**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**Form      10-Q**

**Commission      file number **
**1-14103**

**(Exact      name of registrant as specified in its charter)**

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

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

**(Registrant’s      telephone number, including area code)**

**(N/A)**

** **
**(Former      name, former address and former fiscal year, if changed since last      report)**

| **Class**                                             |   | **Outstanding at August 1st, 2008** |   |
|-------------------------------------------------------|--------|---------------------------------------------------------|--------|
| Common                Stock par value $0.01 per share |   | 100                                                     |   |

----

|                                                                                                                              | Page   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|
| Part                I. FINANCIAL INFORMATION:                                                                                     |        |
|                                                                                                                              |   |
| Item                1(a). Financial Statements                                                                                    |   |
|                                                                                                                              |   |
| Balance                Sheets –                                                                                             |   |
| As                of June 30, 2008 and December 31, 2007                                                                          | 1      |
|                                                                                                                              |   |
| Statements                of Income –                                                                                       |   |
| For                the three-month and six-month periods ended June 30, 2008 and                2007                              | 2      |
|                                                                                                                              |   |
| Statements                of Stockholders’ Equity –                                                                   |   |
| For                the three-month and six-month periods ended June 30, 2008 and                2007                              | 3      |
|                                                                                                                              |   |
| Statements                of Cash Flows –                                                                                   |   |
| For                the six-month periods ended June 30, 2008 and 2007                                                             | 4      |
|                                                                                                                              |   |
| Notes                to the financial statements                                                                                  | 5      |
|                                                                                                                              |   |
| Item                1(b). National Bank of Canada Summarized Financial                Information                                 | 9      |
|                                                                                                                              |   |
| Item                2. Management’s Discussion and Analysis of Financial Condition and Results                of Operations | 10     |
|                                                                                                                              |   |
| Item                3. Quantitative and Qualitative Disclosures About Market                Risk                                  | 12     |
|                                                                                                                              |   |
| Item                4. Controls and Procedures                                                                                    | 12     |
|                                                                                                                              |   |
| Item                4T. Controls and Procedures                                                                                   | 12     |
|                                                                                                                              |   |
| Part                II. OTHER INFORMATION :                                                                                       |   |
|                                                                                                                              |   |
| Item                5. Other Information                                                                                          | 12     |
|                                                                                                                              |   |
| Item                6. Exhibits                                                                                                   | 13     |

----

----

PART          I. FINANCIAL INFORMATION   

***NB          CAPITAL CORPORATION***

***BALANCE          SHEETS***

|                                                                    |   | **June 30,** |        | December 31, |   |
|-------------------------------------------------------------------------|--------|-------------------|-------------|-------------------|--------|
|                                                                    |   | **2008**          |        | 2007              |   |
| ***(                    in thousand of U.S. dollars )***      |   | **(Unaudited)**   |        |              |   |
|                                                                    |   |              |        |              |   |
|                                                                    |   |              | $           |              |   | $ |   |
| **Assets**                                                              |   |              |        |              |   |   |   |
|                                                                    |   |              |        |              |   |   |   |
| Current                    assets                                       |   |              |        |              |   |   |   |
| Cash                    and cash equivalents                            |   |              | **34,737**  |              |   | 16,887 |   |
| Due                    from an affiliated company                       |   |              | **18,203**  |              |   | 11,630 |   |
| Promissory                    notes - current portion (Note 3)          |   |              | **244,296** |              |   | 297,724 |   |
| Prepaid                    expenses                                     |   |              | **16**      |              |   | 36 |   |
| Accrued                    interest on cash equivalents       |   |              | **4**       |              |   | 5 |   |
| Total                    current assets                                 |   |              | **297,256** |              |   | 326,282 |   |
|                                                                    |   |              |        |              |   |   |   |
| Promissory                    notes (Note 3)                            |   |              | **182,972** |              |   | 152,356 |   |
| **Total                    assets**    ** **             |   |              | **480,228** |              |   | 478,638 |   |
|                                                                    |   |              |        |              |   |   |   |
| **Liabilities**                                                         |   |              |        |              |   |   |   |
|                                                                    |   |              |        |              |   |   |   |
| Current                    liabilities                                  |   |              |        |              |   |   |   |
| Due                    to the parent company                            |   |              | **404**     |              |   | 419 |   |
| Accounts                    payable                                     |   |              | **53**      |              |   | 71 |   |
| **Total                    liabilities**                 |   |              | **457**     |              |   | 490 |   |
|                                                                    |   |              |        |              |   |   |   |
| **Stockholders'                    equity**                             |   |              |        |              |   |   |   |
|                                                                    |   |              |        |              |   |   |   |
| Capital                    stock and Additional paid-in capital         |   |              | **476,764** |              |   | 476,764 |   |
|                                                                    |   |              |        |              |   |   |   |
| Retained                    earnings                                    |   |              | **3,007**   |              |   | 1,384 |   |
|                                                                    |   |              |        |              |   |   |   |
| **Total                    stockholders' equity**             |   |              | **479,771** |              |   | 478,148 |   |
|                                                                    |   |              |        |              |   |   |   |
| **Total                    liabilities and stockholders' equity**  |   |              | **480,228** |              |   | 478,638 |   |

----

***NB          CAPITAL CORPORATION***

***STATEMENTS          OF INCOME***

***(Unaudited)***

|                                                                                                 |   | **Three-month periods ended** |                                 | **Six-month periods ended** |   |
|------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------------------------------------|---------------------------------------|--------|
|                                                                                                 |   | **June 30,**                       |                                 | **June 30,**                     |   |
| ***(                    in thousand of U.S. dollars, except per share                    amounts)*** |   | **2008**                                |                                 | 2007                                  |   | **2008** |   | 2007 |   |
|                                                                                                 |   |                                    |                                 |                                  |   |   |   |   |   |
|                                                                                                 |   |                                    | $                                    |                                  |   | $ |   |   | $ |   |   | $ |   |
| **Revenue**                                                                                          |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| Interest                    income                                                                   |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| Cash                    and cash equivalents                                                         |   |                                    | **86**                               |                                  |   | 759 |   |   | **495** |   |   | 1,701 |   |
| Promissory                    notes                                                                  |   |                                    | **7,579**                            |                                  |   | 7,614 |   |   | **14,618** |   |   | 14,587 |   |
|                      **   **                                                          |   |                                    | **7,665**                            |                                  |   | 8,373 |   |   | **15,113** |   |   | 16,288 |   |
|                                                                                                 |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| **Expenses**                                                                                         |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| Servicing                    and advisory fees                                                       |   |                                    | **404**                              |                                  |   | 387 |   |   | **802** |   |   | 751 |   |
| Legal                    and other professional fees                                                 |   |                                    | **79**                               |                                  |   | 92 |   |   | **151** |   |   | 153 |   |
|                      **   **                                                          |   |                                    | **483**                              |                                  |   | 479 |   |   | **953** |   |   | 904 |   |
|                                                                                                 |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| **Net                    income**                                                                    |   |                                    | **7,182**                            |                                  |   | 7,894 |   |   | **14,160** |   |   | 15,384 |   |
|                                                                                                 |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| Preferred                    stock dividends                                                         |   |                                    | **6,268**                            |                                  |   | 6,270 |   |   | **12,537** |   |   | 12,540 |   |
|                                                                                                 |   |                                    |                       |                                  |   |     |   |   |     |   |   |     |   |
| **Income                    available to common stockholders**                                       |   |                                    | **914**                              |                                  |   | 1,624 |   |   | **1,623** |   |   | 2,844 |   |
|                                                                                                 |   |                                    |                                 |                                  |   |   |   |   |   |   |   |   |   |
| Weighted-average                    number of common shares outstanding                              |   |                                    | **100**                              |                                  |   | 100 |   |   | **100** |   |   | 100 |   |
|                                                                                                 |   |                                    |                       |                                  |   |                       |   |   |                       |   |   |                       |   |
| **Earnings                    per common share - basic and diluted**                                 |   |                                    | **9**                                |                                  |   | 16 |   |   | **16** |   |   | 28 |   |

----

***NB          CAPITAL CORPORATION***

***STATEMENTS          OF STOCKHOLDERS' EQUITY***

***(Unaudited)***

|                                                                                                                   |   | **Three-month                    periods ended** |        | **Six-month                    periods ended** |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|-------------|------------------------------------------------|--------|
|                                                                                                                   |   | **June                    30,**                  |        | **June                    30,**                |   |
| ***(                    in thousands of U.S. dollars )***                                                         |   | **2008**                                         |        | 2007                                           |   | **2008** |   | 2007 |   |
|                                                                                                                   |   |                                             |        |                                           |   |   |   |   |   |
|                                                                                                                   |   |                                             | $           |                                           |   | $ |   |   | $ |   |   | $ |   |
| **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                                                                        |   |                                             | **2,093**   |                                           |   | 3,664 |   |   | **1,384** |   |   | 2,444 |   |
| Net                    income                                                                                          |   |                                             | **7,182**   |                                           |   | 7,894 |   |   | **14,160** |   |   | 15,384 |   |
| Preferred                    stock dividends                                                                           |   |                                             | **(6,268**  | **)**                                          |   | (6,270 | ) |   | **(12,537** | **)** |   | (12,540 | ) |
| **Balance,                    end of period    **                                                            |   |                                             | **3,007**   |                                           |   | 5,288 |   |   | **3,007** |   |   | 5,288 |   |
|                                                                                                                   |   |                                             |        |                                           |   |   |   |   |   |   |   |   |   |
| **Total                    stockholders' equity    **                                                        |   |                                             | **479,771** |                                           |   | 482,052 |   |   | **479,771** |   |   | 482,052 |   |

----

***NB          CAPITAL CORPORATION**    *

***STATEMENTS          OF CASH FLOWS***

***(Unaudited)***

|                                                                     |   | **Six-month periods ended** |         |
|--------------------------------------------------------------------------|--------|---------------------------------------|--------------|
|                                                                     |   | **June 30,**                     |         |
| ***(                    in thousand of U.S. dollars )***** **  |   | **2008**                              |         | 2007 |   |
|                                                                     |   |                                  |         |   |   |
|                                                                     |   |                                  | $            |   |   | $ |   |
| **Operating                    activities**                              |   |                                  |         |   |   |   |   |
|                                                                     |   |                                  |         |   |   |   |   |
| Net                    income                                            |   |                                  | **14,160**   |   |   | 15,384 |   |
| Adjustments                    for :                                     |   |                                  |         |   |   |   |   |
| Prepaid                    expenses                                      |   |                                  | **20**       |   |   | 14 |   |
| Due                    from an affiliated company                        |   |                                  | **(6,573**   | **)** |   | (9,929 | ) |
| Due                    to the parent company                             |   |                                  | **(15**      | **)** |   | 22 |   |
| Accounts                    payable                                      |   |                                  | **(18**      | **)** |   | (10 | ) |
| Accrued                    interest receivable on cash equivalents       |   |                                  | **1**        |   |   | 23 |   |
|                      ** **            |   |                                  | **7,575**    |   |   | 5,504 |   |
|                                                                     |   |                                  |         |   |   |   |   |
| **Financing                    activities**                              |   |                                  |         |   |   |   |   |
|                                                                     |   |                                  |         |   |   |   |   |
| Dividends                                                                |   |                                  | **(12,537**  | **)** |   | (12,540 | ) |
|                                       |   |                                  | **(12,537**  | **)** |   | (12,540 | ) |
| **Investing                    activities**                              |   |                                  |         |   |   |   |   |
|                                                                     |   |                                  |         |   |   |   |   |
| Investment                    in promissory notes                        |   |                                  | **(155,789** | **)** |   | (191,298 | ) |
| Repayments                    of promissory notes                        |   |                                  | **178,601**  |   |   | 200,116 |   |
|                                       |   |                                  | **22,812**   |   |   | 8,818 |   |
|                                                                     |   |                                  |         |   |   |   |   |
| Increase                    in cash and cash equivalents                 |   |                                  | **17,850**   |   |   | 1,782 |   |
| Cash                    and cash equivalents, beginning of period        |   |                                  | **16,887**   |   |   | 90,212 |   |
| **Cash                    and cash equivalents, end of period**     |   |                                  | **34,737**   |   |   | 91,994 |   |

----

***NB      CAPITAL CORPORATION***

***NOTES      TO THE FINANCIAL STATEMENTS***

*June*
*      30,      2008*

*(in      thousands of U.S. dollars)*

**1)      Incorporation and nature of operations**

**2)      Significant accounting policies**

***Financial      statements***

***Cash      and cash equivalents***

***Promissory      notes***

***Income      taxes***

*Internal      Revenue Code of 1986*

***Per      share data***

----

**2)      Significant accounting policies (continued)**

***Interest      on promissory notes and cash and cash equivalents***

***Use      of estimates***

***Recent      accounting standards adopted***

**3)      Promissory notes**

| Promissory                notes as of December 31, 2007 |   |   | $                  450,080 |   |
|---------------------------------------------------------|--------|--------|----------------------------|--------|
| Acquisitions                                            |   |   | 155,789                    |   |
| Principal                repayments                     |   |   | (178,601                   | )      |
| Promissory                notes as of June 30, 2008     |   |   | $                  427,268 |   |

| 2008 |   |   | $                    162,016            |   |   | 2013   |   |   | $                    5,324 |   |
|------|--------|--------|-----------------------------------------|--------|--------|--------|--------|--------|----------------------------|--------|
| 2009 |   |   | $                    141,824            |   |   | 2014   |   |   | $                    2,514 |   |
| 2010 |   |   | $                      35,057 |   |   | 2015   |   |   | $                    8,487 |   |
| 2011 |   |   | $                      44,225 |   |   |   |   |   |                       |   |
| 2012 |   |   | $                      27,821 |   |   |   |   |   |                       |   |

----

**4)      Transactions with an affiliated company**

**5)      Transactions with the parent company**

***Advisory      agreement***

***Servicing      agreement***

***Custodial      agreement***

***Interest      on cash and cash equivalents***

**6)      Stockholders' equity **

*          (in U.S. dollars)*

***Common      stock***

|   | · | 100                shares have been authorized and issued to the                Bank. |
|--------|--------|---------------------------------------------------------------------------------------|

***Preferred      stock***

|   | · | 300,000                shares of preferred stock have been authorized and issued as 8.35%                Noncumulative 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. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**6)      Stockholders' equity (continued) **

|   | · | Each                Series A Preferred Share is exchangeable, upon the occurrence of                certain                events, for one newly issued 8.45% Noncumulative 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)      Subsequent event**

----

| (unaudited)                                                                         |   | Quarter                ended April 30 |                        | Six                months ended April 30 |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|-----------------------------|------------------------------------------|--------|
|                                                                                |   |                                  |                        |                                          |   | % |   |   |   |  |   | %  |   |
| Operating                  results                                             |   |                                  | **2008**                    |                                     |   | 2007 |   |   | **Change** |   |   | **2008** |   |   | 2007 |   |   | **Change** |   |
| (millions                of Canadian dollars)                                       |   |                                  |                        |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                revenues                                                       |   |                                  | **$                  887**  |                                     |   | $                  1,021 |   |   | (13 | )    |   | **$                  1,816** |   |   | $                  2,010 |   |   | (10 | ) |
| Net                income                                                           |   |                                  | **165**                     |                                     |   | 233 |   |   | (29 | ) |   | **420** |   |   | 473 |   |   | (11 | ) |
| Return                on common shareholders                '                equity |   |                                  | **14.3**                    | **%**                                    |   | 20.3 | % |   |   |   |   | **18.6** | **%** |   | 20.5 | % |   |   |   |
|                                                                                |   |                                  |                        |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                common share**                                                 |   |                                  |                        |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                - basic                                                     |   |                                  | **$                  1.01** |                                     |   | $                  1.42 |   |   | (29 | ) |   | **$                    2.59** |   |   | $                  2.87 |   |   | (10 | ) |
| Earnings                - diluted                                                   |   |                                  | **1.00**                    |                                     |   | 1.40 |   |   | (29 | ) |   | **2.58** |   |   | 2.83 |   |   | (9 | ) |
| Dividends                declared                                                   |   |                                  | **0.62**                    |                                     |   | 0.54 |   |   | 15 |   |   | **1.24** |   |   | 1.08 |   |   | 15 |   |
| Book                value                                                           |   |                                  |                        |                                     |   |   |   |   |   |   |   | **28.76** |   |   | 28.92 |   |   | (1 | ) |
| Stock                trading range                                                  |   |                                  |                        |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                                                |   |                                  | **53.73**                   |                                     |   | 65.87 |   |   |   |   |   | **54.25** |   |   | 66.59 |   |   |   |   |
| Low                                                                                 |   |                                  | **44.39**                   |                                     |   | 61.96 |   |   |   |   |   | **44.39** |   |   | 61.36 |   |   |   |   |
| Close                                                                               |   |                                  | **53.73**                   |                                     |   | 61.96 |   |   |   |   |   | **53.73** |   |   | 61.96 |   |   |   |   |

| **Financial                  position**                                      |   |   |   |                     |   |   |               |   |     |         |   | **April                  30**    |   |   | October 31              |   |   |   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------------------------|--------|--------|--------------------|--------|----------|--------------|--------|----------------------------------|--------|--------|------------------------------|--------|--------|--------|--------|
| (millions                  of Canadian dollars)                              |   |   |   |                          |   |   |               |   |     |         |   | **2008**                         |   |   | 2007                         |   |   |   |   |
| Cash                  resources and securities                               |   |   |   |                     |   |   |               |   |     |         |   | **58,359**                       |   |   | 48,564                       |   |   | 20     |   |
| Loans                  and acceptances                                       |   |   |   |                     |   |   |               |   |     |         |   | **54,032**                       |   |   | 52,045                       |   |   | 4      |   |
| Other                  assets                                                |   |   |   |                     |   |   |               |   |     |         |   | **11,217**                       |   |   | 12,476                       |   |   | (10    | )      |
| Total                  assets                                                |   |   |   |                     |   |   |               |   |     |         |   | **$                    123,608** |   |   | $                    113,085 |   |   | 9      |   |
|                                                                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Deposits                                                                     |   |   |   |                     |   |   |               |   |     |         |   | **70,370**                       |   |   | 70,798                       |   |   | (1     | )      |
| Other                  liabilities                                           |   |   |   |                     |   |   |               |   |     |         |   | **44,589**                       |   |   | 35,085                       |   |   | 27     |   |
|                                                                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Subordinated                  debentures                                     |   |   |   |                     |   |   |               |   |     |         |   | **1,683**                        |   |   | 1,605                        |   |   | 5      |   |
| Non-controlling                  interest                                    |   |   |   |                     |   |   |               |   |     |         |   | **1,840**                        |   |   | 960                          |   |   | 92     |   |
|                                                                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Preferres                  shares                                            |   |   |   |                     |   |   |               |   |     |         |   | **573**                          |   |   | 400                          |   |   | 43     |   |
| Common                  shares                                               |   |   |   |                     |   |   |               |   |     |         |   | **1,599**                        |   |   | 1,575                        |   |   | 2      |   |
| Contributed                  surplus                                         |   |   |   |                     |   |   |               |   |     |         |   | **34**                           |   |   | 32                           |   |   | 6      |   |
| Retained                  earnings                                           |   |   |   |                     |   |   |               |   |     |         |   | **2,998**                        |   |   | 2,793                        |   |   | 7      |   |
| Accumulated                  other comprehensive income (loss)               |   |   |   |                     |   |   |               |   |     |         |   | **(78**                          | **)**  |   | (163                         | )      |   | (52    | )      |
| Total                  liabilities and shareholder's equity                  |   |   |   |                     |   |   |               |   |     |         |   | **$                    123,608** |   |   | $                    113,085 |   |   | 9      |   |
|                                                                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Capital                  ratios - BIS under Basel II                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Tier                  1                                                      |   |   |   |                     |   |   |               |   |     |         |   | **9.2**                          | **%**  |   |                         |   |   |   |   |
| Total                                                                        |   |   |   |                     |   |   |               |   |     |         |   | **13.3**                         | **%**  |   |                         |   |   |   |   |
| Capital                  ratios - BIS under Basel I                          |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Tier                  1                                                      |   |   |   |                     |   |   |               |   |     |         |   | **9.9**                          | **%**  |   | 9.0                          | %      |   |   |   |
| Total                                                                        |   |   |   |                     |   |   |               |   |     |         |   | **14.3**                         | **%**  |   | 12.4                         | %      |   |   |   |
|                                                                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Impaired                  loans, net of specific and general allowances |   |   |   |                     |   |   |               |   | **(174** | **)**        |   | (179                             | )      |   |                         |   |
| as                  a % of loans and acceptances                             |   |   |   |                     |   |   |               |   |     |         |   | **(0.3**                         | **)%** |   | (0.3                         | )%     |   |   |   |
|                                                                         |   |   |   |                     |   |   |               |   |     |         |   |                             |   |   |                         |   |   |   |   |
| Assets                  under administration/management                      |   |   |   |      |   |   |     |   |     |    |   | **237,165**                      |   |   | 239,028                      |   |   |   |   |

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

**Overview**

*(in      thousands of U.S. dollars)*

**Critical      accounting policies **

**Results      of operations**

*(in      thousands of U.S. dollars)*

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**Capital      Resources and Liquidity**

*(in      thousand of U.S. dollars)*

**Disclosure      of Contractual Obligations**

**Off-Balance      Sheet Arrangements**

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**Disclosure      About Market Risk**

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| Exhibit No. |   | Description                                                                                                                                                              |
|------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                                                                     |
| 11               |   | Computation                of Earnings Per Share                                                                                                                         |
|             |   |                                                                                                                                                                     |
| 14               |   | Code                of Business Conduct and Ethics                                                                                                                       |
|             |   |                                                                                                                                                                     |
| 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             |   | Certification                of Chairman and President Pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002 (18 U.S.C. Section 1350)                 |
|             |   |                                                                                                                                                                     |
| 32.2             |   | Certification                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002 (18 U.S.C. Section                1350) |

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**SIGNATURES**

|                                   |
|----------------------------------------|
|                                   | NB                CAPITAL CORPORATION |
|                                   |   |
|                                   |   |
| Date                : August 1st, 2008 | /s/                  Donna Goral |
|                                   | Donna                Goral |
|                                   | Chairman                of the Board and President |
|                                   |   |
|                                   |   |
|                                   |   |
| Date                : August 1st, 2008 | /s/                Jean Dagenais |
|                                   | Jean                Dagenais |
|                                   | Chief                Financial Officer |

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