SecProbe.io

CORRESP
1
filename1.htm

    Unassociated Document

    Miller
& Martin PLLC

    832
Georgia Avenue

    Chattanooga,
Tennessee 37402-2289

    Phone:
(423) 756-6600

    Facsimile:
(423) 785-8480

    June 17,
2010

    VIA EDGAR
TRANSMISSION

    Mark Webb

    Legal Branch Chief

    United States Securities and Exchange
Commission

    Division of Corporation
Finance

    100 F Street, N.E.

    Washington,
D.C.  20549

    Re:         Cornerstone Bancshares, Inc.

    Registration Statement on Form
S-1

    Filed May 7, 2010

    File
No.  333-166625

    Dear Mr. Webb:

    Cornerstone Bancshares, Inc. (the “Company,” “we,” “our” or “us”)
has received your letter dated June 3, 2010 containing comments on the Company’s
above referenced Registration Statement on Form S-1 (the “Form S-1”), filed with
the Securities and Exchange Commission (the “Commission”) on May 7, 2010. On
behalf of the Company, we have set forth below the responses of the Company to
each of the comments set forth in your letter. The Company has today filed
Amendment No. 1 to the Form S-1 with the Commission (the
“Amendment”).

    For
convenience of reference, we have set forth your comments in bold below, with
the Company’s response following each comment. Capitalized terms used but not defined
herein have the meaning ascribed to such terms in the
Amendment.

    Registration Statement on
Form S-1

    Fee
Table

              1.

              Please revise the fee table to
      register the number of shares of common stock issuable upon conversion of
      the preferred stock. If you are relying on Rule 416 with respect to stock
      splits, stock dividends, or similar transactions, so indicate in a
      footnote to the fee table.

    Response:

    As reflected in the Amendment, we have
revised the fee table to clarify that we are registering 3,000,000 shares of
common stock issuable upon conversion of the Series A Preferred Stock and, in
accordance with Rule 416, such indeterminable additional shares as may be issued
to prevent dilution resulting from stock splits, stock dividends, and similar
transactions.

      June 17,
2010

      Page
2

    Risk
Factors, page 10

              2.

              We think the disclosure in a
      number of your risk factors would be improved if it was quantified where
      quantifiable factors exist and/or examples were provided. Please revise.
      We also note that certain of your risk factors should be
      updated.

    Response:

    As reflected in the Amendment, we have
revised a number of the risk factors to provide quantitative data where
quantifiable factors exist, including with respect to the amount and percentage
of our residential construction and land development loans, the amount of these
loans that have been classified as substandard or doubtful, the balance of our
allowance for loan losses, the balance of our foreclosed properties and recent
changes to the same, and the aggregate outstanding balance of our holding
company loans.

    In addition, we have updated and
clarified several risk factors, as well as related disclosure elsewhere in the
Form S-1, where we believed it to be appropriate, including to discuss our
timely compliance with the Action Plans to date, our establishment of a loan
review committee to identify and categorize problem credits, our most recent
provision for loan losses, the impact upon us of recent adverse economic
conditions in our local markets, and recent financial regulatory reform
legislation.

    Description
of the Series A Preferred Stock, page 39

              3.

              Please revise the introductory
      paragraph to indicate that all material features of the preferred stock
      are summarized in this section. Please confirm that all disclosure
      required by Item 2.02 of Regulation S-K is included. Also, please expand
      the “Ranking” subsection to address your liabilities, including deposits,
      and to indicate what would happen to the preferred stock if Cornerstone
      Community Bank went into
receivership.

    Response:

    As reflected in the Amendment, we have
revised the introductory paragraph of the section entitled “Description of the
Series A Preferred Stock” to indicate that all material features of the Series A
Preferred Stock are summarized in that section.  As requested, we
hereby confirm that all disclosure required by Item 2.02 of Regulation S-K is
included in the Amendment.  In addition, we have expanded the
“Ranking” subsection to include the requested disclosure.

      June 17,
2010

      Page
3

    *           *           *           *

    If you have any questions or require
additional information with respect to the foregoing responses, please do not
hesitate to contact me at (423) 785-8284.

    Very
truly yours,

    /s/ W.
Scott McGinness, Jr.

    W. Scott
McGinness, Jr.

    cc:          Mr.
Michael Seaman (via facsimile: (703) 813-6983)

    Mr. Nathaniel F. Hughes (via
email)