THE PALMETTO BANK
NEWS RELEASE


FOR IMMEDIATE RELEASE                         For More Information Contact:
July 15, 2005                                 CYNTHIA JAMISON, (864) 984-8395
                                              cjamison@palmettobank.com



                        PALMETTO BANCSHARES, INC. REPORTS
                         27% QUARTERLY EARNINGS INCREASE


UPSTATE,  SC - Leon Patterson,  chairman and chief executive officer of Palmetto
Bancshares,  Inc., parent company for The Palmetto Bank, reported net income for
the second quarter of 2005 was $3.5 million, a 27% increase over the same period
in 2004. Net income per diluted share was $.55, a 28% increase over the $.43 per
share reported in the second quarter of 2004.

For the six months ended June 30, 2005, Palmetto  Bancshares,  Inc. reported net
income at $7.0  million  compared to $5.8  million  reported  the same period of
2004, an increase of 19%.  Diluted earnings per share were $1.08, as compared to
$.91 per share in the same period of 2004.

Total assets at June 30 grew 12% to $1.1 billion,  an increase of $111.7 million
over the same period in 2004.  At June 30, 2005,  loans  increased 15% to $831.7
million,  while  deposits  rose to $896.6  million,  a 9% increase over the same
period in 2004. "We are pleased with the Bank's  consistently strong performance
during this past quarter and the past six months," said Leon Patterson, chairman
and chief executive  officer.  "We are in preparation for the opening of our new
Easley  office - our first  location in Pickens  County.  We look forward to the
added growth the location will bring to our company."

Serving the Upstate  for more than 99 years,  The  Palmetto  Bank  manages  $1.7
billion in assets including  Commercial Banking,  Trust,  Brokerage and Mortgage
Servicing.  The Palmetto  Bank is the fifth  largest  independent  state-charted
commercial  bank in South  Carolina  with 31  locations  throughout  the Upstate
counties of  Abbeville,  Anderson,  Cherokee,  Greenville,  Greenwood,  Laurens,
Oconee, Spartanburg, and Pickens.

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