--------------------------------------------------------------------------------

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2009               File Number 000-51950

                               CORNERSTONE BANCORP
             (Exact name of registrant as specified in its Charter)

         South Carolina                                57-1077978
  (State or Other Jurisdiction              (IRS Employer Identification Number)
 of Incorporation or Organization)

               1670 East Main Street, Easley, South Carolina 29640
                (Address of Principal Executive Office, Zip Code)

       Registrant's Telephone Number, Including Area Code: (864) 306-1444

        Securities Registered Pursuant to Section 12(b) of the Act: None

                Securities Registered Pursuant to Section 12(g)
                     of the Act: Common Stock, no par value

Indicate by check mark if the  registrant  is a  well-known  seasoned  issuer as
defined in Rule 405 of the Securities Act. Yes  [ ]  No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act.
 Yes  [ ]  No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted  and posted  pursuant to Rule 405 of  Regulation  S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to  submit  and  post  such  files).  Yes  [ ] No [ ]  (Not  yet  applicable  to
Registrant)

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act (Check one):

         Large accelerated filer  [ ]             Accelerated filer          [ ]

        Non-accelerated filer     [ ]             Smaller reporting company  [X]
 (Do not check if a smaller reporting company)

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes  [ ]  No [X]

The  aggregate  market value of the voting  Common Stock held by  non-affiliates
computed  by  reference  to the  average  of the high and low bid  prices of the
Common Stock  reported on the OTC Bulletin  Board on June 30, 2009, the last day
of  the  registrant's  most  recently  completed  second  fiscal  quarter,   was
approximately   $6,985,892.   The  issuer  has  no   non-voting   common  equity
outstanding.  For purposes of the foregoing  calculation only, all directors and
executive officers of the registrant have been deemed affiliates.

As of March 10, 2010,  there were 2,105,738  shares of the  registrant's  Common
Stock, no par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

(1)  Portions  of the  Registrant's  2009  Annual  Report  to  Shareholders  are
     incorporated by reference into Part II of this Form 10-K.
(2)  Portions of the  Registrant's  2010 Proxy  Statement  are  incorporated  by
     reference into Part III of this Form 10-K.
--------------------------------------------------------------------------------


<PAGE>
                           10-K CROSS REFERENCE INDEX

<TABLE>
<CAPTION>
                                                                                                                    Page

                                     PART I
<S>            <C>                                                                                                    <C>
Item 1.        Business................................................................................................3
Item 1A.       Risk Factors...........................................................................................12
Item 1B.       Unresolved Staff Comments..............................................................................16
Item 2.        Properties.............................................................................................16
Item 3.        Legal Proceedings......................................................................................16
Item 4.        (Removed and Reserved).................................................................................16

                                     PART II
Item 5.        Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
               Equity Securities......................................................................................16
Item 6.        Selected Financial Data................................................................................16
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations..................17
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk.............................................17
Item 8.        Financial Statements and Supplementary Data............................................................17
Item 9.        Changes In and Disagreements With Accountants on Accounting and Financial Disclosure...................17
Item 9A(T).    Controls and Procedures................................................................................17
Item 9B.       Other Information......................................................................................18

                                    PART III
Item 10.       Directors, Executive Officers and Corporate Governance.................................................18
Item 11.       Executive Compensation.................................................................................18
Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.........18
Item 13.       Certain Relationships and Related Transactions, and Director Independence..............................19
Item 14.       Principal Accountant Fees and Services.................................................................19
Item 15.       Exhibits, Financial Statement Schedules................................................................19
</TABLE>





<PAGE>

          CAUTIONARY NOTICE WITH RESPECT TO FORWARD LOOKING STATEMENTS

         Statements  included in this report which are not  historical in nature
are intended to be, and are hereby  identified as "forward  looking  statements"
for  purposes  of the safe  harbor  provided  by Section  21E of the  Securities
Exchange Act of 1934, as amended. Words such as "estimate," "project," "intend,"
"expect,"  "believe,"  "anticipate,"  "plan," "may," "will," "should,"  "could,"
"would," "assume," "indicate," "contemplate," "seek," "target," "potential," and
similar expressions identify  forward-looking  statements.  The Company cautions
readers that forward looking  statements  including  without  limitation,  those
relating to the  Company's new offices,  future  business  prospects,  revenues,
working capital, adequacy of the allowance for loan losses,  liquidity,  capital
needs,   interest  costs,   and  income,   are  subject  to  certain  risks  and
uncertainties  that could cause actual results to differ from those indicated in
the forward looking  statements,  due to several important factors identified in
this report,  among others,  and other risks and factors identified from time to
time in the  Company's  other  reports  filed with the  Securities  and Exchange
Commission.

         These forward-looking statements are based on our current expectations,
estimates  and  projections  about  our  industry,   management's  beliefs,  and
assumptions made by management.  Such information includes,  without limitation,
discussions  as to estimates,  expectations,  beliefs,  plans,  strategies,  and
objectives concerning the Company's future financial and operating  performance.
These  statements  are not guarantees of future  performance  and are subject to
risks, uncertainties and assumptions that are difficult to predict, particularly
in light of the fact that the Company is a  relatively  new company with limited
operating  history.  Therefore,  actual results may differ materially from those
expressed  or  forecasted  in such  forward-looking  statements.  The  risks and
uncertainties include, but are not limited to:

          o    future economic and business conditions;
          o    the Company's growth and ability to maintain growth;
          o    governmental monetary and fiscal policies;
          o    legislative and regulatory changes;
          o    the effect of  interest  rate  changes  on our  level,  costs and
               composition of deposits,  loan demand, and the values of our loan
               collateral,   securities,   and  interest  sensitive  assets  and
               liabilities;
          o    the  effects  of  competition  from  a  wide  variety  of  local,
               regional,  national and other providers of financial,  investment
               and insurance services, as well as competitors that offer banking
               products and services by mail,  telephone,  computer,  and/or the
               Internet;
          o    credit risks;
          o    higher than anticipated levels of defaults on loans;
          o    perceptions by depositors about the safety of deposits;
          o    failure of our customers to repay loans;
          o    failure  of  assumptions  underlying  the  establishment  of  the
               allowance  for loan  losses,  including  the value of  collateral
               securing loans;
          o    the risks of opening new offices, including,  without limitation,
               the related costs and time of building customer relationships and
               integrating  operations,  and the  risk  of  failure  to  achieve
               expected gains, revenue growth and/or expense savings;
          o    changes in accounting policies, rules, and practices;
          o    cost and  difficulty  of  implementing  changes in  technology or
               products;
          o    loss of consumer  confidence and economic  disruptions  resulting
               from terrorist activities;
          o    ability to weather the current economic downturn;
          o    loss of consumer or investor confidence; and
          o    other factors and information described in this report and in any
               of the other  reports we file with the  Securities  and  Exchange
               Commission under the Securities Act of 1934.

         All  forward-looking   statements  are  expressly  qualified  in  their
entirety by this  cautionary  notice.  The Company  undertakes  no obligation to


                                       2
<PAGE>

publicly update or revise any forward-looking statements, whether as a result of
new  information,   future  events  or  otherwise.  In  light  of  these  risks,
uncertainties,  and assumptions,  the  forward-looking  events discussed in this
report might not occur.


                               WEBSITE REFERENCES

         References  to our  Bank's  website  included  in, or  incorporated  by
reference  into,  this report are for  information  purposes  only,  and are not
intended to incorporate our website by reference into this report.


                                     PART I

Item 1.  Business.

General

         Cornerstone  Bancorp (the  "Company") is a South  Carolina  corporation
incorporated  in 1999. The Company is a bank holding  company with no operations
other than those carried on by its wholly owned subsidiary, Cornerstone National
Bank (the "Bank"). The Bank was organized in 1999 and conducts a general banking
business under a national bank charter  granted by the Office of the Comptroller
of the Currency of the United  States (the "OCC")  pursuant to the National Bank
Act. The Bank conducts its activities from its main office in the City of Easley
in Pickens County, South Carolina,  which opened in September,  1999, and from a
branch office located in the Berea area of Greenville  County,  South  Carolina,
which   opened   in   August,   2002,   and   from  a  branch   office   in  the
Powdersville/Piedmont  area of Anderson County, South Carolina,  which opened in
July 2005. In 2004,  our bank  established a wholly owned  subsidiary,  Crescent
Financial Services, Inc. ("Crescent"), which is an insurance agency that has not
yet engaged in any significant operations.

         The Bank's primary market areas are the city of Easley,  South Carolina
and the  immediately  surrounding  areas of  Pickens  County,  the Berea area of
Greenville  County,  and the Powdersville and Piedmont areas of Anderson County,
and  contiguous  areas.  Pickens  County is  included in the  Greenville,  South
Carolina  Metropolitan  Statistical Area (the "Greenville MSA"). Anderson County
is part of the Anderson, South Carolina MSA.

         The Bank's business primarily consists of accepting deposits and making
loans.  The Bank seeks deposit  accounts from  households  and businesses in its
primary  market areas by offering a full range of savings  accounts,  retirement
accounts,  checking  accounts,  money market accounts,  and time certificates of
deposit. It also makes commercial,  real estate and installment loans, primarily
on a secured basis, to borrowers in the Upstate area of South Carolina and makes
other  authorized  investments.  The Bank offers both  in-house and, when market
conditions reasonably allow,  brokered conventional  residential mortgage loans.
Brokered  loans are funded by a third party  investor.  The Bank stopped  making
brokered  residential  mortgage  loans in November 2009 because of  difficulties
created by current  market  conditions  in  brokering  such loans to third party
investors.  The Bank plans to reevaluate  offering  conventional 30- and 15-year
mortgage loans when the housing and mortgage lending markets stabilize. The Bank
does not hold any mortgage loans for sale.

         As of December 31, 2009, the Bank employed 36 people.

Competition

         South Carolina law permits statewide branching by banks and savings and
loan  associations.  Consequently,  many  financial  institutions  have branches
located in several  communities.  According  to the FDIC  Summary of Deposits at
June 30, 2009, in addition to the Bank,  nine  commercial  banks and two savings
institutions  operate  branches in Pickens  County.  In addition to the Bank, 29
commercial  banks and five savings  institutions  operate branches in Greenville
County. In addition to the Bank, 20 commercial banks and one savings institution
operate  branches  in  Anderson  County.  The  principal  areas and  methods  of
competition in the banking industry are the services  offered,  pricing of those
services,  the convenience and  availability of the services,  and the degree of
expertise and personal manner with which those services are offered.

         The Bank  encounters  strong  competition  from  most of the  financial
institutions in its extended market area. In the conduct of certain areas of its
business, the Bank also competes with credit unions, insurance companies,  money
market  mutual  funds and other  financial  institutions,  some of which are not


                                       3
<PAGE>

subject to the same degree of regulation and  restrictions  as the Bank. Most of
these  competitors have  substantially  greater  resources and lending abilities
than  the  Bank and  offer  certain  services,  such as  international  banking,
investment  banking,  and trust  services,  which  the Bank  does not  presently
provide.

                              SERVICES OF THE BANK
Deposits

         The Bank offers the full range of deposit services typically  available
in most banks and savings and loan  associations,  including  checking accounts,
NOW accounts,  retirement accounts (including  Individual  Retirement Accounts),
and savings and other time deposits of various  types,  ranging from daily money
market accounts to longer-term certificates of deposit. The transaction accounts
and  time  certificates  are  tailored  to the  principal  market  area at rates
competitive  with those offered in the area. All deposit accounts are insured by
the Federal  Deposit  Insurance  Corporation  ("FDIC") up to the maximum  amount
permitted by law. The Bank solicits these accounts from individuals, businesses,
associations and organizations, and government authorities.

Lending Activities

         The Bank  offers a range of  lending  services,  including,  commercial
loans,  consumer  loans,  and real estate  mortgage  loans. To address the risks
inherent in making  loans,  management  maintains an  allowance  for loan losses
based on, among other things,  an evaluation of the Bank's loan loss experience,
management's  experience at other financial institutions in the market area, the
amount  of  and  trends  in  past  due  and  nonperforming  loans,  current  and
anticipated economic changes and the values of loan collateral.  Based upon such
factors,  management makes various  assumptions and judgments about the ultimate
collectibility  of the loan  portfolio  and provides an allowance  for potential
loan losses based upon a  percentage  of the  outstanding  balances and specific
loans.  However,  because  there are  certain  risks  that  cannot be  precisely
quantified,  management's  judgment of the allowance is necessarily  approximate
and imprecise.  The adequacy and methodology of the allowance for loan losses is
also subject to regulatory examination.

         Real Estate Loans

         One of the primary  components  of the Bank's loan  portfolio  is loans
secured by first or second  mortgages on residential and commercial real estate.
These loans generally consist of short to mid-term commercial real estate loans,
construction and development  loans and residential real estate loans (including
home  equity  and  second  mortgage  loans).  Interest  rates  may be  fixed  or
adjustable and the Bank frequently charges an origination fee. The Bank seeks to
manage credit risk in the commercial real estate portfolio by emphasizing  loans
on owner-occupied  office and retail buildings where the loan-to-value  ratio at
origination,  established  by  independent  appraisals,  does not exceed 80%. In
addition,  the Bank  generally  requires  personal  guarantees  of the principal
owners of the property.  The  loan-to-value  ratio at origination  for first and
second mortgage loans generally does not exceed 80%, and for construction loans,
generally does not exceed 75% of cost. The Bank employs a reappraisal  policy to
routinely  monitor real estate  collateral values on real estate loans where the
repayment is dependent on sale of the collateral.  In addition,  in an effort to
control interest rate risk, long term  residential  mortgages are not originated
for the Bank's portfolio.

         The principal  economic risk associated with all loans,  including real
estate  loans,  is the  creditworthiness  of the  borrowers.  The  ability  of a
borrower to repay a real estate loan depends upon a number of economic  factors,
including employment levels and fluctuations in the value of real estate. In the
case of a real estate  construction  loan, there is generally no income from the
underlying property during the construction period, and the developer's personal
obligations under the loan are typically  limited.  In the case of a real estate
purchase loan that is not fully  amortized,  the borrower may be unable to repay
the loan at the end of the loan  term and thus may be forced  to  refinance  the
loan at a higher  interest rate, or, in certain cases,  the borrower may default
as a result  of its  inability  to  refinance  the loan.  Each of these  factors
increases the risk of nonpayment by the borrower.

         In  2007,  the  Company  increased  real  estate   construction   loans
approximately  60%.  This segment of the Bank's  business is managed in specific
ways in order to  minimize  the  risks  normally  associated  with  construction
lending.  Management  requires  lending  personnel to visit job sites,  maintain
frequent  contact with  borrowers  and arrange for  third-party  inspections  of
completed work prior to issuing additional  construction loan draws. As a result
of the real  estate  crisis in the  Bank's  markets  throughout  2009,  the Bank
tightened underwriting  standards.  The Bank's loan policy now contains specific
minimum net worth requirements for borrowers,  minimum debt coverage ratios, and
for loans to construct single family residential  properties,  written contracts
with the end purchaser that contain  significant  consequences  to the purchaser
for terminating the contract.

                                       4
<PAGE>

         The Bank faces additional credit risks to the extent that it engages in
making  adjustable  rate  mortgage  loans  ("ARMs").  In the case of an ARM,  as
interest  rates  increase,  the  borrower's  required  payments  increase,  thus
increasing  the  potential  for default.  The  marketability  of all real estate
loans,  including  ARMs, is also generally  affected by the prevailing  level of
interest rates.

         Commercial Loans

         The Bank  makes  loans for  commercial  purposes  in  various  lines of
business.  Commercial loans include both secured and unsecured loans for working
capital  (including  inventory and  receivables),  loans for business  expansion
(including acquisition of real estate and improvements), and loans for purchases
of equipment and  machinery.  Equipment  loans are typically  made for a term of
five  years or less at  either  fixed or  variable  rates,  with the loan  fully
amortized over the term and secured by the financed  equipment.  Working capital
loans  typically  have terms not exceeding  one year and are usually  secured by
accounts  receivable,  inventory or personal guarantees of the principals of the
business.  Commercial loans vary greatly  depending upon the  circumstances  and
loan terms are  structured  on a  case-by-case  basis to better  serve  customer
needs.

         The risks  associated  with  commercial  loans vary with many  economic
factors,  including the economy in the Bank's market areas. The well-established
banks in the Bank's market areas make  proportionately  more loans to medium- to
large-sized  businesses than the Bank makes. Many of the Bank's commercial loans
are made to small- to medium-sized  businesses,  which are not only smaller, but
may have shorter  operating  histories  and less  sophisticated  record  keeping
systems than larger  entities.  As a result,  these smaller entities may be less
able to withstand adverse  competitive,  economic and financial  conditions than
larger borrowers.  In addition,  because payments on loans secured by commercial
property  generally  depend to a large degree on the results of  operations  and
management  of the  properties,  repayment  of such loans may be  subject,  to a
greater extent than other loans, to adverse conditions in the real estate market
or the economy.

         Consumer Loans

         The Bank  makes a variety  of loans to  individuals  for  personal  and
household purposes,  including secured and unsecured installment and term loans,
home equity loans and lines of credit and unsecured  revolving  lines of credit.
The secured  installment and term loans to consumers  generally consist of loans
to  purchase  automobiles,   boats,  recreational  vehicles,  mobile  homes  and
household  furnishings,  with the  collateral  for each loan being the purchased
property.  The  underwriting  criteria for home equity loans and lines of credit
are generally the same as applied by the Bank when making a first mortgage loan,
as described above, and home equity lines of credit typically expire 15 years or
less after origination, unless renewed or extended.

         Consumer  loans  generally  involve  more credit risks than other loans
because of the type and nature of the  underlying  collateral  or because of the
absence  of any  collateral.  Consumer  loan  repayments  are  dependent  on the
borrower's  continuing  financial  stability  and  are  likely  to be  adversely
affected by job loss,  divorce and  illness.  Furthermore,  the  application  of
various  federal and state laws,  including  federal  and state  bankruptcy  and
insolvency  laws,  may limit the amount  which can be recovered on such loans in
the case of default. In most cases, any repossessed  collateral will not provide
an adequate  source of repayment of the outstanding  loan balance.  Although the
underwriting  process for consumer  loans  includes a comparison of the value of
the security,  if any, to the proposed loan amount,  the Bank cannot predict the
extent to which the  borrower's  ability to pay, and the value of the  security,
will be affected by prevailing economic and other conditions.

Other Services

         The  Bank  participates  in a  regional  network  of  automated  teller
machines  that may be used by Bank  customers  in major  cities  throughout  the
Southeast.  The Bank offers both VISA and MasterCard  brands of credit and debit
cards together with related lines of credit. The lines of credit may be used for
overdraft protection as well as pre-authorized credit for personal purchases and
expenses.  Credit cards are  underwritten  and funded by a third party provider.
The Bank also provides stored value cards,  direct deposit of payroll and social
security  checks,  and  automatic  drafts  for  various  accounts,  but does not
currently provide  international or trust banking  services,  other than foreign
currency  exchange  through a  correspondent  bank.  The Bank offers an Internet
banking    product    accessible    via   the   Bank's    custom    website   at
www.cornerstonenatlbank.com.   The  interactive   banking  product  includes  an
electronic bill payment service that allows  customers to make scheduled  and/or
recurring  bill  payments  electronically.  The Bank also  offers  remote  check
deposit  services to  commercial  and small  business  customers.  The Bank also
offers merchant and other business related services to its commercial customers.

                                       5
<PAGE>

         Until  November  2009,  the  Bank  had  a  residential   mortgage  loan
department  with a highly  experienced  staff  qualified  to make many  types of
residential  mortgage  loans.  In an effort to control  interest rate risk, long
term  residential  mortgages were  underwritten and funded by, and closed in the
name of, third party lenders. Since the third quarter of 2007, some of the third
party lenders that offer long term residential mortgages to the Bank's customers
no longer offered certain lending  programs,  or tightened  credit  standards in
response to the crisis in the sub-prime  segment of the mortgage lending market.
As a result,  there was a  significant  decrease  in the  volume of  residential
mortgages  processed by the Bank's mortgage  lending staff. In November 30, 2009
the Bank determined that the volume of mortgage loans had decreased so much that
it would be prudent to discontinue offering longer term mortgage loans. When the
market for long term mortgages  appears to have stabilized,  management plans to
reevaluate the possibility of offering long term residential mortgages.

Asset and Liability Management

         The Bank's  primary  earning  assets  consist of the loan portfolio and
investment portfolio. Management generally makes efforts to match maturities and
rates of loans and the  investment  portfolio  with those of deposits,  although
exact  matching  is  not  possible.   The  majority  of  the  Bank's  securities
investments are in marketable  obligations of government  sponsored  enterprises
and state and municipal governments, generally with varied maturities.

         Long-term loans are priced primarily to be interest-rate sensitive with
only a small portion of the Bank's  portfolio of long-term loans at fixed rates.
Such  fixed-rate  loans  generally  do not have  maturities  longer than fifteen
years, except in exceptional cases.

         Deposit  accounts  represent  the  majority of the Bank's  liabilities.
These  include  transaction  accounts,  savings and money  market  accounts  and
certificates of deposit. The maturities or repricing horizons of the majority of
interest-sensitive accounts are 12 months or less.

Additional Information

         For  additional  information  about the business of the Company and the
Bank, see Item 7- "Management's Discussion and Analysis or Plan of Operation."

Offices
         The  Company's  and  Bank's  main  office is  located at 1670 East Main
Street in Easley,  South Carolina.  The Bank also maintains  full-service branch
locations  at 45  Farrs  Bridge  Road in the  Berea  area of  Greenville,  South
Carolina and at 11000  Anderson  Highway in the  Powdersville  area of Piedmont,
South  Carolina.  An  operations  center is located at 1664 East Main  Street in
Easley,  South Carolina.  The Company owns all of these  properties and believes
they are well-suited to the banking business.


                           SUPERVISION AND REGULATION

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation  may have a material  effect on the  business  of the Company and the
Bank.

General

         The Company and the Bank operate in a highly regulated environment, and
their   business   activities   are   governed  by  statute,   regulation,   and
administrative  policies,  and  supervised  by a number  of  federal  regulatory
agencies,  including the Board of Governors of the Federal  Reserve  System (the
"Federal  Reserve"),  the Comptroller of the Currency (the "OCC"), and the FDIC.
The Company is also subject to limited  regulation by the South  Carolina  State
Board of Financial Institutions. The following discussion summarizes some of the
relevant  aspects of the laws and  regulations  that  affect the Company and the
Bank.  It is  important  to note that these laws and  regulations  are  intended
primarily  for the  benefit  and  protection  of the Bank's  depositors  and the
Depository  Insurance  Fund,  and  not  for  the  protection  of  the  Company's
shareholders  or creditors.  Proposals to change the laws and  regulations  that
govern  the  banking   industry  are  frequently   raised  in  Congress,   state
legislatures,  and various bank  regulatory  agencies,  and such  proposals have
significantly increased in the wake of the recent financial crisis. Furthermore,
financial institutions are being subjected to increased scrutiny and enforcement
activity by state and federal banking agencies,  the United States Department of


                                       6
<PAGE>

Justice,  the  Securities and Exchange  Commission,  and other state and federal
regulatory  agencies.  This increased scrutiny and enforcement  activity entails
significant potential increases in compliance requirements and associated costs.

Regulation of the Company by the Federal Reserve

         The Company is regulated by the Federal  Reserve under the BHCA.  Under
the BHCA, the Company's  activities and those of its subsidiaries are limited to
banking,  managing or controlling  banks,  furnishing  services to or performing
services  for its  subsidiaries  or  engaging  in any other  activity  which the
Federal  Reserve  determines to be so closely  related to banking or managing or
controlling banks as to be a proper incident thereto.  The Company may engage in
a broader  range of  activities  if it  becomes a  "financial  holding  company"
pursuant  to the  Gramm-Leach-Bliley  Act,  which is  described  below under the
caption "Gramm-Leach-Bliley Act"." The BHCA prohibits the Company from acquiring
direct or indirect  control of more than 5% of the  outstanding  voting stock or
substantially  all of the assets of any bank or from  merging  or  consolidating
with another bank holding company without prior approval of the Federal Reserve.
Additionally,  the BHCA prohibits the Company from engaging in or from acquiring
ownership  or control  of more than 5% of the  outstanding  voting  stock of any
company engaged in a non-banking  business unless such business is determined by
the  Federal  Reserve  to be so closely  related  to  banking as to be  properly
incident thereto. The BHCA generally does not place territorial  restrictions on
the activities of such non-banking related activities.

Obligations of the Company to its Subsidiary Bank

         A number of obligations  and  restrictions  are imposed on bank holding
companies  and their  depository  institution  subsidiaries  by Federal  law and
regulatory  policy that are designed to reduce  potential  loss  exposure to the
depositors of such depository institutions and to the FDIC insurance fund in the
event  the  depository  institution  is in danger of  becoming  insolvent  or is
insolvent.  For example, under the policy of the Federal Reserve, a bank holding
company is required to serve as a source of financial strength to its subsidiary
depository  institutions and to commit resources to support such institutions in
circumstances  where it might not do so absent such  policy.  In  addition,  the
"cross-guarantee"  provisions of the Federal  Deposit  Insurance Act, as amended
("FDIA"),  require  insured  depository  institutions  under  common  control to
reimburse  the FDIC for any  loss  suffered  or  reasonably  anticipated  by the
Deposit  Insurance  Fund of the FDIC as a result of the  default  of a  commonly
controlled insured depository  institution or for any assistance provided by the
FDIC to a  commonly  controlled  insured  depository  institution  in  danger of
default.  The FDIC may decline to enforce the  cross-guarantee  provisions if it
determines that a waiver is in the best interest of the Deposit  Insurance Fund.
The  FDIC's  claim for  damages is  superior  to claims of  shareholders  of the
insured  depository  institution  or its holding  company but is  subordinate to
claims of depositors,  secured creditors and holders of subordinated debt (other
than affiliates) of the commonly controlled insured depository institutions.

         The FDIA also provides that amounts  received from the  liquidation  or
other resolution of any insured  depository  institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit  liabilities of
the  institution  prior to payment  of any other  general  or  unsecured  senior
liability,   subordinated  liability,  general  creditor  or  shareholder.  This
provision gives depositors a preference over general and subordinated  creditors
and  shareholders  in the event a receiver is appointed to distribute the assets
of the Bank.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank
regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

         Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency  by assessment  upon the bank's  shareholders,  pro rata,  and to the
extent  necessary,  if any such assessment is not paid by any shareholder  after
three  months  notice,  to sell the stock of such  shareholder  to make good the
deficiency.


                                       7
<PAGE>

Capital Adequacy Guidelines for Bank Holding Companies and National Banks

         The various federal bank regulators,  including the Federal Reserve and
the OCC have adopted  risk-based and leverage  capital  adequacy  guidelines for
assessing bank holding company and bank capital adequacy. These standards define
what qualifies as capital and establish minimum capital standards in relation to
assets and  off-balance  sheet  exposures,  as  adjusted  for credit  risks.  In
addition,  the OCC may establish  individual minimum capital  requirements for a
national bank that are different from the general requirements.

         Failure  to meet  capital  requirements  could  subject  the  Bank to a
variety of enforcement remedies,  ranging from, for example,  prohibition of the
taking of brokered  deposits to the termination of deposit insurance by the FDIC
or the appointment of a receiver.

         The risk-based  capital  standards of both the Federal  Reserve and the
OCC explicitly identify  concentrations of credit risk and the risk arising from
non-traditional  activities, as well as an institution's ability to manage these
risks,  as  important  factors  to be taken  into  account  by the  agencies  in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital due to changes in interest rates should be considered by the agencies as
a factor in evaluating a bank's capital  adequacy.  The Federal Reserve also has
issued additional  capital  guidelines for bank holding companies that engage in
certain trading activities.

         The Bank exceeded all applicable  capital  requirements at December 31,
2009.  The Company is also subject to capital  requirements  established  by the
Federal  Reserve,  which establish  minimum ratios for capital  adequacy as they
apply to the Bank. For 2009, the Company also met its capital ratios. Additional
information about regulatory capital requirements is set forth in Note 20 to the
Company's Financial Statements,  which are included in the 2009 Annual Report to
Shareholders filed as Exhibit 13 to this Form 10-K (the "2009 Annual Report").

Payment of Dividends

         The  Company is a legal  entity  separate  and  distinct  from its bank
subsidiary.  Most of the  revenues of the  Company  are  expected to result from
dividends  paid to the Company by the Bank.  There are statutory and  regulatory
requirements  applicable  to the payment of dividends by the Bank to the Company
as well as by the Company to its shareholders.

Certain Transactions by the Company with its Affiliates

         Federal  law   regulates   transactions   among  the  Company  and  its
affiliates,  including  the  amount of bank loans to or  investments  in nonbank
affiliates  and the  amount  of  advances  to third  parties  collateralized  by
securities of an affiliate.  Further,  a bank holding company and its affiliates
are prohibited  from engaging in certain tie-in  arrangements in connection with
any extension of credit, lease or sale of property or furnishing of services.

FDIC Insurance Assessments

         The FDIC merged the Bank  Insurance  Fund and the  Savings  Association
Insurance  Fund to form the Deposit  Insurance Fund ("DIF") on March 31, 2006 in
accordance  with the  Federal  Deposit  Insurance  Reform Act of 2005.  The FDIC
maintains the DIF by assessing depository institutions an insurance premium. The
amount each institution is assessed is based upon statutory factors that include
the balance of insured  deposits  as well as the degree of risk the  institution
poses to the  insurance  fund.  The FDIC uses a risk-based  premium  system that
assesses higher rates on those  institutions that pose greater risks to the DIF.
Since January 1, 2007, the FDIC has placed each  institution in one of four risk
categories  using a two-step  process based first on capital ratios (the capital
group assignment) and then on other relevant  information (the supervisory group
assignment).  As a result of recent bank  failures  and in order to increase the
amount in the DIF to reflect the increased risk of additional  bank failures and
insurance  claims,  the FDIC  raised  its  assessments  on banks for  2009,  and
collected a special  assessment.  The Bank's  portion of the special  assessment
totaled $80,894,  and was paid in September,  2009 based on deposits at June 30,
2009. The FDIC also required insured  institutions to pay three years of deposit
insurance premiums in advance.  On December 30, 2009 the FDIC collected $997,152
from the Company for deposit insurance premiums. Of that amount, $63,002 related
to the regular quarterly  assessment,  and $934,150 related to the prepayment of
premiums for the years 2010, 2011 and 2012. In 2010 and the following two years,
on a quarterly basis, the FDIC will continue to calculate the assessment  amount
with  then  current  financial  information,   and  will  deduct  the  quarterly
assessment  amount from the prepaid  balance.  The Bank will expense the current
portion as calculated by the FDIC.

                                       8
<PAGE>

Regulation of the Bank

         The Bank is subject to the National Bank Act and the regulations of the
OCC as well as to  examination  by the OCC.  The Bank is also subject to various
other state and federal laws and  regulations,  including state usury laws, laws
relating  to  fiduciaries,  consumer  credit  laws and laws  relating  to branch
banking.  The Bank's loan  operations  are subject to certain  federal  consumer
credit laws and regulations promulgated thereunder,  including,  but not limited
to: the federal  Truth-In-Lending  Act, governing disclosures of credit terms to
consumer  borrowers;  the Home  Mortgage  Disclosure  Act,  requiring  financial
institutions to provide certain  information  concerning their mortgage lending;
the  Equal  Credit  Opportunity  Act  and  the  Fair  Housing  Act,  prohibiting
discrimination on the basis of certain  prohibited  factors in extending credit;
the Fair Credit Reporting Act, governing the use and provision of information to
credit  reporting  agencies;  the Bank Secrecy Act,  dealing  with,  among other
things,  the  reporting  of  certain  currency  transactions;  and the Fair Debt
Collection Act, governing the manner in which consumer debts may be collected by
collection agencies. The deposit operations of the Bank are subject to the Truth
in  Savings  Act,  requiring  certain  disclosures  about  rates paid on savings
accounts;  the Expedited Funds  Availability Act, which deals with disclosure of
the availability of funds deposited in accounts and the collection and return of
checks by banks;  the Right to Financial  Privacy Act,  which  imposes a duty to
maintain  certain   confidentiality  of  consumer  financial  records,  and  the
Electronic  Funds Transfer Act and  regulations  promulgated  thereunder,  which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.

         The  Bank  is  also  subject  to  the  requirements  of  the  Community
Reinvestment  Act (the  "CRA").  The CRA imposes on  financial  institutions  an
affirmative  and  ongoing  obligation  to meet the credit  needs of their  local
communities,  including low- and moderate-income neighborhoods,  consistent with
the safe and sound operation of those institutions. Each financial institution's
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also is considered in evaluating mergers,  acquisitions
and applications to open a branch or facility.

Other Safety and Soundness Regulations

         Prompt  Corrective  Action.  The federal  banking  agencies  have broad
powers under  current  federal law to take prompt  corrective  action to resolve
problems of insured depository institutions.  The extent of these powers depends
upon whether the  institutions in question are "well  capitalized,"  "adequately
capitalized,"    "undercapitalized,"    "significantly    undercapitalized"   or
"critically undercapitalized."

         A bank that is "undercapitalized"  becomes subject to provisions of the
FDIA:   restricting  payment  of  capital  distributions  and  management  fees;
requiring the FDIC to monitor the condition of the bank; requiring submission by
the bank of a capital  restoration  plan;  restricting  the growth of the bank's
assets and requiring prior approval of certain expansion proposals.  A bank that
is  "significantly   undercapitalized"   is  also  subject  to  restrictions  on
compensation  paid  to  senior  management  of  the  bank,  and a bank  that  is
"critically   undercapitalized"  is  further  subject  to  restrictions  on  the
activities of the bank and restrictions on payments of subordinated  debt of the
bank.  The  purpose  of these  provisions  is to  require  banks  with less than
adequate  capital to act quickly to restore  their  capital and to have the FDIC
move  promptly  to take over  banks  that are  unwilling  or unable to take such
steps.

         Brokered Deposits.  Under current FDIC regulations,  "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept  brokered  deposits  with a waiver  from the FDIC  (subject  to
certain  restrictions on payment of rates), while  "undercapitalized"  banks may
not accept brokered deposits.

Interstate Banking

         Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994 the Company and any other  adequately  capitalized  bank holding company
located in South  Carolina can acquire a bank located in any other state,  and a
bank  holding  company  located  outside  South  Carolina  can acquire any South
Carolina-based  bank, in either case subject to certain  deposit  percentage and
other restrictions.  Unless prohibited by state law, adequately  capitalized and
managed bank holding  companies are permitted to  consolidate  their  multistate
bank operations into a single bank subsidiary and to branch  interstate  through
acquisitions. De novo branching by an out-of-state bank is permitted only if the
laws of the host state expressly permit it. The authority of a bank to establish
and operate  branches within a state continue to be subject to applicable  state
branching laws. South Carolina law permits such interstate  branching but not de
novo branching by an out-of-state bank.

                                       9
<PAGE>

Gramm-Leach-Bliley Act

         The  Gramm-Leach-Bliley  Act,  which  makes it easier for  affiliations
between banks,  securities firms and insurance companies to take place,  removes
Depression-era barriers that had separated banks and securities firms, and seeks
to protect the privacy of consumers' financial information.

         Under  provisions of the act and regulations  adopted by the applicable
regulators,  banks,  securities  firms  and  insurance  companies  are  able  to
structure  new  affiliations  through a holding  company  structure or through a
financial  subsidiary.  The  legislation  creates a type of bank holding company
called a "financial  holding  company" which has powers much more extensive than
those of standard holding companies.  These expanded powers include authority to
engage in "financial activities," which are activities that are (1) financial in
nature;  (2)  incidental  to  activities  that are  financial in nature;  or (3)
complementary  to a  financial  activity  and that do not  impose  a safety  and
soundness risk. Significantly,  the permitted financial activities for financial
holding  companies include authority to engage in merchant banking and insurance
activities,  including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well managed, well capitalized
and  have  received  a  rating  of   "satisfactory"   on  their  last  Community
Reinvestment Act examination.

         The legislation also creates another type of entity called a "financial
subsidiary." A financial subsidiary may be used by a national bank or a group of
national  banks  to  engage  in  many of the  same  activities  permitted  for a
financial holding company,  though several of these  activities,  including real
estate development or investment,  insurance or annuity underwriting,  insurance
portfolio  investing and merchant  banking,  are reserved for financial  holding
companies.  A bank's  investment  in a financial  subsidiary  affects the way in
which the bank calculates its regulatory capital, and the assets and liabilities
of financial  subsidiaries  may not be consolidated  with those of the bank. The
bank must also be certain that its risk  management  procedures  are adequate to
protect it from  financial and  operational  risks created both by itself and by
any financial subsidiary.  Further, the bank must establish policies to maintain
the separate corporate  identities of the bank and its financial  subsidiary and
to prevent each from becoming liable for the obligations of the other.

         The Act also  establishes  the  concept  of  "functional  supervision,"
meaning that  similar  activities  should be  regulated  by the same  regulator.
Accordingly,  the Act spells out the regulatory authority of the bank regulatory
agencies,  the Securities and Exchange Commission and state insurance regulators
so that each type of activity is  supervised by a regulator  with  corresponding
expertise.  The Federal  Reserve Board is intended to be an umbrella  supervisor
with the  authority  to  require a bank  holding  company or  financial  holding
company  or any  subsidiary  of  either  to  file  reports  as to its  financial
condition,  risk management  systems,  transactions with depository  institution
subsidiaries  and  affiliates,  and compliance  with any federal law that it has
authority to enforce.

         Although the Act reaffirms that states are the regulators for insurance
activities  of  all  persons,  including  federally  chartered  banks,  the  Act
prohibits  states from preventing  depository  institutions and their affiliates
from conducting insurance activities.

         The Act also  establishes  a minimum  federal  standard  of  privacy to
protect the confidentiality of a consumer's  personal financial  information and
gives the consumer the power to choose how personal financial information may be
used by  financial  institutions.  The privacy  provisions  of the Act have been
implemented  by  adoption  of  regulations  by  various  Federal  agencies.  The
regulations  govern the  customer's  right to opt out of further  disclosure  of
nonpublic  personal  financial  information,  and  require  the Bank to  provide
initial  and annual  privacy  notices.  The Bank is also  required  to develop a
comprehensive plan for the safeguarding of customer information that encompasses
all aspects of the Bank's  technological  environment,  business practices,  and
Bank facilities.

         The Act and the  regulations  adopted  pursuant  to the Act  create new
opportunities  for the Company to offer  expanded  services to  customers in the
future,  though  the  Company  has not yet  determined  what the  nature  of the
expanded  services  might be or when the Company might find it feasible to offer
them. The Act has increased competition from larger financial  institutions that
are  currently  more  capable  than  the  Company  of  taking  advantage  of the
opportunity  to  provide a  broader  range of  services.  However,  the  Company
continues to believe that its commitment to providing high quality, personalized
service to customers will permit it to remain competitive in its market area.


                                       10
<PAGE>


Sarbanes-Oxley Act of 2002

         The  Sarbanes-Oxley  Act was  signed  into  law on July 30,  2002,  and
mandated  extensive reforms and requirements for public  companies.  The SEC has
adopted extensive regulations pursuant to the requirements of the Sarbanes-Oxley
Act.  The  Sarbanes-Oxley  Act and the  SEC's  regulations  have  increased  the
Company's  cost of  doing  business,  particularly  its fees  for  internal  and
external  audit services and legal  services,  and the law and  regulations  are
expected to continue to do so.  However,  the Company  does not believe  that it
will be  affected by  Sarbanes-Oxley  and the SEC  regulations  in ways that are
materially  different or more  onerous  than those of other public  companies of
similar size and in similar businesses.

Legislative Proposals

         Proposed legislation,  which could significantly affect the business of
banking, is introduced in Congress and the South Carolina  Legislature from time
to time.  For  example,  numerous  bills are pending in  Congress  and the South
Carolina  Legislature  to provide  various  forms of relief to  homeowners  from
foreclosure of mortgages as a result of publicity  surrounding economic problems
resulting  from  subprime  mortgage  lending  and the  economic  adjustments  in
national real estate markets.  Broader  problems in the financial  sector of the
economy,  which  became  apparent in 2008,  have led to numerous  calls for, and
legislative  and  regulatory   proposals  relating  to,   restructuring  of  the
regulation of financial  institutions.  Management of the Company cannot predict
the future course of such  legislative  proposals or their impact on the Company
and the Bank should they be adopted.

Fiscal and Monetary Policy

         Banking  is  a  business   that  depends   largely  on  interest   rate
differentials. In general, the difference between the interest paid by a bank on
its deposits and its other  borrowings,  and the interest  received by a bank on
its loans and  securities  holdings,  constitutes  the major portion of a bank's
earnings.  Thus, the earnings and growth of the Company and the Bank are subject
to the influence of economic  conditions  generally,  both domestic and foreign,
and also to the  monetary  and  fiscal  policies  of the  United  States and its
agencies,  particularly the Federal Reserve.  The Federal Reserve  regulates the
supply of money through various means,  including open-market dealings in United
States government  securities,  the discount rate at which banks may borrow from
the Federal Reserve,  and the reserve  requirements on deposits.  The nature and
timing of any changes in such  policies  and their impact on the Company and the
Bank cannot be predicted.

Governmental Response to Recent Financial Crisis

         During the fourth  quarter of 2008 and continuing  throughout  2009 the
FDIC,  the Federal  Reserve,  the Department of the Treasury and Congress took a
number of actions  designed to  alleviate  or correct  mounting  problems in the
financial  services  industry.  A number  of  these  initiatives  were  directly
applicable to community banks.

         Congress  enacted  the  Emergency  Economic  Stabilization  Act of 2008
which,  among other things,  temporarily  increased  the maximum  amount of FDIC
deposit insurance from $100,000 to $250,000 and created a Troubled Assets Relief
Program ("TARP") administered by Treasury. In October,  2008, Treasury announced
a Capital Purchase Program ("CPP") under TARP to increase the capital of healthy
banks. Under the CPP, Treasury would purchase preferred stock with warrants from
qualified banks and bank holding companies in an amount up to 3% of the seller's
risk-weighed  assets  as  of  September  30,  2008.   Institutions   wishing  to
participate in the CPP were required to file an application with their principal
federal  regulators.   The  Company  filed  such  an  application  and  received
preliminary  approval to sell  preferred  stock to the Treasury,  but ultimately
elected not to  participate  in the CPP because of (i) the cost of the preferred
stock, (ii) the open-ended  administrative burdens associated with the preferred
stock,  including  having to agree to allow Treasury to amend  unilaterally  the
stock purchase agreement to comply with subsequent changes in applicable federal
statutes,  (iii)  the fact  that the  Company  and the Bank  were  already  well
capitalized  under regulatory  guidelines and expected to continue to be so, and
(iv) management's  belief that other sources of capital were, and would continue
to be, available should additional capital be needed.

         The FDIC  also  implemented  in  October,  2008 a  Temporary  Liquidity
Guarantee Program consisting of a deposit insurance  component pursuant to which
it  undertook  to  provide  deposit   insurance  in  an  unlimited   amount  for
non-interest  bearing  transaction  accounts,  and a  debt  guarantee  component
pursuant to which it undertook to fully guarantee senior,  unsecured debt issued
by banks or bank holding  companies.  Coverage of both  components was automatic
until December 5, 2008, at which time covered  institutions could opt out of one
or both of the components. Institutions not opting out would be charged fees for
their  participation  in the  components.  The  Bank  did not opt out of  either
component.

                                       11
<PAGE>

         An  unfortunate  consequence  of the  difficulties  that have beset the
banking  industry in the last year has been a large  increase in bank  failures,
which has led to  substantial  claims  being made  against  the  FDIC's  Deposit
Insurance   Fund.  See  "FDIC  Insurance   Assessments"   above  for  additional
information.

         Additional  governmental  efforts to ameliorate the problems afflicting
the banking  industry have been adopted or proposed,  or are being considered by
Congress and various governmental  entities.  The Company is presently unable to
predict the impact of any such changes, although it appears that they are likely
to increase  operating  expenses in the near term  without  creating  completely
offsetting benefits.

Item 1A.   Risk Factors

                          Risks Related to Our Business

There can be no  assurance  that  recent  government  actions  will  continue to
stabilize the U.S. financial system.

         In response to the financial  crises  affecting the banking  system and
financial  markets  and going  concern  threats  to  investment  banks and other
financial  institutions,  various  branches and agencies of the U.S.  government
have  put in place  laws,  regulations  and  programs  to  address  capital  and
liquidity issues in the banking system.  There can be no assurance,  however, as
to the actual impact that such laws,  regulations  and programs will have on the
financial  markets,  including the extreme levels of  volatility,  liquidity and
confidence issues, and limited credit availability  currently being experienced.
The  failure  of such laws,  regulations  and  programs  to help  stabilize  the
financial  markets and a continuation or worsening of current  financial  market
conditions  could  materially  and  adversely  affect  our  business,  financial
condition,  results of operations,  access to credit or the trading price of our
common stock.

Recent levels of market volatility are unprecedented.

         The  volatility  and  disruption  of financial  and credit  markets has
reached  unprecedented  levels for recent times. In some cases, the markets have
produced downward  pressure on stock prices and credit  availability for certain
issuers  without  regard to those issuers'  underlying  financial  strength.  If
current levels of market disruption and volatility continue or worsen, there can
be no assurance  that we will not  experience  an adverse  effect,  which may be
material,  on our  ability  to access  capital  and on our  business,  financial
condition and results of operations.

The soundness of other financial institutions could adversely affect us.

         Financial  services  institutions  are  interrelated  as  a  result  of
trading,  clearing,  counterparty,  or other relationships.  We have exposure to
many  different   industries  and  counterparties,   and  we  routinely  execute
transactions with  counterparties in the financial services industry,  including
brokers,  dealers,  commercial banks, investment banks, and government sponsored
enterprises. Many of these transactions expose us to credit risk in the event of
default of our  counterparty.  In addition,  our credit risk may be  exacerbated
when the  collateral  we hold cannot be realized or is  liquidated at prices not
sufficient  to recover the full amount of the loan or other  obligation  due us.
There is no assurance  that any such losses would not  materially  and adversely
affect our results of operations or earnings.

         Our primary  source of funding  for our  operations  is  deposits  from
customers  in our local  market.  Should other banks in or near our market areas
fail, it could cause our deposit customers to lose confidence in banks and cause
them to withdraw  or  substantially  restrict  their  deposits  with us. If such
activity  reached  a high  enough  level,  it could  substantially  disrupt  our
business. There is no assurance that such disruptions, were they to occur, would
not materially and adversely affect our results of operations or earnings.

Current  market  developments  may adversely  affect our industry,  business and
results of operations.

         Dramatic  declines  in the housing  market  during the prior two years,
with falling home prices and  increasing  foreclosures  and  unemployment,  have
resulted in significant  write-downs of asset values by financial  institutions,
including  government-sponsored  entities and major  commercial  and  investment
banks. These write-downs,  initially of mortgage-backed securities but spreading


                                       12
<PAGE>

to credit default swaps,  other derivative  securities,  and mortgage loans have
caused many financial  institutions  to seek additional  capital,  to merge with
larger and stronger institutions and, in some cases, to fail. Reflecting concern
about the  stability  of the  financial  markets  generally  and the strength of
counterparties,  many lenders and institutional  investors have reduced,  and in
some cases,  ceased to provide  funding to borrowers,  including other financial
institutions.  The resulting lack of available credit, lack of confidence in the
financial  sector,  increased  volatility in the  financial  markets and reduced
business activity could materially and adversely, directly or indirectly, affect
our business, financial condition and results of operations.

Our long-term  growth strategy will require future  increases in capital that we
may not be able to accomplish.

         We are required by banking  regulators  to maintain  various  ratios of
capital to assets.  As our assets grow we expect our  capital  ratios to decline
unless we can increase our earnings or raise sufficient new capital to keep pace
with asset growth.  Our ability to raise  additional  capital,  if needed,  will
depend,  among other things,  on conditions in the capital markets at that time,
which are outside our control,  and on our financial  condition and performance.
If we are unable to limit a capital ratio decline by increasing our capital,  we
will have to  restrict  our asset  growth as we approach  the  minimum  required
capital to asset ratios.

We may be unable to successfully manage our future growth.

         Our future  profitability  will depend in part on our ability to manage
growth  successfully.  Our ability to manage growth  successfully will depend on
our  ability to  maintain  cost  controls  and asset  quality  while  attracting
additional loans and deposits, as well as on factors beyond our control, such as
economic conditions and interest rate trends. If we grow too quickly and are not
able to control  costs and  maintain  asset  quality,  growth  could  materially
adversely affect our financial performance.

We depend on the  services  of a number of key  personnel,  and a loss of any of
those personnel could disrupt our operations and result in reduced revenues.

         We are a relationship-driven  organization.  Our growth and development
to date have  depended  in large part on the  efforts  of our senior  management
team.  These senior  officers  have primary  contact with our  customers and are
extremely important in maintaining personalized  relationships with our customer
base,  which are key aspects of our business  strategy,  and in  increasing  our
market  presence.  The  unexpected  loss of services of one or more of these key
employees  could have a material  adverse  effect on our operations and possibly
result in  reduced  revenues  if we were  unable to find  suitable  replacements
promptly.

If our  loan  customers  do not  pay  us as  they  have  contracted  to,  we may
experience losses.

         Our  principal  revenue  producing  business  is making  loans.  If our
customers do not repay the loans, we will suffer losses. Even though we maintain
an allowance for loan losses, the amount of the allowance may not be adequate to
cover the losses we  experience.  We attempt to mitigate this risk by a thorough
review of the  creditworthiness of loan customers.  Nevertheless,  there is risk
that  our  credit  evaluations  will  prove  to be  inaccurate  due  to  changed
circumstances or otherwise.

Our business is concentrated in the Upstate area of South Carolina,  and, as has
been the case over the past two years,  a downturn in the economy of the area, a
decline  in area real  estate  values or other  events  in our  market  area may
adversely affect our business.

         Substantially  all of our  business is located in the  Upstate  area of
South Carolina.  As a result, our financial  condition and results of operations
are  affected by changes in the Upstate  economy.  As has been the case over the
prior two years, a prolonged period of economic recession,  a general decline in
real estate  values in our market area or other adverse  economic  conditions in
the  Upstate  and South  Carolina  may  result in  decreases  in demand  for our
services,  increases  in  nonpayment  of loans  and  decreases  in the  value of
collateral  securing  loans,  which could have a material  adverse effect on our
business,  future prospects,  financial condition or results of operations.  The
longer such adverse economic conditions persist,  the greater the adverse impact
on us will be.


                                       13
<PAGE>

We face strong competition from larger,  more established  competitors which may
adversely affect our ability to operate profitably.

         We encounter strong competition from financial  institutions  operating
in the Upstate area of South Carolina.  In the conduct of our business,  we also
compete with credit unions,  insurance companies,  money market mutual funds and
other financial  institutions,  some of which are not subject to the same degree
of regulation as we are. Many of these  competitors have  substantially  greater
resources  and  lending  abilities  than we have  and  offer  services,  such as
investment  banking,  trust and  international  banking  services that we do not
provide.  We believe that we have been able to, and will continue to be able to,
compete  effectively with these institutions  because of our experienced bankers
and  personalized  service,  as well as through  loan  participations  and other
strategies and techniques. However, we cannot promise that we are correct in our
belief.  If we are wrong,  our ability to operate  profitably  may be negatively
affected.

Technological changes affect our business,  and we may have fewer resources than
many of our competitors to invest in technological improvements.

         The   financial   services   industry   continues   to  undergo   rapid
technological  changes  with  frequent  introductions  of new  technology-driven
products and services.  In addition to enabling financial  institutions to serve
clients better, the effective use of technology may increase  efficiency and may
enable financial institutions to reduce costs. Our future success may depend, in
part,  upon our ability to use technology to provide  products and services that
provide  convenience to customers and to create  additional  efficiencies in our
operations.  We may need to make significant  additional capital  investments in
technology in the future,  and we may not be able to  effectively  implement new
technology-driven   products  and  services.   Many  of  our  competitors   have
substantially greater resources to invest in technological improvements.

Our  profitability  and liquidity are affected by changes in interest  rates and
economic conditions.

         Our  profitability  depends upon our net interest income,  which is the
difference between interest earned on our interest earning assets, such as loans
and investment securities, and interest expense on interest bearing liabilities,
such as deposits and borrowings.  Our net interest income is adversely  affected
when market  interest rates change such that the interest we pay on deposits and
borrowings  increases  faster than the interest earned on loans and investments,
or,  conversely,  when the interest  earned on loans and  investments  decreases
faster than the interest we pay on deposits and borrowings.  Interest rates, and
consequently  our  results of  operations,  are  affected  by  general  economic
conditions (domestic and foreign) and fiscal and monetary policies. Monetary and
fiscal policies may materially affect the level and direction of interest rates.
Increases in interest  rates  generally  decrease the market  values of interest
earning  investments  and loans  held and  therefore  may  adversely  affect our
liquidity and  earnings.  Increased  interest  rates also  generally  affect the
volume of  mortgage  loan  originations,  the  resale  value of  mortgage  loans
originated  for resale,  and the ability of borrowers to perform under  existing
loans of all types.  In 2007 and 2008, the Federal  Reserve  decreased  interest
rates  significantly,  and has held rates to historically low levels  throughout
2009.  When the  Federal  Reserve  begins to  increase  interest  rates  back to
equilibrium  rates,  rapid  increases in rates could expose the Bank to interest
rate risk.  Management  plans for possible  changes in interest  rates and takes
steps to  capitalize  on  changes  in rates to  increase  net  interest  income.
However,  the  difficulty in  predicting  the timing and magnitude of changes in
interest  rates  creates the risk that our plans are not properly  suited to the
actual changes in rates that occur.

                        RISKS RELATED TO OUR COMMON STOCK

Our  common  stock  has a limited  trading  market,  which  may make the  prompt
execution of sale transactions difficult.

         Although  our  common  stock  may be  traded  from  time  to time on an
individual  basis,  no active trading market has developed and none is likely to
develop  in the  foreseeable  future.  Our  common  stock is not  traded  on any
exchange.  Accordingly, if you wish to sell shares you may experience a delay or
have to sell them at a lower price in order to sell them promptly, if at all.

We may issue additional  securities,  which could affect the market price of our
common stock and dilute your ownership.

          We may issue  additional  securities to raise additional  capital,  to
support growth, or to make acquisitions. Sales of a substantial number of shares
of our common  stock,  or the  perception  by the market  that those sales could


                                       14
<PAGE>

occur, could cause the market price of our common stock to decline or could make
it more difficult for us to raise capital through the sale of common stock or to
use our common stock in future acquisitions.

We do not plan to pay cash dividends in the foreseeable future.

         We have paid a cash  dividend  only  once,  and do not plan to pay cash
dividends again in the foreseeable  future.  We plan to use the funds that might
otherwise be  available to pay  dividends to increase our capital and expand our
business.

         Declaration  and payment of dividends are within the  discretion of our
board of directors.  Our Bank will be our most likely source of funds with which
to pay cash dividends. Our Bank's declaration and payment of future dividends to
us are within the discretion of the Bank's board of directors, and are dependent
upon its earnings,  financial condition,  its need to retain earnings for use in
the business and any other pertinent factors. The Bank's payment of dividends is
also subject to various regulatory requirements.

Provisions  in  our  articles  of  incorporation  and  South  Carolina  law  may
discourage  or prevent  takeover  attempts,  and these  provisions  may have the
effect of reducing the market price for our stock.

         Our articles of incorporation  include several provisions that may have
the  effect  of  discouraging  or  preventing  hostile  takeover  attempts,  and
therefore of making the removal of incumbent management difficult.  In addition,
South Carolina law contains  several  provisions that may make it more difficult
for a third party to acquire  control of us without the approval of our board of
directors,  and may make it more  difficult  or  expensive  for a third party to
acquire a majority of our  outstanding  common  stock.  To the extent that these
provisions are effective in discouraging or preventing  takeover attempts,  they
may tend to reduce the market price for our stock.

Our common stock is not insured, so you could lose your total investment.

         Our  common  stock is not a  deposit  or  savings  account,  and is not
insured by the Federal  Deposit  Insurance  Corporation or any other  government
agency. Should our business fail, you could lose your total investment.

                          RISKS RELATED TO OUR INDUSTRY

We are subject to  governmental  regulation  that could  change and increase our
cost of doing business or have an adverse affect on our business.

         We  operate  in  a  highly  regulated   industry  and  are  subject  to
examination,  supervision  and  comprehensive  regulation by various federal and
state agencies. Our compliance with the requirements of these agencies is costly
and may limit our  growth and  restrict  certain  of our  activities,  including
payment of dividends, mergers and acquisitions,  investments, loans and interest
rates charged,  and locations of offices.  We are also subject to capitalization
guidelines  established  by federal  authorities  and our  failure to meet those
guidelines  could  result,  in an extreme  case,  in our Bank's  being placed in
receivership.  We are  also  subject  to some  of the  extensive  and  expensive
requirements  imposed on public companies by the  Sarbanes-Oxley Act of 2002 and
related regulations.

         Various  laws,  including  the Federal  Deposit  Insurance  Act and the
Emergency Economic Stability Act of 2008 ("EESA"),  and related  regulations are
structured  to  spread  the  governmental  costs of  problems  in the  financial
industry  broadly over the financial  industry in order to prevent the taxpayers
from having to pay such costs.  As a result,  assessments by the FDIC to pay for
deposit  insurance  have  increased,  and  will  likely  continue  to  increase,
substantially,  and the total our bank will be  required  to pay could  increase
enough to  materially  affect our income and our ability to operate  profitably.
Additionally,  EESA  contains  a  provision  for the  financial  industry  to be
required to absorb,  in an as yet undetermined  fashion,  any losses suffered by
the  government on account of its acquiring  troubled  assets under the Troubled
Assets Relief Program of EESA.

         The laws and  regulations  applicable  to the  banking  industry  could
change at any time,  particularly in light of recent developments in the economy
and the financial services  industry,  and we cannot predict the impact of these
changes on our business or profitability.  Because government regulation greatly
affects the  business and  financial  results of all  commercial  banks and bank
holding companies,  our cost of compliance could adversely affect our ability to
operate profitably.


                                       15
<PAGE>

We are  susceptible  to changes in monetary  policy and other  economic  factors
which may adversely affect our ability to operate profitably.

         Changes in governmental,  economic and monetary policies may affect the
ability of our Bank to attract  deposits  and make loans.  The rates of interest
payable  on  deposits  and  chargeable  on loans are  affected  by  governmental
regulation  and fiscal policy as well as by national,  state and local  economic
conditions.  All of these  matters  are  outside of our  control  and affect our
ability to operate profitably.

Item 1B.   Unresolved Staff Comments.

         Not applicable.

Item 2.  Properties.

         The Company owns 1.83 acres of land at 1670 East Main Street in Easley,
South Carolina where its main office and an operations  center are located.  The
Company  also owns 6.197  acres of land in the 40 block of Farrs  Bridge Road in
the Berea area of  Greenville,  South  Carolina where a branch office is located
and .95 acres of land in the Powdersville area of Piedmont, South Carolina where
another branch is located.

Item 3.  Legal Proceedings.

         The  Company  may  from  time  to  time be a  party  to  various  legal
proceedings  arising in the ordinary  course of business,  but management of the
Company  is not aware of any  pending or  threatened  litigation  or  unasserted
claims or assessments that are expected to result in losses,  if any, that would
be material to the Company's business and operations.

Item 4.  (Removed and Reserved).


                                     PART II

Item 5.  Market for Registrant's Common Equity,  Related Stockholder Matters and
         Issuer Purchases of Equity Securities.

         The  information  set forth in the 2009 Annual  Report to  Shareholders
(the "2009  Annual  Report")  under the caption  "Market  for Common  Equity and
Related  Stockholder  Matters,"  which is  included in Exhibit 13 to this Annual
Report on Form 10-K, is incorporated herein by reference.

         The information  required by Item 201(d) of Regulation S-K is set forth
in Item 12 hereof.

         During the quarter  ended March 31,  2009,  the Company  issued  14,172
shares of its common stock to one director  and one  executive  officer upon the
exercise of options,  as reported in the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2009. Issuance of such shares was not registered
under the  Securities  Act of 1933 in reliance  upon the  exemption  provided by
Section 4(2) thereof because the issuance did not involve a public offering. The
Company  has not in the  past  year  sold any  other  securities  that  were not
registered under the Securities Act of 1933.

         Neither the Company nor any  "affiliated  purchaser"  (as defined in 17
C.F.R.  240.10b-18(a)(3))  purchased  any  shares  or units of any  class of the
Company's  equity  securities  that is registered  pursuant to Section 12 of the
Exchange Act during the fourth quarter of 2009.

Item 6.  Selected Financial Data.

         Not applicable.


                                       16
<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

         The  information  set forth in the 2009 Annual Report under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," which is included in Exhibit 13 to this Annual Report on Form 10-K,
is incorporated herein by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

          Not applicable.

Item 8.  Financial Statements and Supplementary Data.

         The Consolidated  Financial  Statements and notes thereto and Report of
Independent  Registered  Public  Accounting  Firm set  forth in the 2009  Annual
Report, which are included in Exhibit 13 to this Annual Report on Form 10-K, are
incorporated herein by reference.

Item 9.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

         Not Applicable.

Item 9A(T)  Controls and Procedures.

Disclosure Controls and Procedures

         Based on the evaluation required by 17 C.F.R. Section  240.13a-15(b) or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17  C.F.R.  Sections  240.13a-15(e)  and  240.15d-15(e)),  the  Company's  chief
executive  officer and chief financial  officer concluded that such controls and
procedures,  as of the end of the  year  covered  by this  annual  report,  were
effective.

Management's Annual Report on Internal Control Over Financial Reporting

         Management is responsible for  establishing  and  maintaining  adequate
internal control over financial  reporting,  as such term is defined in Exchange
Act Rule 13a-15(f).  A system of internal control over financial  reporting is a
process designed to provide  reasonable  assurance  regarding the reliability of
financial  reporting and the  preparation  of financial  statements for external
purposes in accordance with generally accepted accounting principles.

         Under  the  supervision  and  with  the  participation  of  management,
including the principal  executive officer and the principal  financial officer,
the Company's management has evaluated the effectiveness of its internal control
over  financial  reporting  as of  December  31,  2009  based  on  the  criteria
established in a report entitled "Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission" and the
interpretive guidance issued by the Commission in Release No. 34-55929. Based on
this evaluation,  the Company's  management has evaluated and concluded that the
Company's internal control over financial reporting was effective as of December
31, 2009.

         This  annual  report  does not  include  an  attestation  report of the
Company's  independent  registered  public  accounting  firm regarding  internal
control over financial reporting because  management's report was not subject to
attestation  by the  Company's  registered  public  accounting  firm pursuant to
temporary  rules of the  Securities  and  Exchange  Commission  that  permit the
Company to provide only management's report in this annual report.

Changes in Internal Control Over Financial Reporting

         The  Company is  continuously  seeking to improve  the  efficiency  and
effectiveness  of its operations and of its internal  controls.  This results in
modifications to its processes throughout the Company.  However,  there has been
no change in its internal control over financial  reporting that occurred during
the Company's  most recent fiscal quarter that has  materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.


                                       17
<PAGE>

Item 9B.  Other Information

         No  information  was  required to be  disclosed in a report on Form 8-K
during the fourth quarter of 2009 that was not disclosed.

                                    PART III

Item 10. Directors, Executive Officers and Corporate Governance.

         The  information  set  forth  under  the  captions  "Management  of the
Company" and "Section 16(a) Beneficial  Ownership  Reporting  Compliance" in the
Company's  Proxy  Statement for the Annual Meeting of Shareholders to be held on
May 11, 2010 (the "2010 Proxy Statement") is incorporated herein by reference.

Code of Ethics

         The  Company  has  adopted a code of ethics  (as  defined  by 17 C.F.R.
229.406) that applies to its principal executive officer and principal financial
officer.  The Company will provide a copy of the code of ethics, free of charge,
to any person upon written  request to Jennifer M.  Champagne,  Chief  Financial
Officer,  Cornerstone  Bancorp,  1670 East Main Street,  Easley,  South Carolina
29640.

Audit Committee

         The  Company  has  a  separately-designated  standing  Audit  Committee
established in accordance  with Section  3(a)(58)(A) of the Securities  Exchange
Act of 1934. The Audit  Committee is  responsible  for seeing that audits of the
Company are conducted annually. An independent registered public accounting firm
is employed for that purpose by the Board of Directors  upon  recommendation  of
the Audit Committee.  Reports on these audits are reviewed by the Committee upon
receipt and a report thereon is made to the Board at its next meeting. The Audit
Committee is comprised of Messrs. Gaston, Hooper, Hendricks,  Spearman and Wike,
each of whom is independent as defined in the Nasdaq Rules.  The Audit Committee
operates pursuant to a written charter.

Audit Committee Financial Expert

         The Company's  board of directors has determined  that the Company does
not have an "audit committee  financial expert," as that term is defined by Item
407(d)(5)  of  Regulation  S-K   promulgated  by  the  Securities  and  Exchange
Commission,  serving on its audit committee.  The Company's audit committee is a
committee  of  directors  who  are  elected  by the  shareholders  and  who  are
independent of the Company and its  management.  After  reviewing the experience
and  training  of all of the  Company's  independent  directors,  the  board  of
directors  has  concluded  that no  independent  director  meets the SEC's  very
demanding  definition.  Therefore,  it would be  necessary  to find a  qualified
individual willing to serve as both a director and member of the audit committee
and have that  person  elected  by the  shareholders  in order to have an "audit
committee  financial  expert"  serving on the  Company's  audit  committee.  The
Company's audit committee is, however,  authorized to use consultants to provide
financial  accounting  expertise in any instance  where members of the committee
believe  such  assistance  would be useful.  Accordingly,  the Company  does not
believe that it needs to have an "audit committee financial expert" on its audit
committee.

Item 11. Executive Compensation.

         The information set forth under the captions "Management  Compensation"
and  "Compensation  of  Directors" in the 2010 Proxy  Statement is  incorporated
herein by reference.

Item 12. Security  Ownership of  Certain  Beneficial  Owners and  Management and
         Related Stockholder Matters.

         The  information  set forth under the caption  "Security  Ownership  of
Certain  Beneficial  Owners  and  Management"  in the 2010  Proxy  Statement  is
incorporated herein by reference.

                      Equity Compensation Plan Information

         The  following  table sets forth  information  as of December  31, 2009
about all of the Company's compensation plans (including individual compensation
arrangements)  under which equity  securities of the Company are  authorized for
issuance.

                                       18
<PAGE>
<TABLE>
<CAPTION>

                            Number of securities                                      Number of securities remaining
                             to be issued upon            Weighted-average            available for future issuance
                                exercise of               exercise price of          under equity compensation plans
                            outstanding options,        outstanding options,         (excluding securities reflected
Plan Category               warrants and rights          warrants and rights                  in column (a))
-------------               -------------------          -------------------                  --------------
                                    (a)                          (b)                                (c)
<S>                               <C>                           <C>                               <C>
Equity compensation
plans approved by
security holders .........        106,255                       $9.82                             59,487

Equity compensation
plans not approved by
security holders .........              -                           -                                  -
                                  -------                                                         ------

Total ....................        106,255                                                         59,487
                                  =======                                                         ======
</TABLE>



         The equity  securities  shown in the table under  "Equity  compensation
plans approved by security  holders" are stock options  granted to employees and
directors  pursuant to the 2003 Stock Option  Plan.  Further  information  about
these  options  is set  forth in the 2010  Proxy  Statement  under  the  caption
"Management  Compensation  -- 2003  Stock  Option  Plan,"  and in Note 18 to the
Financial Statements included in Exhibit 13 to this Annual Report on Form 10-K.

Item 13. Certain   Relationships   and   Related   Transactions,   and  Director
         Independence.

         The information set forth under the captions "Certain Relationships and
Related Transactions,"  "Compensation of Directors - Organizers' Stock Warrants"
and "Governance Matters - Director  Independence" in the 2010 Proxy Statement is
incorporated  herein by  reference.  Each member of the Audit  Committee and the
Human Resources (compensation) Committee is independent as defined by the Nasdaq
Stock  Market  Marketplace  Rules.  The entire  Board of  Directors  serves as a
nominating  committee,  and not all  members  of the  Board are  independent  as
defined by such rules.

Item 14. Principal Accountant Fees and Services

                  The information set forth under the caption "Registered Public
         Accounting Firm" in the 2010 Proxy Statement is incorporated  herein by
         reference.

Item 15. Exhibits

(a)      Exhibits, Financial Statement Schedules.

Financial Statements

The following financial statements are filed with this report:

     -    Report of Independent Registered Public Accounting Firm.

     -    Consolidated Balance Sheets as of December 31, 2009 and 2008.

     -    Consolidated  Statements of Income (Loss) for the years ended December
          31, 2009, 2008 and 2007.

     -    Consolidated  Statements  of  Shareholders'  Equity and  Comprehensive
          Income for the years ended December 31, 2009, 2008 and 2007.

     -    Consolidated Statements of Cash Flows for the years ended December 31,
          2009, 2008 and 2007.

     -    Notes to Consolidated Financial Statements.

                                       19
<PAGE>

<TABLE>
<CAPTION>
Exhibit No.              Description
<C>                      <C>
3.1                      Articles of Incorporation of Registrant (1)
3.2                      Bylaws of Registrant (1)
10.1                     Form of Organizers' Option Agreements (2)
10.2                     Cornerstone Bancorp 2003 Stock Option Plan (3)
10.3                     Amended  Change of Control  Agreement  between  the Company and J. Roger
                         Anthony (4)
10.4                     Form of Amended  Change of Control  Agreement  between  the  Company and
                         each of Jennifer M. Champagne and Susan S. Jolly (4)
10.5                     Form of Amendment to Endorsement  Method Split Dollar Plan,  dated as of
                         December  5,  2007,  between  the  Company's  wholly-owned   subsidiary,
                         Cornerstone  National Bank, and each of J. Rodger  Anthony,  Jennifer M.
                         Champagne and Susan S. Jolly (4)
13                       Portions  of  2009  Annual  Report  to   Shareholders   incorporated  by
                         reference into this Form 10-K
21                       Subsidiaries of Registrant
31-1                     Rule 13a-14(a) Certifications
31-2                     Rule 13a-14(a) Certifications
32                       Section 1350 Certifications
</TABLE>
-----------------
(1)  Incorporated  by  reference  to  Registration  Statement  on Form SB-2 (No.
     333-79543).
(2)  Incorporated  by  reference  to Annual  Report on Form  10-KSB for the year
     ended December 31, 1999.
(3)  Incorporated  by  reference  to  Quarterly  Report on Form  10-QSB  for the
     quarter ended June 30, 2003.
(4)  Incorporated by reference to Report on Form 8-K filed December 6, 2007.


SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                               Cornerstone Bancorp


March 30, 2010                       By: s/J. Rodger Anthony
                                        ----------------------------------------

                                           J. Rodger Anthony
                                           President and Chief Executive Officer

                                     By: s/Jennifer M. Champagne
                                        ----------------------------------------
                                           Jennifer M. Champagne
                                           Chief Financial Officer
                                           (Principal Financial and Principal
                                            Accounting Officer)


                                       20
<PAGE>


         Pursuant to the  requirements  of the  Securities  Exchange Act of 1934
this  Report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature                                Title                                              Date

<S>                                      <C>                                                <C>
s/J. Rodger Anthony
-------------------------
J. Rodger Anthony                        President, Chief Executive Officer, Director       March  30, 2010

-------------------------
Walter L. Brooks                         Director                                           March  __, 2010

s/Jennifer M. Champagne
-------------------------
Jennifer M. Champagne                    Chief Financial Officer , Director                 March  30, 2010

s/Janice E. Childress
-------------------------
Janice E. Childress                      Director                                           March  30, 2010

s/J. Bruce Gaston
-------------------------
J. Bruce Gaston                          Director                                           March  30, 2010

s/S. Ervin Hendricks, Jr.
-------------------------
S. Ervin Hendricks, Jr.                  Director                                           March  30, 2010

s/Joe E. Hooper
-------------------------
Joe E. Hooper                            Director                                           March  30, 2010

s/Susan S. Jolly
-------------------------
Susan S. Jolly                           Director                                           March  30, 2010

s/Robert R. Spearman
-------------------------
Robert R. Spearman                       Director                                           March  30, 2010

s/John M. Warren, Jr., M.D.
-------------------------
John M. Warren, Jr., M.D.                Director                                           March  30, 2010

s/George I. Wike, Jr.
-------------------------
George I. Wike, Jr.                      Director                                           March  30, 2010
</TABLE>


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                  Exhibit Index

Exhibit No.              Description
<C>                      <C>
3.1                      Articles of Incorporation of Registrant (1)
3.2                      Bylaws of Registrant (1)
10.1                     Form of Organizers' Option Agreements (2)
10.2                     Cornerstone Bancorp 2003 Stock Option Plan (3)
10.3                     Amended  Change of Control  Agreement  between  the Company and J. Roger
                         Anthony (4)
10.4                     Form of Amended  Change of Control  Agreement  between  the  Company and
                         each of Jennifer M. Champagne and Susan S. Jolly (4)
10.5                     Form of Amendment to Endorsement  Method Split Dollar Plan,  dated as of
                         December  5,  2007,  between  the  Company's  wholly-owned   subsidiary,
                         Cornerstone  National Bank, and each of J. Rodger  Anthony,  Jennifer M.
                         Champagne and Susan S. Jolly (4)
13                       Portions  of  2009  Annual  Report  to   Shareholders   incorporated  by
                         reference into this Form 10-K
21                       Subsidiaries of Registrant
31-1                     Rule 13a-14(a) Certifications
31-2                     Rule 13a-14(a) Certifications
32                       Section 1350 Certifications
</TABLE>
-----------------
(1)  Incorporated  by  reference  to  Registration  Statement  on Form SB-2 (No.
     333-79543).
(2)  Incorporated  by  reference  to Annual  Report on Form  10-KSB for the year
     ended December 31, 1999.
(3)  Incorporated  by  reference  to  Quarterly  Report on Form  10-QSB  for the
     quarter ended June 30, 2003.
(4)  Incorporated by reference to Report on Form 8-K filed December 6, 2007.



                                       22