Final Strategic Action to Return to Profitability in 2012

GREENVILLE, S.C. – Palmetto Bancshares, Inc. (the “Company”) (NASDAQ: PLMT) announced that effective July 1, 2012 its wholly-owned subsidiary, The Palmetto Bank, consummated the sale of its Rock Hill and Blacksburg, South Carolina branches to Carolina Premier Bank, a North Carolina state chartered bank and wholly owned banking subsidiary of Premara Financial, Inc. The signing of an agreement to sell these branches to Carolina Premier Bank was originally announced on January 30, 2012. In connection with the consummation of the sale, Carolina Premier Bank purchased real estate, equipment, substantially all of the loans (totaling $7.5 million) and certain other assets, and assumed the deposits (totaling $41.1 million) and lease obligations associated with these two branches. The Company recorded a gain on sale of the branches, net of transaction costs, of $627 thousand, which will be recognized in the third quarter 2012. As part of the settlement of the sale, the Company made a cash payment to Carolina Premier Bank of $31.6 million, representing the excess of deposit and other liabilities assumed by Carolina Premier Bank over the carrying value of loans and other assets sold by the Company, and the premium received by the Company for the deposits sold.

The branch sale is the final strategic action previously announced by the Company in December 2011 to align better the Company’s infrastructure and expense base with its current balance sheet size, scope of business activities, and underlying revenue generating capacity of the franchise. “The consummation of this branch sale is another significant step forward in our strategic plan to return to profitability through reduced operating costs and increased efficiency,” said Samuel L. Erwin, Chief Executive Officer of the Company. “Completing this branch sale will have an immediate positive impact to our earnings. The branch sale, coupled with the disposition of $40.3 million of problem assets announced in June, will accelerate our return to profitability in 2012.”