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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 June 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 August 14, 2003100


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NB CAPITAL CORPORATION

Index

|                               |                                                                                        |                                                                                                                   |    | Page
|------------------------------ | -------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | -- | ----
|Part I. FINANCIAL INFORMATION: |                                                                                        |                                                                                                                  
|Item 1.                        | Financial Statements                                                                   |                                                                                                                   |   
|                               |                                                                                        | Balance Sheets 
      As of June 30, 2003 and
December 31, 2002                                                  |    | 1   
|                               |                                                                                        | Statements of Income 
      For the three-month and six-month periods ended
June 30, 2003 and 2002               |    | 2   
|                               |                                                                                        | Statements of Stockholders' Equity 
      For the three-month and six-month periods ended
June 30, 2003 and 2002 |    | 3   
|                               |                                                                                        | Statements of Cash Flows 
      For the six-month periods ended
June 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 
|PART II.  OTHER INFORMATION    |                                                                                        |                                                                                                                  
|Item 5.                        | Exhibits and Reports on Form 8-K                                                       |                                                                                                                   | 11

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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 June 30, 2003, the Canadian
dollar exchange rate was C$1.3475 = $1.00 and certain amounts stated herein reflect such
exchange rate.

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NB CAPITAL CORPORATION
BALANCE SHEETS

|(in thousands of US dollars)                                     | June 30,
2003
Unaudited | December 31
2002
|---------------------------------------------------------------- | ----------------------- | ----------------
|                                                                
|                                                                
|Assets                                                           |                         | $               
|Cash and cash equivalents                                        |                         | 25,585          
|Due from an affiliated company                                   |                         | 16,937          
|Promissory notes                                                 |                         | 445,660         
|Accrued interest on cash equivalents                             |                         | 3               
|                                                                
|                                                                 |                         | 488,185         
|                                                                
|                                                                
|Liabilities                                                      |                        
|Due to the parent company                                        |                         | 390             
|Accounts payable                                                 |                         | 22              
|                                                                
|                                                                 |                         | 412             
|                                                                
|                                                                
|Stockholders' equity                                             |                        
|Capital stock and Additional paid-in capital (see detail note 6) |                         | 476,764         
|Retained earnings                                                |                         | 11,009          
|                                                                
|                                                                 |                         | 487,773         
|                                                                
|                                                                 |                         | 488,185         
|                                                                

See accompanying notes to financial
statements.

-1-

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NB CAPITAL CORPORATION
STATEMENTS OF INCOME

|                                                     |                                   |                                 |  |      
|---------------------------------------------------- | --------------------------------- | ------------------------------- |  | -----
|(Unaudited)                                          |                                   |                                 |  |      
|                                                     | Three-month periods endedJune 30, | Six-month periods endedJune 30,
|(in thousand of US dollars)                          |                                   | 2003                            |  | 2002 
|                                                    
|Revenue                                              |                                  
|Interest income                                      |                                   | $                               |  | $    
|Cash equivalents                                     |                                   | 116                             |  | 140  
|Promissory notes                                     |                                   | 9,556                           |  | 9,121
|                                                    
|                                                     |                                   | 9,672                           |  | 9,261
|                                                    
|Expenses                                             |                                  
|Servicing and advisory fees                          |                                   | 390                             |  | 347  
|Legal and other professional fees                    |                                   | 64                              |  | 45   
|                                                    
|                                                     |                                   | 454                             |  | 392  
|                                                    
|Net income                                           |                                   | 9,218                           |  | 8,869
|Preferred stock dividends                            |                                   | 6,267                           |  | 6,268
|                                                    
|Income available to common stockholders              |                                   | 2,951                           |  | 2,601
|                                                    
|Weighted-average number of common shares outstanding |                                   | 100                             |  | 100  
|                                                    
|Earnings per common share - basic and diluted        |                                   | 30                              |  | 26   
|                                                    

---

See accompanying notes to financial
statements

-2-

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NB CAPITAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY

|                                     |                                   |                                 |   |        
|------------------------------------ | --------------------------------- | ------------------------------- | - | -------
|(Unaudited)                          |                                   |                                 |   |        
|                                     | Three-month periods endedJune 30, | Six-month periods endedJune 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         |                                   | 8,058                           |   | 7,555  
|Net income                           |                                   | 9,218                           |   | 8,869  
|Preferred stock dividends            |                                   | (6,267                          | ) | (6,268 
|                                    
|Balance, end of period               |                                   | 11,009                          |   | 10,156 
|                                    
|                                    
|TOTAL STOCKHOLDERS' EQUITY           |                                   | 487,773                         |   | 486,920
|                                    

---

See accompanying notes to financial
statements.

-3-

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NB CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS

|Unaudited                                       | Six-month periods ended
June 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        |                                 
|                                               

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See accompanying notes to financial
statements.

-4-

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NB CAPITAL CORPORATION 
NOTES TO THE FINANCIAL STATEMENTS June 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 six-month periods are unaudited,
however, the financial statements include, in the opinion of management, all adjustments
necessary for a fair presentation. The unaudited financial statements should be read in
conjunction with the audited financial statements included in the Companys annual
report filed on Form 10-K. The results of the interim financial statements may not be an
indicator of the results anticipated in the full year.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Promissory
notes
| | ----------------

| | In
accordance with Statements of Financial Accounting Standards (SFAS) No.115
Accounting for certain Investments in debt and equity Securities and based on
the Companys intentions regarding these instruments, the Company has classified the
Promissory notes as held to maturity and has accounted for them at amortized cost.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income
taxes
| | ------------

| | The
Company has elected to be taxed as a Real Estate Investment Trust (REIT)
under the Internal Revenue Code of1986, as amended, and accordingly, is generally
not liable for United States federal income tax to the extent that it distributes at
least 90% of its taxable income to its stockholders, maintains its qualification as a
REIT and complies with certain other requirements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Per
share data
| | --------------

| | Basic
and diluted earnings per share with respect to the Company for the three-month and
six-month periods ended June 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
June 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 July 2003 to December 2012, at rates
ranging from 7.31% to 10.21%, with a weighted average rate of approximately 8.61% 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 March 31, 2003 | 
|Acquisitions                          | 
|Principal repayments                  | 
|                                     
|Promissory notes as of June 30, 2003  | 
|                                     

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

|     |  |         | 
|---- |  | ------- | 
|2003 |  | $34,650 | 
|2004 |  | 101,402 | 
|2005 |  | 80,953  | 
|2006 |  | 73,375  | 
|2007 |  | 11,375  | 
|2008 |  | 25,775  | 

4) Transactions with an
affiliated company

| | During
the three-month and six-month periods ended June 30, 2003 and June 30, 2002, the Company
earned interest from NB Finance, Ltd. on the Promissory notes in the amount of $9,556
($9,121 in 2002) and $19,132 ($18,609 in 2002) respectively (see Note 3).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
amount of $16,937 due from an affiliated company as of June 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 entered into agreements with National Bank of Canada in relation to the
administration of the Companys operations. The agreements are as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Advisory
agreement
| | ------------------

| | In
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
June 30, 2003 and June 30, 2002, fees of $7 were charged to the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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NB CAPITAL CORPORATION

NOTES TO THE FINANCIAL
STATEMENTS
June 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
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 June 30, 2003 and June 30, 2002, the average outstanding
balance of the collateralized mortgage loans were $557,115 and $547,208 respectively.
During the three-month periods ended June 30, 2003 and June 30, 2002, fees of $383 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 June 30, 2003 and June 30, 2002, no fee was charged to the
Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6)     Stockholdersequity
        (in U.S. Dollars)

| | Common
stock
| | ------------

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

| | Preferred
stock
| | ---------------

| | The
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 of America and 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 authorized and 110 shares 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

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| | 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
thousands of U.S. dollars)

For the three-month periods ended
June 30, 2003 and June 30, 2002, the Company reported net income of $9,218 and $8,869
respectively. Revenues, which were comprised entirely of interest income, were $9,672 and
$9,261 respectively, and expenses were $454 and $392, 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 June 30, 2003 and the ninety-eight percent of revenues for
the three-month period ended June 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-eight pools of residential first mortgages insured by 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 June 30, 2003 and 2002 totaled $454 and $392, respectively, of which $390 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
June 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 June 30, 2002, on
its Preferred Stock (i.e., 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 June 30, 2003.

8

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

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

The Companys revenues are
derived from the Mortgage Assets. As of June 30, 2003, $446 million of Mortgage Assets
issued by NB Finance were over-collaterized by the C$841 million ($624 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 June 30, 2003, the Company had
cash equivalents of $25,585 representing 5.24% 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 close by without exceeding 20% of total
assets. While this continues to be the Companys investment policy, the Company
maintains flexibility in this regard. On May 27, 2003, the Company bought $70 million in
additional Mortgage Assets in order to reduce increased liquidity. 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

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# Disclosure About Market
Risk

Any market risk to which the Company
would be exposed would result from fluctuations in (a) interest rates and (b) currency
exchange rates affecting 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 became due. Since the Mortgage Loans are guaranteed by a fixed ratio of exchange,
predetermined on the date of purchase and applicable until the maturity of the Mortgage
Loans pursuant to the Mortgage Loan Assignment Agreement, fluctuations in currency
exchange rates should not present significant market risk.

ITEM 3.  QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is included under
Item 2 of this report under the caption Disclosure About Market Risk.

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 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 rules and forms.

10

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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.           EXHIBITS AND
REPORTS ON FORM 8-K

(a)              Exhibits:

| |  |        
| |  | -------
| |  | 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

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# SIGNATURES

---

| | Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | 
|-------------------- | 
|                     | 
|                     | 
|                     | 
|                     | 
|Date August 14, 2003 | 
|                     | 
|                     | 

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12

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