8-K

                                  UNITED STATES
                       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): October 20, 2005


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


South Carolina                     0-26016                     74-2235055
- ---------------------------     -----------------       -----------------------
State or other jurisdiction   Commission File Number    IRS Employer I.D. number
of incorporation


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


                                 (864) 984-4551
                                ----------------
                          Registrant's telephone number

     Check the  appropriate  box below if the Form 8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

     [  ]  Written communications pursuant to Rule 425 under the Securities Act
           (17 CFR 230.425)

     [  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act
           (17 CFR 240.14a-12)

     [  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
           Exchange Act (17 CFR 240.14d-2(b))

     [  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
           Exchange Act (17 CFR 240.13e-4(c))





ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.


On October 20, 2005,  Palmetto  Bancshares,  Inc.  issued a press  release which
discloses the results of operations  and financial  condition of the Company for
the third quarter ended September 30, 2005.

For  more  information  regarding  this  matter,  see the press release attached
hereto as Exhibit 99.


ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

       99     Press Release issued October 20, 2005



                                   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 thereunto 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:   October 25, 2005

EX-99

[PALMETTO BANK LOGO OMITTED]



FOR IMMEDIATE RELEASE                            For More Information Contact:
October 20, 2005                                 CYNTHIA JAMISON, (864) 984-8395
                                                 cjamison@palmettobank.com



                        PALMETTO BANCSHARES, INC. REPORTS
                      15% 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, reported net income for
the nine  months  ended  September  30, 2005 of $10.3  million  compared to $9.0
million  reported the same period of 2004, an increase of 15%.  Diluted earnings
per share were $1.60 for the first nine months of 2005, a 13% increase  over the
$1.41 per share during the same period of 2004.

Net  income  reported  for the  third  quarter  of 2005 was $3.3  million,  a 6%
increase over the same period in 2004. Net income per diluted share was $0.52, a
6% increase over the $0.49 per share reported in the third quarter of 2004.

Total assets at September  30, 2005 grew 10% to $1.1  billion,  representing  an
increase of $99.5 million over September 30, 2004. At September 30, 2005,  loans
increased 13% to $848.8 million,  while deposits rose to $909.5 million,  an 11%
increase when comparing the same period of 2004.

"We are pleased with the Bank's consistently strong performance during this past
quarter  and the past nine months of 2005," said Leon  Patterson,  chairman  and
chief executive officer.

Serving the Upstate  for more than 99 years,  The  Palmetto  Bank  manages  $1.8
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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