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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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(Mark One)

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

For the quarterly period ended September 30, 2003

OR

| ̈ | 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

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

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Maryland(Jurisdiction of incorporation)

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


125 West 55th Street, 
New York, New York(Address of principal executive offices)

10019(Zip Code)


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

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(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]

Applicable only to issuers
involved in bankruptcy proceedings during the preceding five years:

Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by the court. 
Yes ______ No ______

# Applicable only to
corporate issuers:

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

ClassCommon Stock par value $0.01 per share

Outstanding at November 15, 2003100


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NB CAPITAL CORPORATION

Index

|                               |                                                                                        |                                                                                                                         |    | Page
|------------------------------ | -------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -- | ----
|Part I. FINANCIAL INFORMATION: |                                                                                        |                                                                                                                        
|Item 1.                        | Financial Statements                                                                   |                                                                                                                         |   
|                               |                                                                                        | Balance Sheets 
      
As of September 30, 2003 and
December 31, 2002                                                  |    | 1   
|                               |                                                                                        | Statements of Income 
      
For the three-month and nine-month periods ended
September 30, 2003 and 2002              |    | 2   
|                               |                                                                                        | Statements of Stockholders' Equity 
      For the three-month and nine-month periods ended
September 30, 2003 and 2002 |    | 3   
|                               |                                                                                        | Statements of Cash Flows 
      For the nine-month periods ended
September 30, 2003 and 2002                           |    | 4   
|                               |                                                                                        | Notes to the financial statements                                                                                       |    | 5   
|Item 2.                        | Management's Discussion and Analysis of Financial Conditions 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 2.                        | Changes in Securities                                                                  |                                                                                                                         | 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 or
NB Capital) 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. As of September 30, 2003, the Canadian
dollar exchange rate was C$1.3499 = $1.00 and certain amounts stated herein reflect such
exchange rate.

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NB CAPITAL CORPORATION
BALANCE SHEETS

|( in thousand of US dollars )                | September 30,
2003
Unaudited | December 31,
2002
|-------------------------------------------- | ---------------------------- | -----------------
|                                            
|Assets                                       |                              |                  
|Cash and cash equivalents                    |                              | 91,597           
|Due from an affiliated company               |                              | 10,697           
|Promissory notes                             |                              | 388,100          
|Accrued interest on cash equivalents         |                              | 4                
|                                            
|                                             |                              | 490,398          
|                                            
|                                            
|Liabilities                                  |                             
|Due to the parent company                    |                              | 354              
|Accounts payable                             |                              | 58               
|                                            
|                                             |                              | 412              
|                                            
|                                            
|Stockholders' equity                         |                             
|                                            
|Capital stock and Additional paid-in capital |                              | 476,764          
|                                            
|Retained earnings                            |                              | 13,222           
|                                             |                              | 489,986          
|                                            
|                                             |                              | 490,398          
|                                            

See accompanying notes to financial
statements.

- 1 -

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NB CAPITAL CORPORATION
STATEMENTS OF INCOME

|                                                     |                                        |                                       |  |      
|---------------------------------------------------- | -------------------------------------- | ------------------------------------- |  | -----
|(Unaudited)                                          |                                        |                                       |  |      
|                                                     | Three-month periods endedSeptember 30, | Nine-month periods endedSeptember 30,
|(in thousand of US dollars)                          |                                        | 2003                                  |  | 2002 
|                                                    
|Revenue                                              |                                       
|Interest income                                      |                                        | $                                     |  | $    
|Cash equivalents                                     |                                        | 128                                   |  | 82   
|Promissory notes                                     |                                        | 8,755                                 |  | 9,355
|                                                    
|                                                     |                                        | 8,883                                 |  | 9,437
|                                                    
|Expenses                                             |                                       
|Servicing and advisory fees                          |                                        | 354                                   |  | 347  
|Legal and other professional fees                    |                                        | 49                                    |  | 55   
|                                                    
|                                                     |                                        | 403                                   |  | 402  
|                                                    
|Net income                                           |                                        | 8,480                                 |  | 9,035
|Preferred stock dividends                            |                                        | 6,267                                 |  | 6,268
|                                                    
|Income available to common stockholders              |                                        | 2,213                                 |  | 2,767
|                                                    
|Weighted-average number of common shares outstanding |                                        | 100                                   |  | 100  
|                                                    
|Earnings per common share - basic and diluted        |                                        | 22                                    |  | 28   
|                                                    

---

See accompanying notes to financial
statements

-2-

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NB CAPITAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY

|                                     |                                        |                                       |   |        
|------------------------------------ | -------------------------------------- | ------------------------------------- | - | -------
|(Unaudited)                          |                                        |                                       |   |        
|                                     | Three-month periods endedSeptember 30, | Nine-month periods endedSeptember 30,
|(in thousand of US dollars)          |                                        | 2003                                  |   | 2002   
|                                    
|PREFERRED STOCK                      |                                        | $                                     |   | $      
|Balance, beginning and end of period |                                        | 3                                     |   | 3      
|                                    
|                                    
|COMMON STOCK AND PAID-IN CAPITAL     |                                       
|Balance, beginning and end of period |                                        | 476,761                               |   | 476,761
|                                    
|                                    
|RETAINED EARNINGS                    |                                       
|Balance, beginning of period         |                                        | 11,009                                |   | 10,156 
|Net income                           |                                        | 8,480                                 |   | 9,035  
|Preferred stock dividends            |                                        | (6,267                                | ) | (6,268 
|                                    
|Balance, end of period               |                                        | 13,222                                |   | 12,923 
|                                    
|                                    
|TOTAL STOCKHOLDERS' EQUITY           |                                        | 489,986                               |   | 489,687
|                                    

---

See accompanying notes to financial
statements.

-3-

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NB CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS

|Unaudited                                       | Nine-month periods ended
     September 30,
|----------------------------------------------- | -------------------------------------------
|
|                                               
|OPERATING ACTIVITIES                            |                                            
|                                               
|Net income                                      |                                            
|Items not affecting cash resources              |                                            
|Due from an affiliated company                  |                                            
|Due to the parent company                       |                                            
|Accounts payable                                |                                            
|Accrued interest receivable on cash equivalents |                                            
|                                               
|Net cash provided by operating activities       |                                            
|                                               
|                                               
|FINANCING ACTIVITIES                            |                                            
|                                               
|Dividends                                       |                                            
|                                               
|Net cash used in financing activities           |                                            
|                                               
|                                               
|INVESTING ACTIVITIES                            |                                            
|                                               
|Investment in promissory notes                  |                                            
|Repayments of promissory notes                  |                                            
|                                               
|Net cash used in investing activities           |                                            
|                                               
|                                               
|Cash and cash equivalents, beginning of period  |                                            
|                                               
|Cash and cash equivalents, end of period        |                                            
|                                               

---

See accompanying notes to financial
statements.

-4-

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NB CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS September 30, 2003
(unaudited)(in thousand of U.S. dollars)

|1) | Incorporation and nature of operations
|-- | --------------------------------------

| | NB
Capital Corporation (the Company) was incorporated in 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 an Offering Circular dated August
22, 1997, $300,000 of preferred stock and simultaneously, National Bank of Canada, 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., a wholly-owned subsidiary of National Bank of
Canada.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 nine-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 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 RevenueCode 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
nine-month periods ended September 30, 2003 and 2002 are computed based upon 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-

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NB CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS September 30, 2003
(unaudited)(in thousand of U.S. dollars)

|3) | Promissory notes
|-- | ----------------

| | The
Company entered into loan agreements evidenced by Promissory notes with NB Finance, Ltd.,
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 October 2003 to December 2012, at rates
ranging from 7.31% to 10.21%, with a weighted average rate of approximately 8.66% per
annum.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | These
rates approximate market interest rates for loans of similar credit and maturity
provisions and, accordingly, management believes that the carrying value of the
promissory notes receivable approximates their fair value.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | 
|----------------------------------------- | 
|Promissory notes as of June 30, 2003      | 
|Acquisitions                              | 
|Principal repayments                      | 
|                                         
|Promissory notes as of September 30, 2003 | 
|                                         

| | The
scheduled principal repayments as of September 30, 2003 are as follows:
| | ---------------------------------------------------------------------------

|     |  |         | 
|---- |  | ------- | 
|2003 |  | $12,817 | 
|2004 |  | 90,874  | 
|2005 |  | 72,393  | 
|2006 |  | 67,707  | 
|2007 |  | 10,185  | 
|2008 |  | 23,600  | 

|4) | Transactions with an affiliated company
|-- | ---------------------------------------

| | During
the  three-month  and nine-month  periods ended  September 30, 2003 and September 30,
2002, the Company      earned  interest from NB Finance,  Ltd. on the  Promissory  notes
in the amount of $8,755 ($9,355 in 2002) and      $27,888 ($27,964 in 2002)  respectively
 (see Note 3).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
amount of $10,697 due from an  affiliated  company as of September  30, 2003 and $6,977
as of December 31,      2002 represent interest and principal repayments due on the
promissory notes.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5) | Transactions with the parent company
|-- | ------------------------------------

| | The
Company has entered into agreements with National Bank of Canada in relation to the
administration of      the Company's operations.  The agreements are as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Advisory agreementIn exchange for a fee equal to $30 per year, payable in equal
quarterly installments, National Bank of Canada will furnish advice and
recommendations with respect to all aspects of the business and affairs of the
Company. During the three-month periods ended September 30, 2003 and September 30,
2002, fees of $7 were charged to the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-6-

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NB CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS September 30, 2003
(unaudited)(in thousand of U.S. dollars)

|5) | Transactions with the parent company (continued)
|-- | ------------------------------------------------

| | Servicing
agreement
| | -------------------

| | National
Bank of Canada 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-month  periods ended      September 30, 2003 and
September 30, 2002,  the average  outstanding  balance of the  collateralized  mortgage
     loans were $506,304 and $562,007  respectively.  During the  three-month  periods
ended September 30, 2003 and      September 30, 2002, fees of $347 and  $340
respectively, were charged to the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Custodial
agreement
| | -------------------

| | National
 Bank of Canada  holds all  documents  relating  to the  collateralized  mortgage  loans.
 During the      three-month periods ended September 30, 2003 and September 30, 2002, no
fee was charged to the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6) | Stockholders' equity(in U.S. Dollars)
|-- | -------------------------------------

| | Common stockThe Company is authorized to issue up to 1,000 shares of $ 0.01 par value
common stock.
| | ---------------------------------------------------------------------------------------------------

| | Preferred stockThe Company is authorized to issue up to 10,000,000 shares of $0.01 par value
preferred stock as follows:
| | ------------------------------------------------------------------------------------------------------------------------

| |  |  | 300,000
 shares have been  authorized and issued as 8.35%  Non-cumulative  Exchangeable
 Preferred  Stock,          Series A,  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 are traded on the New          York Stock Exchange in the form of
Depositary Shares, each representing a one-fortieth interest therein.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  |  | 1,000
shares 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%  Non-cumulative          Exchangeable  Preferred
Stock,  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

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 NB Capital Corporation.

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

For the  three-month  periods ended
 September 30, 2003 and September 30, 2002, the Company  reported net income of $8,480
and $9,035  respectively.  Revenues,  which were  comprised  entirely  of interest
 income,  were $8,883 and $9,437  respectively,  and  expenses  were $403 and $402,
 respectively.  Since the Company has elected to be taxed as a REIT, no income tax was
recorded during the period.

Ninety-nine  percent of revenues for
the three-month  period ended  September 30, 2003 and the ninety-nine  percent of
revenues for the  three-month  period ended  September 30, 2002 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 fifty-five 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.

Expenses for the  three-month
 periods ended  September 30, 2003 and 2002 totaled $403 and $402,  respectively,  of
which $354 and $347,  respectively,  represent  servicing and advisory  fees paid to
National  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  September  30,  2003,  the Board of  Directors  of the  Company  authorized
dividends,  in the aggregate,  of $6,267 compared to $6,268 for the three-month period
ended September 30, 2002, 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 Depositary Shares. Such
dividends were paid on September 30, 2003.

-8-

---

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

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 September 30, 2003, $388
million of Mortgage  Assets  issued by NB Finance  were  collateralized  by C$733
 million  ($543  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
Depositary 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  September  30,  2003,  the
Company had cash  equivalents  of $91,597  representing  18.68% of total  assets,
compared to $5,454  representing  1.1% of total  assets,  as of December  31,  2002.  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.  While this continues to be the
Company's  investment  policy,  the Company maintains  flexibility in this regard. On
October 21, 2003, the Company invested in $107 million  additional  Mortgage Assets,
 replacing  recently repaid Mortgage  Assets.  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  Depositary  Shares,
 to pay fees and expenses of the Bank pursuant to the  Servicing  Agreement and the
Advisory  Agreement,  and to pay franchise  fees and expenses of advisors, if any.

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.

-9-

---

ITEM 3.  QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no  significant
 change in the  market  risk faced by the  Company  since  December  31,  2002.  For
information  regarding the  Company's  risk refer to the  information  under the caption
 `Disclosure  About Market Risk' under this item and to the Company's 2002 form 10-K.

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,  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 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  and 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.

-10-

---

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is not involved in any
pending legal proceedings other than routine legal proceedings occurring in the ordinary
course of business, which involve amounts in the aggregate believed by management to be
immaterial to the financial condition of the Company.

ITEM 2.  CHANGES IN
SECURITIES

Not applicable.

ITEM 3.  DEFAULTS UPON
SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5.  OTHER INFORMATION

Not applicable.

ITEM 6.  EXHIBITS AND
REPORTS ON FORM 8-K

| |  |        
| |  | -------
| |  | Exhibit
| | 
| |  | 11     
| | 
| |  | 31.1   
| | 
| |  | 31.2   
| | 
| |  | 32.1   
| | 
| |  | 32.2   

|(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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       | 
|---------------------- | 
|                       | 
|                       | 
|                       | 
|                       | 
|Date November 12, 2003 | 
|                       | 
|                       | 

---

-12-

---