[PALMETTO BANK LOGO OMITTED]




FOR IMMEDIATE RELEASE                             For More Information, Contact:
July 9, 2004                                      Ida Smith, 864/984-8395
                                                  ismith@palmettobank.com



                    Palmetto Bancshares, Inc. Reports Strong
                  Asset Growth of 9.5% for Second Quarter 2004

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, 2004, of $2.8 million,  a 3% increase over the same
period of 2003.  Net  income for the six months  ended June 30,  2004,  was $5.8
million, a 4% increase over $5.6 million reported for the same period in 2003.

     Net income per share  (diluted) for the second  quarter of 2004 was $.44, a
5% increase over the $.42 per diluted share  reported for the second  quarter of
2003.  Net income per diluted share for the six months ended June 30, 2004,  was
$.91, a 7% increase over $.87 per diluted share  reported for the same period of
2003.

     Increased  net income for the six-month  period ended June 30, 2004,  was a
result of a 5% increase in noninterest income and a 17% decline in the provision
for loan losses.

     Total  assets at the end of the second  quarter  were  $941.5  million,  an
increase of 9.5%,  or $81.5  million,  over total assets at June 30,  2003.  The
company  reported  total  assets  under  management,  including  mortgage  loans
serviced for others and trust and investment assets, of $1.6 billion at June 30,
2004, an 8% increase from the total reported at June 30, 2003.

                                      MORE




Palmetto Bancshares, Inc. Reports Second Quarter Earnings
Page 2 of 2




     At June 30, 2004,  total loans increased 6% to $723.1 million,  while total
deposits rose to $818.8 million, a 5% increase over June 30, 2003.

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

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(Date Reported: July 9, 2004)