EX-16

Securities and Exchange Commission
Washington, D.C. 20549


April 23, 2001


Ladies and Gentlemen:

We were previously principal accountants for Palmetto Bancshares, Inc. and,
under the date of February 9, 2001, we reported on the consolidated financial
statements of Palmetto Bancshares, Inc. and subsidiaries as of and for the years
ended December 31, 2000 and 1999. On April 17, 2001, our appointment as
principal accountants was terminated. We have read Palmetto Bancshares, Inc.'s
statements included under Item 4 of its Form 8-K dated April 17, 2001, and we
agree with such statements, except that we are not in a position to agree or
disagree with the following:

*    Palmetto Banchsares, Inc.'s statement that the change was recommended by
     Palmetto Bancshares, Inc.'s audit committee; and

*    Palmetto Bancshares, Inc.'s statement that Elliott Davis & Company, LLP was
     not consulted regarding the application of accounting principles to a
     specified transaction, either completed or proposed, or the type of audit
     opinion that might be rendered on Palmetto Bancshares, Inc.'s financial
     statements.


Very truly yours,

/s/ KPMG LLP

8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 8-K


                             CURRENT REPORT PURSUANT
                          TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


DATE OF REPORT (Date of earliest event reported): April 17, 2001


                            PALMETTO BANCSHARES, INC.
                     --------------------------------------
             (Exact name of registrant as specified in its charter)


South Carolina                    0-26016                    74-2235055
- --------------------------------------------------------------------------------
(State or other            (Commission File Number)         (IRS Employer
jurisdiction of incorporation)                            Identification No.)


301 Hillcrest Drive, Laurens, South Carolina                       29360
- --------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)


                                 (864) 984-4551
                              --------------------
               Registrant's telephone number (including area code)


                                 Not Applicable
                              ---------------------
          (Former name or former address, if changed since last report)





Item 4.  Change in Registrant's Certifying Accountant
- -------  --------------------------------------------

     (a) On  April  17,  2001,  the  Registrant's  Board  of  Directors,  at the
recommendation  of its Audit  Committee,  terminated the engagement of KPMG LLP,
Greenville, South Carolina, as the Registrant's certifying accountants.

     The report of KPMG LLP on the  financial  statements  of The Palmetto  Bank
("the Bank"), the registrant's  wholly-owned subsidiary,  for either of the last
two fiscal years did not contain an adverse  opinion or a disclaimer  of opinion
and was not qualified or modified as to uncertainty,  audit scope, or accounting
principles.

     During the  Registrant's  and the Bank's two most recent  fiscal  years and
subsequent  interim periods  preceding the date of termination of the engagement
of KPMG LLP,  neither the Registrant nor the Bank was in disagreement  with KPMG
LLP on any matter of accounting  principles or  practices,  financial  statement
disclosure, or auditing scope or procedure, which disagreement,  if not resolved
to the  satisfaction of KPMG LLP would have caused KPMP LLP to make reference to
the subject matter of the disagreement in connection with the report.

     The  required  letter  from KPMG LLP with  respect to the above  statements
concerning it is attached hereto as Exhibit 16.1 and incorporated by reference.

     (b) On  April  17,  2001,  the  Registrant's  Board  of  Directors,  at the
recommendation  of its Audit  Committee,  engaged Elliott Davis & Company,  LLP,
Greenville, South Carolina, as the Registrant's certifying accountants.  Neither
the  Registrant  nor the Bank has consulted  with Elliott  Davis & Company,  LLP
during  their two most recent  fiscal  years nor during any  subsequent  interim
period  prior  to  its  engagement   regarding  the  application  of  accounting
principles to a specific transactions, either completed or proposed, or the type
of  audit  opinion  that  might  be  rendered  on  the  Registrant's   financial
statements.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS
         ---------------------------------

(a)  Financial Statements of the Businesses Acquired. Not Applicable

(b)  Pro Forma Financial Information.  Not Applicable

(c)  Exhibits.

     16.1  Letter from KPMG LLP





                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


PALMETTO BANCSHARES, INC.

By:

/s/ L. Leon Patterson
- ---------------------------
L. Leon Patterson
Chairman and Chief Executive Officer

/s/ Paul W. Stringer
- ---------------------------
Paul W. Stringer
President and Chief Operating Officer
(Chief Accounting Officer)


Date: April 23, 2001