##### Table of Contents



UNITED STATES 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
    
    Commission FileDecember 31, 2005
    
    1-08019-01
 PFGI CAPITAL CORPORATION
 Incorporated Under
    
    IRS Employer I.D.The Laws of Maryland
    
    No. 04-3659419
 
 
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Year Ended December 31, 2005
 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, 2005
  
 TABLE OF CONTENTS
 PagePart IItem 1. Business
    
    
    4Average Balance Sheets/Interest/Rates
    
    
    5Loan Participations
    
    
    6Risk Elements of Loan Participation Portfolio
    
    
    7-8Item 1A. Risk Factors
    
    
    24-26Item 1B. Unresolved Staff Comments  NoneItem 2.
Properties  NoneItem 3. Legal Proceedings
    
    
    23Item 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 and Executive Officers of the Registrant (Note 2)Item 11. Executive Compensation (Note 2)Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters (Note 2)Item 13. Certain Relationships and Related Transactions (Note 2)Item 14. Principal Accountant Fees and Services (Note 2)Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    13-23, 27Signature
    
    
    28Exhibit 3.2 Articles of Amendment and Restatement of PFGIExhibit 10.1 Master Participation and Servicing AgmtExhibit 12.0 Computation of Ratio Earnings to Fixed ChargesExhibit 23.0 Consent of Independent Registered Accounting FirmExhibit 24.0 Power of AttorneyExhibit 31.1 302 CEO CertificationExhibit 31.2 302 CFO CertificationExhibit 32.1 906 CEO CertificationExhibit 32.2 906 CFO Certification
     3




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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 BUSINESS
      OVERVIEW
    4




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RESULTS OF OPERATIONS
 Interest Income
  For the Years Ended December 31,2005
    
    2004
    
    2003Average
    
    Interest
    
    Average
    
    Average
    
    Interest
    
    Average
    
    Average
    
    Interest
    
    Average(Dollars in Thousands)
    
    Balance
    
    Earned
    
    Rate
    
    Balance
    
    Earned
    
    Rate
    
    Balance
    
    Earned
    
    RateAssets:Loan participations
    
    $
    286,844
    
    
    $
    18,989
    
    
    
    6.62
    %
    
    $
    316,223
    
    
    $
    16,024
    
    
    
    5.07
    %
    
    $
    320,289
    
    
    $
    15,942
    
    
    
    4.98
    %Deposit account with
Bank
    
    
    11,709
    
    
    
    359
    
    
    
    3.07
    
    
    
    17,328
    
    
    
    192
    
    
    
    1.11
    
    
    
    12,149
    
    
    
    131
    
    
    
    1.08Total earning assets
    
    
    298,553
    
    
    $
    19,348
    
    
    
    6.48
    %
    
    
    333,551
    
    
    $
    16,216
    
    
    
    4.86
    %
    
    
    332,438
    
    
    $
    16,073
    
    
    
    4.83
    %Allowance for loan
participation losses
    
    
    (941
    )
    
    
    
    
    
    
    
    
    
    
    (1,274
    )
    
    
    
    
    
    
    
    
    
    
    (3,203
    )Other nonearning assets
    
    
    1,051
    
    
    
    
    
    
    
    
    
    
    
    1,435
    
    
    
    
    
    
    
    
    
    
    
    845Total assets
    
    $
    298,663
    
    
    
    
    
    
    
    
    
    
    $
    333,712
    
    
    
    
    
    
    
    
    
    
    $
    330,080Liabilities and
stockholders equity:Noninterest bearing
liabilities
    
    $
    501
    
    
    
    
    
    
    
    
    
    
    $
    5
    
    
    
    
    
    
    
    
    
    
    $
    5Stockholders equity
    
    
    298,162
    
    
    
    
    
    
    
    
    
    
    
    333,707
    
    
    
    
    
    
    
    
    
    
    
    330,075Total liabilities and
stockholders equity
    
    $
    298,663
    
    
    
    
    
    
    
    
    
    
    $
    333,712
    
    
    
    
    
    
    
    
    
    
    $
    330,080
 Provision/(Benefit) For Loan Participation Losses
  Noninterest Income and Expense
  Income Taxes
  5




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FINANCIAL CONDITION
 
 Loan Participations
   Aggregate Principal
    
    Percentage byNumber of
    
    Balance
    
    Aggregate PrincipalProperty Type
    
    Loans
    
    (In Thousands)
    
    BalanceApartments
    
    
    26
    
    
    $
    68,305
    
    
    
    25.81
    %Office/Warehouse
    
    
    20
    
    
    
    53,925
    
    
    
    20.38Shopping/Retail
    
    
    7
    
    
    
    25,177
    
    
    
    9.51Healthcare Facilities
    
    
    4
    
    
    
    15,502
    
    
    
    5.86Residential Development
    
    
    4
    
    
    
    4,861
    
    
    
    1.84Hotel/Motel
    
    
    1
    
    
    
    3,026
    
    
    
    1.14Other Commercial Properties
    
    
    58
    
    
    
    93,828
    
    
    
    35.46Total
    
    
    120
    
    
    $
    264,624
    
    
    
    100.00
    %
  Fixed Rate
    
    Variable RateAggregate
    
    Percentage by
    
    
    
    
    
    Aggregate
    
    Percentage byPrincipal
    
    Aggregate
    
    
    
    
    
    Principal
    
    AggregateNumber of
    
    Balance
    
    Principal
    
    Number of
    
    Balance
    
    PrincipalInterest Rate
    
    Loans
    
    (In Thousands)
    
    Balance
    
    Loans
    
    (In Thousands)
    
    BalanceUnder 5.00%
    
    
    2
    
    
    $
    1,553
    
    
    
    .97
    %
    
    
    
    
    
    $
    
    
    
    
    
    %5.00% to 5.99%
    
    
    3
    
    
    
    10,528
    
    
    
    6.58
    
    
    
    4
    
    
    
    14,477
    
    
    
    13.846.00% to 6.99%
    
    
    17
    
    
    
    29,540
    
    
    
    18.46
    
    
    
    19
    
    
    
    35,785
    
    
    
    34.227.00% to 7.99%
    
    
    38
    
    
    
    93,211
    
    
    
    58.24
    
    
    
    19
    
    
    
    41,516
    
    
    
    39.69Over 8.00%
    
    
    14
    
    
    
    25,204
    
    
    
    15.75
    
    
    
    4
    
    
    
    12,810
    
    
    
    12.25Total
    
    
    74
    
    
    $
    160,036
    
    
    
    100.00
    %
    
    
    46
    
    
    $
    104,588
    
    
    
    100.00
    %
 Percentage byAggregate Principal
    
    Aggregate Principal
    
    Weighted AverageInterest Type
    
    Number of Loans
    
    Balance (In Thousands)
    
    Balance
    
    Interest RateFixed Rate Loans
    
    
    74
    
    
    $
    160,036
    
    
    
    60.48
    %
    
    
    7.29
    %Variable Rate Loans
    
    
    46
    
    
    
    104,588
    
    
    
    39.52
    
    
    
    6.96Total
    
    
    120
    
    
    $
    264,624
    
    
    
    100.00
    %
    
    
    7.13
    %
 Other Assets and Liabilities
  6




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INTEREST RATE RISK MANAGEMENT
  CREDIT RISK
    December 31,(In Thousands)
    
    2005
    
    2004Balance at Beginning of Year
    
    $
    1,021
    
    
    $
    1,600Transferred Allowance, Net
    
    
    (82
    )
    
    
    21Benefit for Loan Participation Losses
    
    
    (405
    )
    
    
    (600
    )Loans Charged Off
    
    
    
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance at End of Year
    
    $
    534
    
    
    $
    1,021Net Charge-Offs to Average Loan Participations
    
    
    .00
    %
    
    
    .00
    %Allowance for Loan Participations Losses to Loan
Participations
    
    
    .20
    
    
    
    .31
  7




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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    2005
    
    2004Hypothetical Change in Interest Rates:100 basis points decrease
    
    
    (2.70
    )%
    
    
    (6.51
    )%100 basis points increase
    
    
    2.70
    
    
    
    6.51200 basis points decrease
    
    
    (5.41
    )
    
    
    (13.02
    )200 basis points increase
    
    
    5.41
    
    
    
    13.02
  LIQUIDITY AND CAPITAL RESOURCES
     8




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OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
  APPLICATION OF CRITICAL ACCOUNTING POLICIES
  9




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Allowance for Loan Participation Losses:
  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 Year2005:Interest Income
    
    $
    4,724
    
    
    $
    5,055
    
    
    $
    4,710
    
    
    $
    4,859
    
    
    $
    19,348Benefit for Loan Participation Losses
    
    
    78
    
    
    
    157
    
    
    
    145
    
    
    
    25
    
    
    
    405Net 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
    
    
    
    1.362004:Interest Income
    
    $
    3,729
    
    
    $
    3,857
    
    
    $
    4,161
    
    
    $
    4,469
    
    
    $
    16,216Benefit for Loan Participation Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    600Net Interest Income
    
    
    3,729
    
    
    
    3,857
    
    
    
    4,161
    
    
    
    5,069
    
    
    
    16,816Noninterest Expense
    
    
    208
    
    
    
    222
    
    
    
    225
    
    
    
    213
    
    
    
    868Income Before Income Taxes
    
    
    3,521
    
    
    
    3,635
    
    
    
    3,936
    
    
    
    4,856
    
    
    
    15,948Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    3,521
    
    
    $
    3,635
    
    
    $
    3,936
    
    
    $
    4,856
    
    
    $
    15,948Preferred Stock Dividends
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    12,788Net Income Available to Common Shares
    
    $
    324
    
    
    $
    438
    
    
    $
    739
    
    
    $
    1,659
    
    
    $
    3,160Per Common Share:Basic and Diluted Net Income(a)
    
    $
    .05
    
    
    $
    .07
    
    
    $
    .12
    
    
    $
    .28
    
    
    $
    .53Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .43
    
    
    
    .432003:Interest Income
    
    $
    4,255
    
    
    $
    4,092
    
    
    $
    3,901
    
    
    $
    3,825
    
    
    $
    16,073Benefit for Loan Participation Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,654
    
    
    
    1,654Net Interest Income
    
    
    4,255
    
    
    
    4,092
    
    
    
    3,901
    
    
    
    5,479
    
    
    
    17,727Noninterest Expense
    
    
    208
    
    
    
    229
    
    
    
    210
    
    
    
    211
    
    
    
    858Income Before Income Taxes
    
    
    4,047
    
    
    
    3,863
    
    
    
    3,691
    
    
    
    5,268
    
    
    
    16,869Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    4,047
    
    
    $
    3,863
    
    
    $
    3,691
    
    
    $
    5,268
    
    
    $
    16,869Preferred Stock Dividends
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    3,197
    
    
    $
    12,788Net Income Available to Common Shares
    
    $
    850
    
    
    $
    666
    
    
    $
    494
    
    
    $
    2,071
    
    
    $
    4,081Per Common Share:Basic and Diluted Net Income(a)
    
    $
    .14
    
    
    $
    .11
    
    
    $
    .08
    
    
    $
    .35
    
    
    $
    .69Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .41
    
    
    
    .41
 (a)
    
    The sum of net income per common share for the four quarters may not equal the full
year due to rounding. 11




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




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13




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FINANCIAL STATEMENTS
 BALANCE SHEETS
 December 31,(Dollars in Thousands)
    
    2005
    
    2004AssetsLoan Participations
    
    $
    264,624
    
    
    $
    324,196Allowance for Loan Participation Losses
    
    
    (534
    )
    
    
    (1,021
    )Net Loan Participations
    
    
    264,090
    
    
    
    323,175Cash and Due from Banks
    
    
    7,371
    
    
    
    10,803Interest Receivable
    
    
    1,446
    
    
    
    1,087Other Assets
    
    
    
    
    
    
    691Total Assets
    
    $
    272,907
    
    
    $
    335,756LiabilitiesOther Liabilities
    
    $
    54
    
    
    $
    Stockholders EquitySeries A Preferred Stock, $25 Stated Value, 6,600,000 Shares
Authorized and Issued, 3,950,484 and 6,600,000 Shares
Outstanding at December 31, 2005 and December 31, 2004,
respectively
    
    $
    98,762
    
    
    $
    165,000Series B Preferred Stock, $.01 Par Value, 125 Shares Authorized,
None Issued and Outstanding
    
    
    
    
    
    
    Common Stock, $.01 Par Value, 5,940,000 Shares Authorized,
Issued
Outstanding
    
    
    59
    
    
    
    59Capital Surplus
    
    
    169,879
    
    
    
    167,000Retained Earnings
    
    
    4,153
    
    
    
    3,697Total Stockholders Equity
    
    
    272,853
    
    
    
    335,756Total Liabilities and Stockholders Equity
    
    $
    272,907
    
    
    $
    335,756
 See notes to financial statements.
 14




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STATEMENTS OF INCOME
 For the Year Ended December 31,(In Thousands, Except Per Share Data)
    
    2005
    
    2004
    
    2003Interest IncomeInterest on Loan Participations
    
    $
    18,989
    
    
    $
    16,024
    
    
    $
    15,942Interest on Cash Deposit
    
    
    359
    
    
    
    192
    
    
    
    131Total Interest Income
    
    
    19,348
    
    
    
    16,216
    
    
    
    16,073Benefit for Loan Participation Losses
    
    
    405
    
    
    
    600
    
    
    
    1,654Net Interest Income After Benefit for Loan Participation Losses
    
    
    19,753
    
    
    
    16,816
    
    
    
    17,727Noninterest ExpenseLoan Servicing Fees
    
    
    359
    
    
    
    398
    
    
    
    401Management Fees
    
    
    287
    
    
    
    318
    
    
    
    320Other Noninterest Expense
    
    
    213
    
    
    
    152
    
    
    
    137Total Noninterest Expense
    
    
    859
    
    
    
    868
    
    
    
    858Income Before Income Taxes
    
    
    18,894
    
    
    
    15,948
    
    
    
    16,869Income Taxes
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    
    18,894
    
    
    
    15,948
    
    
    
    16,869Preferred Stock Dividends
    
    
    10,333
    
    
    
    12,788
    
    
    
    12,788Net Income Available to Common Shares
    
    $
    8,561
    
    
    $
    3,160
    
    
    $
    4,081Per Common ShareBasic
    
    $
    1.44
    
    
    $
    .53
    
    
    $
    .69Diluted
    
    
    1.44
    
    
    
    .53
    
    
    
    .69
 See notes to financial statements.
 15




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STATEMENTS OF CASH FLOWS
 For The Year Ended December 31,(In Thousands)
    
    2005
    
    2004
    
    2003Operating ActivitiesNet Income
    
    $
    18,894
    
    
    $
    15,948
    
    
    $
    16,869Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:Benefit for Loan Participation Losses
    
    
    (405
    )
    
    
    (600
    )
    
    
    (1,654
    )(Increase) Decrease in Interest Receivable
    
    
    (359
    )
    
    
    (68
    )
    
    
    88Decrease (Increase) in Other Assets
    
    
    691
    
    
    
    (650
    )
    
    
    255Increase (Decrease) in Other Liabilities
    
    
    54
    
    
    
    (314
    )
    
    
    314Net Cash Provided by Operating Activities
    
    
    18,875
    
    
    
    14,316
    
    
    
    15,872Investing ActivitiesNet Decrease (Increase) in Loan Participations
    
    
    59,490
    
    
    
    1,187
    
    
    
    (353
    )Net Cash Provided By (Used In) Investing Activities
    
    
    59,490
    
    
    
    1,187
    
    
    
    (353
    )Financing ActivitiesRepurchase of Preferred Stock
    
    
    (71,464
    )
    
    
    
    
    
    
    Dividends Paid to Preferred Stockholders
    
    
    (10,333
    )
    
    
    (12,788
    )
    
    
    (12,788
    )Net Cash Used In Financing Activities
    
    
    (81,797
    )
    
    
    (12,788
    )
    
    
    (12,788
    )Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (3,432
    )
    
    
    2,715
    
    
    
    2,731Cash and Cash Equivalents at Beginning of Period
    
    
    10,803
    
    
    
    8,088
    
    
    
    5,357Cash and Cash Equivalents at End of Period
    
    $
    7,371
    
    
    $
    10,803
    
    
    $
    8,088Supplemental Disclosures for Cash Flow InformationCash Paid for:Interest
    
    
    
    
    
    
    
    
    
    
    Income Taxes
    
    
    
    
    
    
    
    
    
    
    Noncash Transactions:Contribution of Common Stock Consent Dividend
    
    $
    8,105
    
    
    $
    2,560
    
    
    $
    2,427Contribution of 8,000 Preferred Shares by National City Bank
    
    
    200
    
    
    
    
    
    
    
    
 See notes to financial statements
 16




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##### Table of Contents



STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Preferred
    
    Common
    
    Capital
    
    Retained(In Thousands)
    
    Stock
    
    Stock
    
    Surplus
    
    Earnings
    
    TotalBalance at December 31, 2002
    
    $
    165,000
    
    
    $
    59
    
    
    $
    162,013
    
    
    $
    1,443
    
    
    $
    328,515Net Income/Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,869
    
    
    
    16,869Dividends Paid on Preferred
Stock ($1.9375 Per Share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,788
    )
    
    
    (12,788
    )Common Stock Consent Dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,427
    )
    
    
    (2,427
    )Contribution of Consent Dividend
    
    
    
    
    
    
    
    
    
    
    2,427
    
    
    
    
    
    
    
    2,427Balance 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
    
    
    $
    272,853
 See notes to financial statements.
 NOTES TO FINANCIAL STATEMENTS
 NOTE 1. NATURE OF OPERATIONS
   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
 Accounting Changes and Error Corrections: Accounting Changes and Error Corrections,
 Accounting for Certain Loans or Debt Securities Acquired in a Transfer Accounting for Certain Loans or Debt Securities Acquired in a Transfer
 NOTE 4. LOAN PARTICIPATIONS AND ALLOWANCE FOR LOAN PARTICIPATION LOSSES
  19




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##### Table of Contents



December 31(In Thousands)
    
    2005
    
    2004Balance at Beginning of Year
    
    $
    1,021
    
    
    $
    1,600Transferred Allowance, Net
    
    
    (82
    )
    
    
    21Benefit for Loan Participation Losses
    
    
    (405
    )
    
    
    (600
    )Loans Charged Off
    
    
    
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance at End of Year
    
    $
    534
    
    
    $
    1,021
 NOTE 5. EARNINGS PER COMMON SHARE
   For the Year EndedDecember 31,(In Thousands, Except Per Share Data)
    
    2005
    
    2004
    
    2003Net Income
    
    $
    18,894
    
    
    $
    15,948
    
    
    $
    16,869Less Preferred Stock Dividends
    
    
    (10,333
    )
    
    
    (12,788
    )
    
    
    (12,788
    )Net Income Available to Common Stockholders
    
    $
    8,561
    
    
    $
    3,160
    
    
    $
    4,081Weighted Average Common Shares Outstanding
    
    
    5,940
    
    
    
    5,940
    
    
    
    5,940Basic and Diluted Earnings Per Share
    
    $
    1.44
    
    
    $
    .53
    
    
    $
    .69
 NOTE 6. PREFERRED STOCK AND FORWARD PURCHASE CONTRACTS (PRIDES)
     20




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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)
    
    2005
    
    2004Principal Balance at Beginning of Year
    
    $
    324,196
    
    
    $
    325,362Transfers of Loan Participations from the Bank
to PFGI Capital
    
    
    645,047
    
    
    
    328,351Loan Participation Advances
    
    
    2,987
    
    
    
    25,392Transfers of Loan Participations from PFGI
Capital to the Bank
    
    
    (642,008
    )
    
    
    (197,712
    )Loan Participation Payments
    
    
    (65,598
    )
    
    
    (157,197
    )Principal Balance at End of Year
    
    $
    264,624
    
    
    $
    324,196
    21




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NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
  December 31,2005
    
    2004Carrying
    
    Fair
    
    Carrying
    
    Fair(In Thousands)
    
    Value
    
    Value
    
    Value
    
    ValueFinancial AssetsCommercial Mortgage Loan Participations
    
    $
    264,624
    
    
    $
    277,292
    
    
    $
    324,196
    
    
    $
    329,906Less: Allowance for Loan Participation Losses
    
    
    (534
    )
    
    
    
    
    
    
    (1,021
    )
    
    
    Net Commercial Mortgage Loan Participations
    
    $
    264,090
    
    
    $
    277,292
    
    
    $
    323,175
    
    
    $
    329,906Cash and Due From Banks
    
    $
    7,371
    
    
    $
    7,371
    
    
    $
    10,803
    
    
    $
    10,803
  
    
    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
    22




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##### Table of Contents



NOTE 10. LEGAL CONTINGENCIES
    Corporate Information
   T. James Berry Director
    
    (Member of Audit and Compensation Committees)Linda 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)Jan M. Bone
    
    Director and Vice PresidentDavid J. Lucido
    
    Director, Chief Financial Officer and TreasurerJ.David Rosenberg
    
    Director (Member of Executive, Audit and Compensation Committees)John E. Rubenbauer
    
    Director
  
 23




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##### Table of Contents



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 Preferred Stock;
    
    restrict PFGI Capitals ability to redeem its 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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CONTROLS AND PROCEDURES
    26




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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.4.1
    
    Forward Purchase Contract Agreement incorporated by reference to Exhibit 4.2 to PFGI
Capitals Amended Registration Statement on Form S-3/A (Registration No. 333-88446) filed
June 6, 2002.4.2
    
    Income PRIDES incorporated by reference to Exhibit A to Exhibit 4.2 to PFGI Capitals
Amended Registration Statement on Form S-3/A (Registration No. 333-88446) filed June 6,
2002.4.3
    
    Pledge Agreement incorporated by reference to Exhibit 4.4 to PFGI Capitals Amended
Registration Statement on Form S-3/A (Registration No. 333-88446) filed June 6, 2002.4.4
    
    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, 2002.4.5
    
    Remarketing Agreement incorporated by reference to Exhibit 4.6 to PFGI Capitals Amended
Registration Statement on Form S-3/A (Registration No. 333-88446) filed June 6, 2002.4.6
    
    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 of Form 8-K filed on
January 30, 2006.10.1
    
    Master Participation and Servicing Agreement, as amended and restated as of October 20, 2004.10.2
    
    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 30, 2006 for PFGI
Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2005.31.2
    
    Chief Financial Officer
Sarbanes-Oxley Act 302 Certification dated March 30, 2006 for PFGI
Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2005.32.1
    
    Chief Executive Officer
Sarbanes-Oxley Act 906 Certification dated March 30, 2006 for PFGI
Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2005.32.2
    
    Chief Financial Officer
Sarbanes-Oxley Act 906 Certification dated March 30, 2006 for PFGI
Capital Corporations Annual Report on Form 10-K for the year ended December 31, 2005.
 27




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SIGNATURE
  PFGI Capital Corporation(Registrant)Date:
March 30, 2006
    
    /s/ David J. LucidoDavid J. LucidoChief Financial Officer and Treasurer (Principal Financial Officer)Duly Authorized Officer
  Signature
    
    Capacity
    
    Date ./s/ Susan M. Kinsey *

Susan M. Kinsey
    
    Director and President
(Principal Executive Officer)
    
    March 30, 2006/s/ T. James Berry *

T. James Berry
    
    Director
    
    March 30, 2006/s/ Dett Hunter *

Dett Hunter
    
    Director
    
    March 30, 2006/s/ Linda K. Erkkila *

Linda K. Erkkila
    
    Director and Secretary
    
    March 30, 2006/s/ Jan M. Bone *

Jan M. Bone
    
    Director, Vice President
    
    March 30, 2006/s/ J. David Rosenberg *

J. David Rosenberg
    
    Director
    
    March 30, 2006/s/ John E. Rubenbauer *

John E. Rubenbauer
    
    Director
    
    March 30, 2006/s/ David J. Lucido *

David J. Lucido
    
    Director, Chief Financial
Officer and Treasurer
    
    March 30, 2006/s/ J. Richard Jordan *

J. Richard Jordan
    
    Director, Vice President
and Assistant Secretary
    
    March 30, 2006
 
  
 28