PFGI CAPITAL CORP - FORM 10-Q

Attached files

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EX-31.1 - SECTION 302 CEO CERTIFICATION - PFGI CAPITAL CORP	dex311.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - PFGI CAPITAL CORP	dex312.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - PFGI CAPITAL CORP	dex322.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - PFGI CAPITAL CORP	dex321.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended		Commission File
March 31, 2010		1-08019-01

PFGI CAPITAL CORPORATION


Incorporated Under		IRS Employer I.D.
The Laws of Maryland		No. 04-3659419

249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707

Phone: (412)-762-2000

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

Securities registered pursuant to section 12(g) of the Act: Series A Preferred Stock

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YESü NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES NO

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

Large accelerated filer Accelerated filer Non-accelerated filer ü Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES NO ü

The numbers of shares outstanding of each of the registrant’s classes of common stock and preferred stock, as of April 30, 2010:

Common Stock, $.01 Par Value - 5,940,000

Series A Preferred Stock, $25.00 Stated Value - 3,950,484

Series B Preferred Stock, $.01 Par Value - 105

LOGO

Quarter Ended March 31, 2010

Financial Report

and Form 10-Q

FINANCIAL REPORT AND FORM 10-Q

INDEX TO QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED MARCH 31, 2010

TABLE OF CONTENTS


Part I	Financial Information	Page
Item 1.	Financial Statements
	Balance Sheets	4
	Statements of Income	5
	Statements of Cash Flows	6
	Statements of Changes in Stockholders’ Equity	7
	Notes to Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	18
Part II	Other Information
Item 1.	Legal Proceedings (None)
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds (None)
Item 3.	Defaults Upon Senior Securities (None)
Item 4.	Reserved
Item 5.	Other Information (None)
Item 6.	Exhibits	19
	Signature	20

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BALANCE SHEETS

PFGI CAPITAL CORPORATION


	(Unaudited)
	March 31,			December 31,
(Dollars in Thousands)	2010			2009
Assets
Cash and Due from Banks	$	44,394		$	21,499
Securities Available for Sale, at Fair Value		278,696			299,677
Interest Receivable		1,216			1,313
Other Assets		50			—
Total Assets	$	324,356		$	322,489

Liabilities
Accounts Payable and Accrued Liabilities	$	156		$	175
Stockholders’ Equity
Series A Preferred Stock, $25 Stated Value, 6,600,000 Shares Authorized and Issued, 3,950,484 Shares Outstanding		98,762			98,762
Series B Preferred Stock, $.01 Par Value, 125 Shares Authorized, 105 Shares Issued and Outstanding		—			—
Common Stock, $.01 Par Value, 5,940,000 Shares Authorized, Issued and Outstanding		59			59
Capital Surplus		230,164			222,352
Retained Earnings (Loss)		(5,829	)		1,289
Accumulated Other Comprehensive Income (Loss)		1,044			(148)
Total Stockholders’ Equity		324,200			322,314
Total Liabilities and Stockholders’ Equity	$	324,356		$	322,489

See Notes to Financial Statements.

STATEMENTS OF INCOME (Unaudited)

PFGI CAPITAL CORPORATION


	Three Months Ended March 31,
(In Thousands, Except Per Share Data)	2010		2009
Interest Income
Securities	$	2,693
Loan Participations		—	$	4,296
Cash Deposit		42		2
Total Interest Income		2,735		4,298
Provision for Loan Participation Losses		—		941
Noninterest Expense
Loan Servicing Fees		—		94
Management Fees		75		75
Other Noninterest Expense		52		31
Total Noninterest Expense		127		200
Net Income	$	2,608	$	3,157
Preferred Stock Dividends		1,914		1,914
Net Income Available to Common Stockholder	$	694	$	1,243
Net Income Per Common Share
Basic	$	.12	$	.21
Diluted		.12		.21
Average Common Shares Outstanding
Basic and Diluted		5,940		5,940

See Notes to Financial Statements.

STATEMENTS OF CASH FLOWS (Unaudited)

PFGI CAPITAL CORPORATION


	Three Months Ended March 31,
(In Thousands)	2010			2009
Operating Activities
Net Income	$	2,608		$	3,157
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Participation Losses		—			941
Premium Amortization of Securities Available for Sale		1,050			—
Decrease in Interest Receivable		97			142
Increase in Other Assets		(50	)		(321)
Decrease in Accounts Payable and Accrued Liabilities		(19	)		(43)
Net Cash Provided by Operating Activities		3,686			3,876
Investing Activities
Net Increase in Loan Participations		—			(1,927)
Proceeds from Repayments on Securities Available for Sale		21,123			—
Net Cash Provided by (Used in) Investing Activities		21,123			(1,927)
Financing Activities
Dividends Paid to Preferred Stockholders		(1,914)			(1,914)
Net Cash Used in Financing Activities		(1,914)			(1,914)
Net Increase in Cash and Cash Equivalents		22,895			35
Cash and Cash Equivalents at Beginning of Period		21,499			7,476
Cash and Cash Equivalents at End of Period	$	44,394		$	7,511
Supplemental Disclosures for Cash Flow Information
Noncash Transaction:
Contribution of Common Stock Consent Dividends	$	7,812		$	—

See Notes to Financial Statements.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

PFGI CAPITAL CORPORATION

(In Thousands)

Preferred
Stock

Common
Stock

Capital
Surplus

Retained
Earnings

(Loss)

Accumulated
Other
Comprehensive
Income (Loss)

Total

Stockholders’

Equity

Balance at January 1, 2009

$98,762

$ 59

$204,852

2,732

$306,405

Net Income

3,157

Dividends Paid on Preferred Stock

(1,914)

Balance at March 31, 2009

$98,762

$ 59

$204,852

3,975

$307,648

Balance at January 1, 2010

$98,762

$ 59

$222,352

1,289

(148)

$322,314

Comprehensive Income:

Net Income

2,608

Other Comprehensive Income:

Net Unrealized Gains on Securities

1,192

Total Comprehensive Income

3,800

Dividends Paid on Preferred Stock

(1,914)

Common Stock Consent Dividend

(7,812)

Contribution of Consent Dividend

7,812

Balance at March 31, 2010

$98,762

$ 59

$230,164

(5,829)

1,044

$324,200

See Notes to Financial Statements.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

PFGI Capital Corporation (PFGI Capital) is a Maryland corporation incorporated on May 9, 2002. The current principal business objective of PFGI Capital is to acquire, hold, and manage residential mortgage-backed agency securities and other authorized investments that generate net income for distribution to PFGI Capital’s stockholders. Prior to September 29, 2009, the principal business objective of PFGI Capital was to acquire, hold, and manage commercial mortgage loan assets and other authorized investments that generated net income for distribution to PFGI Capital’s stockholders.

PFGI Capital has elected to be treated as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, PFGI Capital generally is not liable for federal income tax to the extent that it distributes its income to its stockholders and continues to meet certain other requirements.

Prior to November 6, 2009, all of PFGI Capital’s common stock was owned by National City Bank (NCB), which formerly was a wholly-owned subsidiary of National City Corporation. On December 31, 2008, National City Corporation was acquired by The PNC Financial Services Group, Inc. (PNC, NYSE: PNC) and NCB became a wholly-owned subsidiary of PNC. As of November 6, 2009, NCB merged into PNC Bank, National Association (PNC Bank), a wholly-owned subsidiary of PNC. Unless specifically stated otherwise, references to ‘the Bank’ refer to NCB prior to November 6, 2009 and PNC Bank thereafter.

PFGI Capital’s Series A Preferred Stock is owned by outside investors and its Series B Preferred Stock is owned by present or former employees of the Bank or PNC. All of PFGI Capital’s common stock is owned by the Bank. PFGI Capital’s executive offices are located at 249 Fifth Avenue, Pittsburgh, PA 15222.

NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying financial statements include the accounts of PFGI Capital, which has no equity ownership in any other entities or interests in variable interest entities.

Subsequent Events: Management evaluated all activity of PFGI Capital and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the Notes to Financial Statements.

Use of Estimates: The accounting and reporting policies of PFGI Capital conform with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual realized amounts could differ materially from those estimates. These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and serve to update PFGI Capital’s 2009 Annual Report on Form 10-K (Form 10-K). These financial statements may not include all information and notes necessary to constitute a complete set of financial statements under GAAP applicable to annual periods and accordingly should be read in conjunction with the financial information contained in the Form 10-K. Management believes these unaudited financial statements reflect all adjustments of a normal recurring nature which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

Statements of Cash Flows: For cash flow purposes, cash equivalents include deposit accounts at banks.

Securities: Investments in debt securities with readily determinable fair values, other than those classified as principal investments or accounted for under the cost or equity method, are accounted for under FASB ASC 320, Investments-Debt and Equity Securities. FASB ASC 320 requires investments to be classified within one of three categories (trading, held to maturity, or available for sale) based on the type of security and management’s ability and intent with regard to selling the security.

Securities purchased with the intention of realizing short-term profits, or that are used to manage risk in other balance sheet assets and liabilities carried at fair value, are considered trading securities and are carried at fair value.

Debt securities are classified as held to maturity when management has both the intent and ability to hold the securities to maturity. Securities classified as held to maturity are carried at amortized cost.

Debt securities not classified as held to maturity or trading are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and losses not deemed other-than-temporary reported in accumulated other comprehensive income.

Declines in the fair value of available for sale securities that are deemed other-than-temporary and are attributable to credit deterioration are recognized on the income statement in the period in which the determination is made. Other–than-temporary declines in fair value attributable to factors other than credit deterioration are recognized in accumulated other comprehensive income (loss) on the balance sheet. Interest on securities, including amortization of premiums using the effective interest method over the period to maturity, are included in interest income. Realized gains and losses on the sale of securities and other-than-temporary impairment charges are determined using the specific-identification method. Purchases and sales of securities are recognized on a trade date basis.

Loan Participations: Prior to September 29, 2009, PFGI Capital held a 95% participation interest in commercial mortgage loans secured by real property such as office buildings, multi-family properties of five units or more, industrial warehouse and self-storage properties, retail space, and other types of commercial properties. Loan participations were generally stated at the principal amount outstanding. Interest on loan participations was computed on the outstanding principal balance. Late charges and other loan fees were not transferred to PFGI Capital, but kept by the Bank as part of its loan servicing fees. Any premium or discount applicable to specific loans purchased was amortized over the remaining lives of such loans using the interest method. Loans were generally placed on nonaccrual status when the payment of principal or interest was past due 90 days or more. However, loans that were well secured and in the process of collection may not have been placed on nonaccrual status. When a loan was placed on nonaccrual status, any interest income previously recognized that had not been received was reversed. Future interest income was recorded only when a payment was received and collection of principal was considered reasonably assured.

PFGI Capital considered a loan to be an impaired loan when it was probable that all amounts due would not be collected according to the contractual terms of the loan agreement. PFGI Capital measured the value of an impaired loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, if more practical, at the loan’s observable market price, or the fair value of the collateral. Income on impaired loans was recognized on a cash basis.

The allowance for loan participation losses was maintained at a level management estimated to be necessary to absorb probable credit losses in the loan participation portfolio. When PFGI Capital purchased loan participations from the Bank, an allowance for loan participation losses was transferred from the Bank to PFGI Capital. The allowance was increased whenever further deterioration of the credit quality of the portfolio occurred and decreased whenever credit quality improved. Loans deemed uncollectible were charged off and deducted from the allowance and recoveries on loans previously charged off were added back to the allowance. Loans sold back to the Bank were accompanied by a transfer of the allowance for those loans from PFGI Capital to the Bank. It was PFGI Capital’s practice to sell individual loan participations back to the Bank as such loans became past due. It was the Bank’s practice to repurchase such past due loan participations; however, the Bank was not required to do so.

PFGI Capital did not have any loan participations nor related allowance at March 31, 2010, or December 31, 2009.

Loan Foreclosures: Prior to September 29, 2009, before foreclosure of any commercial mortgage loan, PFGI Capital sold the participation interest in the underlying loan back to the Bank. The Bank then incurred all expenses related to the foreclosure.

Management’s determination of the adequacy of the allowance for loan participations considered individually impaired loans and pools of homogenous loans with similar risk characteristics. An allowance was established for probable credit losses on impaired loans, when necessary. A loan was impaired when, based on current information and events, it was probable that all amounts contractually due would not be collectible.

Dividends: Dividends on the Series A Preferred Stock and Series B Preferred Stock are discussed in Note 6. See Note 8 for potential restrictions on PFGI Capital’s ability to pay dividends.

The common stockholder is entitled to receive dividends when, as and if declared by the Board of Directors out of funds available after the preferred dividends have been paid. Both the common and preferred stock dividends are treated as ordinary income to the stockholders.

As an alternative to an actual distribution of cash to its common stockholder, PFGI Capital has the option of distributing a dividend using a procedure known as a “consent dividend”, as authorized by Section 565 of the Internal Revenue Code, under which a stockholder, on or before a REIT files its tax return, agrees to treat as a dividend the amount that the REIT so designates, without any distribution of cash or property actually occurring. The effect of the consent dividend is that the REIT is considered to have paid a dividend, and the stockholder is treated as having received that dividend and contributed it back to the REIT. The dollar amount of the consent dividend is included, as if it were distributed, in the calculation to determine that at least 90% of a REIT’s taxable income has been distributed to its stockholders. PFGI Capital, as a REIT, receives a deduction for dividends paid, reducing its taxable income by the amount of the consent dividend. The consent dividend for tax year 2009 is discussed in Note 7.

Income Taxes: PFGI Capital has elected to be treated as a REIT for Federal income tax purposes and intends to comply with the related provisions of the Internal Revenue Code, and is therefore not subject to income taxes. Therefore, no provision for income taxes is included in the accompanying financial statements.

In order to qualify as a REIT under the Internal Revenue Code, at least 75% of the total value of PFGI Capital’s assets must, broadly speaking, consist of real estate assets, which includes: residential mortgage loans and commercial mortgage loans, including participation interests in residential or commercial mortgage loans; residential mortgage-backed securities eligible to be held by REITs; cash; cash equivalents which includes receivables and government securities; and other real estate assets. PFGI Capital refers to these types of assets as REIT qualifying assets. PFGI Capital may invest up to 25% of the value of its total assets in other types of securities (within the meaning of SEC’s Investment Company Act of 1940). Under the Investment Company Act, the term “security” is defined broadly to include, among other things, any note, stock, treasury stock, debenture, evidence of indebtedness, or certificate of interest or participation in any profit sharing agreement or a group or index of securities. The Internal Revenue Code also generally requires that the value of any one issuer’s securities, other than those securities included in the 75% test, may not exceed 5% by value of the total assets of PFGI Capital. In addition, under the Internal Revenue Code, PFGI Capital generally may not own more than 10% of the voting securities nor more than 10% of the value of the outstanding securities of any one issuer, other than those securities included in the 75% test.

As of March 31, 2010, all of PFGI Capital’s assets were invested in REIT qualifying assets. PFGI Capital does not hold any securities, as defined above, nor does PFGI Capital intend to hold securities in any one issuer that exceed 5% of PFGI Capital’s total assets, or more than 10% of the voting securities or value of outstanding securities of any one issuer.

REITs generally are subject to tax at the maximum corporate rate on any income from foreclosure property, other than income that would be qualifying income for purposes of the 75% gross income test, less deductible expenses directly connected with the production of such income. Therefore, prior to foreclosure of any underlying loan acquired by PFGI Capital from the Bank, PFGI Capital sold the participation interest in the underlying loan back to the Bank. The Bank incurred all expenses related to the foreclosure after that time.

NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB issued ASU 2010-6, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures About Fair Value Measurements. This guidance requires new disclosures as follows: 1) transfers in and out of Levels 1 and 2 and the reasons for the transfers, 2) additional breakout of asset and liability categories and 3) purchases, sales, issuances, and settlements to be reported separately in the Level 3 rollforward. This guidance was effective for PFGI Capital for first quarter 2010 reporting with the exception of item 3 which is effective beginning with first quarter 2011 reporting. This guidance did not have any impact on PFGI Capital’s financial condition, results of operations, or liquidity.

NOTE 4. SECURITIES AVAILABLE FOR SALE


(In Thousands)	Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
March 31, 2010
Residential Mortgage-backed Agency Securities	$277,652	$1,044	$ —	$278,696
Total Securities	$277,652	$1,044	$ —	$278,696

(In Thousands)	Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
December 31, 2009
Residential Mortgage-backed Agency Securities	$299,825	$ —	$(148)	$299,677
Total Securities	$299,825	$ —	$(148)	$299,677

The fair value of the securities is impacted by interest rates, credit spreads, market volatility, and illiquidity. Net unrealized gains and losses in the securities available for sale portfolio not deemed other-than-temporary are included in stockholders’ equity as accumulated other comprehensive income or loss unless credit-related. There was no other-than-temporary impairment charge recognized for the three months ended March 31, 2010. None of the securities were in an unrealized loss position at March 31, 2010.

All of PFGI Capital’s residential mortgage-backed agency securities have a maturity of greater than 10 years. The weighted average yield of these securities was 4.62% at March 31, 2010.

There were no proceeds from sales of securities or gross securities gains (losses) for the three months ended March 31, 2010.

NOTE 5. EARNINGS PER COMMON SHARE

The Bank owns all of the issued and outstanding common stock of PFGI Capital. Basic earnings per common share is the amount of earnings for the period available to each share of common stock outstanding during the reporting period, after preferred dividends. Diluted earnings per common share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted for the potential issuance of common stock such as for stock options or convertible debt. PFGI Capital has no stock options, convertible debt or other potential equity instruments and therefore basic and diluted earnings per share are calculated on the same basis.

The following table sets forth the computation of basic and diluted earnings per common share for the periods indicated.


	Three Months Ended March 31,
(In Thousands, Except Per Share Data)	2010			2009
Net Income	$	2,608		$	3,157
Less Preferred Stock Dividends		(1,914	)		(1,914)
Net Income Available to Common Stockholder	$	694		$	1,243
Weighted Average Common Shares Outstanding		5,940			5,940
Basic and Diluted Earnings Per Share	$	.12		$	.21

NOTE 6. STOCKHOLDERS’ EQUITY

Preferred Stock: Holders of Series A Preferred Stock are entitled to receive, if, when, and as authorized and declared by the Board of Directors out of legally available funds, non-cumulative cash dividends at the rate of 7.75% per annum of the $25 per share initial liquidation preference ($1.9375 per share). Holders of Series B Preferred Stock are entitled to receive, if, when, and as authorized and declared by the Board of Directors out of legally available funds, non-cumulative cash dividends at a rate of 5% per annum of the $100 liquidation preference per share ($5.00 per share). Dividends on both the Series A Preferred Stock and Series B Preferred Stock are payable, if authorized and declared, quarterly in arrears on February 17, May 17, August 17, and November 17 of each year or, if any such day is not a business day, on the next business day. See Note 8 for potential restrictions on PFGI Capital’s ability to pay stockholder dividends.

The Series A Preferred Stock ranks senior to the common stock and Series B Preferred Stock of PFGI Capital as to dividend rights and rights upon liquidation, winding up or dissolution. Holders of the Series A Preferred Stock are entitled to one-tenth of one vote per share on all matters submitted to a vote of the stockholders, voting as a single class with the holders of common stock. The Series B Preferred Stock ranks senior to the common stock of PFGI Capital as to dividend rights and rights upon liquidation, winding up or dissolution, but junior to the Series A Preferred Stock. Holders of Series B Preferred Stock have no voting rights.

Each share of the Series A Preferred Stock will be exchanged for one newly issued share of Bank Series A Preferred Stock upon the occurrence of an exchange event. An exchange event occurs when:

•

the Bank becomes less than “adequately capitalized” according to regulations established by the OCC;

•

the Bank is placed into conservatorship or receivership;

•

the OCC, in its sole discretion, directs such exchange in writing, and, even if the Bank is not less than “adequately capitalized”, the OCC anticipates the Bank becoming less than “adequately capitalized” in the near term; or

•

the OCC, 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%.

PFGI Capital or the Bank has the right, with the prior written approval of the OCC, to redeem the Series A Preferred Stock at a redemption price of $25 per share, and the Series B Preferred Stock at a redemption price of $100 per share, along with any authorized and unpaid dividends to the date of redemption.

PFGI Capital’s Board of Directors has authorized the repurchase of up to 3 million shares of its Series A Preferred Stock from third party investors. There were no share repurchases during the three months ended March 31, 2010 or 2009. As of March 31, 2010, PFGI Capital had a remaining authorization to repurchase up to 358,484 shares of its Series A Preferred Stock. PFGI Capital currently has no plan to repurchase Series A Preferred Stock under this Board authorization.

Other Comprehensive Income: The following table sets forth the activity in accumulated other comprehensive income (loss) for the three months ended March 31, 2010.


(In Thousands)	2010
Accumulated Other Comprehensive Loss at January 1	$	(148)
Net Unrealized Gains for the Period		1,192
Accumulated Other Comprehensive Income at March 31	$	1,044

NOTE 7. RELATED PARTY TRANSACTIONS

Prior to September 29, 2009, PFGI Capital held a 95% participation interest in certain loans originated by the Bank and its subsidiaries. Generally, the participation interests were in commercial mortgage loans secured by real property that were either directly underwritten by the Bank and its subsidiaries or acquired by the Bank. On September 29, 2009, the loan participations were sold by PFGI Capital to the Bank. PFGI Capital used the proceeds from this sale, along with cash on hand and a portion of a $17.5 million capital contribution from the Bank, to purchase securities from the Bank. Upon completion of these transactions, the primary earning asset now held by PFGI Capital is residential mortgage-backed agency securities.

The day-to-day operations of PFGI Capital are managed pursuant to the terms of a management agreement between the Bank and PFGI Capital. The Bank, in its role as manager under the terms of the management agreement, receives a management fee designed as a reimbursement for costs incurred. The Bank is required to pay all expenses related to the performance of its duties under the management agreement. Prior to the loan participation sale on September 29, 2009, the management fee was calculated as 0.10% per year of the average daily outstanding principal balance of the loans underlying the participation interests. Management fees incurred in the first quarter of 2009 was $75 thousand. After the loan participation sale, the related management fee paid by PFGI Capital to the Bank is $300 thousand per year. Management fees incurred by PFGI Capital totaled $75 thousand for the first quarter of 2010 under the new management agreement.

Prior to September 29, 2009, the participation agreement provided for the Bank to service the loans underlying the participations held by PFGI Capital in a manner substantially the same as similar servicing performed by the Bank for transactions on its own behalf. The servicing fee that the Bank charged was .125% per year of the average daily outstanding principal balance of the loans underlying the participation interests. Loan servicing costs incurred by PFGI Capital totaled $94 thousand for the three months ended March 31, 2009. As a result of the loan participation sale, the participation agreement between PFGI Capital and the Bank was terminated.

The Bank owns 100% of the common stock of PFGI Capital. Accordingly, the Bank receives all common dividends paid by PFGI Capital. PFGI Capital utilizes a consent dividend procedure as an alternative to an actual cash dividend distribution to its common stockholder. The consent dividend was $7.8 million, or $1.31 per common share, for its 2009 tax year, which was recorded in the first quarter of 2010. As of March 31, 2010, all of the Series B Preferred Stock continues to be held by current or former employees of PNC or the Bank.

As of March 31, 2010 and December 31, 2009, PFGI Capital had an interest-bearing deposit account with the Bank of $44.4 million and $21.5 million, respectively.

NOTE 8. DIVIDEND RESTRICTIONS

Because PFGI Capital is a direct subsidiary of the Bank, regulatory authorities have the right to examine PFGI Capital and its activities and, under certain circumstances, to impose restrictions on the Bank or PFGI Capital. If the OCC determines that the Bank’s relationship with PFGI Capital results in an unsafe and unsound banking practice, the Bank’s regulators have the authority to restrict PFGI Capital’s ability to make distributions to its stockholders, including dividends to holders of PFGI Capital’s preferred stock.

Prior approval by the OCC is required for any dividends declared by the Bank or any of its direct subsidiaries that would exceed the sum of the Bank’s retained earnings for the current year plus retained earnings for the preceding two years, less any required transfers to surplus or common stock. As of March 31, 2010 the Bank could, without prior regulatory approval and absent contrary supervisory guidance, declare dividends of approximately $735 million.

Payment of dividends on PFGI Capital’s preferred stock could also be subject to regulatory limitations if the Bank becomes less than “well-capitalized” for purposes of regulations issued by the OCC. Under these regulations, the Bank would be deemed less than “well-capitalized” if it has a total risk-based capital ratio of less than 10.0%, a Tier 1 risk-based capital ratio of less than 6.0%, or a leverage ratio of less than 5.0%. At March 31, 2010, the Bank’s total risk-based capital ratio was 15.1%, its Tier 1 risk-based capital ratio was 11.5%, and its leverage ratio was 10.0%. An exercise of the OCC’s authority to restrict dividends on PFGI Capital’s preferred stock would also have the effect of restricting the payment of dividends on PFGI Capital’s common stock and all series and classes of preferred stock.

Restrictions on PFGI Capital’s ability to pay dividends to its preferred stockholders may also result in an inability to pay common dividends. If PFGI Capital were unable to distribute at least 90% of its taxable income through preferred and common dividends, it would fail to qualify for the favorable tax treatment accorded to REITs, causing the income of PFGI Capital to be subject to taxation.

NOTE 9. FAIR VALUE

Fair Value Measurement

PFGI Capital uses fair value measurements to record certain financial instruments. FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or the price paid to transfer a liability on the measurement date. The standard focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. FASB ASC 820 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used in the measurement are observable or unobservable. Observable inputs reflect market-driven or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data. The three-level hierarchy is noted below.

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 such as: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated to observable market data for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the assets or liabilities.

Securities Available for Sale: Under FASB ASC 320, Investments-Debt and Equity Securities, securities available for sale are carried at fair value with unrealized changes in value recorded through other comprehensive income within stockholders’ equity. All of PFGI Capital’s available for sale securities are mortgage-backed agency securities. The securities are priced using independent third-party pricing services provided by either the Barclay’s Capital Index, formerly known as the Lehman Index, or Interactive Data Corp. (IDC). Barclay’s Capital Index prices are set with reference to market activity for agency mortgage-backed securities. IDC primarily uses pricing models considering adjustments for ratings, spreads, matrix pricing and prepayments for the securities.

All of PFGI Capital’s available for sale securities are classified as Level 2 in the fair value hierarchy at March 31, 2010.

PFGI Capital has no other assets or liabilities measured at fair value on a recurring basis at March 31, 2010 and December 31, 2009. In addition, PFGI Capital does not have any assets or liabilities measured at fair value on a nonrecurring basis.

Fair Value of Financial Instruments

Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market data. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques that are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The aggregate fair value amounts presented below do not represent the underlying value of PFGI Capital, and is a point-in-time valuation. It is not management’s intention to immediately dispose of a significant portion of its financial instruments. As a result, the following fair value information should not be interpreted as a forecast of future earnings and cash flows.


	March 31, 2010		December 31, 2009
(In Thousands)	Cost Basis	Fair Value	Cost Basis	Fair Value
Financial Assets
Securities Available for Sale	$277,652	$278,696	$299,825	$299,677
Cash and Due from Banks	$44,394	$44,394	$21,499	$21,499

The following methods and assumptions were used in estimating fair value disclosures for financial instruments:

•

Securities available for sale: The fair values for securities are determined using independent third-party pricing services based primarily upon observable market inputs.

•

Cash and due from banks: The carrying amounts reported for cash and due from banks approximate fair value of those assets.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS

PFGI Capital Corporation is a Maryland corporation incorporated on May 9, 2002. PFGI Capital’s current principal business objective is to acquire, hold, and manage residential mortgage-backed agency securities and other authorized investments that will generate net income for distribution to its stockholders. Prior to September 29, 2009, the principal business objective of PFGI Capital was to acquire, hold, and manage commercial mortgage loan assets and other authorized investments that generated net income for distribution to PFGI Capital’s stockholders. PFGI Capital operates as a REIT for federal income tax purposes. As a REIT, PFGI Capital generally will not be liable for federal income tax to the extent that it distributes its income to its stockholders and continues to meet a number of other requirements.

Prior to November 6, 2009, all of PFGI Capital’s common stock was owned by NCB, which formerly was a wholly-owned subsidiary of National City Corporation. On December 31, 2008, National City Corporation was acquired by PNC and NCB became a wholly-owned subsidiary of PNC. As of November 6, 2009, NCB merged into PNC Bank, a wholly-owned subsidiary of PNC.

On September 29, 2009, PFGI Capital sold all of its loan participations to the Bank at their market value plus related accrued interest, and recognized a loss on the sale. PFGI Capital used the proceeds from this sale as its primary source of funds to purchase residential mortgage-backed agency securities issued by Federal National Mortgage Association (FNMA) and previously owned by the Bank. The purchase price of these securities was equal to their market value. As a result of these activities, PFGI Capital’s primary asset is now residential mortgage-backed agency securities.

PFGI Capital’s Series A Preferred Stock is owned by outside investors and its Series B Preferred Stock is owned by present and former employees of the Bank or PNC. All of PFGI Capital’s common stock is owned by the Bank. PFGI Capital’s executive offices are located at 249 Fifth Avenue, Pittsburgh, PA 15222.

PFGI Capital does not require any employees because employees of PNC and its affiliates are managing the day-to-day operations and affairs of PFGI Capital under the management agreement. All of PFGI Capital’s officers are also officers or employees of PNC or its affiliates, including the Bank. The Bank also provides to PFGI Capital accounting and reporting services as required.

Prior to September 29, 2009, the servicing of the loans underlying PFGI Capital’s participation interests was administered by the Bank. The participation agreement between the Bank and PFGI Capital required the Bank to service PFGI Capital’s loan portfolio in a manner substantially the same as for similar work performed by the Bank for transactions on its own behalf. The Bank collected and remitted principal and interest payments, maintained perfected collateral positions, and submitted and pursued insurance claims. The Bank was required to pay all expenses related to the performance of its duties under the participation agreement. The participation agreement was terminated as a result of the loan participation sale on September 29, 2009.

EARNINGS SUMMARY

PFGI Capital reported net income of $2.6 million, or $0.12 per common diluted share, for the first three months of 2010 compared to $3.2 million, or $.21 per common diluted share, for the first three months of 2009. The $0.6 million reduction in earnings versus the prior year quarter was primarily due to a $1.6 million reduction in interest income, partially offset by a $0.9 million provision for loan participation losses in the first quarter of 2009. The residential mortgage-backed agency securities currently held by PFGI Capital had an average yield of 3.82% in the first quarter of 2010 compared to 5.80% earned on the loan participations in the first quarter of 2009. Cash dividends of $1.9 million were paid to preferred stockholders during the first quarters of 2010 and 2009.

RESULTS OF OPERATIONS

Interest Income

PFGI Capital’s primary source of revenue in the first quarter of 2010 consisted of interest income earned on its residential mortgage-backed agency securities. The primary source and revenue in the first quarter of 2009 consisted of interest income earned on loan participations. A secondary source of revenue is interest earned on a deposit account held at the Bank. PFGI Capital has no interest-bearing liabilities and therefore no related interest expense. Total interest income was $2.7 million for the first quarter of 2010 compared to $4.3 million for the first quarter of 2009. The interest earned in the first quarter of 2010 included $1.1 million of premium amortization charges, which were primarily associated with the amortization and prepayments of the balance of the residential mortgage-backed agency securities.

The average balances and interest earned for the three months ended March 31, 2010 and 2009 are shown in the following table:


	Three Months Ended March 31,
	2010				2009
(Dollars in Thousands)	Average Balance	Interest Earned	Average Rate		Average Balance		Interest Earned	Average Rate
Assets:
Securities available for sale	$285,907	$2,693	3.82	%
Loan participations	—	—	—		$300,495		$4,296	5.80	%
Deposit account with Bank	30,088	42	.56		8,163		2	.12
Total earning assets	$315,995	$2,735	3.51	%	$308,658		$4,298	5.65	%
Allowance for loan participation losses	—				(2,011	)
Other nonearning assets	9,812				920
Total assets	$325,807				$307,567

Liabilities and stockholders’ equity:
Noninterest bearing liabilities	$ 442				$ 574
Stockholders’ equity	325,365				306,993
Total liabilities and stockholders’ equity	$325,807				$307,567

Provision for Loan Participation Losses

The provision for loan participation losses was the charge to earnings necessary to maintain the allowance for loan participation losses at a level adequate to absorb management’s estimate of probable credit losses in the loan participation portfolio. A provision for loan participation losses of $941 thousand was recognized in the first quarter of 2009, reflecting the general deterioration of the credit environment for commercial real estate loans. On September 29, 2009, PFGI Capital sold all of its loan participations to the Bank. No provision for loan participation losses was necessary subsequent to the sale of the loan participations. PFGI Capital had no credit losses during the three months ended March 31, 2009.

Noninterest Expense

Noninterest expense was comprised of compensation paid to the Bank for management fees and loan servicing fees, and other professional fees paid to external service providers. For the first three months of 2010 and 2009, management fees totaled $75 thousand. Loan servicing fee for the first quarter of 2009 totaled $94 thousand. Prior to September 29, 2009, annual loan servicing and management fees were assessed at a rate of 0.125% and 0.10%, respectively, of the average daily outstanding principal balance of the loan participations. Subsequent to September 29, 2009, PFGI Capital no longer pays loan servicing fees due to the loan participation sale, and management fees are assessed at $300 thousand per year.

Other noninterest expense was $52 thousand and $31 thousand for the three months ended March 31, 2010 and 2009, respectively. The increase in other noninterest expense in the first quarter of 2010 reflects an increase in audit and other professional fees.

FINANCIAL CONDITION

Securities

As of March 31, 2010, PFGI Capital held $278.7 million of residential mortgage-backed agency securities, compared to $299.7 million as of December 31, 2009. The reduction of $21.0 million was due to principal amortization and prepayments in the first quarter of 2010. To qualify as a REIT, at least 75% of PFGI Capital’s assets must consist of real estate assets. PFGI Capital’s investment in these securities qualifies as real estate assets for this purpose.

Other Assets and Liabilities

As of March 31, 2010 and December 31, 2009, PFGI Capital had cash of $44.4 million and $21.5 million, respectively, in an interest bearing deposit account held with the Bank. The $22.9 million increase in cash balance was primarily due to the $21.0 million principal amortization and prepayments received during the first quarter of 2010 on the residential mortgage-backed agency securities. The account was yielding a rate of 0.55% as of March 31, 2010. PFGI Capital had interest receivable of $1.2 million and $1.3 million as of March 31, 2010, and December 31, 2009, respectively, related to the residential mortgage-backed agency securities. Other liabilities of $156 thousand as of March 31, 2010 and $175 thousand as of December 31, 2009 were primarily related to audit fees.

CREDIT QUALITY

Prior to September 29, 2009, PFGI Capital’s exposure to credit risk was managed through the Bank’s underwriting standards that emphasize “in-market” lending while avoiding excessive property type and business activity concentrations. The Bank’s credit and risk management function employed risk management techniques to ensure that loans adhered to corporate policy and problem loans were promptly identified. These procedures provided management of the Bank with the information necessary to implement policy adjustments where necessary, and to take corrective action on a proactive basis. These procedures also included evaluating the adequacy of the allowance for loan participation losses, which included an analysis of specific credits and the application of relevant allowance factors relative to risk portfolio trends, current and historic loss experience, and prevailing economic conditions.

Provision for loan participation losses in the first quarter of 2009 totaled $941 thousand. There were no charge-offs of loan participations in the first quarter of 2009.

LIQUIDITY AND CAPITAL RESOURCES

The objective of maintaining liquidity within PFGI Capital is to ensure the availability of sufficient cash flows to meet all of PFGI Capital’s financial and dividend commitments. In managing liquidity, PFGI Capital takes into account various legal limitations placed on a REIT.

PFGI Capital addresses its principal liquidity needs by maintaining its level of interest earning assets. Because such assets are reduced over time according to their amortization schedules, or due to pre-payments and pay-offs, PFGI Capital intends to periodically reinvest in additional real estate related assets. PFGI Capital does not anticipate any material capital expenditures.

Sufficient liquidity is also needed to pay dividends to the holders of PFGI Capital’s preferred and common stock. Holders of PFGI Capital’s Series A Preferred Stock are entitled to receive, if, when and as authorized and declared by the Board of Directors out of legally available funds, non-cumulative dividends at the rate of 7.75% per annum on the $25.00 liquidation value per share ($1.9375 per share). Holders of Series B Preferred Stock are entitled to receive, if, when and as authorized and declared by the Board of Directors out of legally available funds, non-cumulative cash dividends at a rate of 5.00% per annum on the $100 liquidation preference per share ($5.00 per share). Cash dividends of $1.9 million were paid to the preferred stockholders during the first quarter of 2010 and 2009, respectively. On April 15, 2010, PFGI Capital declared a dividend of $1.9 million for holders of Series A Preferred Stock and Series B Preferred Stock, payable on May 18, 2010.

As a direct subsidiary of the Bank, PFGI Capital is required to seek advance regulatory approval prior to the declaration of any dividends in excess of the Bank’s available retained earnings. Additionally, prior approval by the OCC is required for any dividends declared by the Bank and its subsidiaries, including PFGI Capital, that would exceed the sum of the Bank’s retained earnings for the current year plus retained earnings for the preceding two years, less any required transfers to surplus or common stock. As of March 31, 2010, the Bank could, without prior regulatory approval and absent contrary supervisory guidance, declare dividends of approximately $735 million. As a result, prior regulatory approval to declare and pay dividends is no longer required.

The OCC also has authority to restrict PFGI Capital’s dividend payments to stockholders if they determine that the Bank’s relationship with PFGI Capital results in an unsafe and unsound banking practice. Restrictions on PFGI Capital’s ability to pay dividends to its preferred stockholders may also result in an inability to pay common dividends. If PFGI Capital were unable to distribute at least 90% of its taxable income through preferred and common dividends, it would fail to qualify for the favorable tax treatment accorded to REITs, causing the income of PFGI Capital to be subject to taxation.

PFGI Capital has an authorization by the Board of Directors for the repurchase of up to 3,000,000 shares of Series A Preferred Stock from third-party investors. There were no share repurchases during the three months ended March 31, 2010 or 2009. As of March 31, 2010, PFGI Capital had a remaining authorization to repurchase up to 358,484 shares of its Series A Preferred Stock. There is no expiration date on this repurchase program authorization. Currently, PFGI Capital has no plan to repurchase Series A Preferred Stock under this Board authorization.

To remain qualified as a REIT, PFGI Capital is required to distribute at least 90% of its taxable income to its stockholders. PFGI Capital expects that, after paying the dividends on all series and classes of preferred stock, it will authorize dividends to the holder of its common stock in an amount sufficient to comply with this requirement.

been distributed to its stockholders. PFGI Capital, as a REIT, receives a deduction for dividends paid, reducing its taxable income by the amount of the consent dividend. PFGI Capital and its common stockholder have historically utilized the consent dividend procedure, including for the year ended December 31, 2009 which was recorded in the first quarter of 2010.

To avoid restrictions on its ability to pay dividends or make other distributions on its common stock, PFGI Capital is required to periodically reinvest proceeds from its existing assets in newly acquired interest earning assets so that its aggregate funds from operations (FFO), as projected for the following four quarters, is expected to equal or exceed 140% of the full annual dividends payable on the Series A Preferred Stock. This requirement cannot be amended without the consent or affirmative vote of the holders of the Series A Preferred Stock, voting as separate class. As of March 31, 2010, PFGI Capital’s annualized FFO coverage is estimated at 146.2%.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

PFGI Capital does not have any off-balance sheet arrangements. PFGI Capital has no long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There is no change to critical accounting policies and estimates from those previously disclosed in PFGI Capital’s Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

Note 3 of the financial statements discusses the expected impact of recently issued accounting policies that have not yet been adopted. To the extent the adoption of new accounting standards are expected to materially affect the financial condition, results of operations, or liquidity position of PFGI Capital, the impacts are discussed in the applicable section(s) of this financial review and notes to the financial statements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements may be identified by words such as estimates, anticipates, projects, plans, expects, intends, believes, should, will, and similar expressions and by the context in which they are used. Such statements are based upon current expectations and speak only as of the date made. Actual results and future events could differ materially from those that we anticipate in our forward-looking statements for a variety of factors including: sharp and/or rapid changes in interest rates; prepayments of securities with fixed interest rates, resulting in reinvestment of the proceeds in securities with lower effective interest rates; significant changes in the anticipated economic scenario which could materially change anticipated credit quality trends; the possible exchange of Series A Preferred Stock for preferred shares of the Bank at the direction of the OCC if the Bank becomes undercapitalized; the failure of PFGI Capital to maintain its status as a REIT for federal income tax purposes; and significant changes in accounting, tax, or regulatory practices or requirements and factors noted in connection with forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and interest rates. Management actively monitors interest rate risk exposure and reviews, among other things, the impact of interest rate changes on the market value of its assets and liabilities, unrealized gains and losses, and the expected amortization of its investment portfolio.

Beginning September 29, 2009, PFGI Capital’s income consists primarily of interest income earned on the residential mortgage-backed agency securities. The interest earned on these securities is based on a fixed rate, and therefore will generally not fluctuate due to changes in the interest rate environment. Changes in the interest rate environment may result in a change in the fair value of the residential mortgage-backed agency securities. Such unrealized gains and losses not deemed other-than-temporary are reported in accumulated other comprehensive income. PFGI Capital has no interest-bearing liabilities, and the dividend yield paid on both series of preferred stock is fixed. Therefore, neither the net income nor the net income available to common stockholder of PFGI Capital should be materially impacted by market risk.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of management, including the principal financial officer and principal accounting officer, of the effectiveness of the design and operation of PFGI Capital’s disclosure controls and procedures and of changes in PFGI Capital’s internal control over financial reporting as of March 31, 2010. Based on that evaluation, management, including the principal financial officer and principal accounting officer, concluded that PFGI Capital’s disclosure controls and procedures were effective as of March 31, 2010 with no significant weaknesses noted. There has been no change in PFGI Capital’s internal control over financial reporting that occurred during the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, PFGI Capital’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There are no material changes from any of the risk factors previously disclosed in PFGI Capital’s Form 10-K in response to Part I, Item 1A.

ITEM 6. EXHIBITS


Exhibit Number		Exhibit Description

3.1		Articles of Amendment and Restatement of PFGI Capital 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.

3.2		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.

3.3		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		Articles of Amendment and Restatement of PFGI Capital Corporation defining the rights of the Series A Preferred Stock incorporated by reference to Exhibit 3.1 hereof.

4.2		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.

10.1		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.

10.2		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.

10.3		Purchase and Sale Agreement, dated as of September 29, 2009 by and between PFGI Capital Corporation and National City Bank, with respect to the CRE Loan Participations incorporated by reference to Exhibit 10.1 to PFGI Capital’s Current Report on Form 8-K filed on October 5, 2009.

10.4		Purchase and Sale Agreement, dated as of September 29, 2009 by and between PFGI Capital Corporation and National City Bank, with respect to certain residential mortgage-backed agency securities incorporated by reference to Exhibit 10.2 to PFGI Capital’s Current Report on Form 8-K filed on October 5, 2009.

10.5		Amendment to Management Agreement, dated as of September 29, 2009 by and between PFGI Capital Corporation and National City Bank incorporated by reference to Exhibit 10.3 to PFGI Capital’s Current Report on Form 8-K filed on October 5, 2009.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

SIGNATURE

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


PFGI Capital Corporation
(Registrant)

Date: May 14, 2010 By:				/s/ Kevin R. Glass
				Kevin R. Glass
				Chief Financial Officer and Treasurer
				(Principal Financial Officer)

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PFGI CAPITAL CORP - FORM 10-Q - May 14, 2010

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