Exhibit (99)(a)

EXHIBIT (99)(a)

NEWS RELEASE

July 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 SECOND QUARTER EARNINGS RESULTS

Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank, reported net income of $1.6 million, or $0.47 basic net income per share and $0.46 diluted net income per share, for the three months ended June 30, 2005 as compared to $1.1 million or $0.31 basic and diluted net income per share, for the same period one year ago. During first quarter 2005, the Company declared and distributed a 10% stock dividend to its shareholders. June 30, 2004 per share amounts have been restated to reflect the stock dividend.

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

Net interest income increased 14% to $6.7 million for the three months ended June 30, 2005 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 19% to $5.9 million for the three months ended June 30, 2005 compared to $5.0 million for the same period one year ago. The provision for loan losses for the three months ended June 30, 2005 was $723,000 as compared to $868,000 for the same period one year ago. This decrease is due to a $10.3 million reduction in classified loans as of June 30, 2005 when compared to June 30, 2004.

Non-interest income increased 20% to $1.8 million for the three months ended June 30, 2005, as compared to $1.5 million for the same period one year ago. The increase in non-interest income is primarily due to an increase of $73,000 in NSF fees, $70,000 in check cashing fees, $39,000 in miscellaneous fee income, $41,000 in debit card fee income and an increase of $17,000 in mortgage banking income.

Non-interest expense increased 9% to $5.3 million for the three months ended June 30, 2005, as compared to $4.9 million for the same period last year. The increase in non-interest expense included: (1) an increase of $205,000 or 7% in salaries and benefits expense due to normal salary increases and increased incentive expense, (2) an increase of $95,000 or 11% in occupancy expense due to an increase in furniture and equipment expense and lease expense, and (3) an increase of $127,000 or 10% in non-interest expenses other than salary, benefits and occupancy expenses, which included an increase in advertising expense of $40,000.

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE TWO

Year-to-date net income as of June 30, 2005 was $2.9 million, or $0.84 basic net income per share and $0.82 diluted net income per share as compared to $2.3 million, or $0.66 basic net income per share and $0.65 diluted net income per share, for the same period one year ago.

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

Net interest income increased 10% to $12.9 million for the six months ended June 30, 2005 compared to $11.7 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 15% to $11.5 million for the six months ended June 30, 2005 compared to $10.0 million for the same period one year ago. The provision for loan losses for the six months ended June 30, 2005 was $1.4 million as compared to $1.7 million for the same period one year ago. This decrease is due to a reduction in classified loans.

Non-interest income increased 15% to $3.5 million for the six months ended June 30, 2005, as compared to $3.0 million for the same period one year ago. The increase in non-interest income is primarily due to an increase of $241,000 in fee income from the Bank’s Banco de la Gente branches, an increase of $94,000 in debit card fee income and an increase of $48,000 in mortgage banking income.

Non-interest expense increased 10% to $10.6 million for the six months ended June 30, 2005, as compared to $9.6 million for the same period last year. The increase in year-to-date non-interest expense included an increase of $487,000 or 9% in salaries and benefits expense primarily due to normal salary increases and increased incentive expense, an increase of $179,000 or 10% in occupancy expense, primarily due to an increase in furniture and equipment expense and lease expense, and an increase of $301,000 or 13% in non-interest expenses other than salary, benefits and occupancy expenses primarily due to an increase of $118,000 in advertising expense.

Total assets as of June 30, 2005 amounted to $709.6 million, an increase of 3% compared to total assets of $686.1 million at June 30, 2004. This increase is primarily attributable to an increase in available for sale securities combined with an increase in loans. Available for sale securities increased 15% to $105.8 million as of June 30, 2005 compared to $91.8 million as of June 30, 2004, the result of additional securities purchases, which were partially offset by paydowns on mortgage-backed securities, calls and maturities. Loans increased 1% to $551.1 million as of June 30, 2005 compared to $546.6 million as of June 30, 2004. The 15% increase in available for sale securities and the 1% increase 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 $7.7 million at June 30, 2005 or 1.09% of total assets, compared to $5.7 million at June 30, 2004 or 0.84% of total assets. The allowance for loan losses at June 30, 2005 amounted to $8.0 million or 1.46% of total loans compared to $9.2 million or 1.67% of total loans at June 30, 2004. While non-performing loans increased at June 30, 2005 compared to June 30, 2004, total classified loans, including non-performing loans decreased by $10.3 million. That is the primary factor contributing to the decrease in the allowance for loan losses at June 30, 2005 when compared to 2004.

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE THREE

Deposits amounted to $568.8 million as of June 30, 2005, representing an increase of 3% over deposits of $551.0 million at June 30, 2004. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $19.0 million to $417.8 million at June 30, 2005 as compared to $398.7 million at June 30, 2004 primarily due to an increase of $19.2 in non-interest bearing demand deposits. Certificates of deposit in amounts greater than $100,000 or more totaled $151.1 million at June 30, 2005 as compared to $152.3 million at June 30, 2004.

Shareholders’ equity increased to $52.6 million, or 7.42% of total assets, at June 30, 2005 as compared to $48.1 million, or 7.02% of total assets, at June 30, 2004. The net increase in common stock and retained earnings from June 30, 2004 to June 30, 2005 amounted to $3.5 million due to net income earned for the period, which was combined with a $964,000 increase in accumulated other comprehensive income from June 30, 2004 to June 30, 2005 due to an increase in the market value of available for sale securities.

Peoples Bank operates entirely in North Carolina, with eleven offices throughout Catawba County, one office in Alexander County, three offices in Lincoln County and two offices in Mecklenburg County. 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, 2004.

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE FOUR

CONSOLIDATED BALANCE SHEETS
June 30, 2005, December 31, 2004 and June 30, 2004



		June 30, 2005			December 31, 2004			June 30, 2004
		(Unaudited)						(Unaudited)
ASSETS:
Cash and due from banks	$	20,211,985		$	15,067,871		$	16,460,131
Federal funds sold		2,767,000			1,723,000			4,293,000
Cash and cash equivalents		22,978,985			16,790,871			20,753,131

Investment securities available for sale		105,768,532			105,598,106			91,828,182
Other investments		6,494,249			5,396,959			4,621,973
Total securities		112,262,781			110,995,065			96,450,155

Loans		551,104,351			535,467,733			546,596,277
Mortgage loans held for sale		3,356,750			3,783,175			2,929,920
Less: Allowance for loan losses		(8,021,456	)		(8,048,627	)		(9,153,088	)
Net loans		546,439,645			531,202,281			540,373,109

Premises and equipment, net		13,008,791			12,742,730			12,683,803
Accrued interest receivable and other assets		14,868,797			14,617,125			15,810,828
Total assets	$	709,558,999		$	686,348,072		$	686,071,026


LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand	$	94,679,521		$	78,024,194		$	75,433,797
NOW, MMDA & Savings		184,084,578			193,917,507			180,408,549
Time, $100,000 or more		151,069,343			154,300,926			152,285,659
Other time		139,014,564			130,279,446			142,900,246
Total deposits		568,848,006			556,522,073			551,028,251

Demand notes payable to U.S. Treasury		801,899			1,184,392			1,215,526
FHLB borrowings		69,000,000			59,000,000			67,500,000
Junior subordinated debentures		14,433,000			14,433,000			14,433,000
Accrued interest payable and other liabilities		3,832,783			4,270,755			3,745,709
Total liabilities		656,915,688			635,410,220			637,922,486

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 3,453,312 shares in 2005
and 3,448,341 shares in 2004		41,378,990			35,040,390			35,301,274
Retained earnings		11,933,784			16,018,206			14,480,780
Accumulated other comprehensive income		(669,463	)		(120,744	)		(1,633,514	)
Total shareholders' equity		52,643,311			50,937,852			48,148,540

Total liabilities and shareholders' equity	$	709,558,999		$	686,348,072		$	686,071,026

CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2005 and 2004



		Three months ended				Six months ended
		June 30,				June 30,
		2005		2004		2005		2004
		(Unaudited)		(Unaudited)		*(Unaudited)*		(Unaudited)
INTEREST INCOME:
Interest and fees on loans	$	9,220,187	$	7,913,382	$	17,682,125	$	15,980,196
Interest on federal funds sold		1,424		6,787		2,905		9,427
Interest on investment securities:
U.S. Government agencies		854,201		668,074		1,702,557		1,282,084
States and political subdivisions		180,633		163,149		362,495		312,854
Other		91,925		95,395		178,957		196,987
Total interest income		10,348,370		8,846,787		19,929,039		17,781,548

INTEREST EXPENSE:
NOW, MMDA & Savings deposits		641,962		411,448		1,275,282		776,105
Time deposits		2,101,247		1,783,441		3,890,924		3,674,643
FHLB borrowings		710,008		643,017		1,421,784		1,288,824
Junior subordinated debentures		225,516		162,371		432,990		324,743
Other		7,045		1,487		11,111		3,159
Total interest expense		3,685,778		3,001,764		7,032,091		6,067,474
NET INTEREST INCOME		6,662,592		5,845,023		12,896,948		11,714,074
PROVISION FOR LOAN LOSSES		723,000		868,000		1,413,000		1,727,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,939,592		4,977,023		11,483,948		9,987,074

OTHER INCOME:
Service charges		947,309		881,111		1,752,569		1,684,355
Other service charges and fees		270,865		148,299		515,492		327,030
Mortgage banking income		101,640		84,481		204,756		156,781
Insurance and brokerage commission		102,761		97,964		212,520		256,203
Miscellaneous		419,180		318,851		794,487		606,392
Total other income		1,841,755		1,530,706		3,479,824		3,030,761
OTHER EXPENSES:
Salaries and employee benefits		2,971,764		2,766,467		6,034,266		5,547,068
Occupancy		988,560		893,757		1,957,626		1,778,836
Other		1,340,364		1,213,243		2,567,644		2,267,053
Total other expenses		5,300,688		4,873,467		10,559,536		9,592,957

INCOME BEFORE INCOME TAXES		2,480,659		1,634,262		4,404,236		3,424,878
INCOME TAXES		872,600		547,000		1,519,400		1,159,700

NET INCOME	$	1,608,059	$	1,087,262	$	2,884,836	$	2,265,178
PER SHARE AMOUNTS
Basic net income	$	0.47	$	0.31	$	0.84	$	0.66
Diluted net income	$	0.46	$	0.31	$	0.82	$	0.65
Cash dividends	$	0.10	$	0.09	$	0.20	$	0.18
Book value	$	15.24	$	13.90	$	15.24	$	13.90

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE SIX

FINANCIAL HIGHLIGHTS

For the three and six months ended June 30, 2005 and 2004

Three months ended

Six months ended

June 30,

2005

2004

2005

2004

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

SELECTED AVERAGE BALANCES:

Available for Sale Securities

105,390,837

89,071,254

104,942,742

84,590,201

Loans

544,530,464

549,536,758

541,729,602

551,447,130

Earning Assets

657,009,205

647,297,485

653,698,327

644,328,763

Assets

696,398,878

680,374,972

692,213,129

677,112,978

Deposits

564,528,230

557,550,568

559,407,549

553,539,069

Shareholders' Equity

52,568,462

49,798,662

53,072,781

50,464,084


SELECTED KEY DATA:
Net Interest Margin (tax equivalent)	4.15	%	3.70	%	4.06	%	3.72	%
Return on Average Assets	0.93	%	0.64	%	0.84	%	0.67	%
Return on Average Shareholders' Equity	12.27	%	8.78	%	10.96	%	9.03	%
Shareholders' Equity to Total Assets (Period End)	7.42	%	7.02	%	7.42	%	7.02	%

ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	7,419,580		$	8,928,914		$	8,048,627		$	9,722,267
Provision for loan losses		723,000			868,000			1,413,000			1,727,000
Charge-offs		(276,738	)		(696,322	)		(1,681,002	)		(2,418,702	)
Recoveries		155,614			52,496			240,831			122,523
Balance, end of period	$	8,021,457		$	9,153,088		$	8,021,456		$	9,153,088


ASSET QUALITY:
Non-accrual Loans							$	6,842,387		$	4,093,854
90 Days Past Due and still accruing								208,693			422,600
Other Real Estate Owned								660,030			1,228,841
Repossed Assets								-			-
Total Non-performing Assets							$	7,711,110		$	5,745,295
Non-performing Assets to Total Assets								1.09	%		0.84	%
Allowance for Loan Losses to Non-performing Assets								104.02	%		159.31	%
Allowance for Loan Losses to Total Loans								1.46	%		1.67	%

*Excludes non-accrual loans
At June 30, 2005 there was one relationship exceeding $1.0 million (which totaled $1.1 million) in the Watch risk grade, two relationships exceeding $1.0 million each (which totaled $2.6 million) in the Substandard risk grade and one relationship exceeding $1.0 million (which totaled $3.2 million) in the Low Substandard risk grade. Balances of individual relationships exceeding $1.0 million in these risk grades ranged from $1.1 million to $3.2 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)