchases, which were partially offset by paydowns on mortgage-backed securities, calls and maturities. Loans decreased 3% to $535.5 million as of December 31, 2004 compared to $552.1 million as of December 31, 2003. The increase in available for sale securities and the decrease in loans reflect management’s directed effort to increase investment securities as a percentage of total assets in an effort to reduce the credit risk in the balance sheet.

Non-performing assets totaled $6.0 million at December 31, 2004 or 0.88% of total assets, compared to $6.3 million at December 31, 2003 or 0.93% of total assets. The allowance for loan losses at December 31, 2004 amounted to $8.0 million or 1.50% of total loans compared to $9.7 million or 1.76% of total loans at December 31, 2003.

Deposits amounted to $556.5 million as of December 31, 2004, representing an increase of 1% over deposits of $549.8 million at December 31, 2003. Core deposits, which include non interest-bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $24.0 million to $402.2 million at December 31, 2004 as compared to $378.2 million at December 31, 2003. This increase is primarily due to an increase in the Bank’s Investment Checking product, which was partially offset by a decrease in certificates of deposit less than $100,000. Certificates of deposit in amounts greater than $100,000 or more totaled $154.3 million at December 31, 2004 as compared to $171.6 million at December 31, 2003 as maturing brokered deposits were replaced with core deposits. The Company chose to price the Investment Checking account at a level which attracted new deposits but was more cost effective than brokered deposits.

Shareholders’ equity increased to $50.9 million, or 7.42% of total assets, at December 31, 2004 as compared to $48.6 million, or 7.20% of total assets, at December 31, 2003. This was primarily due to an increase in retained earnings resulting from net income in 2004.

The Company repurchased 15,100 shares of its common stock for a total purchase price of $291,000 during the fourth quarter of 2004 as part of the stock repurchase plan implemented in November 2004. The Board of Directors has authorized stock repurchase for a total purchase price of up to $3,000,000.

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 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.

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 FOURTH QUARTER EARNINGS RESULTS - PAGE FOUR

CONSOLIDATED BALANCE SHEETS
December 31, 2004 and December 31, 2003



	December 31, 2004			December 31, 2003
	*(Unaudited)*
ASSETS:
Cash and due from banks	$	15,067,871		$	18,413,786
Federal funds sold		1,723,000			2,369,000
Cash and cash equivalents		16,790,871			20,782,786

Investment securities available for sale		105,598,106			79,460,452
Other investments		5,396,959			4,216,973
Total securities		110,995,065			83,677,425

Loans		535,467,733			552,126,189
Mortgage loans held for sale		3,783,175			587,495
Less: Allowance for loan losses		(8,048,627	)		(9,722,267	)
Net loans		531,202,281			542,991,417

Premises and equipment, net		12,742,730			12,537,230
Accrued interest receivable and other assets		14,617,125			14,043,586
Total assets	$	686,348,072		$	674,032,444


LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand	$	78,024,194		$	72,420,923
NOW, MMDA & Savings		193,917,507			158,677,445
Time, $100,000 or more		154,300,926			171,596,789
Other time		130,279,446			147,107,075
Total deposits		556,522,073			549,802,232

Demand notes payable to U.S. Treasury		1,184,392			443,384
FHLB borrowings		59,000,000			58,000,000
Junior subordinated debentures		14,433,000			14,433,000
Accrued interest payable and other liabilities		4,270,755			2,799,932
Total liabilities		635,410,220			625,478,548

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 3,135,074 shares in 2004
and 3,135,202 shares in 2003		35,040,390			35,121,510
Retained earnings		16,018,206			12,844,524
Accumulated other comprehensive income		(120,744	)		587,862
Total shareholders' equity		50,937,852			48,553,896

Total liabilities and shareholders' equity	$	686,348,072		$	674,032,444

PEOPLES BANCORP ANNOUNCES FOURTH QUARTER EARNINGS RESULTS - PAGE FIVE

CONSOLIDATED STATEMENTS OF INCOME
For the three months and years ended December 31, 2004 and 2003



	Three months ended						Years ended
	December 31,						December 31,
		2004			2003			2004			2003
		(Unaudited)			(Unaudited)			(Unaudited)
INTEREST INCOME:
Interest and fees on loans	$	8,240,628		$	8,058,546		$	32,253,161		$	31,531,673
Interest on federal funds sold		9,336			4,164			35,236			58,384
Interest on investment securities:
U.S. Government agencies		825,775			585,856			2,903,865			2,244,375
States and political subdivisions		176,700			144,357			660,227			577,339
Other		108,732			106,404			402,080			441,958
Total interest income		9,361,171			8,899,327			36,254,569			34,853,729

INTEREST EXPENSE:
NOW, MMDA & Savings deposits		582,524			352,962			1,899,249			1,318,820
Time deposits		1,724,150			1,920,204			7,145,486			8,157,388
FHLB borrowings		662,799			649,050			2,602,866			2,597,043
Junior subordinated debentures		189,433			177,526			676,547			667,526
Other		4,894			2,095			10,518			7,891
Total interest expense		3,163,800			3,101,837			12,334,666			12,748,668
NET INTEREST INCOME		6,197,371			5,797,490			23,919,903			22,105,061
PROVISION FOR LOAN LOSSES		598,000			2,114,000			3,256,000			6,743,900
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,599,371			3,683,490			20,663,903			15,361,161

OTHER INCOME:
Service charges		842,243			850,462			3,434,544			3,266,949
Other service charges and fees		209,383			171,830			677,191			610,591
Gain (loss) on sale of securities		(63,688	)		(52,855	)		(63,688	)		(52,855	)
Mortgage banking income		116,866			75,164			394,456			685,343
Insurance and brokerage commission		90,963			115,159			429,788			420,762
Miscellaneous		259,049			135,217			1,185,511			995,099
Total other income		1,454,816			1,294,977			6,057,802			5,925,889
OTHER EXPENSES:
Salaries and employee benefits		3,137,711			2,626,339			11,477,495			10,099,811
Occupancy		979,096			849,300			3,672,051			3,389,857
Other		1,357,236			1,309,391			4,907,923			4,738,253
Total other expenses		5,474,043			4,785,030			20,057,469			18,227,921

INCOME BEFORE INCOME TAXES		1,580,144			193,437			6,664,236			3,059,129
INCOME TAXES		522,100			17,738			2,233,300			1,055,538

NET INCOME	$	1,058,044		$	175,699		$	4,430,936		$	2,003,591
PER SHARE AMOUNTS
Basic net income	$	0.34		$	0.06		$	1.41		$	0.64
Diluted net income	$	0.33		$	0.06		$	1.39		$	0.63
Cash dividends	$	0.10		$	0.10		$	0.40		$	0.40
Book value	$	16.25		$	15.49		$	16.25		$	15.49

PEOPLES BANCORP ANNOUNCES FOURTH QUARTER EARNINGS RESULTS - PAGE SIX

FINANCIAL HIGHLIGHTS
For the three months and years ended December 31, 2004 and 2003



	Three months ended							Years ended
	December 31,							December 31,
	2004			2003				2004			2003
		(Unaudited)			(Unaudited)				*(Unaudited)*
SELECTED AVERAGE BALANCES:
Available for Sale Securities	$	104,743,282		$	76,621,570			$	93,769,091		$	72,072,117
Loans		542,453,093			546,377,956				547,753,256			539,559,225
Earning Assets		654,405,508			633,234,060				650,093,576			625,763,733
Assets		690,229,950			666,453,105				684,383,948			660,644,283
Deposits		562,275,527			541,982,860				558,141,197			533,703,774
Shareholders' Equity		51,511,199			48,666,657				51,977,720			49,914,434


SELECTED KEY DATA:
Net Interest Margin (tax equivalent)		3.84	%		3.69	%			3.75	%		3.58	%
Return on Average Assets		0.61	%		0.10	%			0.65	%		0.30	%
Return on Average Shareholders' Equity		8.17	%		1.43	%			8.52	%		4.01	%
Shareholders' Equity to Total Assets (Period End)		7.42	%		7.20	%			7.42	%		7.20	%


ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	9,453,135		$	8,887,322			$	9,722,267		$	7,247,906
Provision for loan losses		598,000			2,114,000				3,256,000			6,743,900
Charge-offs		(2,267,349	)		(1,337,735	)			(5,368,612	)		(4,481,548	)
Recoveries		264,841			58,680				438,972			212,009
Balance, end of period	$	8,048,627		$	9,722,267			$	8,048,627		$	9,722,267


ASSET QUALITY:
Non-accrual Loans								$	5,097,413		$	4,342,689
90 Days Past Due and still accruing									245,169			271,451
Other Real Estate Owned									681,902			1,446,552
Repossessed Assets									-			206,200
Total Non-performing Assets								$	6,024,484		$	6,266,892
Non-performing Assets to Total Assets									0.88%			0.93%
Allowance for Loan Losses to Non-performing Assets									133.60%			155.14%
Allowance for Loan Losses to Total Loans									1.50%			1.76%


LOAN RISK GRADE ANALYSIS:					Percentage of Loans				General Reserve
					By Risk Grade*				Percentage
					12/31/2004		12/31/2003		12/31/2004			12/31/2003
Risk 1 (Excellent Quality)					13.44%		11.36%		0.15%			0.15%
Risk 2 (High Quality)					23.03%		24.03%		0.50%			0.50%
Risk 3 (Good Quality)					53.89%		53.80%		1.00%			1.00%
Risk 4 (Management Attention)					5.67%		5.11%		2.50%			2.50%
Risk 5 (Watch)					0.95%		1.15%		7.00%			7.00%
Risk 6 (Substandard)					0.61%		2.43%		12.00%			12.00%
Risk 7 (Low Substandard)					1.46%		1.33%		25.00%			25.00%
Risk 8 (Doubtful)					0.00%		0.00%		50.00%			50.00%
Risk 9 (Loss)					0.00%		0.00%		100.00%			100.00%

*Excludes non-accrual loans

At December 31, 2004 there was one relationship exceeding $1.0 million (which totaled $1.2 million) in the Watch risk grade, three relationships exceeding $1.0 million each (which totaled $4.1 million) in the Substandard risk grade and three relationships exceeding $1.0 million each (which totaled $8.7 million) in the Low Substandard risk grade. Balances of individual relationships exceeding $1.0 million in these risk grades ranged from $1.2 million to $3.9 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)