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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

PFGI CAPITAL CORPORATION

One East Fourth Street, Cincinnati, Ohio 45202
Phone: (800)622-4204

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

Indicate by check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 Par Value = 5,940,000
Series A Preferred Stock, $25.00 Stated Value = 6,600,000
(As of July 30, 2004)

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PFGI CAPITAL CORPORATION

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

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PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PFGI CAPITAL CORPORATION
BALANCE SHEETS

See notes to financial statements.

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PFGI CAPITAL CORPORATION
STATEMENTS OF INCOME
(Unaudited)

See notes to financial statements.

4

PFGI CAPITAL CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)

See notes to financial statements.

5

PFGI CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)

See notes to financial statements.

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

PFGI Capital Corporation (PFGI Capital) is a Maryland corporation incorporated on May 9, 2002. The principal business objective of PFGI Capital is to acquire, hold, and manage commercial mortgage loan assets and other authorized investments that will generate net income for distribution to PFGI Capital’s stockholders. As such, management views its financial condition and results of operations as one business segment. 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 a number of other requirements.

All of PFGI Capital’s common stock is owned by The Provident Bank (the Bank). Prior to July 1, 2004, the Bank was a wholly-owned subsidiary of Provident Financial Group, Inc. (Provident). Effective July 1, 2004, National City Corporation (National City) acquired Provident Financial Group pursuant to an Agreement and Plan of Merger by virtue of which, The Bank became a wholly-owned subsidiary of National City. National City is a financial holding company headquartered in Cleveland, Ohio. Under terms of the sale, Provident’s shareholders received 1.135 shares of National City common stock for each share of Provident common stock. National City is required to expressly assume Provident’s obligations under the PRIDES Forward Purchase Contracts. Holders of PRIDES Forward Purchase Contracts (as described in Note 5) will be required to purchase shares of National City common stock and the settlement rate has been adjusted to reflect the exchange ratio.

The Bank, an Ohio state-chartered member bank of the Federal Reserve System, provides full-service retail and commercial banking services. PFGI Capital and the Bank’s executive offices are located at One East Fourth Street, Cincinnati, Ohio 45202, and its Investors Relations telephone number is (800)622-4204.

NOTE 2. BASIS OF PRESENTATION

The accompanying unaudited financial statements include accounts of PFGI Capital. PFGI Capital has no equity ownership in any other entities or interest in “variable interest entities”. These financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position, the results of operations, changes in shareholders’ equity and cash flows for the periods presented. These financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission pertaining to Form 10-Q and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been omitted.

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to conform to the current year presentation.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates.

The financial statements and notes thereto appearing in PFGI Capital’s 2003 annual report on Form 10-K, which include descriptions of significant accounting policies and critical accounting policies, should be read in conjunction with these interim financial statements.

NOTE 3. LOAN PARTICIPATIONS AND RESERVE FOR LOAN PARTICIPATION LOSSES

Participations in loans are generally purchased from the Bank at the Bank’s carrying value, which approximates fair value. Carrying value is the principal amount outstanding plus accrued interest. A reserve for loan participation losses is transferred from the Bank to PFGI Capital at the time participations are transferred. Loans sold back to the Bank are accompanied by a transfer of the reserve for those loans from PFGI Capital to the Bank. The reserve for loan participation losses reflects management’s judgment as to the level considered appropriate to absorb inherent losses in the loan participation portfolio. PFGI Capital did not have any nonperforming assets or impaired loans during the first six months of 2004 or 2003.

The following table sets forth an analysis of the reserve for loan participation losses for the periods indicated:

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

NOTE 4. EARNINGS PER COMMON SHARE

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. 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 shares for stock options, convertible debt, etc. The earnings available to each share of Common Stock has been reduced by any Series A Preferred Stock dividend. PFGI Capital has no stock options or convertible debt or other potential equity instruments and therefore basic and diluted earnings per share are calculated on the same basis. The Bank owns all of the issued and outstanding Common Stock of PFGI Capital.

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

NOTE 5. DESCRIPTION OF PRIDES

Each PRIDES has a stated amount of $25.00 per unit and is comprised of two components – a 3-year Forward Purchase Contract and PFGI Capital Series A Preferred Stock.

Each Forward Purchase Contract obligates the holder to buy, on August 17, 2005, for $25.00, a number of newly issued shares of Provident Common Stock equal to the settlement rate. Pursuant to the terms of the Forward Purchase Contracts, National City is required to expressly assume Provident’s obligations under the Forward Purchase Contracts and certain related agreements. Holders of Forward Purchase Contracts will be required to purchase shares of National City common stock and the settlement rate has been adjusted to reflect the exchange ratio. The settlement rate will be calculated as follows:

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

“Applicable market value” is defined as the average of the closing price per share of National City Common Stock on each of the twenty consecutive trading days ending on the fifth trading day immediately preceding August 17, 2005.

Under the Forward Purchase Contract, National City will also make quarterly contract adjustment payments to the PRIDES holders at an annualized rate of 1.25% of the stated amount ($0.3125 per share).

Holders of PFGI Capital’s Series A Preferred Stock are entitled to one-tenth of one vote per share on all matters submitted to a vote of the shareholders, voting as a single class with the holders of Common Stock. The holders of Preferred Stock will be entitled to receive, if, when, and as authorized and declared by the board of directors out of legally available assets, non-cumulative cash dividends at the rate of 7.75% per annum of the $25.00 per share initial liquidation preference ($1.9375 per share). Dividends on the Preferred Stock will be 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. The Preferred Stock will rank senior to the Common Stock of PFGI Capital as to dividend rights and rights upon liquidation, winding up or dissolution.

In connection with the settlement of the Forward Purchase Contract, National City has engaged a remarketing agent to remarket the PFGI Capital Preferred Stock on behalf of the holders, at which time the PFGI Preferred Stock will be permanently detached from the Forward Purchase Contract. Once the Forward Purchase Contract is settled, there will be two separate and distinct securities outstanding: PFGI Capital Preferred Stock and National City Common Stock. The proceeds received from the remarketing will be used by the holders of Preferred Stock to fulfill their commitment under the terms of the Forward Purchase Contract.

Upon a successful remarketing of shares of the PFGI Capital’s Preferred Stock, the applicable dividend rate on the shares of Preferred Stock that have been purchased in the remarketing will be reset to the reset rate described below. The dividend rate of shares of Preferred Stock that are not remarketed will not be reset and will continue to be 7.75%.

The reset rate will be determined by the reset agent as the dividend rate the Preferred Stock should bear for the Preferred Stock to have a market value on the fifth business day immediately preceding August 17, 2005 of 100.5% of the aggregate liquidation preference of the Preferred Stock, plus declared and unpaid dividends, if any.

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

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

NOTE 6. RELATED PARTY TRANSACTIONS

PFGI Capital holds a 95% participation interest through a participation agreement with the Bank in certain loans originated by the Bank and its subsidiaries. Generally, the participation interests are in commercial mortgage loans secured by real property that were either directly underwritten by the Bank and its subsidiaries or acquired by the Bank. PFGI Capital expects to continue to purchase such interests in the future from the Bank under the terms of the participation agreement.

The participation agreement also provides for the Bank to service the loans underlying the participations held by PFGI Capital in a manner substantially the same for similar work performed by the Bank for transactions on its own behalf. The servicing fee that the Bank charges is .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 $196,000 and $201,000 for the first six months of 2004 and 2003, respectively.

A summary of loan participation activity between the Bank and PFGI Capital for the periods indicated follows:

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

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 to manage PFGI Capital. The Bank is required to pay all expenses related to the performance of its duties under the management agreement, including any payment to its affiliates for managing PFGI Capital. The management fee that the Bank charges is .10% per year of the average daily outstanding principal balance of the loans underlying the participation interests. Management fees incurred by PFGI Capital total $157,000 and $160,000 for the first six months of 2004 and 2003, respectively.

The Bank owns 100% of the Common Stock of PFGI Capital. Accordingly, the Bank will receive all common dividends paid, if any, by PFGI Capital.

As of June 30, 2004 and December 31, 2003, PFGI Capital had an interest-bearing deposit account of $8,079,000 and $8,088,000, respectively, at the Bank and a net receivable/(payable) of $825,000 and $(314,000), respectively, to the Bank.

NOTE 7. LEGAL CONTINGENCIES

On May 3, 2003, a purported class action was filed in the U.S. District Court for the Southern District of Ohio by shareholder Silverback Master Ltd. As amended August 22, 2003 the case names as defendants Provident, PFGI Capital, Provident’s former President, Robert L. Hoverson and Provident’s former Chief Financial Officer, Christopher J. Carey, and is allegedly, on behalf of all purchasers of PRIDES in or traceable to a June 6, 2002 offering of those securities registered with the Securities and Exchange Commission and extending to March 5, 2003. This action is based upon circumstances involved in a restatement of earnings announced by Provident on March 5, 2003. It alleges violations of securities laws by the defendants in Provident’s financial disclosures during the period from March 30, 1998 through March 5, 2003 and in the June 2002 offering. It seeks an unspecified amount of compensatory damages.

This action and other class actions have been consolidated before Judge S. Arthur Spiegel of the United States District Court for the Southern District of Ohio under the caption, Merzin v. Provident Financial Group, Inc., consolidated Civil Action Master File No. C-1-03-165. PFGI Capital and other Defendants filed a Motion to Dismiss the Complaint on November 5, 2003. The motion was granted on March 9, 2004 and the Court dismissed all claims except those relating to the June 6, 2002 offering of 6,600,000 PRIDE securities. However, the Court’s order confined any later finding of damages to $0.70 per PRIDE security.

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PFGI CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

NOTE 8. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB issued revised FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). FIN 46, which is an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” addresses consolidation by business enterprises of variable interest entities (VIEs). A VIE exists when (1) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (2) equity investors do not have the ability to make decisions about the entity’s activities through voting rights or do not have the obligation/right to absorb expected losses/residual returns of the entity; or (3) equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity are conducted on behalf of an investor with a disproportionately small voting interest. FIN 46 requires VIEs to be consolidated by their primary beneficiaries. The primary beneficiary of a VIE is the party that absorbs a majority of the entity’s expected losses and/or receives a majority of its expected residual returns as a result of holding variable interests. FIN 46 became effective for entities that have interest in special purpose entities for periods ending after December 15, 2003, and for all other types of VIEs for periods ending after March 15, 2004. As of June 30, 2004 and December 31, 2003, PFGI Capital did not hold any interest in VIEs, and therefore, the adoption of FIN 46 did not have a material impact on PFGI Capital’s results of operations or financial condition.

Also in December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for acquired loans that show evidence of having deteriorated in terms of credit quality since their origination (i.e. impaired loans). This SOP states that acquired loans should be recorded at their fair value defined as the present value of future cash flows. An allowance for loan losses would not be recognized at acquisition as credit losses would be considered in future cash flows. Subsequent increases in expected cash flows would be accounted for as a change in estimate of the accretable yield on a prospective basis. Subsequent decreases in cash flows would be accounted for as a loss contingency in the current period. SOP 03-03 is effective for loans that are acquired in fiscal years beginning after December 15, 2004. Management will continue to evaluate the applicability of this SOP for prospective acquisitions.

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PFGI CAPITAL CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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

INTRODUCTION

PFGI Capital is a Maryland corporation that was incorporated on May 9, 2002. PFGI Capital’s principal business objective is to acquire, hold, and manage mortgage assets and other authorized investments that will generate net income for distribution to its shareholders. Since operations commenced in June 2002, PFGI Capital has been operating as a REIT for federal income tax purposes.

PFGI Capital is a subsidiary of the Bank. All of PFGI Capital’s day-to-day activities and the servicing of the loans underlying its participation interests are administered by the Bank.

The participation agreement between the Bank and PFGI Capital requires 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 collects and remits principal and interest payments, maintains perfected collateral positions, and submits and pursues insurance claims. The Bank also provides to PFGI Capital accounting and reporting services as required. The Bank is required to pay all expenses related to the performance of its duties under the participation agreement.

All of PFGI Capital’s Common Stock is owned by the Bank. Prior to July 1, 2004, the Bank was a wholly-owned subsidiary of Provident. Effective July 1, 2004, National City acquired Provident pursuant to an Agreement and Plan of Merger. National City is a financial holding company headquartered in Cleveland, Ohio. Under terms of the sale, Provident’s shareholders received 1.135 shares of National City common stock for each share of Provident common stock.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain forward-looking statements that are subject to numerous assumptions, risks or uncertainties. 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 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 could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: sharp and/or rapid changes in interest rates; prepayments of loans with fixed i