Ownership Submission
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
OMB APPROVAL
OMB Number: 3235-0287
Expires: January 31, 2005
Estimated average burden hours per response... 0.5

(Print or Type Responses)
1. Name and Address of Reporting Person *
FORGOTSON MERRILL J
  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)
President and CEO
(Last)
(First)
(Middle)
7 BAYBERRY LANE
3. Date of Earliest Transaction (Month/Day/Year)
08/04/2005
(Street)

WESTPORT, CT 06880
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 08/04/2005 08/04/2005 M   15,000 A $ 13.636 22,700 D  
Common Stock               1,260 (1) I By wife as custodian for child
Common Stock               11,060 (2) I By wife
Common stock               60 I By child
Common stock               10,398 (3) I By trust of which wife is trustee

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. SEC 1474 (9-02)

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 $ 13.636 08/04/2005 08/04/2005 M     15,000 05/29/2001 05/29/2011 Common stock 15,000 $ 13.636 7,000 D  
Employee Stock option - right to buy $ 14.545             01/02/2002 01/02/2012 Common stock 2,200   9,200 D  
Employee stock option - right to buy $ 20.3             01/02/2004 01/02/2014 Common stock 2,000   11,200 D  

Reporting Owners

Reporting Owner Name / Address Relationships
 Director  10% Owner  Officer  Other
FORGOTSON MERRILL J
7 BAYBERRY LANE
WESTPORT, CT 06880
  X     President and CEO  

Signatures

 Leigh A. Hardisty as power of attorney   08/08/2005
**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) During 2005 the reporting persons received 8.221 shares of common stock as a result of participation in the Bancorp's plan for the reinvestment of dividends. In May 2005, 0.21 shares of common stock were converted to cash as a result of the termination of the Bancorp's plan for the reinvestment of dividends.
(2) During 2005 the reporting person received 43.23 shares of common stock as a result of participation in the Bancorp's plan for the reinvestment of dividends. In May 2005, 0.74 shares of common stock were converted to cash as a result of the termination of the Bancorp's plan for the reinvestment of dividends.
(3) During 2005 the reporting person received 67.84 shares of common stock as a result of participation in the Bcorp's plan for the reinvestment of dividends. In May 2005, 0.83 shares of common stock were converted to cash as a result of termination of the Bancorp's plan for the reinvestment of dividends.

Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.

Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB number.