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<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'><b>UNITED STATES </b></p>

<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'><b>SECURITIES AND EXCHANGE
COMMISSION</b></p>

<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'><b>Washington, D. C. 20549</b></p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>&nbsp;</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'><b>FORM 8-K</b></p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>&nbsp;</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>CURRENT REPORT</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>&nbsp;</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>&nbsp;</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>Date of Report (Date of
earliest event reported): January 18, 2006</p>



<p align=center style='margin:0in;margin-bottom:.0001pt;
text-align:center'>&nbsp;</p>



<div align="center">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="740">
 <tr>
  <td valign=top style='width:246;padding:0in; '>

  </td>
  <td colspan=5 valign=top style='width:311;padding:0in; '>

  </td>
  <td valign=top style='width:183;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=7 valign=top style='width:740;padding:0in; '>
  <p align=center style='text-align:center'><b>Palmetto Bancshares, Inc.<br>
  </b>(Exact name of registrant as
  specified in charter)</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:246;padding:0in; '>

  &nbsp;

  </td>
  <td colspan=2 valign=top style='width:52;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:27;padding:0in; '>

  </td>
  <td valign=top style='width:183;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td valign=top style='width:246;padding:0in; '>

  &nbsp;

  </td>
  <td colspan=2 valign=top style='width:52;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:27;padding:0in; '>

  </td>
  <td valign=top style='width:183;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>
  <p style='margin-right:-17.05pt'><u>South
  Carolina&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
  <td valign=top style='width:47;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>
  <p align=center style='text-align:center'><u>&nbsp;&nbsp;&nbsp;&nbsp;
  0-26016&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td width=188 colspan=2 valign=top style='padding:0in; ' align="right">
  <p align=right style='text-align:right'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  74-2235055</u></p>
  </td>
 </tr>
 <tr>
  <td colspan=3 valign=top style='width:298;padding:0in; '>
  <p>State or
  other jurisdiction of incorporation </p>

  </td>
  <td valign=top style='width:232;padding:0in; '>
  <p align=center style='text-align:center'>Commission File Number</p>
  </td>
  <td colspan=3 valign=top width="210">
  <p align=right>IRS Employer I.D. number</p>
  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>

  &nbsp;

  </td>
  <td valign=top style='width:47;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>

  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>

  &nbsp;

  </td>
  <td valign=top style='width:47;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>

  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=4 valign=top style='width:530;padding:0in; '>
  <p><u>301
  Hillcrest Drive, Laurens, South Carolina</u></p>
  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>
  <p align=right style='text-align:right'><u>29360</u></p>
  </td>
 </tr>
 <tr>
  <td colspan=4 valign=top style='width:530;padding:0in; '>
  <p>Address
  of principal executive offices</p>
  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>
  <p align=right style='text-align:right'>Zip Code</p>
  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>

  </td>
  <td valign=top style='width:47;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>

  &nbsp;

  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>

  </td>
  <td valign=top style='width:47;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>

  &nbsp;

  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>

  </td>
  <td valign=top style='width:47;padding:0in; '>

  </td>
  <td valign=top style='width:232;padding:0in; '>
  <p style='margin-right:-15.25pt' align="center"> <u>(864) 984-4551</u></p>
  </td>
  <td valign=top style='width:22;padding:0in; '>

  </td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='width:251;padding:0in; '>

  &nbsp;</td>
  <td valign=top style='width:47;padding:0in; '>

  &nbsp;</td>
  <td valign=top style='width:232;padding:0in; '>
  <p align="center">Registrant's telephone number
  </td>
  <td valign=top style='width:22;padding:0in; '>

  &nbsp;</td>
  <td colspan=2 valign=top style='width:188;padding:0in; '>

  &nbsp;</td>
 </tr>
 </table>



</div>



<p style='text-align:justify;text-indent:.25in'>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 (<i>see</i> General
Instruction A.2. below):</p>



<p style='text-align:justify;text-indent:.25in'>[&nbsp; ]&nbsp; Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</p>



<p style='text-align:justify;text-indent:.25in'>[&nbsp; ]&nbsp; Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</p>



<p style='text-indent:.25in'>[&nbsp;&nbsp; ] Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</p>



<p style='text-indent:.25in'>[&nbsp;&nbsp; ] Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </p>

<hr color="#000080"><br clear=all
style='page-break-before:always'>




<p style='margin:0in;margin-bottom:.0001pt'><b>Item 2.02.&nbsp; Results of Operations and Financial
Condition.</b></p>

<p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt'>On January 18, 2006, Palmetto Bancshares, Inc. issued
a press release that disclosed the results of operations and financial
condition of the Company for the quarter and year-to-date periods ended
December 31, 2005.</p>



<p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p>



<p style='margin:0in;margin-bottom:.0001pt'>For more information regarding this matter, see the
shareholder earnings overview attached hereto as Exhibit 99.</p>





<p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p>





<p style='margin:0in;margin-bottom:.0001pt'><b>Item 9.01.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financial Statements and Exhibits</b></p>

<p style='margin:0in;margin-bottom:.0001pt'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt'>(d) Exhibits</p>



<p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p>



<p style='margin:0in;margin-bottom:.0001pt;text-indent:13.5pt'>99&nbsp;&nbsp; Press Release issued January 18, 2006.</p>







<p align=center style='margin-right:-9.0pt;text-align:center'>SIGNATURES</p>



<p style='margin-right:-9.0pt;text-align:justify'>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 thereunto duly authorized.</p>







<p style='margin-right:-9.0pt;text-align:justify'>PALMETTO BANCSHARES, INC.</p>





<p style='margin-right:-9.0pt;text-align:justify'>By:</p>





<p style='margin-right:-9.0pt;text-align:justify'>/s/ L. Leon Patterson<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>&nbsp;L. Leon Patterson<br>
Chairman and Chief Executive
Officer<br>
Palmetto Bancshares, Inc.</p>





<p style='margin-right:-9.0pt;text-align:justify'>&nbsp;</p>



<p style='margin-right:-9.0pt;text-align:justify'>/s/ Paul W. Stringer<br>
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
</u>Paul W. Stringer<br>
President and Chief Operating
Officer<br>
(Chief Accounting Officer)</p>



<p style='margin-right:-9.0pt;text-align:justify'>&nbsp;</p>





<p style='margin-right:-9.0pt'>Date:&nbsp;&nbsp; January 23, 2006</p>



</body>

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Prepared by E-Services - www.edgar2.com
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D. C. 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): January 18, 2006
Palmetto Bancshares, Inc.
(Exact name of registrant as
  specified in charter)
South
  Carolina
0-26016
74-2235055
State or
  other jurisdiction of incorporation
Commission File Number
IRS Employer I.D. number
301
  Hillcrest Drive, Laurens, South Carolina
29360
Address
  of principal executive offices
Zip Code
(864) 984-4551
Registrant's telephone number
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 (17 CFR 240.14d-2(b))
[   ] Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02.  Results of Operations and Financial
Condition.
On January 18, 2006, Palmetto Bancshares, Inc. issued
a press release that disclosed the results of operations and financial
condition of the Company for the quarter and year-to-date periods ended
December 31, 2005.
For more information regarding this matter, see the
shareholder earnings overview attached hereto as Exhibit 99.
Item 9.01.      Financial Statements and Exhibits
(d) Exhibits
99   Press Release issued January 18, 2006.
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 thereunto duly authorized.
PALMETTO BANCSHARES, INC.
By:
/s/ L. Leon Patterson
L. Leon Patterson
Chairman and Chief Executive
Officer
Palmetto Bancshares, Inc.
/s/ Paul W. Stringer
Paul W. Stringer
President and Chief Operating
Officer
(Chief Accounting Officer)
Date:   January 23, 2006