Peoples Bancorp of North Carolina (PEBK) 8-K Financial statements and exhibits

EXHIBIT (99)(a)

NEWS RELEASE

April 19, 2004

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 FIRST QUARTER EARNINGS RESULTS

Peoples Bancorp of North Carolina, Inc., the parent company of Peoples Bank, reported net income of $1.2 million, or $0.38 basic net income per share and $0.37 diluted net income per share, for the three months ended March 31, 2004 as compared to $1.4 million, or $0.45 basic and diluted net income per share, for the same period one year ago. Net income from recurring operations for the three months ended March 31, 2004 was $1.2 million, or $0.38 basic net income per share and $0.37 diluted net income per share, representing a 6% increase over first quarter 2003 net income from recurring operations of $1.1 million, or $0.36 basic and diluted net income per share. The Company had non-recurring losses on the disposition of assets of $21,000 in first quarter 2004. Net non-recurring income in first quarter 2003 amounted to $461,000, including a $479,000 gain on the sale of the Bank’ ;s $3.7 million credit card portfolio.

Tony W. Wolfe, President and Chief Executive Officer, attributed the increase in first quarter recurring earnings to an increase in net interest income, which was partially offset by an increase in non-interest expense.

Net interest income after the provision for loan losses increased 7% to $5.0 million for the three months ended March 31, 2004 compared to $4.7 million for the same period one year ago. This increase is attributable to an increase in interest income due to 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. The provision for loan losses for the three months ended March 31, 2004 was $859,000 as compared to $793,000 for same period one year ago.

Non-interest expense increased 6% to $4.7 million for the three months ended March 31, 2004, as compared to $4.4 million for the same period last year. The increase in non-interest expense included an increase of $217,000 or 8% in salaries and benefits expense due to normal salary increases and increased employee insurance costs and an increase of $50,000 or 6% in occupancy expense due to an increase in lease expense resulting from lease agreements for branch facilities entered into during 2003.

Recurring non-interest income amounted to $1.5 million for the three months ended March 31, 2004 and 2003. Non-recurring losses in first quarter 2004 included a $21,000 net loss on the disposition of assets. In the first quarter of 2003, the Company had a non-recurring gain on the sale of the Bank’s $3.7 million credit card portfolio of $479,000, which was partially offset by net non-recurring losses on repossessed assets of $18,000.

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PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS – PAGE TWO

Total assets as of March 31, 2004 amounted to $686.5 million, an increase of 4% compared to total assets of $661.8 million at March 31, 2003. This increase is primarily attributable to an increase in loans combined with an increase in available for sale securities.

Loans increased 5% to $555.4 million as of March 31, 2004 compared to $528.9 million as of March 31, 2003. Non-performing assets totaled $8.1 million at March 31, 2004 or 1.18% of total assets, compared to $9.6 million at March 31, 2003 or 1.45% of total assets. The allowance for loan losses at March 31, 2004 amounted to $8.9 million or 1.61% of total loans compared to $7.6 million or 1.44% of total loans at March 31, 2003.

Deposits amounted to $561.2 million as of March 31, 2004, representing an increase of 5% over deposits of $536.7 million at March 31, 2003.

Shareholders’ equity increased to $50.3 million, or 7.33% of total assets, at March 31, 2004 as compared to $49.7 million, or 7.51% of total assets, at March 31, 2003.

Peoples Bank operates eleven offices throughout Catawba County, North Carolina, one office in Alexander County, North Carolina and three offices in Lincoln 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.

(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. Fac tors 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 FIRST QUARTER EARNINGS RESULTS - PAGE THREE
CONSOLIDATED BALANCE SHEETS
March 31, 2004, December 31, 2003 and March 31, 2003
		March 31, 2004			December 31, 2003			March 31, 2003
		(Unaudited)						(Unaudited)
ASSETS:
Cash and due from banks	$	18,818,832		$	18,413,786		$	15,596,019
Federal funds sold		4,712,000			2,369,000			15,144,000
Cash and cash equivalents		23,530,832			20,782,786			30,740,019
Investment securities available for sale		84,499,038			79,460,452			70,555,422
Other investments		3,941,973			4,216,973			4,241,973
Total securities		88,441,011			83,677,425			74,797,395
Loans		555,376,628			552,126,189			528,866,443
Mortgage loans held for sale		1,866,230			587,495			5,786,084
Less: Allowance for loan losses		(8,928,914	)		(9,722,267	)		(7,606,124	)
Net loans		548,313,944			542,991,417			527,046,403
Premises and equipment, net		12,460,717			12,537,230			15,224,207
Accrued interest receivable and other assets		13,754,336			14,043,586			13,957,052
Total assets	$	686,500,840		$	674,032,444		$	661,765,076
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand	$	79,228,213		$	72,420,923		$	69,411,825
NOW, MMDA & Savings		168,290,902			158,677,445			152,260,665
Time, $100,000 or more		169,428,506			171,596,789			179,963,909
Other time		144,254,049			147,107,075			135,107,971
Total deposits		561,201,670			549,802,232			536,744,370
Demand notes payable to U.S. Treasury		653,666			443,384			537,019
FHLB borrowings		57,000,000			58,000,000			58,000,000
Trust preferred securities		14,433,000			14,433,000			14,433,000
Accrued interest payable and other liabilities		2,890,732			2,799,932			2,355,144
Total liabilities		636,179,068			625,478,548			612,069,533
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 3,142,437 shares in 2004
and 3,135,202 shares in 2003		35,217,451			35,121,510			35,097,773
Retained earnings		13,708,344			12,844,524			13,199,096
Accumulated other comprehensive income		1,395,977			587,862			1,398,674
Total shareholders' equity		50,321,772			48,553,896			49,695,543
Total liabilities and shareholders' equity	$	686,500,840		$	674,032,444		$	661,765,076
Memorandum:Letters of Credit	$	4,091,038		$	3,876,430		$	1,954,050

PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS - PAGE FOUR
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2004 and 2003
		Three months
		March 31,
		2004		2003
		(Unaudited)		(Unaudited)
INTEREST INCOME:
Interest and fees on loans	$	8,059,268	$	7,783,423
Interest on federal funds sold		2,640		16,929
Interest on investment securities:
U.S. Government agencies		614,010		635,126
States and political subdivisions		149,705		149,661
Other		101,592		108,967
Total interest income		8,927,215		8,694,106
INTEREST EXPENSE:
NOW, MMDA & Savings deposits		364,657		306,760
Time deposits		1,891,202		2,102,756
FHLB borrowings		645,807		659,941
Trust preferred securities		162,371		166,250
Other		1,672		2,236
Total interest expense		3,065,709		3,237,943
NET INTEREST INCOME		5,861,506		5,456,163
PROVISION FOR LOAN LOSSES		859,000		793,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,002,506		4,663,163
OTHER INCOME:
Service charges		803,243		772,151
Other service charges and fees		178,731		159,438
Gain (loss) on sale of securities		-		-
Mortgage banking income		79,846		190,357
Insurance and brokerage commission		158,238		96,961
Miscellaneous		287,592		765,451
Total other income		1,507,650		1,984,358
OTHER EXPENSES:
Salaries and employee benefits		2,780,601		2,563,794
Occupancy		885,079		834,889
Other		1,053,860		1,048,250
Total other expenses		4,719,540		4,446,933
INCOME BEFORE INCOME TAXES		1,790,616		2,200,588
INCOME TAXES		612,700		782,500
NET INCOME	$	1,177,916	$	1,418,088
PER SHARE AMOUNTS
Basic net income	$	0.38	$	0.45
Diluted net income	$	0.37	$	0.45
Cash dividends	$	0.10	$	0.10
Book value	$	16.01	$	15.86

PEOPLES BANCORP ANNOUNCES FIRST QUARTER EARNINGS RESULTS - PAGE FIVE
FINANCIAL HIGHLIGHTS
For the three months ended March 31, 2004 and 2003
		Three months ended
		March 31,
		2004			2003
		(Unaudited)			(Unaudited)
SELECTED AVERAGE BALANCES:
Available for Sale Securities	$	80,009,157		$	69,086,484
Loans		553,357,514			533,157,212
Earning Assets		641,360,056			613,036,913
Assets		673,851,025			650,176,427
Deposits		547,475,376			519,362,374
Shareholders' Equity		50,042,241			49,957,890
SELECTED KEY DATA:
Net Interest Margin (tax equivalent)		3.74	%		3.66	%
Return on Average Assets		0.70	%		0.88	%
Return on Average Shareholders' Equity		9.47	%		11.51	%
Shareholders' Equity to Total Assets (Period End)		7.33	%		7.51	%
ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	9,722,267		$	7,247,906
Provision for loan losses		859,000			793,000
Charge-offs		(1,722,381	)		(483,696	)
Recoveries		70,028			48,914
Balance, end of period	$	8,928,914		$	7,606,124
ASSET QUALITY:
Nonaccrual Loans	$	6,757,121		$	7,441,918
90 Days Past Due and still accruing		431,695			334,570
Other Real Estate Owned		914,464			272,209
Repossessed Assets		22,700			1,521,653
Total Nonperforming Assets	$	8,125,980		$	9,570,350
Nonperforming Assets to Total Assets		1.18	%		1.45	%
Allowance for Loan Losses to Nonperforming Assets		109.88	%		79.48	%
Allowance for Loan Losses to Total Loans		1.61	%		1.44	%
LOAN RISK GRADE ANALYSIS:		Percentage of Loans					General Reserve
		By Risk Grade					Percentage
		3/31/2004			3/31/2003		3/31/2004	3/31/2003
Risk 1 (Excellent Quality)		12.35 %			9.41 %		0.15 %	0.15 %
Risk 2 (High Quality)		23.30 %			33.22 %		0.50 %	0.50 %
Risk 3 (Good Quality)		53.65 %			46.33 %		1.00 %	1.00 %
Risk 4 (Management Attention)		4.99 %			5.46 %		2.50 %	2.50 %
Risk 5 (Watch)		1.40 %			3.25 %		7.00 %	7.00 %
Risk 6 (Substandard)		2.14 %			1.98 %		12.00 %	12.00 %
Risk 7 (Low Substandard)		0.95 %			0.00 %		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 %

At March 31, 2004 there was one relationship exceeding $1 million in the Watch risk grade, three relationships exceeding $1 million each (which totaled $8.1 million) in the Substandard risk grade and two relationships exceeding $1 million each (which totaled $5.2 million) in the Low Substandard risk grade. Balances of individual relationships exceeding $1 million in these risk grades ranged from $1.0 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)