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

~~FORM~~SECURITIES AND ~~10-Q~~ 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 30, 2005 OR

~~For~~o ~~the~~TRANSITION ~~quarterly~~REPORT ~~period~~PURSUANT ~~ended~~TO ~~March~~SECTION ~~31,~~13 ~~2005~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM__________TO________

Commission file OR number 1-14103

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

~~For~~(Exact name ~~the~~of ~~transition~~registrant ~~period~~as ~~from to~~ specified in its charter)

Commission file Number: 1-14103

Maryland		52-2063921
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

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


65 East 55^th Street, New York, New York		10022
(Address of principal executive offices)		(Zip Code)

~~Maryland~~212-632-8697 (~~Jurisdiction~~Registrant’s oftelephone ~~incorporation)~~number, ~~52-2063921~~including ~~(I.R.S.~~area ~~Employer Identification No.~~code)

65(N/A) ~~East~~(Former ~~55th Street~~name, ~~New~~former ~~York,~~address ~~New~~and ~~York~~former ~~(Address~~fiscal ofyear, ~~principal~~if ~~executive~~changed ~~offices)~~since ~~10022~~last ~~(Zip Code~~report)

~~212-632-8697~~ Indicate by check mark whether the registrant (~~Registrant's~~1) ~~telephone~~has ~~number,~~filed ~~including~~all ~~area~~reports ~~code~~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 o

~~(N/A)~~ Indicate ~~(Former~~ by ~~name,~~check ~~former~~mark ~~address~~whether ~~and~~the ~~former~~registrant ~~fiscal~~is ~~year,~~an ifaccelerated ~~changed~~filer ~~since~~(as ~~last~~defined ~~report~~in Rule 12b-2 of the Exchange Act). Yes o No x

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 May 13, 2005 100

Class	Outstanding at July 20, 2005
Common Stock par value $0.01 per share		100

NB CAPITAL CORPORATION

Index

		Page
Part I. FINANCIAL INFORMATION:
Item 1.	Financial Statements
	Balance Sheets — As of March 31, 2005 and December 31, 2004	1
	Statements of Income — For the three-month periods ended March 31, 2005 and 2004	2
	Statements of Stockholders' Equity — For the three-month periods ended March 31, 2005 and 2004	3
	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 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:		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

Part I. FINANCIAL INFORMATION:

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.

	Page
Item 1. Financial Statements

Balance Sheets - As of June 30, 2005 and December 31, 2004	1

Statements of Income - For the three-month and six-month periods ended June 30, 2005 and 2004	2

Statements of Stockholders’ Equity - For the three-month and six-month periods ended June 30, 2005 and 2004	3

Statements of Cash Flows - For the six-month periods ended June 30, 2005 and 2004	4

Notes to the financial statements	5

Item 2. Management’s Discussion and Analysis of Financial 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 :

Item 1. Legal Proceedings	11

Item 6. Exhibits	11

References to $ are to United States dollars; references to C$ are to Canadian dollars. On ~~March 31~~ June 30, 2005, the Canadian dollar exchange rate posted by the Bank of Canada was C$1.~~2096~~ 2254 = $1.00 and certain amounts stated herein reflect such exchange rate.

~~PART I. FINANCIAL INFORMATION~~ -i-

ITEM 1. FINANCIAL STATEMENTS

*NB CAPITAL CORPORATION*

*BALANCE SHEETS*

(in thousands of US dollars)	March 31, 2005 (Unaudited)		December 31, 2004
	June 30,			December 31,
Assets	$		$
	2005			2004
Current assets
(in thousands of US dollars)	(Unaudited)
Cash and cash equivalents	17,399		58,327
Assets	$			$
Due from an affiliated company	8,877		9,474
Current
Accrued interest on cash equivalents	1		26
Cash and cash equivalents		70,032			58,327
Prepaid expenses	31		30
Due from an affiliated company		11,751			9,474
Promissory notes - current portion	~~55,575~~	75,885	~~51,678~~		51,678
	81,883		119,535
Accrued interest on cash equivalents		10			26
Promissory notes	398,020		358,228
Prepaid expenses		16			30
	479,903		477,763
		157,694			119,535
Liabilities
Promissory notes		324,421			358,228
Current liabilities
		482,115			477,763
Due to the parent company	413		414
Liabilities
Accounts payable	39		30
Current
	452		444
Due to the parent company		388			414
Stockholders' equity
Accounts payable		45			30
Capital stock and Additional paid-in capital	476,764		476,764
		433			444
Retained earnings	2,687		555
Stockholders' equity
	479,451		477,319
Capital stock and Additional paid-in capital		476,764			476,764
	479,903		477,763
Retained earnings		4,918			555
		481,682			477,319
		482,115			477,763
See accompanying notes to the financial statements.

See accompanying notes to financial statements.

-1-

*NB CAPITAL CORPORATION*


*STATEMENTS OF INCOME*

(in thousands of US dollars, except per share amounts)	2005		2004
(Unaudited)	~~Three-month periods ended March 31,~~
	Three-month periods ended					Six-month periods ended
Revenue	$		$
	June 30,					June 30,
Interest income
( in thousands of US dollars )	2005			2004		2005		2004
Cash and cash equivalents	226		80
	$			$		$		$
Promissory notes	8,662		8,805
Revenue
	8,888		8,885
Interest income
Expenses
Cash equivalents		270			83		496		163
Servicing and advisory fees	413		391
Promissory notes		8,709			9,257		17,371		18,062
Legal and other professional fees	75		54
		8,979			9,340		17,867		18,225
	488		445
Expenses
Net income	8,400		8,440
Servicing and advisory fees		388			391		801		782
Preferred stock dividends	6,268		6,267
Legal and other professional fees		92			74		167		128
Income available to common stockholders	2,132		2,173
		480			465		968		910
Number of common shares outstanding	100		100
Net income		8,499			8,875		16,899		17,315
Earnings per common share - basic and diluted	21		22
Preferred stock dividends		6,268			6,267		12,536		12,534
Income available to common stockholders		2,231			2,608		4,363		4,781
Weighted-average number of common shares outstanding		100			100		100		100
Earnings per common share - basic and diluted		22			26		44		48
See accompanying notes to the financial statements.

See accompanying notes to financial statements

-2-

NB CAPITAL CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands of US dollars)	2005		2004
(Unaudited)	~~Three-month periods ended March 31,~~
	Three-month periods ended						Six-month periods ended
PREFERRED STOCK	$		$
	June 30,						June 30,
Balance, beginning and end of period	3		3
( in thousands of US dollars )	2005			2004			2005			2004
COMMON STOCK AND PAID-IN CAPITAL
	$			$			$			$
Balance, beginning and end of period	476,761		476,761
PREFERRED STOCK
RETAINED EARNINGS
Balance, beginning and end of period		3			3			3			3
Balance, beginning of period	555		1,663
COMMON STOCK AND PAID-IN CAPITAL
Net income	8,400		8,440
Balance, beginning and end of period		476,761			476,761			476,761			476,761
Preferred stock dividends	(6,268	)	(6,267	)
RETAINED EARNINGS
Balance, end of period	2,687		3,836
Balance, beginning of period		2,687			3,836			555			1,663
TOTAL STOCKHOLDERS' EQUITY	479,451		480,600
Net income		8,499			8,875			16,899			17,315
Preferred stock dividends		(6,268	)		(6,267	)		(12,536	)		(12,534	)
Balance, end of period		4,918			6,444			4,918			6,444
TOTAL STOCKHOLDERS' EQUITY		481,682			483,208			481,682			483,208
See accompanying notes to the financial statements.

See accompanying notes to financial statements.

-3-

*NB CAPITAL CORPORATION*


*STATEMENTS OF CASH FLOWS*

(in thousands of US dollars)	2005		2004
(Unaudited)	~~Three-month periods ended March 31,~~
	Six-month periods
OPERATING ACTIVITIES	$		$
	ended June 30,
Net income	8,400		8,440
( in thousands of US dollars )	2005			2004
Item not affecting cash resources :
OPERATING ACTIVITIES
Prepaid expenses	(1	)	(2	)
	$			$
Due from an affiliated company	598		238
Net income		16,899			17,315
Due to the parent company	(1	)	(24	)
Items not affecting cash resources
Accounts payable	8		(11	)
Prepaid expenses		14			12
Accrued interest receivable on cash equivalents	25		4
Due from an affiliated company		(2,277	)		(2,872	)
Net cash provided by operating activities	9,029		8,645
Due to the parent company		(26	)		(24	)
FINANCING ACTIVITIES
Accounts payable		15			(5	)
Dividends	(6,268	)	(6,267	)
Accrued interest receivable on cash equivalents		16			5
Net cash used in financing activities	(6,268	)	(6,267	)
Net cash provided by operating activities		14,641			14,431
INVESTING ACTIVITIES
FINANCING ACTIVITIES
Investment in promissory notes	(73,038	)	0
Dividends		(12,536	)		(12,534	)
Repayments of promissory notes	29,349		39,516
Net cash used in financing activities		(12,536	)		(12,534	)
Net cash (used in) provided by investing activities	(43,689	)	39,516
INVESTING ACTIVITIES
Cash and cash equivalents, beginning of period	58,327		19,406
Investment in promissory notes		(73,038	)		(76,053	)
Cash and cash equivalents, end of period	17,399		61,300
Repayments of promissory notes		82,638			110,485
Net cash provided by investing activities		9,600			34,432
Cash and cash equivalents, beginning of period		58,327			19,406
Cash and cash equivalents, end of period		70,032			55,735
See accompanying notes to the financial statements.

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, 2005

(unaudited)

(in thousands of U.S. dollars)

1)	Incorporation and nature of operations

NB Capital Corporation (the “"Company”") was incorporated under 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 a Prospectus 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 the Bank.

2)	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 ~~periods~~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 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 ~~March~~June 3130, 2005 and 2004 are computed based on the 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 TO THE FINANCIAL STATEMENTS

June 30, 2005

(unaudited)

(in thousands of U.S. dollars)

Interest on Promissory notes and cash equivalents

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

3)	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 ~~April~~ July 2005 to January 2015, at rates ranging from 5.49% to 10.21%, with a weighted average rate of approximately 8.1312% per annum.

The fair value of the Promissory notes as at ~~March~~June 3130, 2005 is $~~462~~414,~~428~~057. 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, 2004	$ ~~409,906~~	409,906
Acquisitions	~~73,038~~	73,038
Principal repayments	~~(29,349~~	)(82,638	)
Promissory notes as of March 31, 2005	$ 453,595
Promissory notes as of June 30, 2005	$	400,306

The scheduled principal repayments on a year end basis as of ~~March 31~~June 30, 2005 are as follows:

2005	$ ~~40,776~~	25,536	~~2011~~	~~$79,604~~2011	$	73,370
2006	$~~100,121~~	90,385	~~2012~~	~~$47,437~~2012	$	43,571
2007	$ ~~36,589~~	31,730	~~2013~~	~~$ 9,228~~2013	$	8,735
2008	$ ~~34,744~~	28,841	~~2014~~	~~$ 4,382~~2014	$	4,333
2009	$ ~~41,275~~	39,124	~~2015~~	~~$ 8,585~~2015	$	8,585
2010	$ ~~50,854~~	46,096

4)	Transactions with an affiliated company

During the three-month and six-month periods ended ~~March~~June 3130, 2005 and ~~March~~June 3130, 2004, the Company earned interest from NB Finance, on the Promissory notes in the amount of $8,~~662~~709 ($9,257 in 2004) and $17,371 ($818,~~805~~062 in 2004), respectively (see Note 3).

The amount of $811,~~877~~ 751 due from NB Finance as of June ~~March 31~~30, 2005 and $9,474 as of December 31, 2004 represents interest and principal repayments due on the promissory notes.

5)	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, 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 periods ended March 31, 2005 and March 31, 2004, fees of $25 ($25 in 2004) were charged to the Company.

-6-

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

5)NOTES TO ~~Transactions~~THE ~~with~~FINANCIAL ~~the parent company (continued)~~STATEMENTS

June 30, 2005

(unaudited)

(in thousands of U.S. dollars)

Advisory agreement

In exchange for a fee equal to $100 per year, 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 30, 2005 and June 30, 2004, fees of $25 ($25 in 2004) and $50 ($50 in 2004) were charged to the Company.

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 ~~three~~ six-month periods ended ~~March~~June 3130, 2005 and ~~March~~June 3130, 2004, the average outstanding balance of the collateralized mortgage loans were $~~549~~537,~~655~~ 316 and $~~529~~539,~~266~~ 361 respectively. During the three-month and six-month periods ended ~~March~~June 3130, 2005 and ~~March~~June 3130, 2004, fees of $~~388~~ 363 ($366 in 2004) and $751 ($732 in 2004) 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 ~~March~~June 3130, 2005 and ~~March~~June 3130, 2004, no fee was charged to the Company for custodial services.

Interest on ~~bank~~cash ~~account and short-term investments~~equivalents

The Company received interest on ~~term~~cash ~~deposits~~equivalents held with National Bank of Canada ~~in the amounts of $226~~ for the three-month and ~~period~~six-month periods ended ~~March~~June 3130, 2005, and ~~80$~~June ~~for~~30, 2004 in the amounts ~~three-month~~of ~~period~~$270 ~~ended~~($83 ~~March~~in ~~31,~~2004) and $496 ($163 in 2004).

6) Stockholders~~’equity~~' ~~(in U.S. Dollars)~~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 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 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 (110 issued) as Adjustable Rate Cumulative Senior Preferred Shares, non-voting, ranked senior to the common stock and to the Series A Preferred Shares 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 condition and liquidation / cash flows for the first quarter ended March 31, 2005, compared to the same periods in 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, 2004. Overview

The Company was incorporated under 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 a Prospectus 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 the Bank.

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~~This discussion ~~accounting~~summarizes ~~policies~~the significant factors affecting the Company’s results of operations, financial condition and liquidation / cash flows for the second quarter ended June 30, 2005, compared to the same periods in 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, 2004.

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

~~Results~~We believe ofthat ~~operations~~there (are no critical accounting policies in ~~thousand~~connection with the preparation of ~~U.S.~~the ~~dollars)~~financial statements of the Company.

~~For the three~~-~~month periods ended March 31, 2005 and March 31, 2004, the Company reported net income of $~~8,400 and $8,440 respectively. Revenues, which were comprised almost entirely of interest income, were $8,888 and $8,885 respectively, and expenses were $488 and $445 respectively. Since the Company has elected to be taxed as a REIT, no income tax was recorded during the period. -

~~Ninety-eight percent of revenues for~~ITEM ~~the three-month period ended March 31, 2005 and ninety-nine percent of revenues for the three-month period ended March 31, 2004 were derived from the Mortgage Assets issued by NB Finance~~ 2. ~~The Mortgage Assets issued by NB Finance are collateralized by the “Mortgage~~ ~~Loans”~~ MANAGEMENT’S ~~that~~DISCUSSION ~~consist~~AND ofANALYSIS 72OF ~~pools~~FINANCIAL ofCONDITION ~~residential first mortgages insured by the Canada~~AND ~~Mortgage~~ RESULTS ~~and~~OF ~~Housing~~OPERATIONS Corporation and which are secured by real property located in Canada. The balance of the revenues result from interest on cash equivalents. The Company believes that the majority of revenues will continue to be generated by the Mortgage Assets issued by NB Finance. (continued)

~~Expenses for the three-month periods~~Results ~~ended March 31, 2005 and 2004 totaled $488 and $445, respectively,~~ of which $413 and $391, respectively, represent servicing and advisory fees paid to the Bank, the Company’s direct parent, 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.~~

~~-8-~~(in thousand of U.S. dollars)

~~ITEM~~For the three-month 2periods ended June 30, 2005 and June 30, 2004, the Company reported net income of $8,499 and $8,875 respectively. ~~MANAGEMENT'S~~ Revenues, ~~DISCUSSION~~which ~~AND~~were comprised mostly of interest income, were $8,979 ~~ANALYSIS~~ and OF$9,340 ~~FINANCIAL~~respectively, and expenses ~~CONDITION~~were ~~AND~~$480 and $465 ~~RESULTS~~respectively. Since OFthe ~~OPERATIONS~~Company ~~(continued)~~ has elected to be taxed as a REIT, no income tax was recorded during the period.

~~During~~Ninety-seven percent of revenues for the three-month period ended ~~March~~ 31June 30, 2005 and ninety-nine percent of revenues for the three-month period ended June 30, 2004 were derived from the ~~Board~~Mortgage ofAssets ~~Directors~~issued ofby NB Finance. The Mortgage Assets issued by NB Finance are collateralized by the ~~Company~~“Mortgage ~~authorized~~Loans” ~~dividends,~~that inconsist of 71 pools of residential first mortgages insured by the Canada Mortgage and Housing ~~aggregate,~~ Corporation ofand ~~$6,268~~which ~~compared~~are tosecured ~~$6,267~~by ~~for~~real property located in Canada. The balance of the ~~three-month~~revenues ~~period~~results ~~ended~~from ~~March~~interest ~~31,~~on ~~2004,~~cash equivalents. These on revenues ~~its~~were ~~Adjustable~~higher ~~Rate~~in ~~Cumulative~~2005 ~~Senior~~than ~~Preferred~~2004 ~~Shares~~due (to an increase in the ~~“Senior~~interest ~~Preferred~~rate ~~Shares”)~~ on ~~and~~term 8deposits held in NY (2.3525% ~~Non-cumulative~~in ~~Exchangeable~~2005 ~~Preferred~~versus ~~Stock,~~.75% ~~Series~~in A2004). ~~(the~~The ~~“Series~~ Company Abelieves ~~Preferred~~that ~~Shares”)~~the ~~and,~~majority ~~accordingly,~~of ~~the~~revenues ~~Depository~~will ~~Shares.~~continue ~~Such~~to be generated ~~dividends~~ by the ~~were~~Mortgage ~~paid~~Assets onissued ~~March~~by ~~31,~~NB ~~2005~~Finance.

Expenses ~~Capital~~ for ~~Resources~~the three-month periods ended June 30, 2005 and ~~Liquidity~~2004 totaled $480 and $465, respectively, of which $388 and $391, respectively, represent servicing and advisory fees paid to the Bank, the Company’s direct parent, 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 ~~thousand~~connection ofwith Uadministering the Mortgage Assets issued by NB Finance and the Mortgage Loans.S. Legal ~~dollars)~~ and other professional fees include payments to the transfer agent and other professional fees.

~~The Company’s revenues are~~During ~~derived from interest payments from~~ the three-month ~~Mortgage~~period ~~Assets. As of March 31~~ended June 30, 2005, ~~$453~~ ~~million~~ the Board of ~~Mortgage~~Directors ~~Assets~~of ~~issued~~the byCompany NBauthorized ~~Finance~~dividends, ~~were~~in ~~collateralized~~the byaggregate, Cof $~~782 million (~~6,268 compared to $~~566~~6,267 ~~million) of Mortgage Loans. The Company believes that~~ for the ~~amounts generated from the~~ ~~payment~~ three-month ofperiod ~~interest~~ended ~~and~~June ~~principal~~30, on2004, ~~such Mortgage Loans will provide more than sufficient~~on ~~funds~~ its Adjustable toRate ~~make~~Cumulative ~~full~~Senior ~~payments~~Preferred ~~with~~Shares ~~respect to~~ (the ~~Mortgage~~“Senior ~~Assets issued by NB Finance and~~Preferred ~~that~~ Shares”) ~~such payments will provide the Company with sufficient funds to meet its operating expenses~~ and to8.35% ~~pay~~Non-cumulative ~~quarterly~~Exchangeable ~~dividends on the Senior~~ Preferred ~~Shares~~Stock, ~~and~~Series ~~the~~A (the “Series A Preferred Shares”) and, accordingly, the Depository Shares. ~~To the extent that the cash flow~~Such ~~from~~ dividends ~~its~~were ~~Mortgage~~paid ~~Assets~~on ~~exceeds those amounts~~June 30, ~~the Company will use the excess to fund~~ ~~the acquisition of additional Mortgage Assets and make distributions on the Common Stock~~ 2005.

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

As of March 31, 2005, the Company had cash equivalents of $17,399 representing 3.63% of total assets, compared to $58,327 representing 12.21% of total assets, as of December 31, 2004. It is expected that the Company will invest (in ~~additional Mortgage Assets once cash resources are close to, but~~ ~~not~~ thousand ~~exceeding, 20%~~ of ~~total assets~~U. ~~The Company expects to make an investment in Mortgage Assets in June 2005, in its normal course of business~~S. dollars)

~~While~~The Company’s ~~this~~revenues ~~continues~~are toderived befrom interest payments from the Mortgage Assets. ~~Company’s~~ As ~~investment~~of ~~policy~~June 30, 2005, $400 million of Mortgage ~~the~~Assets ~~Company~~issued ~~maintains~~by ~~flexibility~~NB inFinance ~~this~~were ~~regard.~~collateralized by C$689 million ($500 million) of Mortgage Loans. The ~~liquidity~~ Company ~~level~~believes isthat ~~sufficient~~the ~~for~~amounts generated from the ~~Company~~payment of interest and principal on such Mortgage Loans will provide more than sufficient funds to make full ~~pay~~payments ~~fees~~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 ~~pursuant~~and to pay quarterly dividends on the Senior Preferred Shares ~~Servicing~~ (see ~~Agreement~~Note 6 of Financial Statements) and the ~~Advisory~~Series ~~Agreement~~A Preferred Shares (see Note 6 of Financial Statements) and, accordingly, the Depository Shares (see Note 6 of Financial Statements). 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’s ~~principal short-term~~does ~~and~~not ~~long-term~~require ~~liquidity~~any ~~needs~~capital ~~are~~resources tofor ~~pay~~its ~~quarterly~~operations ~~dividends on the Senior Preferred Shares~~ and ~~the Series A Preferred Shares and~~, ~~accordingly, the Depository~~ ~~Shares~~ therefore, toit ~~pay~~is ~~fees~~not ~~and~~expected ~~expenses~~to ofacquire ~~the~~any ~~Bank~~capital ~~pursuant~~assets toin the ~~Servicing Agreement and the~~foreseeable ~~Advisory Agreement, and to pay legal and professional fees and expenses of advisors, if any~~ future.

~~Disclosure of Contractual Obligations~~-9-

~~The~~ As of June 30, 2005, the Company ~~does~~had ~~not~~cash ~~have~~and ~~any indebtedness~~cash ~~(current~~equivalents orof ~~long-term)~~$70,032 representing 14.53% of ~~other~~total assets, ~~material~~compared ~~capital~~to ~~expenditures~~$58,327 representing 12.21% of ~~balloon~~total assets, ~~payments~~as of December or 31, ~~other~~2004. The increase ~~payments~~is due onto ~~other~~a ~~long-term~~large ~~obligations.~~repayment Noof ~~negative~~Promissory ~~covenants~~Notes ~~have~~that ~~been~~was made in June ~~imposed~~ 2005. onIt 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 2005, in its normal course of business.

~~Off-Balance~~While this ~~Sheet~~continues ~~Arrangements~~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 ~~does~~principal ~~not~~short-term ~~have~~and ~~any off~~long-~~balance~~term ~~sheet~~liquidity ~~arrangements.~~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 legal and professional fees and expenses of advisors, if any.

~~-9-~~Disclosure of Contractual Obligations

~~ITEM~~The Company ~~3. QUANTITATIVE~~does ~~AND~~not have any indebtedness ~~QUALITATIVE~~ (current or ~~DISCLOSURES~~long-term), ~~ABOUT~~other ~~MARKET~~material ~~RISK~~ capital expenditures, balloon payments or other payments due on other long-term obligations. No negative covenants have been imposed on the Company.

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

~~Disclosure~~The Company ~~About~~does ~~Market~~not ~~Risk~~have any off-balance sheet obligations.

~~Any market risk to which the Company~~ITEM ~~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~~ 3. ~~Since the Mortgage Assets are significantly overcollateralized by the Mortgage~~ QUANTITATIVE ~~Loans,~~ AND ~~the~~QUALITATIVE ~~Company~~DISCLOSURES ~~believes~~ABOUT ~~that~~MARKET 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. RISK

~~ITEM~~There has been 4no significant change in the market risks faced by the Company since December 31, 2004. ~~CONTROLS~~ ~~AND~~For ~~PROCEDURES~~ information regarding the Company’s risks refer to the information under the caption ‘Disclosure About Market Risk’ below and to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Disclosure ~~Based~~ About onMarket their evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s President and Chief Financial Officer have concluded that such disclosure controls and procedures are effective. There were no changes in the Company’s internal controls over financial reporting identified in connection with their evaluation that occurred during the Company’s fiscal quarter that ended March 31, 2005, that have materially affected, or are reasonably likely to materially affect, the Company’s control over financial reporting. Risk

~~-10-~~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.

~~PART II — OTHER~~ITEM ~~INFORMATION~~ 4. CONTROLS AND PROCEDURES

~~ITEM~~Based on their ~~1. LEGAL~~evaluation ~~PROCEEDINGS~~ as of the end of the period covered by this report, the Company’s President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

~~The~~There has been ~~Company~~no ischange ~~not~~in the ~~subject of any material litigation. The~~ Company’s isinternal ~~not~~control ~~currently~~over ~~involved~~financial inreporting ~~nor,~~that has tooccurred during the Company’s ~~knowledge,~~ ~~currently~~fiscal ~~threatened~~quarter ~~with~~ended ~~any~~June ~~material~~30, ~~litigation~~2005 ~~other~~that ~~than~~has materially ~~routine~~affected, ~~litigation arising~~or inis ~~the~~reasonably ~~ordinary~~likely ~~course~~to ofmaterially ~~business~~affect, ~~most~~the ofCompany’s internal ~~which~~control isover ~~expected~~financial ~~to be covered by liability insurance~~reporting.

~~ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS~~ -10-

~~None.~~PART II - OTHER INFORMATION

ITEM 3 1. ~~DEFAULTS UPON~~LEGAL ~~SENIOR SECURITIES~~ PROCEEDINGS

~~None~~The Company is not the subject of any material litigation. The Company is not currently involved in nor, to the Company's knowledge, currently threatened with any material litigation other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance.

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

ITEM 6.	EXHIBITS

	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)

~~None.~~ -11-

~~ITEM 5. OTHER INFORMATION~~ SIGNATURES

~~None.~~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.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


	NB CAPITAL CORPORATION

Date: August 8, 2005	By:	/s/ Serge Lacroix

		Serge Lacroix Chairman of the Board and President

(a) Exhibits:



Date: August 8, 2005	By:	/s/ Jean Dagenais

		Jean Dagenais Chief Financial Officer

~~Exhibit No. Description~~-12-

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)

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.

-11-

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 May 13, 2004 /s/ Serge Lacroix Serge Lacroix Chairman of the Board and President

Date May 13, 2004 /s/ Jean Dagenais Jean Dagenais Chief Financial Officer

-12-

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