PALMETTO BANCSHARES INC - 10-Q Quarterly Report

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No __

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

PALMETTO BANCSHARES, INC.
Consolidated Balance Sheets
(in thousands, except share data)

				March 31,		December 31,
				2004	2003	2003
				(unaudited)
ASSETS
Cash and due from banks				$ 26,406	32,953	32,309
Federal funds sold				10,090	14,479	930
		Cash and cash equivalents		36,496	47,432	33,239

Federal Home Loan Bank (FHLB) stock, at cost				2,122	1,868	1,868
Investment securities available for sale at fair value				106,373	113,138	128,930
Loans held for sale				6,353	11,093	6,399

Loans				706,999	646,628	693,213
	Less allowance for loan losses			(7,692)	(6,771)	(7,463)
		Loans, net		699,307	639,857	685,750

Premises and equipment, net				21,927	19,805	21,724
Accrued interest receivable				3,784	4,114	4,083
Other assets				17,331	15,792	16,086
			Total assets	$ 893,693	853,099	898,079

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
	Noninterest-bearing			$122,247	116,615	115,982
	Interest-bearing			656,554	622,144	655,766
		Total deposits		778,801	738,759	771,748

Securities sold under agreements to repurchase				18,126	16,261	13,525
Commercial paper (Master notes)				16,339	16,965	16,170
Federal funds purchased				-	-	18,000
Other liabilities				5,772	11,358	6,647
		Total liabilities		819,038	783,343	826,090

Shareholders' equity
Common stock - par value $5.00 per share; authorized 10,000,000 shares; issued and outstanding 6,265,440, 6,329,909 and 6,263,210 at March 31, 2004 and 2003 and December 31, 2003, respectively.

				31,327	31,650	31,316
Capital surplus				268	89	250
Retained earnings				41,607	36,314	39,454
Accumulated other comprehensive income, net of tax				1,453	1,703	969
		Total shareholders' equity		74,655	69,756	71,989

			Total liabilities and shareholders' equity	$ 893,693	853,099	898,079



See accompanying notes to consolidated interim financial statements.

PALMETTO BANCSHARES, INC.
Consolidated Statements of Income
(in thousands, except share data)

				For the three months ended March 31,
				2004	2003
				(unaudited)
Interest income
	Interest and fees on loans			$ 11,271	11,543
	Interest and dividends on investment securities available for sale
		U.S. Treasury and U.S. Government agencies		108	415
		State and municipal		510	382
		Mortgage-backed securities		338	209
	Interest on federal funds sold			15	35
	Dividends on FHLB stock			19	23
			Total interest income	12,261	12,607

South Carolina	74-2235055
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

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

(864) 984-4551	palmettobank.com
(Registrant's telephone number)	(Registrant's web site)

Class	Outstanding at May 3, 2004
-----------------------------	-------------------------------
Common stock, $5.00 par value	6,265,490

PALMETTO BANCSHARES, INC.
Table of Contents

			Page No.

PART I. FINANCIAL INFORMATION			3
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
	Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION			38
	Item 1.	Legal Proceedings	38
	Item 2.	Changes in Securities and Use of Proceeds	38
	Item 3.	Defaults Upon Senior Securities	38
	Item 4.	Submission of Matters to a Vote of Security Holders	38
	Item 5.	Other Information	38
	Item 6.	Exhibits and Reports on Form 8-K	38

SIGNATURES			39