FOR IMMEDIATE RELEASE                       FOR MORE INFORMATION CONTACT:
JULY 14, 2003                               PENNY KREIN, 864/984-8395
                                            kreinp@palmettobank.com


                 PALMETTO BANCSHARES, INC. REPORTS 14% INCREASE
   FOR SIX MONTH PERIOD ENDED AND 9% INCREASE FOR QUARTER ENDED JUNE 30, 2003

UPSTATE,  SC - Leon Patterson,  chairman and chief executive officer of Palmetto
Bancshares,  Inc., parent company for The Palmetto Bank, reported net income for
the quarter ending June 30, 2003 of $2.7 million,  a 9% increase from net income
for the same quarter of 2002.  Net income for the six months ended June 30, 2003
was $5.6 million,  a 14% increase over $4.9 million reported for the same period
in 2002.

Net income per diluted  share for the second  quarter was $.42,  an 11% increase
over the $.38 per share  reported for the second quarter of 2002. Net income per
diluted  share for the six months  ended June 30, 2003 was $.87,  a 14% increase
over $.76 per diluted share reported for the same period of 2002.

Increased  net income for the six month period ended June 30, 2003 resulted from
a continued growth of earning assets,  an 7% improvement in net interest income,
and a 5% decline in the  provision  for loan  losses,  compared  to the same six
months ended June 30, 2002.

The company reported return on shareholders'  equity of 16.09% at June 30, 2003,
as compared with 16.12% reported at June 30, 2002.  Return on assets at June 30,
2003 was 1.35%, up from 1.32% at June 30, 2002.

Total assets at quarter end were $860 million,  an increase of 13% compared with
June 30, 2002.  Total loans increased 18% to $680 million,  while total deposits
rose to $777 million,  a 12% increase  compared with June 30, 2002.  The company
reported total assets under  management,  including  mortgage loans serviced for
others and trust and investment  assets, of $1.5 billion at June 30, 2003, a 14%
increase from the total reported at June 30, 2002.

"In spite of the challenging  economic times we continue to face, we are pleased
with the company's  consistently  strong  performance  over the last quarter and
particularly over the past six months," said Leon Patterson,  chairman and chief
executive officer.

Founded in 1906,  The Palmetto Bank is an  independent  Upstate based  financial
institution,  with 30 locations  in twenty  communities  throughout  the Upstate
counties of  Abbeville,  Anderson,  Cherokee,  Greenville,  Greenwood,  Laurens,
Oconee, and Spartanburg.

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(Date Reported: July 14, 2003)