##### Table of Contents



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, 2006
    
    Commission File
1-08019-01
 PFGI CAPITAL CORPORATION
 Incorporated Under 
The Laws of Maryland
    
    IRS Employer I.D.
No. 04-3659419
     o þ
 o þ
 þ o
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Year Ended December 31, 2006
 Financial Report
and Form 10-K
 2




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##### 



FINANCIAL REPORT AND FORM 10-K
INDEX TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2006
 TABLE OF CONTENTS
 PagePart IItem 1.
Business
    
    
    4Average Balance Sheets/Interest/Rates
    
    
    5Loan
Participations
    
    
    6Risk Elements of Loan Participation Portfolio
    
    
    7Item 1A.
Risk Factors
    
    
    24-26Item 1B. Unresolved Staff Comments  NoneItem 2. Properties  NoneItem 3. Legal Proceedings  NoneItem 4. Submission of Matters to a Vote of Security Holders  NonePart IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities (Note 1)
    
    
    8-9Item 6.
Selected Financial Data
    
    
    12Item 7.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    4-10Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
    
    
    8Item 8.
Financial Statements and Supplementary Data
    
    
    11,13-23Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  NoneItem 9A.
Controls and Procedures
    
    
    26Item 9B. Other Information  NonePart IIIItem 10. Directors, Executive Officers and Corporate Governance (Note 1)Item 11. Executive Compensation (Note 1)Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters (Note 1)Item 13. Certain Relationships and Related Transactions, and Director Independence (Note 1)Item 14. Principal Accountant Fees and Services (Note 1)Part IVItem 15.
Exhibits and Financial Statement Schedules
    
    
    13-23, 27Signature
    
    
    28EX-12EX-23EX-24EX-31.1EX-31.2EX-32.1EX-32.2
    3




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ITEM 
7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 ITEM 
1. BUSINESS
      EARNINGS SUMMARY
    4




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RESULTS OF OPERATIONS
 Interest Income
  For the Years Ended December 31,2006
    
    2005
    
    2004(Dollars in Thousands)
    
    Average Balance
    
    Interest Earned
    
    Average Rate
    
    Average Balance
    
    Interest Earned
    
    Average Rate
    
    Average Balance
    
    Interest Earned
    
    Average RateAssets:Loan participations
    
    $
    270,616
    
    
    $
    19,569
    
    
    
    7.23
    %
    
    $
    286,844
    
    
    $
    18,989
    
    
    
    6.62
    %
    
    $
    316,223
    
    
    $
    16,024
    
    
    
    5.07
    %Deposit account with
Bank
    
    
    7,514
    
    
    
    377
    
    
    
    5.01
    
    
    
    11,709
    
    
    
    359
    
    
    
    3.07
    
    
    
    17,328
    
    
    
    192
    
    
    
    1.11Total earning assets
    
    
    278,130
    
    
    $
    19,946
    
    
    
    7.17
    %
    
    
    298,553
    
    
    $
    19,348
    
    
    
    6.48
    %
    
    
    333,551
    
    
    $
    16,216
    
    
    
    4.86
    %Allowance for loan
participation losses
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    (941
    )
    
    
    
    
    
    
    
    
    
    
    (1,274
    )Other nonearning assets
    
    
    1,155
    
    
    
    
    
    
    
    
    
    
    
    1,051
    
    
    
    
    
    
    
    
    
    
    
    1,435Total assets
    
    $
    278,835
    
    
    
    
    
    
    
    
    
    
    $
    298,663
    
    
    
    
    
    
    
    
    
    
    $
    333,712Liabilities and
stockholders equity:Noninterest bearing
liabilities
    
    $
    614
    
    
    
    
    
    
    
    
    
    
    $
    501
    
    
    
    
    
    
    
    
    
    
    $
    5Stockholders equity
    
    
    278,221
    
    
    
    
    
    
    
    
    
    
    
    298,162
    
    
    
    
    
    
    
    
    
    
    
    333,707Total liabilities and
stockholders equity
    
    $
    278,835
    
    
    
    
    
    
    
    
    
    
    $
    298,663
    
    
    
    
    
    
    
    
    
    
    $
    333,712
 Provision (Benefit) For Loan Participation Losses
  Noninterest Income and Expense
   Income Taxes
  5




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FINANCIAL CONDITION
 
 Loan Participations
   Aggregate Principal
    
    Percentage byBalance
    
    Aggregate PrincipalProperty Type
    
    Number of Loans
    
    (In Thousands)
    
    BalanceNonresidential Real Estate
    
    
    47
    
    
    $
    53,420
    
    
    
    19.35
    %Apartments
    
    
    24
    
    
    
    51,347
    
    
    
    18.60Office/Warehouse
    
    
    18
    
    
    
    43,793
    
    
    
    15.86Commercial
    
    
    27
    
    
    
    33,702
    
    
    
    12.21Shopping/Retail
    
    
    11
    
    
    
    32,662
    
    
    
    11.83Healthcare Facilities
    
    
    6
    
    
    
    20,523
    
    
    
    7.44Hotel/Motel
    
    
    2
    
    
    
    4,478
    
    
    
    1.62Other Commercial Properties
    
    
    33
    
    
    
    36,141
    
    
    
    13.09Total
    
    
    168
    
    
    $
    276,066
    
    
    
    100.00
    %
  Fixed Rate
    
    Variable RateAggregate Principal
    
    Percentage by
    
    
    
    
    
    Aggregate Principal
    
    Percentage byBalance
    
    Aggregate Principal
    
    
    
    
    
    Balance
    
    Aggregate PrincipalInterest Rate
    
    Number of Loans
    
    (In Thousands)
    
    Balance
    
    Number of Loans
    
    (In Thousands)
    
    BalanceUnder 5.00%
    
    
    2
    
    
    $
    1,012
    
    
    
    .53
    %
    
    
    2
    
    
    $
    720
    
    
    
    .85
    %5.00% to 5.99%
    
    
    16
    
    
    
    23,420
    
    
    
    12.29
    
    
    
    6
    
    
    
    15,039
    
    
    
    17.606.00% to 6.99%
    
    
    26
    
    
    
    41,728
    
    
    
    21.89
    
    
    
    4
    
    
    
    7,128
    
    
    
    8.347.00% to 7.99%
    
    
    50
    
    
    
    105,499
    
    
    
    55.35
    
    
    
    31
    
    
    
    45,227
    
    
    
    52.92Over 8.00%
    
    
    16
    
    
    
    18,951
    
    
    
    9.94
    
    
    
    15
    
    
    
    17,342
    
    
    
    20.29Total
    
    
    110
    
    
    $
    190,610
    
    
    
    100.00
    %
    
    
    58
    
    
    $
    85,456
    
    
    
    100.00
    %
 Aggregate Principal
    
    Percentage byBalance (In
    
    Aggregate Principal
    
    Weighted AverageInterest Type
    
    Number of Loans
    
    Thousands)
    
    Balance
    
    Interest RateFixed Rate Loans
    
    
    110
    
    
    $
    190,610
    
    
    
    69.05
    %
    
    
    7.05
    %Variable Rate Loans
    
    
    58
    
    
    
    85,456
    
    
    
    30.95
    
    
    
    7.41Total
    
    
    168
    
    
    $
    276,066
    
    
    
    100.00
    %
    
    
    7.18
    %
 Other Assets and Liabilities
  6




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INTEREST RATE RISK MANAGEMENT
  CREDIT QUALITY
    December 31,(In Thousands)
    
    2006
    
    2005Balance at Beginning of Year
    
    $
    534
    
    
    $
    1,021Transferred Allowance, Net
    
    
    17
    
    
    
    (82
    )Benefit for Loan Participation Losses
    
    
    (68
    )
    
    
    (405
    )Loans Charged Off
    
    
    
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance at End of Year
    
    $
    483
    
    
    $
    534Net Charge-Offs to Average Loan Participations
    
    
    .00
    %
    
    
    .00
    %Allowance for Loan Participations Losses to Loan
Participations
    
    
    .17
    
    
    
    .20
  7




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    2006
    
    2005Hypothetical Change in Interest Rates100 basis points decrease
    
    
    (2.18
    )%
    
    
    (2.70
    )%200 basis points decrease
    
    
    (4.36
    )
    
    
    (5.41
    )100 basis points increase
    
    
    2.18
    
    
    
    2.70200 basis points increase
    
    
    4.36
    
    
    
    5.41
  LIQUIDITY AND CAPITAL RESOURCES
    8




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OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
  APPLICATION OF CRITICAL ACCOUNTING POLICIES
  Allowance for Loan Participation Losses:
 9




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RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
    10




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QUARTERLY RESULTS OF OPERATIONS  (Unaudited)
  (In Thousands, Except Per Share Amounts)
    
    First
    
    Second
    
    Third
    
    Fourth
    
    Full Year2006:Interest Income
    
    $
    4,872
    
    
    $
    4,942
    
    
    $
    5,050
    
    
    $
    5,082
    
    
    $
    19,946(Benefit) Provision for Loan
Participation Losses
    
    
    (95
    )
    
    
    (51
    )
    
    
    16
    
    
    
    62
    
    
    
    (68
    )Net Interest Income
    
    
    4,967
    
    
    
    4,993
    
    
    
    5,034
    
    
    
    5,020
    
    
    
    20,014Noninterest Expense
    
    
    259
    
    
    
    225
    
    
    
    160
    
    
    
    184
    
    
    
    828Income Before Income Taxes
    
    
    4,708
    
    
    
    4,768
    
    
    
    4,874
    
    
    
    4,836
    
    
    
    19,186Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    4,708
    
    
    $
    4,768
    
    
    $
    4,874
    
    
    $
    4,836
    
    
    $
    19,186Preferred Stock Dividends
    
    $
    1,914
    
    
    $
    1,913
    
    
    $
    1,914
    
    
    $
    1,913
    
    
    $
    7,654Net Income Available to Common Shares
    
    $
    2,794
    
    
    $
    2,855
    
    
    $
    2,960
    
    
    $
    2,923
    
    
    $
    11,532Per Common Share:Basic and Diluted Net Income
    
    $
    .47
    
    
    $
    .48
    
    
    $
    .50
    
    
    $
    .49
    
    
    $
    1.94Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.94
    
    
    
    1.942005:Interest Income
    
    $
    4,724
    
    
    $
    5,055
    
    
    $
    4,710
    
    
    $
    4,859
    
    
    $
    19,348Benefit for Loan Participation Losses
    
    
    (78
    )
    
    
    (157
    )
    
    
    (145
    )
    
    
    (25
    )
    
    
    (405
    )Net Interest Income
    
    
    4,802
    
    
    
    5,212
    
    
    
    4,855
    
    
    
    4,884
    
    
    
    19,753Noninterest Expense
    
    
    204
    
    
    
    248
    
    
    
    198
    
    
    
    209
    
    
    
    859Income Before Income Taxes
    
    
    4,598
    
    
    
    4,964
    
    
    
    4,657
    
    
    
    4,675
    
    
    
    18,894Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    4,598
    
    
    $
    4,964
    
    
    $
    4,657
    
    
    $
    4,675
    
    
    $
    18,894Preferred Stock Dividends
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    2,025
    
    
    $
    1,914
    
    
    $
    10,333Net Income Available to Common Shares
    
    $
    1,401
    
    
    $
    1,767
    
    
    $
    2,632
    
    
    $
    2,761
    
    
    $
    8,561Per Common Share:Basic and Diluted Net Income
    
    $
    .24
    
    
    $
    .30
    
    
    $
    .44
    
    
    $
    .46
    
    
    $
    1.44Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.36
    
    
    
    1.36
 11




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ITEM 6. SELECTED FINANCIAL DATA
  (In Thousands, Except Per Share Amounts)
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002Statements of IncomeInterest Income
    
    $
    19,946
    
    
    $
    19,348
    
    
    $
    16,216
    
    
    $
    16,073
    
    
    $
    10,065Benefit for Loan Participation Losses
    
    
    (68
    )
    
    
    (405
    )
    
    
    (600
    )
    
    
    (1,654
    )
    
    
    Net Interest Income
    
    
    20,014
    
    
    
    19,753
    
    
    
    16,816
    
    
    
    17,727
    
    
    
    10,065Noninterest Expense
    
    
    828
    
    
    
    859
    
    
    
    868
    
    
    
    858
    
    
    
    448Income Before Income Taxes and Preferred Dividends
    
    
    19,186
    
    
    
    18,894
    
    
    
    15,948
    
    
    
    16,869
    
    
    
    9,617Net Income Available to Common Shareholder
    
    $
    11,532
    
    
    $
    8,561
    
    
    $
    3,160
    
    
    $
    4,081
    
    
    $
    4,076Basic and Diluted Net Income Per Common Share
    
    $
    1.94
    
    
    $
    1.44
    
    
    $
    .53
    
    
    $
    .69
    
    
    $
    .69Series A and Series B Preferred Stock Cash Dividend Paid
    
    
    7,654
    
    
    
    10,333
    
    
    
    12,788
    
    
    
    12,788
    
    
    
    5,541Series A Preferred Stock Dividends paid per Share
    
    
    1.9375
    
    
    
    1.9375
    
    
    
    1.9375
    
    
    
    1.9375
    
    
    
    .8396Series B Preferred Stock Dividends paid per Share
    
    
    3.7500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average Yield on Earnings Assets
    
    
    7.17
    %
    
    
    6.48
    %
    
    
    4.86
    %
    
    
    4.83
    %
    
    
    5.51
    %Balance SheetLoan Participation Interests, Net of Allowance for Loan
Participation Losses
    
    $
    275,583
    
    
    $
    264,090
    
    
    $
    323,175
    
    
    $
    323,762
    
    
    $
    321,755Total Assets
    
    
    285,443
    
    
    
    272,907
    
    
    
    335,756
    
    
    
    332,910
    
    
    
    328,515Series A Preferred Stock
    
    
    98,762
    
    
    
    98,762
    
    
    
    165,000
    
    
    
    165,000
    
    
    
    165,000Total Stockholders Equity
    
    
    284,395
    
    
    
    272,853
    
    
    
    335,756
    
    
    
    332,596
    
    
    
    328,515
 12




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/s/ ERNST & YOUNG LLP 
 13




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ITEM 8. FINANCIAL STATEMENTS
 BALANCE SHEETSDecember 31,(Dollars in Thousands)
    
    2006
    
    2005AssetsLoan Participations
    
    $
    276,066
    
    
    $
    264,624Allowance for Loan Participation Losses
    
    
    (483
    )
    
    
    (534
    )Net Loan Participations
    
    
    275,583
    
    
    
    264,090Cash and Due from Banks
    
    
    8,385
    
    
    
    7,371Interest Receivable
    
    
    1,475
    
    
    
    1,446Total Assets
    
    $
    285,443
    
    
    $
    272,907LiabilitiesAccounting Payable and Accrued Liabilities
    
    $
    1,048
    
    
    $
    54Stockholders EquitySeries A Preferred Stock, $25 Stated Value,
6,600,000 Shares Authorized and Issued, 3,950,484 Shares
Outstanding at December 31, 2006 and 2005
    
    
    98,762
    
    
    
    98,762Series B Preferred Stock, $.01 Par Value,
125 Shares Authorized, 105 and 0 Shares Issued and Outstanding at
December 31, 2006 and 2005, respectively
    
    
    
    
    
    
    Common Stock, $.01 Par Value, 5,940,000
Shares Authorized, Issued and Outstanding
    
    
    59
    
    
    
    59Capital Surplus
    
    
    181,403
    
    
    
    169,879Retained Earnings
    
    
    4,171
    
    
    
    4,153Total Stockholders Equity
    
    
    284,395
    
    
    
    272,853Total Liabilities and Stockholders Equity
    
    $
    285,443
    
    
    $
    272,907
 See notes to financial statements.
 14




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STATEMENTS OF INCOMEFor the Year Ended December 31,(In Thousands, Except Per Share Data)
    
    2006
    
    2005
    
    2004Interest IncomeInterest on Loan Participations
    
    $
    19,569
    
    
    $
    18,989
    
    
    $
    16,024Interest on Cash Deposit
    
    
    377
    
    
    
    359
    
    
    
    192Total Interest Income
    
    
    19,946
    
    
    
    19,348
    
    
    
    16,216Benefit for Loan Participation Losses
    
    
    (68
    )
    
    
    (405
    )
    
    
    (600
    )Net Interest Income After Benefit for Loan Participation Losses
    
    
    20,014
    
    
    
    19,753
    
    
    
    16,816Noninterest ExpenseLoan Servicing Fees
    
    
    338
    
    
    
    359
    
    
    
    398Management Fees
    
    
    271
    
    
    
    287
    
    
    
    318Other Noninterest Expense
    
    
    219
    
    
    
    213
    
    
    
    152Total Noninterest Expense
    
    
    828
    
    
    
    859
    
    
    
    868Income Before Income Taxes
    
    
    19,186
    
    
    
    18,894
    
    
    
    15,948Income Taxes
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    
    19,186
    
    
    
    18,894
    
    
    
    15,948Preferred Stock Dividends
    
    
    7,654
    
    
    
    10,333
    
    
    
    12,788Net Income Available to Common Shares
    
    $
    11,532
    
    
    $
    8,561
    
    
    $
    3,160Per Common ShareBasic
    
    $
    1.94
    
    
    $
    1.44
    
    
    $
    .53Diluted
    
    
    1.94
    
    
    
    1.44
    
    
    
    .53
 See
notes to financial statements.
 15




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STATEMENTS OF CASH FLOWSFor The Year Ended December 31,(In Thousands)
    
    2006
    
    2005
    
    2004Operating
ActivitiesNet Income
    
    $
    19,186
    
    
    $
    18,894
    
    
    $
    15,948Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:Benefit for Loan Participation Losses
    
    
    (68
    )
    
    
    (405
    )
    
    
    (600
    )Increase in Interest Receivable
    
    
    (29
    )
    
    
    (359
    )
    
    
    (68
    )Decrease (Increase) in Other Assets
    
    
    
    
    
    
    691
    
    
    
    (650
    )Increase (Decrease) in Accounts Payable and Accrued Liabilities
    
    
    994
    
    
    
    54
    
    
    
    (314
    )Net Cash Provided by Operating Activities
    
    
    20,083
    
    
    
    18,875
    
    
    
    14,316Investing ActivitiesNet (Increase) Decrease in Loan Participations
    
    
    (11,425
    )
    
    
    59,490
    
    
    
    1,187Net Cash (Used In) Provided By Investing Activities
    
    
    (11,425
    )
    
    
    59,490
    
    
    
    1,187Financing ActivitiesProceeds from Issuance of Series B Preferred Stock
    
    
    10
    
    
    
    
    
    
    
    Repurchase of Series A Preferred Stock
    
    
    
    
    
    
    (71,464
    )
    
    
    Dividends Paid to Preferred Stockholders
    
    
    (7,654
    )
    
    
    (10,333
    )
    
    
    (12,788
    )Net Cash Used In Financing Activities
    
    
    (7,644
    )
    
    
    (81,797
    )
    
    
    (12,788
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    1,014
    
    
    
    (3,432
    )
    
    
    2,715Cash and Cash Equivalents at Beginning of Period
    
    
    7,371
    
    
    
    10,803
    
    
    
    8,088Cash and Cash Equivalents at End of Period
    
    $
    8,385
    
    
    $
    7,371
    
    
    $
    10,803Supplemental
Disclosures for Cash Flow InformationCash Paid for:Interest
    
    
    
    
    
    
    
    
    
    
    Income Taxes
    
    
    
    
    
    
    
    
    
    
    Noncash Transactions:Contribution of Common Stock Consent Dividend
    
    $
    11,514
    
    
    $
    8,105
    
    
    $
    2,560Contribution of 8,000 Preferred Shares by National City Bank
    
    
    
    
    
    
    200
    
    
    
    
 See notes to financial statements
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STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY(In Thousands)
    
    Preferred Stock
    
    Common Stock
    
    Capital Surplus
    
    Retained Earnings
    
    TotalBalance at December 31, 2003
    
    $
    165,000
    
    
    $
    59
    
    
    $
    164,440
    
    
    $
    3,097
    
    
    $
    332,596Net Income/Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,948
    
    
    
    15,948Dividends Paid on Preferred Stock ($1.9375 Per Share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,788
    )
    
    
    (12,788
    )Common Stock Consent Dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,560
    )
    
    
    (2,560
    )Contribution of Consent Dividend
    
    
    
    
    
    
    
    
    
    
    2,560
    
    
    
    
    
    
    
    2,560Balance at December 31, 2004
    
    $
    165,000
    
    
    $
    59
    
    
    $
    167,000
    
    
    $
    3,697
    
    
    $
    335,756Net Income/Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,894
    
    
    
    18,894Repurchase of Preferred Stock (2,641,516 shares)
    
    
    (66,038
    )
    
    
    
    
    
    
    (5,426
    )
    
    
    
    
    
    
    (71,464
    )Dividends Paid on Preferred Stock ($1.9375 Per Share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,333
    )
    
    
    (10,333
    )Contribution by Bank of Preferred Stock (8,000 shares)
    
    
    (200
    )
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    Common Stock Consent Dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,105
    )
    
    
    (8,105
    )Contribution of Consent Dividend
    
    
    
    
    
    
    
    
    
    
    8,105
    
    
    
    
    
    
    
    8,105Balance at December 31, 2005
    
    $
    98,762
    
    
    $
    59
    
    
    $
    169,879
    
    
    $
    4,153
    
    
    $
    272,853Net Income/Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,186
    
    
    
    19,186Dividends Paid on Preferred Stock ($1.9375 Per Series
A Share and $3.75 Per Series B Share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,654
    )
    
    
    (7,654
    )Issuance of Series B Preferred Stock
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Common Stock Consent Dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,514
    )
    
    
    (11,514
    )Contribution of Consent Dividend
    
    
    
    
    
    
    
    
    
    
    11,514
    
    
    
    
    
    
    
    11,514Balance at December 31, 2006
    
    $
    98,762
    
    
    $
    59
    
    
    $
    181,403
    
    
    $
    4,171
    
    
    $
    284,395
 See notes to financial statements.
 NOTES TO FINANCIAL STATEMENTS
 NOTE 1. ORGANIZATION
    NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation:
 Use of Estimates:
 Statement of Cash Flows:
 Business Segments:
 17




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Loan Participations:
  Loan Foreclosures:
 Allowance for Loan Participation Losses:
  Dividends:
   18




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##### Table of Contents



Income Taxes:
    NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Option The Fair Value Option for
Financial Assets and Financial Liabilities
 Fair Value Measurements: Fair Value Measurements
 Accounting for Uncertainty in Income Taxes: Accounting for Uncertainty in Income Taxes Accounting for
Income Taxes
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Accounting Changes and Error Corrections: Accounting Changes and Error Corrections,
 NOTE 4. LOAN PARTICIPATIONS AND ALLOWANCE FOR LOAN PARTICIPATION LOSSES
   December 31(In Thousands)
    
    2006
    
    2005Balance at Beginning of Year
    
    $
    534
    
    
    $
    1,021Transferred Allowance, Net
    
    
    17
    
    
    
    (82
    )Benefit for Loan Participation Losses
    
    
    (68
    )
    
    
    (405
    )Loans Charged Off
    
    
    
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance at End of Year
    
    $
    483
    
    
    $
    534
 NOTE 5. EARNINGS PER COMMON SHARE
   For the Year EndedDecember 31,(In Thousands, Except Per Share Data)
    
    2006
    
    2005
    
    2004Net Income
    
    $
    19,186
    
    
    $
    18,894
    
    
    $
    15,948Less Preferred Stock Dividends
    
    
    (7,654
    )
    
    
    (10,333
    )
    
    
    (12,788
    )Net Income Available to Common Stockholders
    
    $
    11,532
    
    
    $
    8,561
    
    
    $
    3,160Weighted Average Common Shares Outstanding
    
    
    5,940
    
    
    
    5,940
    
    
    
    5,940Basic and Diluted Earnings Per Share
    
    $
    1.94
    
    
    $
    1.44
    
    
    $
    .53
 NOTE 6. PREFERRED STOCK
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
    
    the Bank becomes less than adequately capitalized according to regulations established
by the Office of the Comptroller of the Currency;
    
    the Bank is placed into conservatorship or receivership;
    
    the Office of the Comptroller of the Currency, in its sole discretion, directs such
exchange in writing, and, even if the Bank is not less than adequately capitalized, the
Office of the Comptroller of the Currency anticipates the Bank becoming less than
adequately capitalized in the near term; or
    
    the Office of the Comptroller of the Currency, in its sole discretion, directs such
exchange in writing in the event that the Bank has a Tier 1 risk-based capital ratio of
less than 5.0%.
  NOTE 7. RELATED PARTY TRANSACTIONS
    For the Year EndedDecember 31,(In Thousands)
    
    2006
    
    2005Principal Balance at Beginning of Year
    
    $
    264,624
    
    
    $
    324,196Transfers of Loan Participations from the Bank
to PFGI Capital
    
    
    181,179
    
    
    
    645,047Loan Participation Advances
    
    
    12,543
    
    
    
    2,987Transfers of Loan Participations from PFGI
Capital to the Bank
    
    
    (98,300
    )
    
    
    (642,008
    )Loan Participation Payments
    
    
    (83,980
    )
    
    
    (65,598
    )Principal Balance at End of Year
    
    $
    276,066
    
    
    $
    264,624
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NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
  December 31,(In Thousands)
    
    2006
    
    2005Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    ValueFinancial AssetsCommercial Mortgage Loan Participations
    
    $
    276,066
    
    
    $
    286,463
    
    
    $
    264,624
    
    
    $
    277,292Less: Allowance for Loan Participation Losses
    
    
    (483
    )
    
    
    
    
    
    
    (534
    )
    
    
    Net Commercial Mortgage Loan Participations
    
    $
    275,583
    
    
    $
    286,463
    
    
    $
    264,090
    
    
    $
    277,292Cash and Due From Banks
    
    $
    8,385
    
    
    $
    8,385
    
    
    $
    7,371
    
    
    $
    7,371
  
    
    Loan participations: The fair values for loan participations are
estimated using discounted cash flow analyses and interest rates
currently being offered for loans with similar terms to borrowers
of similar credit quality.
 
    
    Cash and due from banks: The carrying amounts reported in the
balance sheet for cash and due from banks approximate those assets
fair values.
 NOTE 9. DIVIDEND RESTRICTIONS
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##### Table of Contents



Corporate Information
   T. James Berry
    
    Director (Member of Audit and Compensation Committees)Jan M. Bone
    
    Director and Vice PresidentLinda K. Erkkila
    
    Director and Secretary (Member of Executive Committee)Robert P. Hipskind
    
    General AuditorDett P. Hunter
    
    Director (Member of Audit and Compensation Committees)J. Richard Jordan
    
    Director, Vice President and Assistant SecretarySusan M. Kinsey
    
    Director and President (Member of Executive Committee)David J. Lucido
    
    Director, Chief Financial Officer and TreasurerJ. David Rosenberg
    
    Director (Member of Executive, Audit and Compensation Committees)John E. Rubenbauer
    
    Director
  
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##### Table of Contents



ITEM 1A. RISK FACTORS
 U.S FEDERAL INCOME TAX LAWS AND CONSEQUENCES
     
    
    85% of PFGI Capitals ordinary income for the calendar year,
    
    95% of PFGI Capitals capital gains net income for the calendar year, and
    
    100% of undistributed taxable income from prior periods.
  POTENTIAL DIVIDEND RESTRICTIONS BY BANK REGULATORS
   
    
    restrict PFGI Capitals ability to transfer assets;
    
    restrict PFGI Capitals ability to make distributions to its stockholders, including
dividends to holders of shares of PFGI Capital Series A and Series B Preferred Stock;
    
    restrict PFGI Capitals ability to redeem its Series A and Series B preferred stock; or
    
    require the Bank to sever its relationship with PFGI Capital or divest its ownership of PFGI Capital.
   24




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CONFLICT OF INTERESTS
    CHANGES IN INTEREST RATES AND COLLATERAL VALUES
  25




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ITEM 9A. CONTROLS AND PROCEDURES
    26




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ITEM 15. EXHIBITS
 ExhibitNumber
    
    Exhibit Description1.0
    
    Underwriting Agreement incorporated
by reference to Exhibit 1 to PFGI Capitals Amended Registration Statement on Form S-3/A (Registration No. 333-88446) Filed June 6, 2002.3.1
    
    By-Laws incorporated by reference
to Exhibit 3.2 to PFGI Capitals Registration Statement on Form S-3 (Registration No. 333-88446) Filed May 16, 2002.3.2
    
    Articles of Amendment and
Restatement of PFGI Capital Corporation incorporated by reference to Exhibit 3.2 to PFGI Capitals Annual Report on Form 10-K for the fiscal year ended December 31, 2005.3.3
    
    Articles Supplementary incorporated by reference to Exhibit 3.3 to PFGI Capitals Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.4.1
    
    By-Laws incorporated by reference to Exhibit 3.2 to PFGI Capitals Registration Statement on Form S-3 (Registration No. 333-88446) Filed May 16, 2002, as related to stockholder rights.4.2
    
    Articles of Amendment and Restatement of PFGI Capital Corporation incorporated by reference to Exhibit 3.2 to PFGI Capitals Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as related to stockholder rights.4.3
    
    Series A Preferred Stock Certificate incorporated by reference to Exhibit 4.5 to PFGI Capitals Amended Registration Statement on Form S-3/A (Registration No. 333-88446) Filed June 6, 2002.4.4
    
    Certificate of Designation Rights
and Preferences of the Series B Non-Voting Preferred Stock incorporated by reference to Exhibit 4 to PFGI Capitals Current Report on Form 8-K filed on January 30, 2006.4.5
    
    Articles Supplementary incorporated by reference to Exhibit 3.3 to PFGI Capitals Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, as related to stockholder rights.10.1
    
    Master Participation and Servicing Agreement as amended and restated as of October 20, 2004 incorporated by reference to Exhibit 10.1 to PFGI Capitals Annual Report on Form 10-K for the fiscal year ended December 31, 2005.10.2
    
    Management Agreement incorporated by reference to Exhibit 10.2 to PFGI Capitals Amended Registration Statement on Form S-3/A (Registration No. 333-88446) Filed June 6, 2002.10.3
    
    Exchange Agreement incorporated by reference to Exhibit 10.3 to PFGI Capitals Amended Registration Statement on Form S-3/A (Registration No. 333-88446) filed June 6, 2002.11.0
    
    Statement re computation of per share earnings incorporated by reference to Note 5 of the Notes to Financial Statements of this report.12.0
    
    Computation of Ratio Earnings to Fixed Charges.14.0
    
    PFGI Capital Corporation Code of Ethics incorporated by reference to Exhibit 14.1 to PFGI Capitals Current Report on Form 8-K filed on April 20, 2005.23.0
    
    Consent of Independent Registered Public Accounting Firm.24.0
    
    Power of Attorney.31.1
    
    Chief Executive Officer Sarbanes-Oxley Act 302 Certification dated March 9, 2007 for PFGI Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2006.31.2
    
    Chief Financial Officer Sarbanes-Oxley Act 302 Certification dated March 9, 2007 for PFGI Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2006.32.1
    
    Chief Executive Officer Sarbanes-Oxley Act 906 Certification dated March 9, 2007 for PFGI Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2006.32.2
    
    Chief Financial Officer Sarbanes-Oxley Act 906 Certification dated March 9, 2007 for PFGI Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2006.
 27




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SIGNATURE
  PFGI Capital Corporation(Registrant) Date: March 9, 2007
    /s/ David J. LucidoDavid J. LucidoChief Financial Officer and Treasurer (Principal Financial Officer and
Principal Accounting Officer)
Duly Authorized Officer  Signature
    
    Capacity
    
    Date/s/ Susan M. Kinsey *
    
    Director and President (Principal Executive Officer)
    
    March 9, 2007Susan M. Kinsey/s/ T. James Berry *
    
    Director
    
    March 9, 2007T. James Berry/s/ Dett Hunter *
    
    Director
    
    March 9, 2007Dett Hunter/s/ Linda K. Erkkila *
    
    Director and Secretary
    
    March 9, 2007Linda K. Erkkila/s/ Jan M. Bone *
    
    Director, Vice President
    
    March 9, 2007Jan M. Bone/s/ J. David Rosenberg *
    
    Director
    
    March 9, 2007J. David Rosenberg/s/ John E. Rubenbauer *
    
    Director
    
    March 9, 2007John E. Rubenbauer/s/ David J. Lucido *
    
    Director (Principal Financial Officer and Principal Accounting Officer)
    
    March 9, 2007David J. Lucido/s/ J. Richard Jordan *
    
    Director, Vice President and Assistant Secretary
    
    March 9, 2007J. Richard Jordan
 
 *
    
    Linda K. Erkkila, as attorney-in-fact, signs this report on behalf of the above-named officers
and directors pursuant to powers of attorney duly executed by such officers and directors
empowering Linda K. Erkkila, Susan M. Kinsey or David J. Lucido to sign on their behalf. /s/ Linda K. ErkkilaLinda K. Erkkila, attorney-in-fact 28