Exhibit 99.1

The Palmetto Bank Reports Improved First Quarter Financial Results

And Credit Quality Trends Continue to Improve

Greenville, S.C. – Palmetto Bancshares, Inc. (NASDAQ: PLMT) reported a reduced consolidated net loss for the first quarter 2012 of $587 thousand, compared to a consolidated net loss for the fourth quarter 2011 of $2.3 million. The net loss in both quarters was primarily due to credit-related costs resulting from depressed real estate values which declined to $4.4 million in the first quarter 2012 from $5.9 million in the fourth quarter 2011, the third consecutive quarterly decline. Results for the first quarter 2012 and fourth quarter 2011 also included $328 thousand and $343 thousand, respectively, of one-time charges related to the Company’s previously announced strategic decisions to sell and consolidate four branches and outsource certain operational functions. Excluding the credit-related items and one-time charges, pre-tax operating earnings were $4.7 million in the first quarter 2012, compared to $3.8 million in the fourth quarter 2011 and have increased in four of the last five quarters. The quarterly reduction in net loss is a direct result of the Company’s continued execution of its strategic plan.

Highlights for the first quarter 2012 are summarized as follows:

“We continued to make significant progress on our return to profitability. First quarter results reflect improvement in credit costs and other credit quality measures that are indicative of the intense focus we have been placing on reducing problem assets and returning to profitability over the last several years,” said Samuel L. Erwin, Chief Executive Officer. “During the first quarter we also made significant progress implementing the strategic actions to accelerate our return to profitability which were announced in the fourth quarter of 2011, including the completion of our branch consolidations. These efforts resulted in lower operating expenses, the bulk of which are expected to be realized starting in the second quarter of this year and further contribute to improved financial performance over the remainder of 2012.

Notwithstanding our hard work and improved financial results, we continue to face fundamental industry-wide issues such as volatile market conditions, low interest rates, slow loan growth, depressed real estate values, increased regulatory costs, and revenue challenges. These overall industry and economic factors confirm the need for the proactive actions we have taken which are yielding positive results.”

The discussion of the Company’s results of operations and financial condition below is supplemented by the accompanying financial tables.

Net Interest Income

Net interest income decreased $262 thousand during the quarter to $10.6 million, while the net interest margin improved 6 basis points to 3.71% from 3.65% in the prior quarter. The net interest margin has improved five consecutive quarters as a result of continued strategic reduction in higher cost time deposits, repayments of FHLB advances and reduced deposit funding costs. These benefits were partially offset by elevated cash balances and reduced yields on securities and loans as the continuation of the Federal Reserve’s monetary policy continues to keep interest rates low, which has negatively impacted earning asset yields.

Noninterest Income

Noninterest income increased $134 thousand during the quarter to $3.9 million. The increase is attributable to higher mortgage banking and debit card income. The improvement in mortgage banking income is largely due to improved pricing on secondary market loan sales based on changes in interest rates. These increases were partially offset by lower nonsufficient funds fees and overdraft fees which continue to be under pressure as a result of new regulatory guidelines.

Noninterest Expense

Noninterest expense was $11.9 million during the first quarter, a $3.2 million decrease from the fourth quarter 2011 and the third consecutive quarterly decline. Included in total noninterest expense are credit-related costs associated with loan workout expenses, foreclosed real estate writedowns and expenses, and loss on commercial loans held for sale which also declined for the third consecutive quarter and were $1.7 million in the first quarter 2012 compared to $3.9 million in the fourth quarter 2011. The decline in these expenses reflects a sustained decline in the level of the Company’s problem assets and moderation in the degree of decline in real estate values from appraisals.

Also reflected in noninterest expense in the first quarter 2012 and fourth quarter 2011 are one-time charges of $328 thousand and $343 thousand, respectively, associated with the Company’s previously announced strategic decision to sell and consolidate four branches and outsource certain operational functions. These charges include severance and retention payments, writedowns on premises and equipment, a lease impairment charge and professional fees directly related to the strategic actions. Excluding these credit-related expenses and one-time charges, noninterest expenses were $9.9 million, or $978 thousand less than noninterest expense excluding credit-related expenses and one-time charges in the fourth quarter 2011, primarily as a result of continued expense management and realization of operational efficiencies, as well as lower provisions for unfunded commitments and the absence of certain year-end adjustments recorded in the fourth quarter 2011.

Credit Quality

The Company continued its aggressive focus on improving credit quality. As a result of our proactive problem asset resolution efforts, total nonperforming assets decreased $8.5 million to $72.3 million in the first quarter 2012 and are down 49% from the peak at March 31, 2010. In addition, nonperforming assets include loans and foreclosed real estate with a net carrying value of $7.8 million that were under contract for sale or disposition at March 31, 2012 and are expected to close during the second quarter 2012. Net charge-offs were $4.9 million during the first quarter 2012, compared to $3.3 million in the prior quarter and reflect charge-offs of $2.1 million related to the loan sales that are under contract at March 31, 2012.

In addition, past due loans increased to 1.59% of loans at March 31, 2012 compared to 0.62% at December 31, 2011. The increase is primarily due to two loan relationships, one of which is expected to be resolved during the second quarter, therefore the increase is not indicative of underlying deterioration in credit quality of the portfolio as a whole.

Balance Sheet and Capital

Total assets were $1.2 billion at March 31, 2012 and increased $11.0 million during the quarter as a result of increased cash and securities balances stemming from seasonal increases in transaction deposits. As loan pay downs continue to outpace new loan originations, the Company is attempting to strategically reduce the level of excess cash, primarily by reducing higher cost time deposits and investing in securities to improve the net interest margin, efficiently utilize capital, and reduce FDIC insurance premiums that are primarily based on deposit balances. The Company also expects to utilize cash of $34 million during the second quarter 2012 for the net cash outlay on the sale of the Rock Hill and Blacksburg branches.

The Company’s banking subsidiary, The Palmetto Bank, met all regulatory required minimum capital ratios and continued to be considered “well-capitalized” at March 31, 2012.

“As we completed the first quarter of 2012, we believe it is apparent that our efforts to improve our credit quality and execute on the business and operational changes necessary to return to profitability are working,” continued Erwin. “While moderating, credit costs remain higher than historical levels and continue to negatively impact our financial results; however, our credit quality has steadily improved which has resulted in three straight quarterly declines in these credit-related costs. We are continuing to aggressively pursue problem asset resolution strategies to accelerate the reduction in our problem assets, including the potential for a bulk asset sale in the future. Excluding the elevated credit costs, our core business continues to show sustained operating results and is confirmation that our hard work and strategic actions are achieving the desired results.”

Headquartered in Greenville, South Carolina, The Palmetto Bank is a 105-year old independent state-chartered commercial bank and is the fourth largest banking institution headquartered in South Carolina. The Palmetto Bank has assets of $1.2 billion and after completion of the reduction in the branch network will serve the Upstate through 25 banking locations in the nine counties of Abbeville, Anderson, Cherokee, Greenville, Greenwood, Laurens, Oconee, Pickens, and Spartanburg. The Bank specializes in providing personalized community banking services to individuals and small to mid-size businesses including Retail Banking (including Mortgage, Credit Cards and Indirect Auto), Commercial Banking (including Business Banking, Treasury Management and Merchant Services), and Wealth Management (including Trust, Brokerage, Financial Planning, and Insurance). Additional information may be found at the Company’s web site at www.palmettobank.com.

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Addendum to News Release – Use of Certain Non-GAAP Financial Measures and Forward-Looking Statements

This News Release contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles (“GAAP”). This News Release discusses both GAAP net loss and pre-tax loss excluding credit-related items and one-time charges, which are non-GAAP measures. We believe that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP. Investors should consider the Company’s recording of provision for loan losses, loan workout expenses, foreclosed real estate writedowns and expenses and loss on commercial loans held for sale in the periods presented when assessing the performance of the Company. In addition, investors should consider the costs associated with the Company’s previously announced strategic decisions to sell and consolidate four branches and outsource certain operational functions when assessing the performance of the Company in the first quarter 2012 and fourth quarter 2011. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

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) 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 the timing and amount of future capital raising activities by the Company, if any; and (3) actions taken by banking regulatory agencies related to the banking industry in general and the Company or the Bank specifically. The assumptions underlying the forward-looking statements 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 U.S. Securities and Exchange Commission (the “SEC”) and available at the SEC’s Internet site (http://www.sec.gov), including the “Risk Factors” included therein. 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 changes in circumstances or events that occur after the date the forward-looking statements are made.

Palmetto Bancshares, Inc.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

Palmetto Bancshares, Inc.

Consolidated Statements of Income (Loss)

(dollars in thousands)

(unaudited)

Reconciliation of Non-GAAP to GAAP Financial Statements

(dollars in thousands)