Exhibit 99.1

The Palmetto Bank Reports Improved Fourth Quarter Financial Results

Greenville, S.C. – Palmetto Bancshares, Inc. (NASDAQ: PLMT) reported a reduced consolidated net loss for the fourth quarter 2011 of $2.3 million, compared to a consolidated net loss for the third quarter 2011 of $5.5 million. The primary contributor to the net loss in both quarters was credit-related costs resulting from depressed real estate values which declined to $5.9 million in the fourth quarter 2011 from $11.1 million in the third quarter 2011. Results for the fourth quarter 2011 also included $343 thousand 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 $3.8 million in the fourth quarter 2011, compared to $4.3 million in the third quarter 2011. The quarterly reduction in net loss is a direct result of the Company’s continued execution of its strategic plan.

Highlights for the fourth quarter 2011 are summarized as follows:

“Our results for the fourth quarter continue to reflect the significant improvement in virtually all areas of the Bank that we have been working tirelessly to achieve over the last several years,” said Samuel L. Erwin, Chief Executive Officer. “During the fourth quarter we also took additional strategic actions to accelerate our return to profitability and we expect continued improvement in our financial results in 2012. While the banking industry in general continues to deal with fundamental issues such as volatile market conditions, low interest rates, slow loan growth, depressed real estate values, increased regulatory costs, and revenue challenges, our results for the fourth quarter are evidence that the proactive actions we have taken 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 $55 thousand during the quarter to $10.9 million, while the net interest margin improved 12 basis points to 3.65% from 3.53% in the prior quarter. The net interest margin has improved four 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 offset by 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 asset yields.

Noninterest Income

Noninterest income was $3.8 million during the quarter, a $504 thousand decrease from the third quarter 2011. During the fourth quarter, the Company realized gains of $101 thousand on the sale of investment securities. These gains were offset by a decrease in mortgage banking income due to lower income from the sale of mortgage loans and valuation of forward sales commitments, as well as lower fees from Trust services, credit card servicing and service charges on deposit accounts. During the third quarter 2011, the Company completed the transfer of servicing on its credit card portfolio that was sold in fourth quarter 2010 and is no longer generating this source of fee income or the associated expenses which were reflected in other noninterest expense.

Noninterest Expense

Noninterest expense was $15.1 million during the fourth quarter, a $1.3 million decrease from the third quarter 2011. Included in total noninterest expense are credit-related costs associated with loan workout expense, foreclosed real estate writedowns and expenses and losses on commercial loans held for sale which were $3.9 million in the fourth quarter and $5.5 million in the prior quarter. The decline in these expenses reflects a general 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 total noninterest expense are one-time charges of $343 thousand 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, and professional fees directly related to the strategic actions. Excluding these credit-related expenses and charges totaling $4.3 million, noninterest expenses were $10.9 million, or $71 thousand less than noninterest expense excluding credit-related expenses in the third quarter 2011, primarily as a result of lower salaries and other personnel costs.

Credit Quality

The Company continued its aggressive efforts to improve credit quality. Total nonperforming assets decreased $9.0 million in the fourth quarter 2011 and are down 43% from the peak at March 31, 2010. The decrease in nonperforming assets in the fourth quarter included the repayment of a $6.7 million loan at an amount in excess of its carrying amount and charge-offs. Net charge-offs were $3.3 million during the fourth quarter, compared to $5.7 million in the prior quarter and reflect a lower overall level of problem loans and continued moderation in the decline in property values from appraisals. In addition, past due loans improved to 0.62% of loans at December 31, 2011 compared to 0.78% at September 30, 2011, resulting in the fourth consecutive quarterly improvement.

Balance Sheet and Capital

Total assets decreased $45.4 million to $1.2 billion during the quarter as the Company continued to strategically reduce the level of excess cash, primarily by reducing the source of funding from higher cost time deposits to improve the net interest margin, efficiently utilize capital and reduce FDIC insurance premiums. Loans held for investment declined $10.3 million to $773.6 million at December 31, 2011 as net charge-offs, transfers to foreclosed real estate and principal repayments offset new loan fundings. Loans held for investment also included the transfer in of a performing loan from commercial loans held for sale in the amount of $8.1 million during the quarter. Taking into consideration the transfers to and from loans held for investment related to foreclosed real estate and commercial loans held for sale, total loans held for investment decreased $6.4 million in the fourth quarter.

The Company’s banking subsidiary, The Palmetto Bank, met all regulatory required minimum capital ratios and continued to be considered “well-capitalized” at December 31, 2011.

“During the past year we have made significant progress in our efforts to improve our credit quality and execute on the business and operational changes necessary to return to profitability,” continued Erwin. “Credit costs remain high and continue to be the primary reason for our net loss for the quarter; however, these credit-related costs are moderating and we believe they will continue to do so this year. In addition, our core business continues to show more sustained operating results and is confirmation that our hard work and strategic actions are paying off. As we begin 2012, we believe we are positioned to return to profitability later this year.”

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 and Credit Cards), 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 certain gains, losses 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 losses on commercial loans held for sale in the periods presented when assessing the performance of the Company. In addition, investors should consider the gain on the sale of the Company’s merchant services processing business in the first quarter 2010, goodwill impairment recorded in the third quarter 2010, the gain on sale of the Company’s credit card portfolio in the fourth quarter of 2010 and 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 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.

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