FORM 4 Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940

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(Print or Type Responses)

1. Name and Address of Reporting Person * READER PAUL H   2. Issuer Name and Ticker or Trading Symbol CORNERSTONE BANCORP INC [cbn] 5. Relationship of Reporting Person(s) to Issuer (Check all applicable) __X__ Director _____ 10% Owner __X__ Officer (give title below) _____ Other (specify below) Senior Vice President (Last) (First) (Middle) 181 CARTER ST 3. Date of Earliest Transaction (Month/Day/Year) 07/13/2005 (Street) NEW CANAAN, CT 06840 4. If Amendment, Date Original Filed(Month/Day/Year) 6. Individual or Joint/Group Filing(Check Applicable Line) _X_ Form filed by One Reporting Person ___ Form filed by More than One Reporting Person (City) (State) (Zip) Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned

1.Title of Security (Instr. 3) 2. Transaction Date (Month/Day/Year) 2A. Deemed Execution Date, if any (Month/Day/Year) 3. Transaction Code (Instr. 8) 4. Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5) 5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4) 6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4) Code V Amount (A) or (D) Price Common Stock 07/13/2005 07/13/2005 M   23,595 A $ 8.678 41,360 D   Common Stock 07/13/2005 07/13/2005 M   1,513 A $ 8.988 42,873 D   Common Stock 07/13/2005 07/13/2005 M   7,865 A $ 8.678 50,738 (1) D   Common Stock               1,210 I Joint with wife Common Stock               885 (2) I Custodian for minor Common Stock               10,398 (3) I By trust for which he is trustee

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
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Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)

1. Title of Derivative Security (Instr. 3)

2. Conversion or Exercise Price of Derivative Security

3. Transaction Date (Month/Day/Year)

3A. Deemed Execution Date, if any (Month/Day/Year)

4. Transaction Code (Instr. 8)

5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4, and 5)

6. Date Exercisable and Expiration Date (Month/Day/Year)

7. Title and Amount of Underlying Securities (Instr. 3 and 4)

8. Price of Derivative Security (Instr. 5)

9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)

10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4)

11. Nature of Indirect Beneficial Ownership (Instr. 4)

Code

V

(A)

(D)

Date Exercisable

Expiration Date

Title

Amount or Number of Shares

Employee Stock Option - right to buy

$ 8.678

07/13/2005

07/13/2005

M

7,865

07/19/1995

07/19/2005

Common Stock

7,865

$ 8.678

0

D

Employee Stock Option - right to buy

$ 8.988

07/13/2005

07/13/2005

M

1,513

02/21/1996

02/21/2006

Common Stock

1,513

$ 8.988

0

D

Employee Stock Option - right to buy

$ 8.678

07/13/2005

07/13/2005

M

23,595

07/19/1995

07/19/2005

Common Stock

23,595

$ 8.678

0

D

Employee Stock Option - right to buy

$ 12.397

05/21/1997

05/21/2007

Common Stock

1,513

1,513

D

Employee Stock Option - right to buy

$ 16.012

12/31/1997

12/31/2007

Common Stock

14,520

16,033

D

Employee Stock Option - right to buy

$ 14.545

01/02/2002

01/02/2012

Common Stock

1,100

17,133

D

Employee Stock Option - right to buy

$ 20.3

01/02/2004

01/02/2014

Common Stock

2,000

19,133

D

Reporting Owners

Reporting Owner Name / Address	Relationships
	Director	10% Owner	Officer	Other
READER PAUL H 181 CARTER ST NEW CANAAN, CT 06840	X		Senior Vice President

Signatures

Leigh A. Hardisty		07/13/2005
**Signature of Reporting Person		Date

Explanation of Responses:

*	If the form is filed by more than one reporting person, see Instruction 4(b)(v).
**	Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1)	Approximately 0.74 fractional shares of common stock were converted to cash as a result of the termination of the Bancorp's plan for the reinvestment of dividends in May 2005.
(2)	Approximately 0.837 fractional shares of common stock were converted to cash as a result of the termination of the Bancorp's plan for the inrevestment of dividends in May 2005.
(3)	Approximately 0.83 fractional shares of common stock were converted to cash as a result of the termination of the Bancorp's plan for the reinvestment of dividends in May 2005.

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