[Palmetto Bank Logo Omitted]


FOR IMMEDIATE RELEASE                         For More Information Contact:
October 10, 2003                              Penny Krein, 864/984-8395
                                              kreinp@palmettobank.com


                Palmetto Bancshares, Inc. Reports Record Results
                  With a 16% Increase in Year-to-Date Earnings

UPSTATE,  SC - Leon Patterson,  chairman and chief executive officer of Palmetto
Bancshares,  Inc.,  parent  company  for The  Palmetto  Bank,  announced  record
earnings, reflecting the best year in the Bank's history to date.

Net income for the nine months ended  September  30, 2003 was $8.5  million,  an
increase of 16% from net income of $7.3 million  reported for the same period of
2002.  Net income for the quarter ended  September 30, 2003 was $2.9 million,  a
23% increase from net income for the same three months of 2002.

Net income per diluted  share for the nine months ended  September  30, 2003 was
$1.32,  an 18%  increase  over $1.12 per share  reported  for the same period of
2002.  Net  income  per  diluted  share for the third  quarter  was $.45,  a 25%
increase over $.36 per share reported for the third quarter of 2002.

The company's  return on average  shareholders'  equity (ROE) reached  16.08% at
September 30, 2003, as compared to 15.42% at the end of September  2002.  Return
on  average  assets  (ROA) was 1.33% at  September  30,  2003,  up from 1.28% at
September 30, 2002.

Total assets at September 30, 2003 were $883 million, an increase of 9% compared
to September  30, 2002.  Total loans  increased 12% to $679 million at September
30, 2003 from September 30, 2002,  while total deposits rose to $767 million,  a
16% increase when compared over the same  periods.  The company  reported  total
assets under management  (including trust and investment assets) of $1.5 billion
at September 30, 2003, an 11% increase from the total  reported at September 30,
2002.

"We are happy to report that the Bank  continues to have a record year in 2003,"
said Leon  Patterson.  "We  attribute  this  success to a dedicated  staff and a
strong focus on the strategic direction of our company."

As The Palmetto  Bank,  one of the oldest and largest  community  banks in South
Carolina.  Founded in 1906,  The Palmetto Bank is an  independent  Upstate based
financial  institution,  with 30 locations  throughout  the Upstate  counties of
Abbeville,  Anderson,  Cherokee,  Greenville,  Greenwood,  Laurens,  Oconee, and
Spartanburg.



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(Date Reported: October 10, 2003)