SecProbe.io

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                               CORNERSTONE BANCORP
                              1670 East Main Street
                          Easley, South Carolina 29642
                                 (864) 306-1444

July 29, 2005

Mr. John P. Nolan
Accounting Branch Chief
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549

         Re:  Cornerstone Bancorp, Easley, South Carolina
              Form 10-KSB filed March 24, 2005
              Form 10-QSB filed May 12, 2005
              File No. 333-79543

Dear Mr. Nolan:

Thank you for your letter dated July 22, 2005  commenting on the filings  listed
above. Set forth below are the Company's responses.

Form 10-KSB filed March 24, 2005

Business

Lending Activities, page 3

Comment 1

We note  your  disclosure  in  which  you  state  that in most  cases,  you sell
residential   mortgage  loans  upon  origination.   Please  revise  your  filing
throughout  (including  balance sheet,  cash flows, and footnotes) to separately
identify  mortgage loans held for sale.  Please revise your financial  statement
footnotes to describe your accounting policies for mortgage loans held for sale.
Refer to paragraphs 28 and 29 of SFAS 65.

         Response

         The sentence to which you refer was, perhaps,  inartfully  worded.  The
         Bank does not currently  hold,  and has not to date held,  any mortgage
         loans for  sale.  The  reference  to  mortgage  loans  being  sold upon
         origination  relates to loans that are  table-funded  by other lenders,
         not to loans booked in the name of the Bank and then sold.  These loans
         are also  referred to as  "brokered"  loans in the last sentence of the
         third paragraph under "General" on page 3 of the Form 10-KSB.  The Bank
         does not  currently  sell any loans  that have been  originated  in its
         name,  and has no present  intention to do so in the near  future.  The
         Company will clarify this point in future filings.

2004 Annual Report

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations, page 2

Other Expenses, page 8

Comment 2

We note from your  Consolidated  Statements of Income on page 19 that during the
year ended  December  31,  2004,  deposit  charge-offs  increased  approximately

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Mr. John P. Nolan
July 29, 2005
Page 2

$55,000 over the prior year and was the second  largest  component of your total
increase in noninterest expense during 2004. Please revise your MD&A to describe
what  caused  this  increase  and if this  represents  a trend that is likely to
continue in future periods.

         Response

         The  increase in total non  interest  expense from 2003 to 2004 was not
         material,  and since  the  increase  in  deposit  charge-offs  was only
         approximately one-fourth of the increase in total non interest expense,
         it was not deemed material either.  Furthermore,  we do not believe the
         increase  represents  a trend  that is  likely  to  continue  in future
         periods.  Accordingly, the Company did not discuss this increase in the
         Form 10-KSB.

         The Company did, however, discuss these deposit charge-offs in its Form
         10-QSB for the quarter  ended  September  30, 2004, on page 9 under the
         heading  "Results of Operations." As disclosed there, we noted that the
         deposit charge-offs included a loss of $25,190 on two customer accounts
         arising from  fraudulent  activity,  and we further  disclosed that ATM
         processing and deposit  charge-offs had increased due to an increase in
         the  number of demand  deposit  accounts  and the  automated  overdraft
         protection product.

         Because the increase in deposit  charge-offs was not material year over
         year,  because we do not believe the increase  represents a trend,  and
         because the reasons for the increase were  discussed in the Form 10-QSB
         relating to the quarter in which it occurred, we do not believe further
         disclosure is necessary.

Maturity Distribution of Loans, page 10

Comment 3

We note that  approximately  $57 million of your $75 million  loan  portfolio is
scheduled to mature in one year or less from  December 31, 2004.  Please tell us
how  you  considered   the  guidance  in  Item  III.B,   including  the  related
instructions  in the  preparation  of your table.  Please fully  explain how you
determined  that the majority of your loans are properly  classified  in the one
year or less table. For example,  we are unclear whether these are demand loans,
loans with rollover  features or have other terms and conditions  which lead you
to this  classification.  Please also revise your  presentation if your maturity
classifications are not correct.

         Response

         The amounts  listed under the first  column of this table  include both
         amounts maturing and repricing within one year. Amounts maturing within
         one year,  strictly by maturity date, and ignoring  repricing,  totaled
         approximately  $34.3 million at December 31, 2004. The remaining  $22.9
         million of the total $57.2 million  disclosed is tied to the Prime rate
         and can reprice within the 12 month time period.

         We included loans  repricing or maturing  within one year in the column
         "1 Year or Less" to reflect that  variable  rate loans in the portfolio
         would reprice within the one-year time frame.  Variable rate loans with
         actual  maturity  dates after one year are further  detailed  below the
         table to show the maturity  distribution of these loans. We believe the
         combination of these two items  reflects,  as closely as possible,  the
         interest rate risk inherent in the loan  portfolio.  Interest rate risk
         is one of the most  significant  risks for all depository  institutions
         that have fixed rate  interest  earning  assets  funded with fixed rate
         interest bearing  liabilities.  In management's opinion this disclosure
         enables the user of the  financial  statements to discern the amount of
         interest  rate risk that might be inherent in the  portfolio,  with the
         possible  exception  of  optionality  in the  balance  sheet  where the
         options are not controlled by the Company.  Placing variable rate loans
         in categories of this table which reflect their  maturity,  rather than
         their  repricing time frames,  would be redundant with the  information
         below the table and would not disclose the  repricing  time frame,  and

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Mr. John P. Nolan
July 29, 2005
Page 3
         would  not  enable  the user of the  financial  statements  to make any
         evaluation of interest rate risk inherent in the portfolio.

         We do not plan to change the manner of presenting  the  information  in
         this table in the future unless you require us to do so.

Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies and Activities, page 22

Comment 4

Please revise Note 1 to describe your  accounting  policies  regarding  loan and
commitment  fees for both  loans  held for  investment  and loans held for sale.
Refer to  paragraphs  20-25 of SFAS  65.  Your  revised  footnotes  should  also
specifically address how you comply with paragraphs 5 and 18-22 of SFAS 91.

         Response

         We do not hold loans for sale.  Please refer to the response to Comment
         1.

         With respect to SFAS 91, we do not defer loan fees under SFAS 91 on the
         basis that the effect on our  financial  statements  of the net fees or
         costs associated with our loans is immaterial to the loans on our books
         with maturities  greater than one year. The Company performs a detailed
         annual analysis comparing the fees from newly originated loans with the
         cost of making  these loans in order to  determine  the net  deferrable
         amount.  In each of the years for which  the  analysis  has been  done,
         including  2004 and  2003,  the net  deferrable  amount  was less  than
         $20,000,  of which  only 50%  would be  deferred  because  the  average
         remaining  maturity of the loan  portfolio  as of December 31, 2004 was
         2.02 years. Accordingly, the net deferrable amount is immaterial to the
         Company's  financial  statements.  The Company will continue to perform
         this annual  analysis,  and in the event that we  determine  the effect
         would be material to the financial statements, we will fully adopt SFAS
         91.

Comment 5

Please  revise  Note 1 to clarify  whether  you retain the  servicing  rights on
residential  mortgage  loans you sell to others.  If so,  please  also revise to
include the disclosures specified in paragraph 17e of SFAS 140.

         Response

         We do not hold loans for sale.  Please refer to the response to Comment
         1.

Comment 6

Describe whether loans are sold with or without recourse. If sold with recourse,
please  describe  the  nature  of the  recourse  provisions  and tell us how you
considered  paragraphs 9-12 of SFAS 140 in determining these transactions should
be recorded as loan sales instead of as secured borrowings.

         Response

         We do not hold loans for sale.  Please refer to the response to Comment
         1.

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Mr. John P. Nolan
July 29, 2005
Page 4

Note 4 - Investment securities, page 28

Comment 7

We note from the Consolidated  Statements of Cash Flows on page 21 that you sold
securities  during  2004 for a net gain of $5,230.  Please  quantify  for us the
types of investment  securities  sold,  amortized  amount,  fair value, and gain
recognized for each type of security.

         Response

         The  Company   sold  one   security  in  2004.   The  security  was  an
         available-for-sale security with an amortized book value of $703,192, a
         fair value of $708,422, and was sold for a gain of $5,230. The security
         was an SLMA Floater with an original  coupon of 4.48%.  During December
         2003,  it yielded only 1.65%.  Proceeds in the amount of $708,422  were
         reported in the Consolidated Statement of Cash Flows for the year ended
         December  31, 2004 and in our  quarterly  report on form 10-QSB for the
         quarter ended March 31, 2004.

Form 10-Q filed May 12, 2005

Consolidated Financial Statements

Consolidated Statements of Shareholders' Equity and Comprehensive Income, page 4

Comment 8

We note that during the first quarter of 2005, $57,327 of unrealized losses were
recorded to accumulated other  comprehensive  income (loss).  Please tell us and
revise future  filings to state whether you still have the ability and intent to
hold  securities  with  gross  unrealized  losses  until  such time as the value
recovers or the securities mature. Please also confirm and revise future filings
to disclose that you do not consider these losses to be other-than-temporary.

         Response

         Unrealized  losses of $57,327 as of March 31, 2005 are considered to be
         temporary  losses as the  Company  does have the  ability and intent to
         hold these  securities  until  maturity.  All of these  securities  are
         issued by agencies of the U.S. Government and municipal governments and
         all have AAA or Aaa ratings.  As of June 30,  2005,  Available-for-Sale
         securities  have an average life of 2.02 years.  Of the total amount of
         Available-for-Sale  securities ($7.9 million) at June 30, 2005, 72% are
         pledged  for public or other large  deposits  and sweep  accounts,  and
         would not be sold for that reason.

         The Company will disclose in future filings  whether it has the ability
         and intent to hold securities with gross  unrealized  losses until such
         time as the  value  recovers  or the  securities  mature,  and that the
         Company does not consider these losses to be other than temporary.

                                  * * * * * * *

We plan to make the  revisions  discussed  above  only  with  respect  to future
filings.  We do not believe  revising  previously filed documents to include the
additional  information would be material to an investor's decision to purchase,
sell or  continue  to  hold  our  stock.  Accordingly,  we do no plan to  revise
previously filed documents unless you require us to do so.

In connection with your comments, we acknowledge that:

 .       The  Company  is  responsible  for the  adequacy  and  accuracy  of the
         disclosure in filings  required  under the  Securities  Exchange Act of
         1934;
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Mr. John P. Nolan
July 29, 2005
Page 5

 .       Staff  comments or changes to disclosure in response to staff  comments
         do not foreclose the Commission  from taking any action with respect to
         the filing; and

 .       The  Company  may  not  assert  staff  comments  as a  defense  in  any
         proceeding  initiated by the Commission or any person under the federal
         securities laws of the United States.

We  appreciate  the  staff's  assistance  and  suggestions  to help  improve the
Company's disclosures,  and hope the above responses clarify the issues you have
raised with respect to our Form 10-KSB  dated  December 31, 2004 and Form 10-QSB
dated March 31, 2005.  Please do not hesitate to call me at  864-306-7009 or fax
me at 864-306-1473 if additional clarification or information is necessary.

Sincerely,

s/Jennifer M. Champagne
Jennifer M. Champagne
Chief Financial Officer

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