**Exhibit 31.1**

CERTIFICATION

I,L. Leon Patterson, certify that:  

| 1.     | I have reviewed this quarterlyreport on Form 10-Q of Palmetto Bancshares, Inc.;                                                                                                                                                                                                                                                      |
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| 2.     | Based on my knowledge, this reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this report;                               |
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| 3.     | Based on my knowledge, thefinancial statements, and other financial information included in this report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this report;                                                  |
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| 4.     | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) and internal control over financial reporting (as defined inExchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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|   |                                                                                                                                                                                                                                                                                                                                 | a. | Designed such disclosure controlsand procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which thisreport is being prepared; |
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|   |                                                                                                                                                                                                                                                                                                                                 | b. | Designed such internal control overfinancial reporting, or caused such internal control over financial reportingto be designed under our supervision, to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally acceptedaccounting principles; |
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|   |                                                                                                                                                                                                                                                                                                                                 | c. | Evaluated the effectiveness of theregistrant's disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls andprocedures, as of the end of the period covered by this report based on suchevaluation; and |
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|   |                                                                                                                                                                                                                                                                                                                                 | d. | Disclosed in this report any changein the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourthfiscal quarter in the case of an annual report) that has materially affected,or is reasonably likely to materially affect, the registrant's internal controlover financial reporting; and |
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| 5.     | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the auditcommittee of the registrant's board of directors (or persons performing theequivalent functions):                                      |
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|   |                                                                                                                                                                                                                                                                                                                                 | a. | All significant deficiencies andmaterial weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect theregistrant's ability to record, process, summarize and report financialinformation; and |
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|   |                                                                                                                                                                                                                                                                                                                                 | b. | Any fraud, whether or not material,that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting. |

/s/     L. Leon Patterson                          L.Leon PattersonChairman and Chief Executive Officer

Dated:November 9, 2006