The Palmetto Bank
News Release


FOR IMMEDIATE RELEASE                         For More Information Contact:
October 22, 2004                              Ida Smith, 864/984-8395
                                              ismith@palmettobank.com



                        Palmetto Bancshares, Inc. Reports
                     10% Increase in Third Quarter Earnings


UPSTATE,  SC - Leon Patterson,  chairman and chief executive officer of Palmetto
Bancshares,  Inc.,  parent  company for The Palmetto  Bank,  announced  earnings
totaling $3.1 million for the quarter ended September 30, 2004, reflecting a 10%
increase in quarterly net income compared to the same period of 2003. Net income
per diluted  share for the third  quarter was $.49, a 9% increase  over $.45 per
share reported for the same period of 2003.

Excellent  earnings in the third quarter were due primarily to an 8% increase in
net interest  income after the provision  expense while at the same time holding
noninterest expense to a 1% increase compared to third quarter 2003.

Net income for the nine months ended  September 30, 2004,  was $9.0 million,  an
increase of 6% from net income of $8.5  million  reported for the same period in
2003. Net income per diluted share for the nine months ended September 30, 2004,
was $1.41,  a 7% increase  over $1.32 per share  reported for the same period of
2003.

Total  assets at  September  30, 2004,  were $965.8  million,  an increase of 9%
compared to September  30, 2003.  Total loans  increased  11% to $751 million at
September 30, 2004,  from September 30, 2003,  while total deposits rose to $820
million, a 2% increase when compared over the same periods.

                                      MORE


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Third Quarter Earnings Report
The Palmetto Bank
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"We are  pleased  to report  that the Bank  continues  to have a strong  year in
2004," said Leon Patterson.  "We attribute this success to a dedicated staff and
a strong focus on the strategic direction of our company.  Maintaining our focus
on serving  Upstate  South  Carolina,  we will  break  ground on a new office in
Easley in December, with the branch opening scheduled for third quarter 2005."

Serving the Upstate for 98 years,  The  Palmetto  Bank  manages  $1.6 billion in
assets including  commercial banking,  trust,  brokerage and mortgage servicing.
The  Palmetto  Bank is an  independent  bank with 30  locations  throughout  the
Upstate  counties  of  Abbeville,  Anderson,  Cherokee,  Greenville,  Greenwood,
Laurens, Oconee, and Spartanburg.

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