8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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): September 22, 2010

PALMETTO BANCSHARES, INC.

(Exact Name of Registrant As Specified in Its Charter)

South Carolina	0-26016	74-2235055
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
306 East North Street, Greenville, South Carolina		29601
(Address of Principal Executive Offices)		(Zip Code)

(800) 725-2265

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report.)

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 (17CFR 240.14d-2(b))

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

Item 1.01 Entry into a Material Definitive Agreement

Amendment No. 2 to Stock Purchase Agreement

As previously disclosed, Palmetto Bancshares, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”), Registration Rights Agreement (the “Registration Rights Agreement”), and Amendment No. 1 to Stock Purchase Agreement and Registration Rights Agreement (“Amendment No. 1”) with CapGen Capital Group V LP (“CapGen”) and certain additional institutional investors, including affiliates of Patriot Financial Partners, L.P. (“Patriot”) and affiliates of Sandler O’Neill Asset Management (“Sandler”) (collectively, the “Investors”), pursuant to which CapGen, Patriot, Sandler, and the other Investors committed to purchase approximately $103 million of the Company’s common stock at $2.60 per share, subject to the terms contained therein (the “Private Placement”).

On September 22, 2010, the Company and the Investors entered into Amendment No. 2 to Stock Purchase Agreement (“Amendment No. 2” and together with the Stock Purchase Agreement, the Registration Rights Agreement, and Amendment No. 1, the “Investment Agreements”), a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference. Amendment No. 2 includes, among other changes, an amendment to Section 9.18 of the Stock Purchase Agreement to revise the termination fee due to the Investors in the event CapGen terminates the Stock Purchase Agreement under the circumstances set forth in Section 9.18 of the Stock Purchase Agreement.

The Private Placement is conditioned upon, among other things, the Company’s representations and warranties contained in the Investment Agreements being true and correct in all material respects on the closing date and the Investors receiving all required regulatory approvals and determinations. The Investment Agreements may be terminated by the Company or an Investor under certain circumstances, including that the Company or an Investor, with respect to its investment, may terminate if the closing of the Private Placement has not occurred by December 31, 2010.

The foregoing descriptions of the Stock Purchase Agreement, the Registration Rights Agreement, Amendment No. 1, and Amendment No. 2 do not purport to be complete, and are qualified in their entirety by reference to such agreements, which are filed as Exhibits 10.1 and 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2010, Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 11, 2010, and Exhibit 10.1 to this Current Report on Form 8-K, respectively, which are incorporated herein by reference.

Item 3.02 Unregistered Sales of Equity Securities.

To the extent required by Item 3.02 of Item 8-K, the information regarding the Private Placement set forth under Item 1.01 is incorporated by reference into this Item 3.02. The issuance of securities pursuant to the Private Placement is a private placement to “accredited investors” (as that term is defined under Rule 501 of Regulation D), and is exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), in reliance upon Section 4(2) of the Securities Act and Regulation D Rule 506, as a transaction by an issuer not involving a public offering.

Item 8.01 Other Events

On September 23, 2010, the Company issued a news release regarding the status of the Private Placement. A copy of the news release is attached to this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01(d) Exhibits.

Exhibit No.	Exhibit
10.1	Amendment No. 2 dated September 22, 2010 to Stock Purchase Agreement by and among Palmetto Bancshares, Inc. and the investors named therein dated as of May 25, 2010.
99.1	News Release dated September 23, 2010.

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Important Information

Certain investments discussed above involve the sale of securities in private transactions that will not be registered under the Securities Act of 1933 and will be subject to the resale restrictions under that Act. Such securities may not be offered or sold absent registration or an applicable exemption from registration. This document does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Caution about Forward-Looking Statements

Certain statements in the news release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions. Forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors which could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements include, but are not limited to: (1) the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which could result in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio and allowance for loan losses and the rate of delinquencies and amounts of charge-offs, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (2) the risk that the private placement may not close due to, among other things, federal anti-trust review or adverse developments or other matters that could result in the closing conditions of the Stock Purchase Agreement related to the private placement not being satisfied; (3) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the company; and (4) actions taken by banking regulatory agencies related to the banking industry in general and the Company specifically. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our Company or any person that the future events, plans, or expectations contemplated by our Company will be achieved. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

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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/ Samuel L. Erwin
Name:	Samuel L. Erwin
Title:	Chief Executive Officer
Date:	September 24, 2010

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Exhibit Index

Exhibit No.	Exhibit
10.1	Amendment No. 2 dated September 22, 2010 to Stock Purchase Agreement by and among Palmetto Bancshares, Inc. and the investors named therein dated as of May 25, 2010.
99.1	News Release dated September 23, 2010.

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 2

TO

STOCK PURCHASE AGREEMENT

BY AND AMONG

PALMETTO BANCSHARES, INC.,

CAPGEN CAPITAL GROUP V LP

AND EACH OF THE OTHER

INVESTORS NAMED THEREIN,

DATED AS OF

MAY 25, 2010,

AS AMENDED AS OF JUNE 8, 2010

AMENDMENT NO. 2

TO THE

STOCK PURCHASE AGREEMENT

This Amendment No. 2 (the “Amendment”), dated as of September 22, 2010, is to the Stock Purchase Agreement, dated as of May 25, 2010 (the “Stock Purchase Agreement”) by and among PALMETTO BANCSHARES, INC., a South Carolina corporation (the “Company”), and CAPGEN CAPITAL GROUP V LP, a Delaware limited partnership (“CapGen”), as Amended by Amendment No. 1 (“Amendment No. 1”) to the Stock Purchase Agreement, dated as of June 8, 2010, by and among the Company, CapGen and each of the respective other investors set forth on the signature pages to Amendment No. 1 (collectively, with CapGen, the “Investors”).

This Amendment modifies certain terms of the Stock Purchase Agreement and Amendment No. 1 as set forth below. Capitalized terms used, but not defined herein, shall have the same respective meanings as provided in the Stock Purchase Agreement.

In consideration of the premises, and other good and valuable consideration, the receipt of which is acknowledged, the parties, intending to be legally bound, agree as follows:

SECTION I.

AMENDMENTS TO THE STOCK PURCHASE AGREEMENT

Section 1.01 Section 6.09 of the Stock Purchase Agreement is amended as follows:

(a) All references in clause (a) and (b) to “Investor” shall refer solely to CapGen and the “Investor Percentage Interest” shall refer solely to the Investor Percentage Interest of CapGen.

(b) A new clause (c) is added to Section 6.09, which will read in its entirety as follows:

“The Company and its Subsidiaries will permit such Investors, whether or not such Investor qualifies, or is intended to qualify, as a “venture capital operating company” (“VCOC”), as defined in the regulations (the “Plan Asset Regulations”) issued by the Department of Labor at 29 C.F.R. Section 2510.3 101, as the same may be amended from time to time to have customary and appropriate VCOC rights (including consultation rights, inspection and access rights, and rights to receive materials for all meetings of the Board of Directors, and the right to audited and unaudited financial statements, annual budget and other financial and operations information, including advance notification of and consultation with respect to significant corporate actions) relating to inspection, information and consultation with respect to the Company or the Bank (the “VCOC Rights”). Any inspection pursuant to this Section 6.09(c) shall be conducted during normal business hours and in such a manner as not to interfere unreasonably with the conduct of the business of the Company or its Subsidiaries, and nothing herein shall require the Company or its Subsidiaries to disclose any information to the extent (1) prohibited by Law or (2) that the Company or its Subsidiaries reasonably believe such

information to be competitively sensitive proprietary information (except to the extent such Investor provides assurances reasonably acceptable to Company or such Subsidiary, as applicable, that such information shall not be used by such Investor or its affiliates to compete with the Company or such Subsidiary, as applicable). Each Investor also shall hold and use any information that receives pursuant to this Section 6.09(c) solely for purposes of managing its investment in the Company, and shall not use or disclose any material nonpublic information regarding the Company to trade in Company securities or any derivatives thereof. Notwithstanding the foregoing, nothing herein shall require the Company or its Subsidiaries to (1) honor a request from such Investor to visit and inspect any of the offices and properties of the Company and its Subsidiaries and inspect and copy the books and records of the Company and its Subsidiaries more frequently than once per quarter or (2) make appropriate officers and directors of the Company and its Subsidiaries available to such Investor for consultation with the Investor or its designated representative with respect to matters relating to the business and affairs of the Company and its Subsidiaries more frequently than once per quarter.”

Section 1.02 Section 7.06(a) of the Stock Purchase Agreement is amended in its entirety to read as follows:

“(a) Indemnification of the Investor. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold each Investor and its directors, officers, shareholders, members, partners, employees and agents (and any other persons with a functionally equivalent role of a person holding such titles notwithstanding a lack of such title or any other title), each person who controls the Investor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other persons with a functionally equivalent role of a person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, an “Investor Party”), from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in permitted settlements, court costs and reasonable attorneys’ fees of one counsel and costs of investigation that any such Investor Party may suffer or incur as a result of (i) any material breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or (ii) any action instituted against an Investor Party in any capacity, by any shareholder of the Company who is not Investor Party or an affiliate of that Investor Party, with respect to this Agreement or any of the transactions contemplated hereby, except to the extent that a court has determined in a final nonappealable order that any such losses, claims and expenses have resulted directly from an Investor Party’s gross negligence or willful misconduct. The Company will not be liable to any Investor Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Investor Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Private Placement Documents. Notwithstanding anything to the contrary contained in this Agreement, no indemnification pursuant to this Section 7.06(a) will be available to the extent not allowed under applicable federal and state law.”

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Section 1.03 Section 9.18 of the Stock Purchase Agreement is amended in its entirety to read as follows:

“Section 9.18 (a) The Company and the Bank agree that none of the Company, the Bank or any of the Subsidiaries or any of the officers or directors of the Company, the Bank or any of the Subsidiaries shall, and that they shall instruct and use their reasonable best efforts to cause their and the Subsidiaries’ employees, investment bankers, attorneys, accountants and other advisors or representatives (such directors, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives, collectively, “Representatives”) not to (it being understood and agreed that any violation of the restrictions set forth in this Section 9.18 by a Representative, whether or not such Representative is so authorized and whether or not such Representative is purporting to act on behalf of the Company, the Bank or any Subsidiary or otherwise, shall be deemed to be a breach of this Agreement by the Company and the Bank), directly or indirectly:

(1) initiate, solicit or knowingly facilitate or encourage any inquiries or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal;

(2) make or authorize any statement, recommendation or solicitation in support of any Acquisition Proposal;

(3) engage in, continue or otherwise participate in any discussions or negotiations or enter into an agreement regarding, or provide any non-public information or data to any person relating to, any Acquisition Proposal; or

(4) otherwise knowingly facilitate any effort or attempt to make an Acquisition Proposal.

(b) For purposes of this Agreement, the term “Acquisition Proposal” means (1) any proposal or offer with respect to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, rights offering, share exchange, business combination or similar transaction involving the Company, the Bank or any of the Subsidiaries and (2) any acquisition by any person resulting in, or proposal or offer, that, if consummated, would result in, any person becoming the beneficial owner, directly or indirectly, in one or a series of related transactions, of ten percent (10%) or more of the total voting power of any class of equity securities of the Company or the Bank or those of any of the Subsidiaries, or ten percent (10%) or more of the consolidated total assets (including, without limitation, equity securities of any subsidiaries) of the Company, in each case other than the transactions contemplated by this Agreement.

(c) Nothing contained in this Section 9.18 shall prohibit the Company from taking and disclosing to its shareholders a position required by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act; provided, however, that compliance with

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such rules shall not in any way limit or modify the effect that any action taken pursuant to such rules has under any other provision of this Agreement.

(d) The Company and the Bank each agrees that it will promptly (and, in any event, within 24 hours) notify the Investors if any inquiries, proposals or offers with respect to an Acquisition Proposal are received by, any such information is requested from, or any such discussions or negotiations are sought to be initiated or continued with, the Company, the Bank or any Subsidiary or any of their respective Representatives indicating, in connection with such notice, the name of such person and the material terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) and thereafter shall keep the Investors informed, on a current basis, of the status and terms of any such proposals or offers (including any amendments thereto) and the status of any such discussions or negotiations, including any change in the Company’s or the Bank’s intentions as previously notified.

(e) Notwithstanding anything contained herein to the contrary, each of the Company and the Bank agrees that a non-exclusive right and remedy for noncompliance with this Section 9.18 is to have such provision specifically enforced by any court having equity jurisdiction; it being acknowledged and agreed that any such breach will cause irreparable injury to the Investors and that money damages may not provide an adequate remedy to the Investors.”

Section 1.04 Section 8.01 of the Stock Purchase Agreement is amended to add a new clause (h), which will read in its entirety as follows:

“(h) by CapGen if the Company or the Bank shall have breached the covenants contained in Section 9.18 hereof or the Company’s Board shall have recommended or publicly announced its intention to recommend any Acquisition Proposal in accordance with Section 9.18(c) of this Agreement.”

Section 1.05 Section 9.03 of the Stock Purchase Agreement is amended in its entirety to read as follows:

“Section 9.03 Fees and Expenses. (a) Except as set forth in Section 1.05 and except as otherwise set forth in this Section 9.03, each party shall pay its own fees and expenses (including, without limitation, the fees and expenses of its agents, representatives, attorneys, and accountants) incurred in connection with the negotiation, drafting, execution, delivery, and performance of this Agreement and the Transaction.

(b) If this Agreement is terminated pursuant to Section 8.01(h) and the Company, the Bank or any of the Subsidiaries (i) enter into an agreement contemplating an Acquisition Proposal, (ii) the transaction contemplated by such agreement (an “Alternative Transaction”) is consummated and (iii) such Alternative Transaction substitutes for or substantially replaces the transaction contemplated by this Agreement, then the Company and the Bank shall be jointly and severally obligated to pay to the Investors (on a pro rata basis, based on the number of Shares agreed to be purchased pursuant to this Agreement

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by each Investor) an amount equal to the Termination Fee promptly, but in any event not later than two (2) business days, following the date of the consummation of such Alternative Transaction.

(c) If, after the date hereof, an Acquisition Proposal is made to the Company, the Bank, any Subsidiary, or the Company’s shareholders generally, or becomes public (including an Acquisition Proposal made prior to the date hereof) and thereafter this Agreement is terminated by CapGen pursuant to Section 8.01(b) or (e) on the basis of a breach of a covenant or agreement made by the Company or the Bank in this Agreement, and (i) within twelve months after such termination the Company and/or the Bank enters into an agreement to effect an Alternative Transaction, (ii) such Alternative Transaction is consummated and (iii) such Alternative Transaction substitutes for or substantially replaces the transaction contemplated by this Agreement, then the Company and the Bank shall be jointly and severally obligated to pay to the Investors (on a pro rata basis, based on the number Shares agreed to be purchased pursuant to this Agreement by each Investor) an amount equal to the Termination Fee promptly, but in any event not later than two (2) business days, following the consummation of such Alternative Transaction.

(d) “Termination Fee” means an amount in cash equal to four million dollars ($4,000,000), which Termination Fee shall be paid by wire transfer of immediately available funds to the account or accounts designated by Investors at the time specified in this Section 9.03. To the extent not paid when due, any amount payable pursuant to this Section 9.03 shall accrue interest at a rate equal to eighteen percent (18%) per annum or, if lower, the maximum rate allowable by law.

(e) Each of the Company, the Bank and each Investor acknowledges that the agreements contained in this Section 9.03 are an integral part of the transactions contemplated by this Agreement. The amounts payable pursuant to Section 9.03 hereof constitute liquidated damages and not a penalty and shall be the sole monetary remedy in the event a Termination Fee is paid in connection with a termination of this Agreement on the bases specified in Section 9.03 hereof; provided that nothing herein shall relieve any party from liability for fraud or intentional breach of this Agreement. In the event that the Company or the Bank shall fail to make any payment pursuant to this Section 9.03 when due, the Company and the Bank shall be jointly and severally obligated to reimburse CapGen for all reasonable expenses actually incurred or accrued by CapGen (including reasonable expenses of counsel) in connection with the collection under and enforcement of this Section 9.03.”

Section 1.06 Section 1.15 of Amendment No. 1 is deleted in its entirety and replaced with “[Intentionally Omitted]”.

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EACH OF THE UNDERSIGNED HAVE EXECUTED OR CAUSED THIS AMENDMENT NO. 2 TO BE EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN BY THEIR RESPECTIVE DULY AUTHORIZED OFFICIALS.

PALMETTO BANCSHARES, INC.
By:
	Name: Samuel L. Erwin
	Title: Chief Executive Officer

Joined in by the Bank as to Section 2.02 (as to the Bank only), Section 9.03 and Section 9.18 only in consideration of the capital to be provided to the Bank from proceeds of the Private Placement and other good and valuable consideration, the receipt of which is acknowledged.

THE PALMETTO BANK
By:
	Name:
	Title:

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CAPGEN CAPITAL GROUP V LP
CAPGEN CAPITAL GROUP V LLC,
THE GENERAL PARTNER OF CAPGEN CAPITAL GROUP V LP
By:
	Name: John P. Sullivan
	Title: Managing Director

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INVESTOR
Name Of Investor
By:
	Name:
	Title:
Address for Notices:

8

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE	For More Information Contact:
September 23, 2010	Cynthia Jamison-Brashier: (864) 250-6061
	cjamison@palmettobank.com

Palmetto Bancshares Receives Regulatory Approval for Private Placement

Greenville, S.C. – Palmetto Bancshares, Inc., a bank holding company whose principal banking subsidiary is The Palmetto Bank, announced today that regulatory approval of the Federal Reserve Board has been received to consummate the previously announced $103 million private placement of its common stock with institutional investors.

“Obtaining this regulatory approval was a key step for us to complete our private placement,” said Samuel L. Erwin, Chief Executive Officer. “We currently expect to close the transaction in early October.” Erwin continued, “Our Board of Directors and employees have worked tirelessly over the past eighteen months to position the Company to raise capital. Completing the capital raise in this very challenging economic environment is a testament to our hard work and the value of The Palmetto Bank franchise.”

The Company will use the net proceeds from the private placement primarily to contribute capital to The Palmetto Bank. The capital contribution to the Bank will result in the Bank’s capital adequacy ratios exceeding the minimum capital levels required to be categorized as “well capitalized”. Under the stock purchase agreement with the investors, the Company also is permitted to conduct a $10 million offering after the closing of the private placement to current shareholders to purchase common stock of the Company.

“Moving closer to completing our capital raise is very important,” said L. Leon Patterson, Chairman of the Board. “We appreciate the loyal support of our shareholders over our 104-year history and we continue to take value generating actions to reposition the Company for the future.”

About The Palmetto Bank

Headquartered in Greenville, South Carolina, The Palmetto Bank is a 104-year old independent state-chartered commercial bank and is the fifth-largest banking institution headquartered in South Carolina. The Palmetto Bank has assets of $1.4 billion and serves the Upstate through 29 banking locations in Abbeville, Anderson, Cherokee, Greenville, Greenwood, Laurens, Oconee, Pickens, Spartanburg and York counties. The Bank specializes in providing personalized community banking services to individuals and small to mid-size businesses including Retail and Commercial Banking, Mortgage, Trust, Brokerage, and Insurance. Additional information may be found at the Company’s web site at www.palmettobank.com.

Important Information

Certain investments discussed in this News Release involve the sale of securities in private transactions that will not be registered under the Securities Act of 1933 and will be subject to the resale restrictions under that Act. Such securities may not be offered or sold absent registration or an applicable exemption from registration. This News Release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

306 East North Street — Greenville, South Carolina 29601

www. palmettobank.com — Phone: (864)250-6061 — Fax: (864) 250-6074

Addendum to News Release - Forward-Looking Statements

Certain statements in this News Release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions. Forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors which could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements include, but are not limited to: (1) the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which could result in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio and allowance for loan losses and the rate of delinquencies and amounts of charge-offs, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (2) the risk that the private placement may not close due to, among other things, federal anti-trust review or adverse developments or other matters that could result in the closing conditions of the Stock Purchase Agreement related to the private placement not being satisfied; (3) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the company; and (4) actions taken by banking regulatory agencies related to the banking industry in general and the Company specifically. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our Company or any person that the future events, plans, or expectations contemplated by our Company will be achieved. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

306 East North Street — Greenville, South Carolina 29601

www. palmettobank.com — Phone: (864)250-6061 — Fax: (864) 250-6074