UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~March 3031, ~~2004~~2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file Number: 1-14103

NB CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)

Maryland
(Jurisdiction of incorporation)

52-2063921
(I.R.S. Employer Identification No.)

~~125~~65 ~~West~~East 55th Street, New York, New York (Address of principal executive offices) ~~10019~~10022 (Zip Code)

212-632-~~8580~~8697 (Registrant's telephone number, including area code)

(N/A)
(Former name, former address and former fiscal year, if changed since last report

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. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange 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.

Class Common Stock par value $0.01 per share Outstanding at ~~August~~May 1213, ~~2004~~2005 100

NB CAPITAL CORPORATION

Index

		Page
Part I. FINANCIAL INFORMATION:
Item 1.	Financial Statements
	Balance Sheets — As of June 30, 2004 and December 31, 2003	1
	Balance Sheets — As of March 31, 2005 and December 31, 2004	1
	Statements of Income — For the three-month and six-month periods ended June 30, 2004 and 2003	2
	Statements of Income — For the three-month periods ended March 31, 2005 and 2004	2
	Statements of Stockholders' Equity — For the three-month and six-month periods ended June 30, 2004 and 2003	3
	Statements of Stockholders' Equity — For the three-month periods ended March 31, 2005 and 2004	3
	Statements of Cash Flows — For the six-month periods ended June 30, 2004 and 2003	4
	Statements of Cash Flows — For the three-month periods ended March 31, 2005 and 2004	4
	Notes to the financial statements	5
Item 2.	Management's Discussion and Analysis of Financial ~~Conditions~~Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	10
Item 4.	Controls and Procedures	10
PART II. OTHER INFORMATION
Part II. OTHER INFORMATION:		11
Item 1.	Legal Proceedings	11
Item 2.	Changes in Securities and Use of Proceeds	11
Item 3.	Defaults Upon Senior Securities	11
Item 4.	Submission of Matters to a Vote of Security Holders	11
Item 5.	Other Information	11
Item 6.	Exhibits and Reports on Form 8-K	11

This report contains certain forward-looking statements and information relating to NB Capital Corporation (the “Company”) that are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. When used in this report, the words “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company’s management with respect to future events and the Company’s future performance and are subject to certain risks, uncertainties and assumptions. Should management’s current view of the future or underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements.

References to $ are to United States dollars; references to C$ are to Canadian dollars. On March 31, 2005, the Canadian dollar exchange rate posted by the Bank of Canada was C$1.2096 = $1.00 and certain amounts stated herein reflect such exchange rate.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NB CAPITAL CORPORATION

BALANCE SHEETS

(in thousands of US dollars)	~~June~~March 3031, ~~2004~~2005 (Unaudited)	December 31, ~~2003~~2004
Assets	$	$
Current
Current assets
Cash and cash equivalents	5517,~~735~~399	1958,~~406~~327
Due from an affiliated company	138,~~984~~877	119,~~112~~474
Accrued interest on cash equivalents	01	526
Prepaid expenses	1631	2830
Promissory notes - current portion	6955,~~097~~575	8751,~~511~~678
	138,832	118,062
	81,883	119,535
Promissory notes	~~344~~398,~~804~~020	~~360~~358,~~822~~228
	483,636	478,884
	479,903	477,763
Liabilities
Current
Current liabilities
Due to the parent company	~~391~~413	~~415~~414
Accounts payable	3739	4230
	428	457
	452	444
Stockholders' equity
Capital stock and Additional paid-in capital	476,764	476,764
Retained earnings	62,~~444~~687	~~1,663~~555
	483,208	478,427
	479,451	477,319
	483,636	478,884
	479,903	477,763

See accompanying notes to financial statements.

-1-

NB CAPITAL CORPORATION

STATEMENTS OF INCOME

	Three-months periods ended June 30,		Six-months periods ended June 30,
(Unaudited)	Three-month periods ended March 31,
(in thousands of US dollars)	2004	2003	2004	2003
(in thousands of US dollars, except per share amounts)	2005	2004
	$	$	$	$
Revenue	$	$
Revenue
Interest income
Cash equivalents	83	116	163	170
Cash and cash equivalents	226	80
Promissory notes	98,~~257~~662	98,~~556~~805	~~18,062~~	~~19,132~~
	9,340	9,672	18,225	19,302
	8,888	8,885
Expenses
Servicing and advisory fees	~~391~~413	~~390~~391	~~782~~	~~758~~
Legal and other professional fees	7475	6454	~~128~~	~~129~~
	465	454	910	887
	488	445
Net income	8,~~875~~400	98,~~218~~440	~~17,315~~	~~18,415~~
Preferred stock dividends	6,~~267~~268	6,267	~~12,534~~	~~12,534~~
Income available to common stockholders	2,~~608~~132	2,~~951~~173	~~4,781~~	~~5,881~~
Weighted-average number of common shares outstanding	100	100	100	100
Number of common shares outstanding	100	100
Earnings per common share - basic and diluted	2621	3022	48	59

See accompanying notes to financial statements

-2-

NB CAPITAL CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY

	Three-months periods ended June 30,				Six-months periods ended June 30,
(Unaudited)	Three-month periods ended March 31,
(in thousands of US dollars)	~~2004~~2005		~~2003~~2004		~~2004~~		~~2003~~
PREFERRED STOCK	$		$		$		$
Balance, beginning and end of period	3		3		3		3
COMMON STOCK AND PAID-IN CAPITAL
Balance, beginning and end of period	476,761		476,761		~~476,761~~		~~476,761~~
RETAINED EARNINGS
Balance, beginning of period	~~3,836~~555		81,~~058~~663		~~1,663~~		~~5,128~~
Net income	8,~~875~~400		98,~~218~~440		~~17,315~~		~~18,415~~
Preferred stock dividends	(6,~~267~~268	)	(6,267	)	~~(12,534~~	)	~~(12,534~~	)
Balance, end of period	62,~~444~~687		113,~~009~~836		~~6,444~~		~~11,009~~
TOTAL STOCKHOLDERS' EQUITY	~~483~~479,~~208~~451		~~487~~480,~~773~~600		~~483,208~~		~~487,773~~

See accompanying notes to financial statements.

-3-

NB CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

	Six-month periods ended June 30,
(Unaudited)	Three-month periods ended March 31,
(in thousands of US dollars)	~~2004~~2005		~~2003~~2004
OPERATING ACTIVITIES	$		$
Net income	178,~~315~~400		188,~~415~~440
Items not affecting cash resources
Item not affecting cash resources :
Prepaid expenses	12(1	)	0(2	)
Due from an affiliated company	~~(2,872~~598	)	~~(9,960~~238	)
Due to the parent company	(241	)	45(24	)
Accounts payable	(58	)	(1911	)
Accrued interest receivable on cash equivalents	525		(34	)
Net cash provided by operating activities	149,~~431~~029		8,~~478~~645
FINANCING ACTIVITIES
Dividends	(126,~~534~~268	)	(126,~~534~~267	)
Net cash used in financing activities	(126,~~534~~268	)	(126,~~534~~267	)
INVESTING ACTIVITIES
Investment in promissory notes	(7673,~~053~~038	)	~~(70,420~~0	)
Repayments of promissory notes	~~110~~29,~~485~~349		9439,~~607~~516
Net cash used in investing activities	34,432		24,187
Net cash (used in) provided by investing activities	(43,689	)	39,516
Cash and cash equivalents, beginning of period	1958,~~406~~327		519,~~454~~406
Cash and cash equivalents, end of period	5517,~~735~~399		2561,~~585~~300

See accompanying notes to financial statements.

-4-

NB CAPITAL CORPORATION NOTES TO THE FINANCIAL STATEMENTS March 31, 2005 (unaudited) (in thousand of U.S. dollars)

NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 (unaudited) (in thousand of U.S. dollars)

Incorporation and nature of operations

NB Capital Corporation (the “Company”) was incorporated inunder the laws of the State of Maryland on August 20, 1997. The Company’s principal business is to acquire, hold, finance and manage mortgage assets. The Company issued, through ana ~~Offering~~Prospectus ~~Circular~~ dated August 22, 1997, $300,000 of preferred stock and simultaneously, National Bank of Canada (the “Bank”), the Company’s parent company, made a capital contribution in the amount of $183,000. The Company used the aggregate net proceeds of $477,000 to acquire promissory notes (“Promissory notes”) issued by NB Finance, Ltd. (“NB Finance”), a wholly-owned subsidiary of ~~National Bank of Canada (~~the “Bank”).

Significant accounting policies

Financial statements

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and are expressed in U.S. dollars.

The interim financial statements for the three-month ~~and six-month~~ periods are unaudited, however, the financial statements include, in the opinion of management, all adjustments necessary for a fair presentation. The unaudited financial statements should be read in conjunction with the audited financial statements included in the Company’s annual report for the year ended December 31, 2004 filed on Form 10-K. The ~~results of the~~ interim financial statements may not be an indicator of the results anticipated in the full year.

Promissory notes

In accordance with Statements of Financial Accounting Standards (“SFAS”) No.115 “Accounting for certain Investments in Debt and Equity Securities” and based on the Company’s intentions regarding these instruments, the Company has classified the Promissory notes as held to maturity and has accounted for them at amortized cost.

Income taxes

The Company has elected to be taxed as a Real Estate Investment Trust (“REIT”) under the Internal Revenue Code of 1986, as amended, and accordingly, is generally not liable for United States federal income tax to the extent that it distributes at least 90% of its taxable income to its stockholders, maintains its qualification as a REIT and complies with certain other requirements.

Per share data

Basic and diluted earnings per share with respect to the Company for the three-month ~~and six-month~~ periods ended ~~June~~March 3031, ~~2004~~2005 and ~~2003~~2004 are computed based ~~upon~~on the ~~weighted average~~ number of common shares outstanding during the period.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

-5-

NB CAPITAL CORPORATION NOTES TO THE FINANCIAL STATEMENTS March 31, 2005 (unaudited) (in thousand of U.S. dollars)

~~NOTES~~Interest TOon ~~THE~~Promissory ~~FINANCIAL~~notes ~~STATEMENTS June~~and ~~30,~~cash ~~2004 (unaudited) (in thousand of U.S. dollars)~~ equivalents

Interest income on the Promissory notes and cash equivalents is accrued using the simple interest method based on the amount of principle outstanding. The accrual of interest is discontinued when management believes that the collection of interest is doubtful.

Promissory notes

The Company entered into loan agreements evidenced by Promissory notes with NB Finance, an affiliated company. The Promissory notes are collateralized by mortgage loans which are secured by residential first mortgages and insured by the Canada Mortgage and Housing Corporation.

The Promissory notes have maturities ranging from ~~July~~April ~~2004~~2005 to ~~December~~January ~~2012~~2015, at rates ranging from 5.49% to 10.21%, with a weighted average rate of approximately 8.4413% per annum.

The fair value of the Promissory notes as at ~~June~~March 3031, ~~2004~~2005 is $~~438~~462,~~145~~428. Fair value is estimated by using the present value of expected future cash flows and may not be indicative of the net realizable value.

Promissory notes as of December 31, 2003	$ 448,333
Promissory notes as of December 31, 2004	$ 409,906
Acquisitions	7673,~~053~~038
Principal repayments	(~~110~~29,~~485~~349	)
Promissory notes as of June 30, 2004	$ 413,901
Promissory notes as of March 31, 2005	$ 453,595

The scheduled principal repayments on a year end basis as of ~~June~~March 3031, ~~2004~~2005 are as follows:

2004	$ 43,045	2009	$23,634
2005	$ 40,776	2011	$79,604
2005	$ 57,553	2010	$46,010
2006	$100,121	2012	$47,437
2006	$118,418	2011	$65,315
2007	$ 36,589	2013	$ 9,228
2007	$ 10,037	2012	$30,238
2008	$ 34,744	2014	$ 4,382
2008	$ 19,651
2009	$ 41,275	2015	$ 8,585
2010	$ 50,854

Transactions with an affiliated company

During the three-month ~~and six-month~~ periods ended ~~June~~March 3031, ~~2004~~2005 and ~~June~~March 3031, ~~2003~~2004, the Company earned interest from NB Finance, on the Promissory notes in the amount of $98,~~257~~662 ($98,~~556~~805 in ~~2003~~2004) ~~and $18,062~~ (~~19,132 in 2003) respectively (~~see Note 3).

The amount of $138,~~984~~877 due from anNB ~~affiliated~~Finance ~~company~~ as of ~~June~~March 3031, ~~2004~~2005 and $119,~~112~~474 as of December 31, ~~2003~~2004 ~~represent~~represents interest and principal repayments due on the promissory notes.

Transactions with the parent company

The Company has entered into agreements with the Bank in relation to the administration of the Company’s operations. The agreements are as follows:

Advisory agreement

In exchange for a fee equal to $100 per year ~~($30 per year in 2003)~~, payable in equal quarterly installments, the Bank will furnish advice and recommendations with respect to all aspects of the business and affairs of the Company. During the three-month ~~and six-month~~ periods ended ~~June~~March 3031, ~~2004~~2005 and ~~June~~March 3031, ~~2003~~2004, fees of $25 ($825 in ~~2003~~2004) ~~and $50 ($15 in 2003)~~ were charged to the Company.

-6-

NB CAPITAL CORPORATION NOTES TO THE FINANCIAL STATEMENTS March 31, 2005 (unaudited) (in thousand of U.S. dollars)

NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 (unaudited) (in thousand of U.S. dollars)

Transactions with the parent company (continued)

Servicing agreement

The Bank services and administers the Promissory notes and the collateralized mortgage loans and performs all necessary operations in connection with such servicing and administration in exchange for a monthly fee based upon the outstanding balance of the collateralized mortgage.

The monthly fee equals to one-twelfth (1/12) of 0.25% per annum of the aggregate outstanding balance of the collateralized mortgage loans as of the last day of each calendar month. For the ~~six~~three-month periods ended ~~June~~March 3031, ~~2004~~2005 and ~~June~~March 3031, ~~2003~~2004, the average outstanding balance of the collateralized mortgage loans were $~~539~~549,~~361~~655 and $~~559~~529,~~682~~266 respectively. During the three-month ~~and six-month~~ periods ended ~~June~~March 3031, ~~2004~~2005 and ~~June~~March 3031, ~~2003~~2004, fees of $~~366~~388 ($~~383~~366 in ~~2003~~2004) ~~and $732 ($744 in 2003) respectively,~~ were charged to the Company.

Custodial agreement

The Bank holds all documents relating to the collateralized mortgage loans. During the three-month ~~and six-month~~ periods ended ~~June~~March 3031, ~~2004~~2005 and ~~June~~March 3031, ~~2003~~2004, no fee was charged to the Company for custodial services.

6)Interest ~~Stockholders’~~on ~~equity~~bank ~~(in~~account ~~U.S.~~and ~~Dollars)~~short-term investments

The Company received interest on term deposits held with National Bank of Canada in the amounts of $226 for the three-month period ended March 31, 2005, and 80$ for the three-month period ended March 31, 2004.

Stockholders’equity
(in U.S. Dollars)

Common stock

The Company is authorized to issue up to 1,000 shares of $ 0.01 par value common stock. To date:

•

100 shares have been authorized and issued to the Bank.

Preferred stock

The Company is authorized to issue up to 10,000,000 shares of $0.01 par value preferred stock. To date:

• 300,000 shares of preferred stock have been authorized and issued as 8.35% Non-cumulative Exchangeable Preferred Stock, Series A (“Series A Preferred Shares”), non-voting, ranked senior to the common stock and junior to the Adjustable Rate Cumulative Senior Preferred Shares, with a liquidation value of $1,000 per share, redeemable at the Company’s option on or after September 3, 2007, except upon the occurrence of certain changes in tax laws in the United States or in Canada, on or after September 3, 2002. These Series A ~~shares~~Preferred Shares are traded on the New York Stock Exchange in the form of Depository Shares, each Depository Share representing a one-fortieth interest therein.

• Each Series A ~~share~~Preferred Share is exchangeable, upon the occurrence of certain events, for one newly issue 8.45% Non-cumulative First Preferred Share, Series Z, of the Bank.

• 1,000 shares of preferred stock have been authorized ~~and~~ (110 ~~shares have been~~ issued) as Adjustable Rate Cumulative Senior Preferred Shares, non-voting, ranked senior to the common stock and to the ~~8.35%~~Series ~~Non-cumulative~~A ~~Exchangeable~~ Preferred ~~Stock,~~Shares ~~Series A,~~ with a liquidation value of $3,000 per share, redeemable at the Company’s option at any time and retractable at the holder’s option on December 30, 2007 and every ten-year anniversary thereof.

-7-

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

This discussion summarizes the significant factors affecting the Company’s results of operations, ~~financial~~ financial condition and liquidation / cash flows for the ~~second~~ first quarter ~~and six-months~~ ended ~~June~~March 3031, ~~2004~~2005, compared to the same periods in ~~2003~~2004. This discussion should be read in connection with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2003~~2004.

The Company’s principal business objective is to acquire, hold, finance and manage assets consisting of obligations secured by real property as well as other qualifying REIT assets (“Mortgage Assets”). The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and accordingly, is generally not liable for United States federal income tax to the extent that it distributes at least 90% of its taxable income, subject to certain adjustments, to its stockholders.

Critical accounting policies

We believe that there are no critical accounting policies in connection with the preparation of the financial statements of the Company.

Results of operations (in thousand of U.S. dollars)

For the ~~the~~ three-month periods ended ~~June~~March 3031, ~~2004~~2005 and ~~June~~March 3031, ~~2003~~2004, the Company reported net income of $8,~~875~~400 and $98,~~218~~440 respectively. Revenues, which were comprised almost entirely of interest income, were $98,~~340~~888 and $98,~~672~~885 respectively, and expenses were $~~465~~488 and $~~454,~~445 respectively. Since the Company has elected to be taxed as a REIT, no income tax was recorded during the period.

Ninety-~~nine~~eight percent of revenues for the three-month period ended ~~June~~March 3031, ~~2004~~2005 and ~~the~~ ninety-nine percent of revenues for the three-month period ended ~~June~~March 3031, ~~2003~~2004 were derived from the Mortgage Assets issued by NB Finance~~, Ltd~~., ~~an affiliated company (“NB Finance”).~~ The Mortgage Assets issued by NB Finance are collateralized by the “Mortgage Loans” that consist of ~~sixty-three~~ 72 pools of residential first mortgages insured by the Canada Mortgage and Housing Corporation and which are secured by real property located in Canada. The balance of the revenues result from interest on cash equivalents. The decrease in revenues for the three-month period ended June 30, 2004 as compared to the three-month period ended June 30, 2003 is mainly attributable to the decline in the average outstanding balance of the Mortgage Assets. The Company believes that the majority of revenues will continue to be generated by the Mortgage Assets issued by NB Finance.

Expenses for the three-month periods ended ~~June~~March 3031, ~~2004~~2005 and ~~2003~~2004 totaled $~~465~~488 and $~~454~~445, respectively, of which $~~391~~413 and $~~390~~391, respectively, represent servicing and advisory fees paid to ~~National~~the Bank ~~of Canada~~, the Company’s direct parent, ~~(the “Bank”)~~ pursuant to the Servicing Agreement between the Bank and the Company (the “Servicing Agreement”) and the Advisory Agreement between the Bank and the Company (the “Advisory Agreement”), whereby the Bank performs all necessary operations in connection with administering the Mortgage Assets issued by NB Finance and the Mortgage Loans. Legal and other professional fees include payment to the transfer agent and other professional fees.

~~During the three~~-month period ended June 30, 2004, the Board of Directors of the Company authorized dividends, in the aggregate, of $6,267 compared to $6,267 for the three-month period ended June 30, 2003, on its Adjustable Rate Cumulative Senior Preferred Shares (the “Senior Preferred Shares”) and 8~~.35% Non~~-~~cumulative~~ ~~Exchangeable Preferred Stock, Series A (the “Series A Preferred Shares”) and, accordingly, the Depository Shares. Such dividends were paid on June 30, 2004.~~

~~-8-~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

~~ITEM~~During ~~2. MANAGEMENT'S~~the ~~DISCUSSION~~three-month ~~AND~~period ended ~~ANALYSIS~~March OF31, ~~FINANCIAL~~2005, ~~CONDITION~~the ~~AND~~Board ~~RESULTS~~of OFDirectors ~~OPERATIONS~~of the Company authorized dividends, in the aggregate, of $6,268 compared to $6,267 for the three-month period ended March 31, 2004, on its Adjustable Rate Cumulative Senior Preferred Shares (~~continued~~the “Senior Preferred Shares”) and 8.35% Non-cumulative Exchangeable Preferred Stock, Series A (the “Series A Preferred Shares”) and, accordingly, the Depository Shares. Such dividends were paid on March 31, 2005.

Capital Resources and Liquidity (in thousand of U.S. dollars)

The Company’s revenues are derived from interest payments from the Mortgage Assets. As of ~~June~~March 3031, ~~2004~~2005, $~~414 million~~453 million of Mortgage Assets issued by NB Finance were collateralized by C$~~747~~782 million ($~~517~~566 million) of Mortgage Loans. The Company believes that the amounts generated from the payment of interest and principal on such Mortgage Loans will provide more than sufficient funds to make full payments with respect to the Mortgage Assets issued by NB Finance and that such payments will provide the Company with sufficient funds to meet its operating expenses and to pay quarterly dividends on the Senior Preferred Shares and the Series A Preferred Shares and, accordingly, the Depository Shares. To the extent that the cash flow from its Mortgage Assets exceeds those amounts, the Company will use the excess to fund the acquisition of additional Mortgage Assets and make distributions on the Common Stock.

The Company does not require any capital resources for its operations and, therefore, it is not expected to acquire any capital assets in the foreseeable future.

As of ~~June~~March 3031, ~~2004~~2005, the Company had cash equivalents of $5517,~~735~~399 representing 113.5263% of total assets, compared to $1958,~~406~~327 representing 412.0521% of total assets, as of December 31, ~~2003~~2004. ~~The increase in liquidity is attributable to repayment of Mortgage Assets.~~ It is expected that the Company will invest in additional Mortgage Assets once cash resources are close to, but not exceeding, 20% of total assets. The Company expects to make an investment in Mortgage Assets in ~~August 2004~~June 2005, in its normal course of business.

While this continues to be the Company’s investment policy, the Company maintains flexibility in this regard. The liquidity level is sufficient for the Company to pay fees and expenses pursuant to the Servicing Agreement and the Advisory Agreement.

The Company’s principal short-term and long-term liquidity needs are to pay quarterly dividends on the Senior Preferred Shares and the Series A Preferred Shares and, accordingly, the Depository Shares, to pay fees and expenses of the Bank pursuant to the Servicing Agreement and the Advisory Agreement, and to pay ~~franchise~~legal and professional fees and expenses of advisors, if any.

Disclosure of Contractual Obligations

The Company does not have any indebtedness (current or long-term), other material capital expenditures, balloon payments or other payments due on other long-term obligations. No negative covenants have been imposed on the Company.

Off-Balance Sheet AccountingArrangements

The Company does not have any off-balance sheet ~~obligations~~arrangements.

-9-

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in the market ~~risk~~risks faced by the Company since December 31, ~~2003~~2004. For information ~~regarding~~ regarding the Company’s ~~risk~~risks refer to the information under the caption ‘Disclosure About Market Risk’ ~~under~~below ~~this item~~ and to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2003~~2004.

Disclosure About Market Risk

Any market risk to which the Company would be exposed would result from fluctuations in interest rates that would affect the interest payments received by the Company in respect of the Mortgage Assets issued by NB Finance. Since the Mortgage Assets are significantly overcollateralized by the Mortgage Loans, the Company believes that interest rate fluctuations should not present significant market risk. The Company expects that the interest and principal generated by the Mortgage Loans should enable full payment by NB Finance of all of its obligations as they become due.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this ~~report~~Quarterly Report on Form 10-Q, the Company’s President and Chief Financial Officer have concluded that ~~the~~such ~~Company’s~~ disclosure controls and procedures ~~(as~~are ~~defined~~effective. There inwere ~~Rules~~no ~~13a-15(e)~~changes ~~and~~in ~~15d-15(e) under~~ the ~~Securities~~Company’s ~~Exchange~~internal ~~Act~~controls ofover ~~1934,~~financial ~~as amended~~reporting ~~(the~~identified ~~“Exchange~~in ~~Act”)),~~connection ~~are~~with ~~effective~~their evaluation ~~to ensure~~ that ~~information~~occurred ~~required to~~during ~~be disclosed by~~ the Company’s infiscal ~~reports~~quarter that itended ~~files~~March ~~or submits under the Exchange Act is recorded~~31, ~~processed~~2005, that ~~summarized~~have ~~and~~materially ~~reported~~affected, ~~within~~or ~~the~~are ~~time~~reasonably ~~periods~~likely ~~specified~~to materially inaffect, the ~~Securities~~ ~~and Exchange Commission~~Company’s ~~rules~~control ~~and~~over ~~forms.~~financial reporting.

-10-

PART II~~. OTHER~~ — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not ~~involved~~the insubject of any ~~pending~~material ~~legal~~litigation. ~~proceedings~~The ~~other~~Company ~~than~~is ~~routine~~not ~~legal~~currently ~~proceedings~~involved ~~occurring~~ in nor, to the ~~ordinary~~Company’s ~~course~~knowledge, ofcurrently ~~business,~~threatened ~~which~~with ~~involve~~any ~~amounts~~material litigation other than routine litigation arising in the ~~aggregate~~ordinary ~~believed~~course byof ~~management~~business, tomost ~~be immaterial~~of towhich ~~the~~is ~~financial~~expected ~~condition~~to ofbe ~~the~~covered ~~Company~~by liability insurance.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

		Exhibit No.		Description
		11		Computation of Earnings Per Share
		31.1		Certification of Chairman and President 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		Written Statement of Chairman and President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
		32.2		Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

(a)

Exhibits:

~~(b)~~Exhibit ~~Reports~~No. ~~on Form 8-K:~~Description

No11 ~~Reports~~Computation onof ~~Form~~Earnings ~~8-K~~Per ~~were filed during the quarter for which this report is filed.~~Share

31.1 Certification of Chairman and President pursuant to Section 302 of the Sarbanes-~~11-~~Oxley Act of 2002

31.2

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

32.1

Written Statement of Chairman and President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

32.2

Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

99.1

Annual Report on Form 10-K of the Registrant for the Year Ended December 31, 2004

(b) Reports on Form 8-K:

No Reports on Form 8-K were filed during the quarter for which this report is filed.

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SIGNATURES

Pursuant to the requirements 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.

NB CAPITAL CORPORATION

Date ~~August~~May 1213, 2004 /s/ Serge Lacroix Serge Lacroix Chairman of the Board and President

Date ~~August~~May 1213, 2004 /s/ Jean Dagenais Jean Dagenais Chief Financial Officer

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