Exhibit (99)(a)

EXHIBIT (99)(a)


NEWS RELEASE

		July 17, 2006
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 $2.7 million, or $0.70 basic net income per share and $0.68 diluted net income per share, for the three months ended June 30, 2006 as compared to $1.6 million or $0.42 basic and diluted net income per share, for the same period one year ago. Net income from recurring operations for the three months ended June 30, 2006 was $2.7 million, or $0.72 basic net income per share and $0.70 diluted net income per share, as compared to second quarter 2005 net income from recurring operations of $1.6 million, or $0.42 basic and diluted net income per share. June 30, 2005 per share amounts have been restated to reflect the 10% stock dividend declared and distributed during the second quarter 2006.

Tony W. Wolfe, President and Chief Executive Officer, attributed the increase in second quarter earnings to growth in interest-earning assets, which contributed to growth in net interest income and non-interest income. In addition, the Company had a decrease in the provision for loan losses. The increases in net interest income and non-interest income and the decrease in the provision for loan losses were partially offset by an increase in non-interest expense.

Net interest income increased 28% to $8.5 million for the three months ended June 30, 2006 compared to $6.7 million for the same period one year ago. This increase is attributable to Federal Reserve interest rate increases, which resulted in increases to the prime rate. In addition, the average outstanding balances of loans and investment securities available for sale increased for the three months ended June 30, 2006. Net interest income after the provision for loan losses increased 36% to $8.1 million during the second quarter of 2006, compared to $5.9 million for the same period one year ago. The provision for loan losses for the three months ended June 30, 2006 was $413,000 as compared to $723,000 for the same period one year ago, primarily attributable to a decrease in non-accrual loans of $3.4 million when compared to June 30, 2005.

Recurring non-interest income increased 15% to $2.1 million for the three months ended June 30, 2006, as compared to $1.8 million for the same period one year ago. The increase in recurring non-interest income is primarily due to an increase in service charges and fees of $162,000 and an increase in miscellaneous other income of $90,000 resulting from activity in new branches opened in 2004 and 2005. Net non-recurring losses of $87,000 for the three months ended June 30, 2006 included a $92,000 loss on the sale of securities partially offset by a $5,000 gain on the disposition of assets.

Non-interest expense increased 12% to $5.9 million for the three months ended June 30, 2006, as compared to $5.3 million for the same period last year. The increase in non-interest expense included an increase of $293,000 or 10% in salaries and benefits expense due to normal salary increases and increased incentive expense, as well as an increase of $321,000 or 24% in other non-interest expenses primarily due to an increase of $148,000 in amortization of the issuance costs of the trust preferred securities issued in 2001 that management intends to call on December 31, 2006.

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE TWO

Year-to-date net income as of June 30, 2006 was $4.9 million, or $1.29 basic net income per share and $1.26 diluted net income per share as compared to $2.9 million, or $0.76 basic net income per share and $0.75 diluted net income per share, for the same period one year ago. Net income from recurring operations for the six months ended June 30, 2006 was $5.1 million or $1.35 basic net income per share and $1.32 diluted net income per share, representing a 78% increase over net income from recurring operations of $2.9 million, or $0.76 basic net income per share and $0.75 diluted net income per share for the six months ended June 30, 2005.

The increase in year-to-date earnings is primarily attributable to growth in interest-earning assets, which contributed to increases in net interest income and non-interest income. In addition, the Company had a decrease in the provision for loan losses. The increases in net interest income and non-interest income and the decrease in the provision for loan losses were partially offset by an increase in non-interest expense.

Net interest income increased 28% to $16.5 million for the six months ended June 30, 2006 compared to $12.9 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, which resulted from Federal Reserve interest rate increases. In addition, the average outstanding balances of loans and investment securities available for sale increased for the six months ended June 30, 2006. Net interest income after the provision for loan losses increased 34% to $15.4 million for the six months ended June 30, 2006, compared to $11.5 million for the same period one year ago. The provision for loan losses for the six months ended June 30, 2006 was $1.2 million as compared to $1.4 million for the same period one year ago.

Recurring non-interest income increased 19% to $4.1 million for the six months ended June 30, 2006, as compared to $3.5 million for the same period one year ago. The increase in recurring non-interest income is primarily due to an increase in service charges and fees of $433,000 and an increase in miscellaneous other income of $189,000 resulting from activity in new branches opened in 2004 and 2005. Net non-recurring losses of $150,000 for the six months ended June 30, 2006 included a $174,000 loss on the sale of securities partially offset by a $24,000 gain on the disposition of assets.

Recurring non-interest expense increased 9% to $11.5 million for the six months ended June 30, 2006, as compared to $10.6 million for the same period last year. The increase in recurring non-interest expense included an increase of $470,000 or 8% in salaries and benefits expense due to normal salary increases and increased incentive expense, as well as an increase of $391,000 or 15% in other non-interest expenses. The Company had non-recurring expenses of $178,000 for the six months ended June 30, 2006 resulting from a prepayment fee associated with the early termination of a $5.0 million Federal Home Loan Bank advance during first quarter. This fee is included in other non-interest expense.

Total assets as of June 30, 2006 amounted to $783.7 million, an increase of 10% compared to total assets of $709.6 million at June 30, 2005. This increase is primarily attributable to an increase in loans combined with an increase in available for sale securities. Loans increased 10% to $607.2 million as of June 30, 2006 compared to $551.1 million as of June 30, 2005. Available for sale securities increased 7% to $113.2 million as of June 30, 2006 compared to $105.8 million as of June 30, 2005, the result of net securities purchases that are part of management’s objective to grow the investment portfolio. This increase in available for sale securities was partially offset by paydowns on mortgage-backed securities, calls and maturities.

Non-performing assets totaled $3.9 million at June 30, 2006 or 0.49% of total assets, compared to $7.7 million at June 30, 2005 or 1.09% of total assets. The allowance for loan losses at June 30, 2006 amounted to $7.9 million or 1.30% of total loans compared to $8.0 million or 1.46% of total loans at June 30, 2005.

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE THREE

Deposits amounted to $610.8 million as of June 30, 2006, representing an increase of 7% over deposits of $568.8 million at June 30, 2005. Core deposits, which include non-interest bearing demand deposits, NOW, MMDA, savings and certificates of deposits of denominations less than $100,000, increased $17.4 million to $435.1 million at June 30, 2006 as compared to $417.8 million at June 30, 2005 primarily due to an increase in certificates of deposit in amounts less than $100,000 and an increase in non-interest bearing demand deposits. Certificates of deposit in amounts greater than $100,000 or more totaled $175.7 million at June 30, 2006 as compared to $151.1 million at June 30, 2005. This increase is due to an increase of $5.4 million in brokered deposits combined with an increase of $19.2 million in non-brokered deposits resulting from a change in certificate of deposit pricing strategies implemented in 2005.

On June 28, 2006, the Company completed the issuance of $20 million PEBK Capital Trust II floating rate capital securities with a maturity date of June 28, 2036. The Company expects to use the net proceeds from this issuance to replace the trust preferred securities issued in 2001, which will be called at December 31, 2006.

Shareholders’ equity increased to $56.8 million, or 7.25% of total assets, at June 30, 2006 as compared to $52.6 million, or 7.42% of total assets, at June 30, 2005. The net increase in common stock and retained earnings from June 30, 2005 to June 30, 2006 amounted to $6.4 million primarily due to net income earned for the period, which was offset by a $2.2 million decrease in accumulated other comprehensive income from June 30, 2005 to June 30, 2006. The decrease in accumulated other comprehensive income is due to a decrease 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, two offices in Mecklenburg County and one office in Union County. The Bank also operates a Loan Production Office in Davidson, North Carolina, which is located 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.”

(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, 2005.

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE FOUR

CONSOLIDATED BALANCE SHEETS
June 30, 2006, December 31, 2005 and June 30, 2005




	June 30, 2006			December 31, 2005			June 30, 2005
		*(Unaudited)*						(Unaudited)
ASSETS:
Cash and due from banks	$	28,048,883		$	18,468,999		$	20,211,985
Federal funds sold		2,951,000			1,347,000			2,767,000
Cash and cash equivalents		30,999,883			19,815,999			22,978,985

Investment securities available for sale		113,225,359			115,158,184			105,768,532
Other investments		6,055,199			5,810,749			6,494,249
Total securities		119,280,558			120,968,933			112,262,781

Loans		607,230,621			566,663,416			551,104,351
Mortgage loans held for sale		3,440,575			2,247,900			3,356,750
Less: Allowance for loan losses		(7,922,419	)		(7,424,782	)		(8,021,456	)
Net loans		602,748,777			561,486,534			546,439,645

Premises and equipment, net		12,779,739			12,662,153			13,008,791
Cash surrender value of life insurance		6,415,211			6,311,757			6,202,973
Accrued interest receivable and other assets		11,468,148			9,034,239			8,665,824
Total assets	$	783,692,316		$	730,279,615		$	709,558,999


LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand	$	105,941,780		$	94,660,721		$	94,679,521
NOW, MMDA & Savings		171,272,466			183,248,699			184,084,578
Time, $100,000 or more		175,658,315			152,410,976			151,069,343
Other time		157,916,424			152,533,265			139,014,564
Total deposits		610,788,985			582,853,661			568,848,006

Demand notes payable to U.S. Treasury		177,851			1,473,693			801,899
Securities sold under agreement to repurchase		2,868,110			981,050			-
FHLB borrowings		74,100,000			71,600,000			69,000,000
Junior subordinated debentures		35,052,000			14,433,000			14,433,000
Accrued interest payable and other liabilities		3,899,724			4,585,217			3,832,783
Total liabilities		726,886,670			675,926,621			656,915,688

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 3,788,284 shares in 2006
and 3,440,805 shares in 2005		50,384,830			41,096,500			41,378,990
Retained earnings		9,318,997			14,656,160			11,933,784
Accumulated other comprehensive income		(2,898,181	)		(1,399,666	)		(669,463	)
Total shareholders' equity		56,805,646			54,352,994			52,643,311

Total liabilities and shareholders' equity	$	783,692,316		$	730,279,615		$	709,558,999

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE SIX

FINANCIAL HIGHLIGHTS
For the three and six months ended June 30, 2006 and 2005



	Three months ended							Six months ended
	June 30,							June 30,
	2006			2005				2006			2005
		*(Unaudited)*			(Unaudited)				*(Unaudited)*			(Unaudited)
SELECTED AVERAGE BALANCES:
Available for sale securities	$	117,265,624		$	105,390,837			$	116,958,642		$	104,942,742
Loans		596,207,370			544,530,463				588,379,013			541,729,602
Earning assets		722,484,968			657,009,512				713,769,621			653,698,482
Assets		763,297,478			696,398,878				753,785,125			692,213,129
Deposits		606,883,376			564,528,228				696,255,231			559,407,549
Shareholders' equity		57,641,451			52,568,462				58,403,846			53,072,781


SELECTED KEY DATA:
Net interest margin (tax equivalent)		4.83%			4.16%				4.77%			4.07%
Return of average assets		1.40%			0.93%				1.31%			0.84%
Return on average shareholders' equity		18.52%			12.27%				16.91%			10.96%
Shareholders' equity to total assets (period end)		7.25%			7.42%				7.25%			7.42%


ALLOWANCE FOR LOAN LOSSES:
Balance, beginning of period	$	7,649,364		$	7,419,580			$	7,424,782		$	8,048,627
Provision for loan losses		413,000			723,000				1,172,000			1,413,000
Charge-offs		(314,448	)		(276,738	)			(900,487	)		(1,681,002	)
Recoveries		174,503			155,614				226,124			240,831
Balance, end of period	$	7,922,419		$	8,021,456			$	7,922,419		$	8,021,456


ASSET QUALITY:
Non-accrual loans								$	3,439,382		$	6,842,387
90 days past due and still accruing									33,396			208,693
Other real estate owned									380,418			660,030
Total non-performing assets								$	3,853,196		$	7,711,110
Non-performing assets to total assets									0.49%			1.09%
Allowance for loan losses to non-performing assets									205.61%			104.02%
Allowance for loan losses to total loans									1.30%			1.46%


LOAN RISK GRADE ANALYSIS:					Percentage of Loans				General Reserve
					By Risk Grade*				Percentage
					6/30/2006		6/30/2005		6/30/2006			6/30/2005
Risk 1 (excellent quality)					13.01%		15.10%		0.15%			0.15%
Risk 2 (high quality)					16.99%		20.58%		0.50%			0.50%
Risk 3 (good quality)					59.12%		55.79%		1.00%			1.00%
Risk 4 (management attention)					8.06%		5.05%		2.50%			2.50%
Risk 5 (watch)					0.99%		0.67%		7.00%			7.00%
Risk 6 (substandard)					0.70%		0.87%		12.00%			12.00%
Risk 7 (low substandard)					0.55%		0.68%		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 June 30, 2006 there was one relationship exceeding $1.0 million (which totaled $1.9 million) in the Watch risk grade, one relationship exceeding $1.0 million (which totaled $1.5 million) in the Substandard risk grade, and one relationship exceeding $1.0 million (which totaled $3.1 million) in the Low Substandard risk grade. 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)

PEOPLES BANCORP ANNOUNCES SECOND QUARTER EARNINGS RESULTS - PAGE FIVE

CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2006 and 2005



	Three months ended					Six months ended
	June 30,					June 30,
	2006			2005		2006			2005
		*(Unaudited)*			(Unaudited)		*(Unaudited)*			(Unaudited)
INTEREST INCOME:
Interest and fees on loans	$	12,543,896		$	9,220,188	$	24,071,375		$	17,682,125
Interest on federal funds sold		17,060			1,425		21,202			2,905
Interest on investment securities:
U.S. Government agencies		1,070,334			854,201		2,092,008			1,702,557
States and political subdivisions		193,411			180,632		386,161			362,495
Other		120,424			91,924		245,587			178,957
Total interest income		13,945,125			10,348,370		26,816,333			19,929,039

INTEREST EXPENSE:
NOW, MMDA & savings deposits		681,623			641,962		1,356,360			1,275,282
Time deposits		3,432,723			2,101,247		6,420,454			3,890,924
FHLB borrowings		968,265			710,008		1,853,955			1,421,784
Junior subordinated debentures		297,681			225,516		577,320			432,990
Other		48,300			7,045		83,843			11,111
Total interest expense		5,428,592			3,685,778		10,291,932			7,032,091
NET INTEREST INCOME		8,516,533			6,662,592		16,524,401			12,896,948
PROVISION FOR LOAN LOSSES		413,000			723,000		1,172,000			1,413,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		8,103,533			5,939,592		15,352,401			11,483,948

NON-INTEREST INCOME:
Service charges		1,016,930			947,309		1,941,875			1,752,569
Other service charges and fees		363,012			270,865		759,029			515,492
Gain (loss) on sale of securities		(91,951	)		-		(173,751	)		-
Mortgage banking income		119,268			101,640		239,876			204,756
Insurance and brokerage commission		109,783			102,761		213,683			212,520
Miscellaneous		508,871			419,181		983,080			794,487
Total non-interest income		2,025,913			1,841,756		3,963,792			3,479,824
NON-INTEREST EXPENSES:
Salaries and employee benefits		3,265,032			2,971,765		6,503,802			6,034,266
Occupancy		1,017,425			988,560		2,005,821			1,957,626
Other		1,660,957			1,340,364		3,136,269			2,567,644
Total non-interest expenses		5,943,414			5,300,689		11,645,892			10,559,536

INCOME BEFORE INCOME TAXES		4,186,032			2,480,659		7,670,301			4,404,236
INCOME TAXES		1,524,600			872,600		2,773,800			1,519,400

NET INCOME	$	2,661,432		$	1,608,059	$	4,896,501		$	2,884,836
PER SHARE AMOUNTS
Basic net income	$	0.70		$	0.42	$	1.29		$	0.76
Diluted net income	$	0.68		$	0.42	$	1.26		$	0.75
Cash dividends	$	0.11		$	0.09	$	0.21		$	0.18
Book value	$	15.00		$	13.86	$	15.00		$	13.86