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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2004

OR

For the transition period from              to             

Commission file number 0-11337

FOOTHILL INDEPENDENT BANCORP

(Exact name of Registrant as specified in its charter)

(626) 963-8551

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001 per share

Rights to Purchase Common Stock

(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 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 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 an accelerated filer (as defined in Securities Exchange Act Rule 12b-2).    Yes  x    No  ¨.

The aggregate market value of voting shares held by non-affiliates of Registrant as of June 30, 2003, which was determined on the basis of the closing price of Registrant’s shares on that date, was approximately $94,884,000.

As of March 9, 2005, there were 6,747,195 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Except as otherwise indicated therein, Part III of the Form 10-K is incorporated by reference from the Registrant’s Definitive Proxy Statement to be filed with the Commission on or before April 29, 2005 for its 2005 Annual Meeting.

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FOOTHILL INDEPENDENT BANCORP, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

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FORWARD LOOKING STATEMENTS

Statements contained in this Report that are not historical facts or that discuss our expectations or beliefs regarding our future operations or future financial performance, or financial or other trends in our business, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” The expectations or beliefs discussed in forward-looking statements are based on current information and the outcome of those matters are subject to a number of risks and uncertainties that could cause our financial condition or operating results in the future to differ, possibly significantly, from those expected at the current time. Those risks and uncertainties are described in Part II of this Report in the Section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations, and readers of this Report are urged to read the cautionary statements contained in that Section of this Report.

Due to these uncertainties and risks, readers are cautioned not to place undue reliance on forward-looking statements contained in this Report, which speak only as of the date of this Annual Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

Overview

Foothill Independent Bancorp (the “Company”), which was organized in 1982, is a one-bank holding company that is registered, as such, under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Like other bank holding companies in the United States, we are subject to regulation, supervision and periodic examination by the Board of Governors of the Federal Reserve System (commonly known as the “Federal Reserve Board”). We own all of the capital stock of Foothill Independent Bank, a California state-chartered bank (the “Bank”), which is our principal subsidiary and accounts for substantially all of our consolidated assets, liabilities and operating results.

The Bank, which was organized and commenced business operations in 1973, conducts a commercial banking business in the contiguous counties of Los Angeles, San Bernardino and Riverside, California, and as of December 31, 2004 had total assets of $787,000,000. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) to the maximum extent permitted by law, and the Bank is a California state chartered bank and a member of the Federal Reserve System. As a member of the Federal Reserve System and a California state chartered bank, the Bank is subject to regulation, supervision and periodic examination by the Federal Reserve Board, which is its principal federal regulatory agency, and by the California Department of Financial Institutions (the DFI). See “Supervision and Regulation” below in this Section of this Report.

The Bank offers a full range of commercial banking services including the acceptance of checking and savings deposits, and the making of various types of commercial and business loans, including credit lines and accounts receivable and inventory financing, real estate mortgage and construction loans and consumer installment loans. In addition, the Bank provides safe deposit, collection, travelers’ checks, notary public and other customary non-deposit banking services. The Bank currently operates 12 banking offices, one in each of the communities of Glendora, Upland, Claremont, Irwindale, Ontario, Rancho Cucamonga, Covina, Glendale, Corona, Chino, Monrovia, and Temecula California, which are located in the area of Southern California that includes (i) the San Gabriel Valley of Los Angeles County, (ii) the western portions of San Bernardino County, and (iii) the western and southern portions of Riverside County, which together are commonly known as the “Inland Empire.” The Bank’s organization and operations have been designed primarily to meet the banking needs of small-to-medium sized businesses, professionals and consumers, primarily in its market areas.

The Bank emphasizes personalized service, convenience and the ability to customize services to meet the banking needs of its customers in order to attract business within its market areas. Drive-up or walk-up facilities and 24-hour automated teller machines (“ATM’s”) are available at all of its banking offices. The Bank also offers internet banking services to its customers, enabling them to conduct many of their banking transactions with us

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online, from their businesses or residences, 24 hours per day, seven days per week; and a computerized telephone service, which enables customers to obtain information concerning their bank deposit accounts telephonically at any time day or night.

Consolidated Average Assets and Liabilities. The following table sets forth the average balances for each principal category of our consolidated assets and liabilities, and also of our stockholders’ equity, for each of the years in the three year period ended December 31, 2004. Average balances are based on daily averages for the Bank and monthly averages for the Company, since the Company does not maintain daily average information. We believe that the differences between monthly and daily average data (where monthly data have been used) are not significant. (Dollars are set forth in thousands.)

Deposits

Deposits represent the Bank’s primary source of funds that it uses to fund its interest-earning assets, principally loans and investment securities. The following table sets forth, as of December 31, 2004, the different categories of deposits maintained at the Bank and the number of deposit accounts, the average balance of each account and the aggregate dollar amount of the deposits in each such category:

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During the year ended December 31, 2004, average non-interest bearing demand deposits increased by $46.8 million, or 15.4%; average money market checking account deposits increased by $45.1 million, or 32.1%; average savings deposits increased by $6.0 million, or 10.1%; and average time deposits decreased by $9.8 million, or 12.2%, which was attributable to decreases of $1.9 million in TCDs and $8.0 million in other time deposits.

Although there are some business and public agency customers that carry large deposits with the Bank, we do not believe that the Bank is dependent on a single customer or even a few customers for its deposits. Most of the Bank’s deposits are obtained from individuals and small and moderate-size businesses. This results in relatively small average deposit balances, but makes the Bank less subject to the adverse effect on liquidity that can result from the loss of a substantial depositor. At December 31, 2004, no individual, corporate or public agency depositor accounted for more than 5% of the Bank’s total deposits and the five largest deposit accounts represented, collectively, 10% of total deposits.

Loan Portfolio

We offer a diverse line of loan products, including commercial loans and credit lines, SBA guaranteed business loans, accounts receivable and inventory financing, real estate mortgage and construction loans and consumer loans. The following table sets forth the types, and the amounts (in thousands of dollars), by type, of the loans that were outstanding at December 31, 2004, 2003, and 2002, respectively.

Except for the categories of loans set forth in the table above, at December 31, 2004 there were no loans outstanding to borrowers engaged in similar businesses activities that aggregated more than 10% of our loan portfolio.

Commercial Loans. The commercial loans we offer include:

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In order to mitigate the risk of borrower defaults, we generally require collateral to support the credit or personal guarantees from the borrower’s owners, or both. In addition, all loans must have well-defined primary and secondary sources of repayment. Generally, lines of credit are granted for no more than a 12-month period and are subject to frequent periodic reviews.

We also offer asset-based lending products that involve a higher degree of risk than other types of commercial loans, because asset-based loans are designed for those borrowers who do not generate cash flow from their operations that is sufficient to enable them to qualify, under our credit underwriting criteria, for unsecured loans. These borrowers generally consist of businesses that are growing rapidly, but cannot internally fund their growth without borrowings. Usually, the collateral for such loans consists of accounts receivable and inventory. We mitigate our risk by requiring loan-to-value ratios of not more than 80% and by regularly monitoring the amount and value of the collateral in order to maintain that ratio. These loans often are supported by additional collateral, usually in the form of first or second mortgages or deeds of trust on real property.

Commercial loans, including accounts receivable financing, are generally made to businesses that have been in operation for at least three years. In addition, to qualify for these loans, a borrower usually is required to have a debt-to-net worth ratio of not more than four-to-one; operating cash flow sufficient to demonstrate the ability to pay obligations as they become due; and a good payment history.

Real Estate Loans. Nonresidential real estate loans make up approximately 90% of our real estate loan portfolio, and substantially all of those loans are secured by first mortgages or deeds of trust. The remainder of our real estate loans are secured by first and second deeds of trust on residential real property.

Loans secured by nonresidential real estate often involve loan balances to single borrowers or groups of related borrowers, and generally involve a greater risk of nonpayment than do mortgage loans secured by single and multi-family dwellings. Payments on loans secured by nonresidential real estate depend to a large degree on the results of operations and dependable cash flows generated by the businesses of the borrowers or tenants at the property. As a result, repayment of these loans is affected by changes in economic conditions in general or by the real estate market more specifically. Accordingly, the nature of this type of loan makes it more difficult to monitor and evaluate. Consequently, personal guarantees from the owners of the borrowers are typically required as security for the repayment of such loans.

A customer seeking to obtain a commercial real estate loan must have a good payment record and the real property that will secure the loan must generate sufficient cash flow to cover the debt service of the loan by at least 1.25-to-1 (debt coverage ratio). If the property is owner-occupied, the owner’s business generally must have a debt coverage ratio of at least 1.50-to-1. In addition, we require insurance on the property adequate to protect the collateral value. Generally, these types of loans are written for maximum terms of 10 years with loan-to-value ratios of not more than 70%.

Consumer Loans. We offer a wide variety of loan and credit products to consumers that include personal installment loans, lines of credit and credit cards. We design these products to meet the needs of our customers and some are made at fixed rates of interest and others at adjustable rates. Consumer loans often entail greater risk than real estate mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles, which may not provide an adequate source of loan repayment in the event of a default by the borrower. As a result, consumer loan collections are dependent on borrowers’ ongoing financial stability. Furthermore, bankruptcy and insolvency laws may limit the amount that can be recovered on such loans. We require the borrower to have a good payment record and, typically, a debt-to-asset ratio of not more than 45%.

Past Due, Restructured and Non-Accrual Loans. The risk that borrowers will fail or be unable to repay their loans is an inherent part of the banking business. We follow the practice of specifically identifying loans that have become past due, either as to interest or principal, for more than 90 days. Such loans are given special attention by our credit officers and additional efforts are made to get the borrowers to bring their loans current or to provide additional collateral to reduce the risk of potential losses on those loans. Additionally, we sometimes renegotiate the payment terms of loans to permit the borrower to defer interest or principal payments in those instances where it appears that the borrower is encountering temporary or short-term financial difficulties and we believe the deferral will reduce the likelihood of an eventual loss on the loan. When we have reason to believe that continued payment of interest and principal on any loan is unlikely, the loan is placed on non-accrual status (that is, accrual of interest on the loan is discontinued and any previously accrued but unpaid interest on the loan is reversed and, therefore, the loan ceases to be an earning asset for the Bank) and we increase our efforts to recover the amounts due us, which may include the initiation of foreclosure proceedings against the collateral securing the loan.

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The following table sets forth, as of the end of each of the years in the five year period ended December 31, 2004, the amounts of our loans, by type, (i) that were more than 90 days past due, (ii) as to which the terms of payment had been renegotiated (referred to as “troubled debt restructurings”), or (iii) that had been placed on non-accrual status.

In accordance with Statement of Financial Accounting Standards N. 114, “Accounting by Creditors for Impairment of a Loan” (SFAS 114”), as amended by Statement of Financial Accounting Standards No. 118, “Accounting by Creditors for Impairment of a Loan—Income Recognition and Disclosures” (“SFAS 118”), we consider a loan to be impaired when, based upon current information and events, we believe it is probable that we will be unable to collect the entire amount due according to the contractual terms of the loan agreement. In determining impairment, we primarily evaluate those loans, both performing and non-performing, that are large non-homogenous loans in our commercial and real estate mortgage and construction loan portfolios which exhibit, among other characteristics, high loan-to-value ratios, low debt-coverage ratios, or other indications that the borrowers are experiencing increased financial difficulties. In general, payment delays of less than 90 days or payment shortfalls of less than 1% are deemed insignificant and, for that reason, would not necessarily result in the classification of such loans as impaired. However, we consider all non-accrual and troubled debt restructured loans to be impaired. Smaller balance, homogenous loans, which consist primarily of consumer installment, credit card and direct lease financing, are not considered in determining loan impairment.

A loan identified as impaired is placed on non-accrual status and is evaluated at that time and regularly thereafter to determine whether the carrying value of the loan should be written off in its entirety, as a loss, or partially written-down to what is believed to be its recoverable value, or whether the terms of the loan, including the collateral required to secure the loan, should renegotiated with the borrower. Impaired loans are written off or written down when the possibility of collecting the full balance of the loan becomes remote. The average balances of impaired loans in our loan portfolio totaled approximately $641,000 for the fiscal year ended December 31, 2004, down from $1,140,000 for fiscal 2003. During 2004, cash receipts totaling approximately $847,000 were applied to reduce the principal balances of, and $355,000 of interest income was recognized on, impaired loans and we set aside reserves for possible losses specifically on those loans of approximately $27,000, as compared to $19,000 during 2003. Additional information regarding the Bank’s loan loss reserve is set forth below in this Section of this Report under the caption, “The Reserve for Loan Losses.” Additional information regarding SFAS 114, is contained in Note 5 to the Company’s Consolidated Financial Statements that are set forth in Part II, Item 8 of this Report.

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Other Potential Problem Loans or Assets. At December 31, 2004, there were no loans in our loan portfolio as to which there were serious doubts as to the ability of the borrower to comply with then present loan repayment terms as to which we had not ceased accruing interest and there were no other interest-earning assets as to which we believe the recovery of the principal or interest is at significant risk.

The Reserve For Loan Losses. The risk that borrowers will fail or be unable to repay their loans is an inherent part of the banking business. In order to recognize on a timely basis, to the extent practicable, losses that can result from such failures, banks establish a reserve or allowance for loan losses by means of periodic charges to income referred to as “provisions for loan losses.” When we believe that collection of a loan has become unlikely, either in whole or in part, the carrying amount of the loan is written down to what is believed to be its recoverable value (in any case where the loan is believed to be collectible in part) or written off in its entirety (in any case where the loan is believed to have become uncollectible in full). The write-down in the value, or the write-off, of the loan is charged against the loan loss reserve. Periodic additions are made to the loan loss reserve by making provisions for loan losses in order (i) to replenish and thereby maintain the adequacy of the reserve following the occurrence of loan losses that have been charged against the reserve, and (ii) to increase the reserve in response to increases in the volume of outstanding loans or deteriorations in economic conditions or in the financial condition of any borrowers that increase the potential for future loan losses. At December 31, 2004 the loan loss reserve totaled approximately $5 million or 1% of total loans and leases then outstanding.

As is set forth in the following table, the loan loss reserve is allocated among the different loan categories because there are differing levels of risk associated with each such loan category. The allocation is made based on historical loss experience within each category and management’s periodic review of loans in the loan portfolio. However, the reserves allocated to specific loan categories are not the total amounts available for future losses that might occur within such categories because the total reserve is a general reserve applicable to the entire portfolio. Dollar amounts in the table are set forth in thousands.

The Investment Portfolio

As a customary part of our business, we purchase investment grade securities, consisting primarily of securities issued by the United States government and its agencies and by state and local government agencies, in order to diversify our investment risks and provide a source of liquidity for our operations. Additional objectives of our investment policy are to manage interest rate risk, and reinvest in our market areas, while maximizing earnings that can be generated from a portfolio of investment-grade securities. Each security purchased is subject to credit, maturity and liquidity guidelines that are defined in our investment policy and the securities are reviewed regularly to verify their continued creditworthiness.

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The following table summarizes the components of our investment securities at the dates indicated (in thousands):

The following table presents the maturities of our investment securities at December 31, 2004, and the weighted average yields of those securities (which, in the case of tax-exempt obligations are presented on a fully taxable basis assuming a 36.0% tax rate).

Competition

The banking business in California generally, and in our market areas in particular, is highly competitive both for loans and deposits and is dominated by a relatively small number of large multi-regional and large out-of-state based banks which have offices covering wide geographic areas. We compete for loans and deposits with such banks, as well as other independent and community banks that are based or have branch offices in our market areas, and with savings and loan associations, credit unions, mortgage companies, money market and other mutual funds, stock brokerage firms, insurance companies and other traditional and nontraditional financial institutions. We also compete for customers’ funds with governmental and private entities issuing debt or equity securities or other forms of investments which may offer different and potentially higher yields than those available through bank deposits.

Major financial institutions that operate throughout California and that have offices in our service areas include Wells Fargo Bank, Bank of America, Union Bank of California, Washington Mutual Bank, Comerica Bank, Bank of the West and Citibank. Wells Fargo Bank, Bank of America, Comerica and Citibank and Washington Mutual Bank are headquartered outside of California. Independent banks or financial institutions with offices in our service areas include, among others, City National Bank, Citizens Business Bank, PFF Bank & Trust and Vineyard Bank.

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The larger banks and some of the independent institutions have the financial capability to conduct extensive advertising campaigns and to shift their resources to regions or activities of greater potential profitability. Many of them also offer diversified financial services that we do not presently offer directly, such as trust services and international banking services. The larger banks also have substantially more capital and higher lending limits, which enables them to meet the lending needs of larger borrowers whose lending requirements exceed our lending limits.

In order to compete with the financial institutions and financial service organizations operating in our market areas, we rely on our independent status to provide flexible and personalized service to customers. We emphasize personal contacts with customers by our executive officers, directors and employees; develop and participate in local promotional activities; and seek to develop specialized or streamlined services for customers. To the extent customers desire loans in excess of our lending limit or services not offered by us, we attempt to assist customers in obtaining such loans or other services through participations with other banks or assistance from correspondent banks or third party vendors.

Additionally, a growing number of banks and financial services companies are offering customers the ability to effectuate banking transactions with them over the internet. We began offering internet banking services to consumers during 2001 and to our business customers in 2002.

Existing and future state and federal legislation could significantly affect the costs of doing business, the range of permissible activities and competitive balance among major and smaller banks and other financial institutions, all of which could affect the competitive environment in which we operate. We cannot predict the impact such legislation may have on commercial banking in general or on our business in particular. For additional information regarding these matters, see the discussion below under the caption “Supervision and Regulation.”

Supervision and Regulation

Bank holding companies and banks are regulated under extensive federal and state laws. This regulation is intended primarily for the protection of depositors and the FDIC’s deposit insurance fund and not for the benefit of stockholders. Set forth below is a summary description of the material laws and regulations which affect our operations. The description does not purport to be complete and is qualified in its entirety by reference to the laws and regulations that are summarized below.

Foothill Independent Bancorp

General. We are a registered bank holding company subject to regulation under the Bank Holding Company Act and, pursuant to that Act we are required to file periodic reports with, and we are subject to periodic examinations by, the Federal Reserve Board.

Under Federal Reserve Board regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve Board’s policy that, in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks, particularly during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. For this reason, as well as others, the Federal Reserve Board requires all bank holding companies to maintain capital at or above certain prescribed levels. See “Capital Standards and Prompt Corrective Action” below. A bank holding company’s failure to meet these requirements will generally be considered by the Federal Reserve Board to be an unsafe and unsound banking practice.

Among the powers conferred on the Federal Reserve Board is the power to require any bank holding company to terminate an activity or terminate control of or liquidate or divest subsidiaries or affiliates that the Federal Reserve Board determines constitutes a significant risk to the financial safety, soundness or stability of the bank holding company or any of its banking subsidiaries. The Federal Reserve Board also has the authority to regulate provisions of a bank holding company’s debt, including authority to impose interest ceilings and reserve requirements on such debt. Subject to certain exceptions, a bank holding company also is required to file a written notice and obtain approval from the Federal Reserve Board prior to purchasing or redeeming its own common stock or other equity securities. A bank holding company and its non-banking subsidiaries also are prohibited from engaging in “tie-in” arrangements that would require customers of any of its bank subsidiaries to purchase goods or services from the bank holding company or any of its non-bank subsidiaries in order to obtain loan or other services from its bank subsidiaries.

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As a bank holding company, we must obtain the prior approval of the Federal Reserve Board for the acquisition of more than 5% of the outstanding shares of any class of voting securities, or of substantially all of the assets, of any bank or other bank holding company and for any merger of the Company with any other bank holding company.

We also are a bank holding company within the meaning of Section 3700 of the California Financial Code. As such, we are subject to examination by, and may be required to file reports with, the California Department of Financial Institutions (the “DFI”).

Financial Services Modernization Legislation. In 1999, the Gramm-Leach-Bliley Act of 1999 (the “Financial Services Modernization Act”) was enacted into law. The principal objectives of that Act were to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers to permit a bank holding company system, meeting certain specified qualifications, to engage in a broader range of financial activities and, thereby, to foster greater competition among financial services companies. To accomplish those objectives, among other things, the Financial Services Modernization Act repealed the two affiliation provisions of the Glass-Steagall Act that had been adopted in the early 1930s during the Depression: Section 20, which restricted the affiliation of federally insured banks with firms “engaged principally” in specified securities activities; and Section 32, which restricted officer, director, or employee interlocks between a federally insured bank and any company or person “primarily engaged” in specified securities activities. The Financial Services Modernization Act also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. This Act also:

A bank holding company that elects to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or are incidental or complementary to activities that are financial in nature. According to current Federal Reserve Board regulations, activities that are financial in nature include:

In order for a bank holding company to become and to continue to be a financial holding company, and therefore to be eligible to engage in these activities, all of its bank subsidiaries must have been found, at their most recent regulatory examinations, to be well capitalized, well managed and, subject to certain limited exceptions, to be in compliance with the Community Reinvestment Act. If, after a bank holding company has become a financial holding company, any of its bank subsidiaries ceases to maintain

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compliance with any of those requirements, the financial holding company may not acquire any more financial services businesses permitted to financial holding companies until that bank subsidiary again achieves compliance with those requirements. Moreover, if that bank subsidiary fails to come back into compliance with any of those requirements within a period of 180 days, the Federal Reserve Board has the power to require the financial holding company to divest itself of those of its businesses that are engaged in financial activities solely permitted to a financial holding company, or may even require the holding company to divest itself of all of its bank subsidiaries.

In 2002, we became a financial holding company under the Financial Services Modernization Act. Accordingly, as a financial holding company, we are now permitted to engage in any of the above described financial activities, in addition to those deemed closely related to banking and which, as a result, may be engaged in by bank holding companies generally. Additionally, as a financial holding company, we do not need to obtain prior approval for the acquisition of companies or businesses engaged in such financial activities. By contrast, a bank holding company that is not a financial holding company may not engage in such activities. Instead, it is limited to engaging in banking and such other activities as are determined by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

At the present time we have no plans to engage in any of the financial activities that are permitted to be engaged in by financial holding companies. Additionally, we do not believe that the Financial Services Modernization Act will have a material effect on our operations, at least in the near-term. However, to the extent that it enables banks, securities firms and insurance companies to affiliate, the financial services industry may experience further consolidation. Additionally, the Act may have the result of increasing the extent of competition that we face from larger institutions and other types of companies offering financial products, many of which may have substantially greater financial resources than we have.

Privacy Provisions of the Financial Services Modernization Act. Pursuant to the Financial Services Modernization Act, Federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. Pursuant to the rules, financial institutions must provide:

These privacy provisions affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. These privacy provisions have not had a material impact on our financial condition or our results of operations.

The Sarbanes-Oxley Act of 2002. On July 30, 2002, President Bush signed into law The Sarbanes-Oxley Act of 2002. This Act addresses accounting oversight and corporate governance matters of companies whose securities are registered under the Securities Exchange Act (“public companies”) and, therefore, applies to the Company. Among other things, the Sarbanes-Oxley Act:

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We have taken the actions required by, and we believe we are in compliance with, the provisions of the Sarbanes-Oxley Act that are applicable to us. Among other things, we have implemented disclosure controls and procedures and taken other actions to meet the expanded disclosure requirements and the certification requirements of the Sarbanes-Oxley Act. We also have determined that six of our seven directors meet the independence requirements applicable to directors generally, and that all of the members of our audit committee meet the more stringent standards of independence, established pursuant to the Sarbanes-Oxley Act.

Foothill Independent Bank

General. As a member of the Federal Reserve Bank of San Francisco, the Bank is subject to regulation by the Federal Reserve Board, which is its primary federal banking regulator, and as a California state chartered bank, the Bank is subject to supervision, periodic examination and regulation by the DFI. Also, because its deposits are insured by the FDIC, the Bank is subject to regulations promulgated by the FDIC.

Various requirements and restrictions under the Federal and California banking laws affect the operations of the Bank. These laws and the implementing regulations that are promulgated by Federal and state regulatory agencies, cover most aspects of a bank’s operations, including the reserves a bank must maintain against deposits and for possible loan losses and other contingencies; the types of deposits it may obtain and the interest it is permitted to pay on deposit accounts; the loans and investments that a bank may make; the borrowings that a bank may incur; the number and location of banking offices that a bank may establish and the rate at which it may grow its assets; the acquisition and merger activities of a bank; the amount of dividends that a bank may pay; and the capital requirements that a bank must satisfy. A more detailed discussion regarding capital requirements that are applicable to us and the Bank is set forth below under the caption “Capital Standards and Prompt Corrective Action.”

Like other FDIC-insured banks, the Bank is subject to periodic examination by its primary federal regulatory agency, which is the Federal Reserve Board. If, as a result of an examination of the Bank, the Federal Reserve Board were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank’s operations have become unsatisfactory or that the Bank or its management is violating any banking laws or regulations, the Federal Reserve Board is empowered to take a number of remedial actions. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to require the Bank to raise additional capital, to restrict the Bank’s growth, to assess civil monetary penalties against the Bank’s officers or directors, to remove a bank’s officers or directors and ultimately to terminate the Bank’s deposit insurance, which would result in a revocation of the Bank’s charter and require it to cease its banking operations.

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Additionally, under California law the DFI conducts periodic examinations of the Bank and has many of the same remedial powers as the Federal Reserve Board.

Dividends and Other Transfers of Funds. Dividends from the Bank constitute the principal source of cash for Foothill Independent Bancorp (the “Bancorp”), which is a legal entity separate and distinct from the Bank. The Bank is subject, however, to various statutory and regulatory restrictions on its ability to pay cash dividends to us. In addition, the DFI and the Federal Reserve Board have the authority to prohibit the Bank from paying dividends, if either of those agencies deem payment of dividends by the Bank to us to be an unsafe or unsound practice.

Although dividend restrictions of this nature have not been imposed on the Bank in the past, it is possible, depending upon the future financial condition of the Bank and other factors, that either of those agencies could assert that the payment of dividends or other payments by the Bank to the Bancorp might, under some circumstances, constitute an unsafe or unsound practice. Additionally, the Federal Reserve Board has established guidelines with respect to the maintenance of appropriate levels of capital by banks and bank holding companies under its jurisdiction. A failure by the Bank to maintain compliance with the standards set forth in those guidelines could result in the imposition by federal bank regulators, under the prompt corrective action provisions of federal law, of restrictions on the amount of dividends which the Bank would be permitted to pay to us, as well as restrictions on the Bank’s business operations that could restrict its growth and increase its costs of operations and thereby adversely affect its operating results. See “Capital Standards and Prompt Corrective Action” below.

Restrictions on Transactions between the Bank and the Company and Company Affiliates. The Bank is subject to restrictions imposed by federal law on any extensions of credit to, and the issuance of any guarantees or letters of credit on behalf of, the Bancorp or its other affiliates; the purchase of, or investments in, Bancorp stock or other Bancorp securities; the taking of such securities as collateral for loans; and the purchase of assets from the Bancorp or its other subsidiaries. Such restrictions prevent the Bancorp or its other affiliates from borrowing from the Bank unless the loans are secured by marketable obligations in designated amounts. In addition, no such loan or investment by the Bank to or in the Bancorp or any other Bancorp affiliates may exceed 10% of the Bank’s capital and surplus (as defined by federal regulations) and the total of such loans and investments may not exceed, in the aggregate, 20% of the Bank’s capital and surplus. California law also imposes restrictions with respect to transactions between the Bank and the Bancorp and other controlling persons of the Bank. Additional restrictions on transactions with affiliates may be imposed on the Bank under the prompt corrective action provisions of federal law.

Capital Standards and Prompt Corrective Action.

Capital Standards. The Federal Reserve Board and the other federal bank regulatory agencies have adopted uniform risk-based minimum capital guidelines intended to require federally insured banking organizations to maintain capital at levels that reflect the degree of risk associated with the banking organization’s operations, both for assets reported on the balance sheet and assets, such as letters of credit and recourse arrangements, which are recorded as off-balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off-balance sheet items are multiplied by one of several risk-adjusted percentages, which range from zero percent for assets with low credit risk, such as U.S. Treasury securities, to 100% for assets with relatively high credit risk, such as commercial loans.

These guidelines require federally insured banking organizations to maintain a ratio of qualifying total capital-to-risk adjusted assets of at least 8% and a minimum ratio of Tier 1 capital (the sum of a bank’s common stock, non-redeemable preferred stock and retained earnings)-to-risk adjusted assets of 4%. In addition to the risked-based guidelines, federal banking regulators require federally insured banking organizations to maintain a ratio of Tier 1 capital-to-total average assets of 4%, which is referred to as a banking organization’s “leverage ratio.” However, for a banking organization to be rated by a bank regulatory agency above minimum capital requirements, the minimum leverage ratio of Tier 1 capital to total assets must be higher than 4% (see “Prompt Corrective Action and Other Enforcement Mechanisms” below). In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, federal and state banking regulators have the discretion to set individual minimum capital requirements for any banking organization at rates significantly above the minimum guidelines and ratios generally applicable to insured banking organizations, if the regulator believes that the financial condition or operating results of the particular bank are worse than that of, or there are other risks faced by it that are greater than the risks faced by, most commercial banking organizations generally.

Prompt Corrective Action and Other Enforcement Mechanisms. Federal banking agencies, including the Federal Reserve Board, possess broad powers to take corrective and other supervisory action to resolve the problems of insured depository institutions, including those institutions that fall below one or more the minimum capital ratios prescribed by federal banking regulations.

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Each federal banking agency, including the Federal Reserve Board, has promulgated regulations defining the following five categories in which an insured depository institution will be placed, based on its capital ratios:

However, a bank that, based upon its capital levels, is classified as well capitalized, adequately capitalized or undercapitalized, may be treated as though it were in the next lower capital category, if its federal bank regulatory agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or practice at that institution warrants such treatment. At each successive lower capital category, an insured depository institution is subject to greater operating restrictions and increased Prompt Corrective Action and Other Enforcement Mechanisms supervision. The federal banking agencies, however, may not treat a significantly undercapitalized institution as critically undercapitalized unless its capital ratio actually warrants such treatment.

The following table sets forth, as of December 31, 2004, the capital ratios of the Bank and compares those capital ratios to the federally established capital requirements that must be met for a bank to be categorized as “adequately-capitalized” and “well-capitalized,” respectively, under the prompt corrective action regulations:

As the table indicates, at December 31, 2004 the Bank exceeded the capital ratios required to be classified, and it has been classified by the Federal Reserve Board, as a “well capitalized” institution under the federally established prompt corrective action regulations.

Safety and Soundness Standards. In addition to measures taken under the prompt corrective action provisions, federally insured banking organizations may be subject to potential enforcement actions by federal bank regulatory agencies for unsafe or unsound practices or for violating any law, rule, regulation, or any condition imposed in writing by the agency or in any written agreement entered into by the banking organization with the agency. The federal banking agencies have adopted guidelines designed to identify and address potential safety and soundness concerns that could, if not corrected, lead to a deterioration in the quality of a bank’s assets or to liquidity or capital problems. Those guidelines set forth operational and managerial standards relating to such matters as:

These guidelines also provide six standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating. Under these standards, an insured banking organization is expected to:

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These guidelines also establish standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient to enable the bank to maintain adequate capital and reserves.

FDIC Deposit Insurance. The FDIC operates a Bank Insurance Fund (“BIF”) which insures the deposits, up to federally prescribed limits, of those banks that are subject to regulation by a federal banking regulatory agency and have elected to participate in that Fund (“BIF Members”). The Bank is a BIF Member and, as a result, its deposit accounts are insured up to the maximum amount permitted by law. The FDIC charges all BIF Members an annual assessment for the insurance of their deposits. The amount of a bank’s annual assessment is based on its relative risk of default as measured by (i) the insured bank’s federal regulatory capital risk category, which can range from well capitalized to less than adequately capitalized, and (ii) its supervisory subgroup category, which is based on the federal regulatory assessment of the financial condition of the institution and the probability that FDIC or other corrective action will be required. The assessment rate currently ranges from 0 to 27 cents per $100 of domestic insured deposits. The FDIC has the authority to increase or decrease the rate of the assessment on a semi-annual basis. An increase in the assessment rate would increase the Bank’s costs of doing business.

The FDIC may terminate a bank’s deposit insurance upon finding that it has engaged in any unsafe or unsound practices, is in too unsafe or unsound a condition to continue operations, or has violated any applicable laws, regulations, orders, or conditions imposed by the FDIC or the bank’s primary federal regulatory agency. California does not permit commercial banks to operate without FDIC deposit insurance and, as a result, termination of a California bank’s FDIC insurance would result in its closure.

All FDIC-insured banking institutions also are required to pay an annual assessment for the payment of interest on bonds (known as “FICO Bonds”) that were issued by the Financing Corporation, a federally chartered corporation, to assist in the recovery of the savings and loan industry following the failure of numerous savings and loan institutions in the 1980s. Effective for the first quarter of 2005, the FDIC established the FICO assessment rate at approximately $0.0144 per $100 of assessable deposits of the insured banks. The FICO assessment rate for the fourth quarter of 2004 was approximately $0.0146 per $100 of assessable deposits of the insured banks. The FICO assessment rates are subject to quarterly adjustments by the FDIC to reflect changes in the assessment bases of the FDIC’s insurance funds and, unlike the BIF assessments, do not vary on the basis of a bank’s capital or supervisory risk categories.

Community Reinvestment Act and Fair Lending Developments. The Bank, like other federally insured banking organizations, is subject to fair lending requirements and reporting obligations involving home mortgage lending operations and Community Reinvestment Act activities. The Community Reinvestment Act (the “CRA”) generally requires federal bank regulatory agencies to evaluate the performance of the financial institutions which they regulate to determine whether they are meeting the credit needs of their local communities, including low-and moderate-income neighborhoods. A bank’s compliance with its CRA obligations is measured in accordance with a performance-based evaluation system. A bank may incur substantial penalties and be required to take corrective measures in the event it is found to be in violation of the CRA or other fair lending laws. The federal banking agencies also may take compliance with those laws and CRA obligations into account when regulating and supervising other activities of the banks they regulate and their bank holding companies. For example, when a bank holding company files an application with the Federal Reserve Board for approval to acquire a bank or other bank holding company, the Federal Reserve Board will assess the CRA performance of each of its existing bank subsidiaries, and a finding that such performance has been deficient could be a basis for denying the holding company’s application.

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Interstate Banking and Branching. The Bank Holding Company Act permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to conditions including nationwide- and state-imposed concentration limits. The Bank also has the ability, subject to certain restrictions, to acquire branches outside California either by acquisition from or a merger with another bank. The establishment by a state bank of new bank branches (often referred to as “de novo” branches) in other states is also possible in states with laws that expressly permit it. Interstate branches are subject to laws of the states in which they are located. Consolidations of and competition among banks has increased as banks have begun to branch across state lines and enter new markets.

USA Patriot Act of 2001. The USA Patriot Act of 2001, enacted into law in response to the terrorist attacks on September 11, 2001, is intended to strengthen the ability of U.S. law enforcement and intelligence agencies to work cohesively to combat terrorism on a variety of fronts. Among other things that Act contains sweeping anti-money laundering and financial transparency laws and imposes various requirements on banking organizations, including:

The U.S. Treasury Department also has adopted regulations requiring banking institutions to incorporate a customer identification program into their written anti-money laundering plans that would implement reasonable procedures for:

Fair and Accurate Credit Transactions Act of 2003 (“FACTA”). FACTA revises certain sections of the Fair Credit Reporting Act (“FCRA”) and establishes additional rights for consumers to obtain copies of and to correct their credit reports; addresses identity theft; and establishes additional requirements for consumer reporting agencies and financial institutions that provide adverse credit information about consumers to those agencies. FACTA also extends the period during which consumers may opt-out of prescreened lists for credit or insurance marketing solicitations; extends the statute of limitations for civil liability for violations of the Fair Credit Reporting Act; and requires a financial institution’s affiliates that exchange consumer information for market solicitation purposes to alert the consumer of the practice and allows the consumer to prohibit permanently all solicitations for marketing purposes. Certain provisions of FACTA became effective at the end of 2004, and its remaining provisions will become effective on various dates in 2005. FACTA also preempts state laws that provide for similar or even more extensive regulations, such as the California Financial Information Privacy Act, which became effective in July 1, 2003 and had imposed disclosure and reporting requirements on financial institutions based in California that were more extensive than those that are contained in FACTA. Because we had already implemented measures to comply with the California Financial Privacy Act, we believe that we will be able to satisfy the material requirements of FACTA and the regulations implementing it without incurring any material increases in our operating expenses.

Check Clearing for the Twenty-First Century Act. The Check Clearing for the Twenty-First Century Act, also known as Check 21, which became effective on October 28, 2004, is intended to revamp the way banks process checks. Check 21 will facilitate check truncation, a process which eliminates the original paper check from the check clearing process. As a result, many checks will be processed electronically. Under Check 21, as a bank processes a check, funds

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from the check writer’s account are transferred to the check depositor’s account electronically, and an electronic image of the check, which is a processable printout known as a substitute check or Image Replacement Document (IRD), will be considered the legal equivalent of the original check. Banks can choose to send substitute checks as electronic files to be printed on-site or in close proximity to the paying bank. For banking institutions and their clients, these changes have the potential to reduce costs, improve efficiency in check collections and accelerate funds availability, while alleviating dependence on the national transportation system.

Future Legislation and Regulatory Initiatives. In recent years, significant legislative proposals and reforms affecting the banking and financial services industry have been introduced in and considered by Congress, including reforms that would result in a consolidation of the three current federal bank regulatory agencies, the Federal Reserve Board, the FDIC and the Comptroller of the Currency, into a single federal bank regulatory agency. We cannot predict what new proposals might be introduced in the current Congress or whether any will be enacted into law. It is possible, however, that new laws may be adopted that could have a significant impact on the operations and financial performance of banking institutions or the competitive environment in which we operate.

Employees

At December 31, 2004, we had 163 full-time and 86 part-time employees, all of whom are employees of the Bank and three of whom also are employees of the Bancorp. We believe that our relations with our employees is good.

Company Website

Our internet website address is www.foothillbank.com. Our Annual Report to Stockholders and Quarterly Reports as well as all of our SEC Filings are available on our website.

ITEM 2. PROPERTIES

Our executive offices and those of the Bank’s are located at the Bank’s main banking office at 510 South Grand Avenue, Glendora, California. The Bank owns the building and the land at that location; owns the building and leases, under a 20-year ground lease, the land on which its Claremont banking office is located; and occupies its ten other banking offices, and the facilities where its service center are located, under leases expiring at various dates through 2014. We believe that the Bank’s present facilities are adequate for its present purposes and anticipated growth in the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

We are subject to legal actions that arise in the ordinary course of our business. None of the legal proceedings that were pending at December 31, 2004 is expected to have a material adverse effect on us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information regarding the current executive officers of the Company and the Bank:

All officers hold office at the pleasure of the Board of Directors, except Mr. Langley who is employed under an Employment Agreement with the Bank.

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GEORGE E. LANGLEY. Mr. Langley has been the President and Chief Executive Officer of the Company and the Bank since April 1992. From 1982 to April 1992, Mr. Langley served as the Executive Vice President, Chief Financial Officer and Secretary of the Company and the Bank. From 1976 to 1982, which preceded the formation of the Company, Mr. Langley held various executive positions with the Bank.

CASEY J. CECALA, III. Mr. Cecala has been the Chief Credit Officer of the Bank since 2001 and was promoted to Executive Vice President in 2003. In May of 2004 he was appointed Executive Vice President of the Company. From 1998 to May 2001, he was a Senior Vice President and Senior Credit Officer of the Bank. From 1992, when he joined the Bank, through September 1998, Mr. Cecala held other management positions with the Bank including as a Vice President.

CAROL ANN GRAF. Ms. Graf has served as Chief Financial Officer of the Company and the Bank since January 1993 and as a Senior Vice President of both the Company and the Bank since January 1997. From 1993 to 1997, she was a First Vice President of the Bank as well as its Chief Financial Officer. From April 1988 to January 1993, Ms. Graf served as Vice President and Comptroller, and from 1984 to April 1988 as Assistant Comptroller, of the Bank.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Trading Market for Shares. Our shares of Common Stock are listed and trade on the NASDAQ National Market System under the symbol “FOOT”. The following table sets forth the high and low closing sales prices per share of our Common Stock as reported on the NASDAQ National Market System for each of the fiscal quarters in 2004 and 2003. On March 9, 2005 the closing per share price was $25.19 and, as of that same date, there were 1,026 record stockholders of the Company.

Transfer Agent. The transfer agent and registrar for the Company’s shares is Registrar and Transfer Company, the address of which is 10 Commerce Drive, Cranford, New Jersey 07016.