**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**Form      10-Q**

| x      | QUARTERLY                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                              |
| OR     |                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                              |
| o      | 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**

**(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)**

| Large                  Accelerated Filer o | Accelerated                  Filer o | Non-Accelerated                  Filer x |
|--------------------------------------------|--------------------------------------|------------------------------------------|

|   | **Class**                                  | **Outstanding                  at November 3, 2006** |
|--------|--------------------------------------------|------------------------------------------------------|
|   | Common                  Stock              |                                                 |
|   | par                  value $0.01 per share | 100                                                  |

----

| Part                    I. FINANCIAL INFORMATION: | Page                          |
|---------------------------------------------------|-------------------------------|
|                                              |                          |   |   |
|                                              | Item                    1(a). | Financial                    Statements |   |
|                                              |                          |   |   |
|                                              |                          | Balance                    Sheets - |   |
|                                              |                          | As                    of September 30, 2006 and December 31, 2005 | 1 |
|                                              |                          |   |   |
|                                              |                          | Statements                    of Income - |   |
|                                              |                          | For                    the three-month and nine-month periods ended September 30, 2006                    and                    2005 | 2 |
|                                              |                          |   |   |
|                                              |                          | Statements                    of Stockholders’ Equity - |   |
|                                              |                          | For                    the three-month and nine-month periods ended September 30, 2006                    and                    2005 | 3 |
|                                              |                          |   |   |
|                                              |                          | Statements                    of Cash Flows - |   |
|                                              |                          | For                    the nine-month periods ended September 30, 2006 and 2005 | 4 |
|                                              |                          |   |   |
|                                              |                          | Notes                    to the financial statements | 5 |
|                                              |                          |   |   |
|                                              | Item                    1(b). | National                    Bank of Canada Summarized Financial Statements | 8 |
|                                              |                          |   |   |
|                                              | Item                    2.    | Management’s                    Discussion and Analysis of Financial Condition and Results of                    Operations | 9 |
|                                              |                          |   |   |
|                                              |                          |   |   |
|                                              | Item                    3.    | Quantitative                    and Qualitative Disclosures About Market Risk | 11 |
|                                              |                          |   |   |
|                                              | Item                    4.    | Controls                    and Procedures | 11 |
|                                              |                          |   |   |
| Part                    II. OTHER INFORMATION:    |                          |
|                                              |                          |   |   |
|                                              | Item                    1.    | Legal                    Proceedings | 12 |
|                                              |                          |   |   |
|                                              | Item                    5.    | Other                    Information | 12 |
|                                              |                          |   |   |
|                                              | Item                    6.    | Exhibits | 12 |

----

***NB          CAPITAL CORPORATION***

***BALANCE            SHEETS***

|                                                            |   | **September                    30,** |        | **December                    31,** |   |
|-----------------------------------------------------------------|--------|--------------------------------------|-------------|-------------------------------------|--------|
|                                                            |   | **2006**                             |        | **2005**                            |   |
| ***(                    in thousands of US dollars )***         |   | **(Unaudited)**                      |        |                                |   |
|                                                            |   |                                 |        |                                |   |
| **Assets**                                                      |   | $                                    |        |                                | $      |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
| **Current**                                                     |   |                                 |        |                                |   |   |   |
| Cash                    and cash equivalents                    |   |                                 | 41,627      |                                |   | 59,901 |   |
| Due                    from an affiliated company               |   |                                 | 10,573      |                                |   | 9,680 |   |
| Promissory                    notes - current portion           |   |                                 | 200,501     |                                |   | 79,840 |   |
| Prepaid                    expenses                             |   |                                 | 51          |                                |   | 32 |   |
| Accrued                    interest on cash equivalents         |   |                                 | 17          |                                |   | 19 |   |
|                                                            |   |                                 | 252,769     |                                |   | 149,472 |   |
|                                                            |   |                                 |        |                                |   |   |   |
| **Promissory                    notes**                         |   |                                 | 231,590     |                                |   | 330,139 |   |
|                                                            |   |                                 | **484,359** |                                |   | **479,611** |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
| **Liabilities**                                                 |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
| **Current**                                                     |   |                                 |        |                                |   |   |   |
| Due                    to the parent company                    |   |                                 | 399         |                                |   | 402 |   |
| Accounts                    payable                             |   |                                 | 35          |                                |   | 117 |   |
|                                                            |   |                                 | 434         |                                |   | 519 |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
| **Stockholders'                    equity**                     |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
| Capital                    stock and Additional paid-in capital |   |                                 | 476,764     |                                |   | 476,764 |   |
|                                                            |   |                                 |        |                                |   |   |   |
| Retained                    earnings                            |   |                                 | 7,161       |                                |   | 2,328 |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 | 483,925     |                                |   | 479,092 |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 |        |                                |   |   |   |
|                                                            |   |                                 | **484,359** |                                |   | **479,611** |   |

----

***NB            CAPITAL CORPORATION***

***STATEMENTS            OF INCOME***

| ***(Unaudited)***                                                       |   |                                                                                 |      |                                                                                |   |
|-------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|-----------|-------------------------------------------------------------------------------------|--------|
|                                                                    |   | **Three-month                    periods ended****September                    30,** |      | **Nine-month                    periods ended****September                    30,** |   |
| ***(                    in thousands of US dollars )***                 |   | **2006**                                                                             |      | **2005**                                                                            |   | **2006** |   | **2005** |   |
|                                                                    |   | $                                                                                    |      |                                                                                | $      |   |   | $ |   |   | $ |   |   |
| **Revenue**                                                             |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| Interest                    income                                      |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| Cash                    equivalents                                     |   |                                                                                 | 697       |                                                                                |   | 452 |   |   | 1,626 |   |   | 948 |   |
| Promissory                    notes                                     |   |                                                                                 | 7,356     |                                                                                |   | 8,241 |   |   | 23,428 |   |   | 25,612 |   |
|                                                                    |   |                                                                                 | **8,053** |                                                                                |   | **8,693** |   |   | **25,054** |   |   | **26,560** |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| **Expenses**                                                            |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| Servicing                    and advisory fees                          |   |                                                                                 | 399       |                                                                                |   | 411 |   |   | 1,226 |   |   | 1,212 |   |
| Legal                    and other professional fees                    |   |                                                                                 | 64        |                                                                                |   | 94 |   |   | 187 |   |   | 261 |   |
|                                                                    |   |                                                                                 | **463**   |                                                                                |   | **505** |   |   | **1,413** |   |   | **1,473** |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| **Net                    income**                                       |   |                                                                                 | **7,590** |                                                                                |   | **8,188** |   |   | **23,641** |   |   | **25,087** |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| Preferred                    stock dividends                            |   |                                                                                 | 6,269     |                                                                                |   | 6,268 |   |   | 18,808 |   |   | 18,804 |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| **Income                    available to common stockholders**          |   |                                                                                 | **1,321** |                                                                                |   | **1,920** |   |   | **4,833** |   |   | **6,283** |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| Weighted-average                    number of common shares outstanding |   |                                                                                 | 100       |                                                                                |   | 100 |   |   | 100 |   |   | 100 |   |
|                                                                    |   |                                                                                 |      |                                                                                |   |   |   |   |   |   |   |   |   |
| **Earnings                    per common share - basic and diluted**    |   |                                                                                 | **13**    |                                                                                |   | **19** |   |   | **48** |   |   | **63** |   |

----

***NB          CAPITAL CORPORATION***

***STATEMENTS          OF STOCKHOLDERS' EQUITY***

| ***(Unaudited)***                                             |   |                                                                                     |        |                                                                                          |   |        |   |     |        |
|---------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|-------------|-----------------------------------------------------------------------------------------------|--------|-------------|--------|----------|-------------|
|                                                          |   | **Three-month                      periods ended****September                      30,** |        | **Nine-month                      periods ended****September                      30,**  |   |
| ***(                      in thousands of US dollars )***     |   | **2006**                                                                                 |        | **2005**                                                                                      |   | **2006**    |   | **2005** |        |
|                                                          |   |                                                                                     |        |                                                                                          |   |        |   |     |        |
| **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             |   |                                                                                     | 5,840       |                                                                                          |   | 4,918       |   |     | 2,328       |   |   | 555 |   |
| Net                      income                               |   |                                                                                     | 7,590       |                                                                                          |   | 8,188       |   |     | 23,641      |   |   | 25,087 |   |
| Preferred                      stock dividends                |   |                                                                                     | (6,269      | )                                                                                             |   | (6,268      | )      |     | (18,808     | ) |   | (18,804 | ) |
| **Balance,                      end of period**               |   |                                                                                     | **7,161**   |                                                                                          |   | **6,838**   |   |     | **7,161**   |   |   | **6,838** |   |
|                                                          |   |                                                                                     |        |                                                                                          |   |        |   |     |        |   |   |   |   |
|                                                          |   |                                                                                     |        |                                                                                          |   |        |   |     |        |   |   |   |   |
| **TOTAL                      STOCKHOLDERS' EQUITY**           |   |                                                                                     | **483,925** |                                                                                          |   | **483,602** |   |     | **483,925** |   |   | **483,602** |   |

----

***NB        CAPITAL CORPORATION***

***STATEMENTS          OF CASH FLOWS***

| ***(Unaudited)***                                                |   |                                                                                |        |     |   |
|------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|-------------|----------|--------|
|                                                             |   |  **Nine-month                periods ended****September                  30,** |        |
| ***(                  in thousands of US dollars )***            |   | **2006**                                                                            |        | **2005** |   |
| **OPERATING                  ACTIVITIES**                        |   |                                                                                |        |     |   |
|                                                             |   | $                                                                                   |        |     | $      |   |   |
| Net                  income                                      |   |                                                                                | 23,641      |     |   | 25,087 |   |
| Items                  not affecting cash resources              |   |                                                                                |        |     |   |   |   |
| Prepaid                  expenses                                |   |                                                                                | (19         | )        |   | 11 |   |
| Due                  from an affiliated company                  |   |                                                                                | (893        | )        |   | (3,926 | ) |
| Due                  to the parent company                       |   |                                                                                | (3          | )        |   | (3 | ) |
| Accounts                  payable                                |   |                                                                                | (82         | )        |   | 38 |   |
| Accrued                  interest receivable on cash equivalents |   |                                                                                | 2           |     |   | 23 |   |
|                                                             |   |                                                                                |        |     |   |   |   |
| Net                  cash provided by operating activities       |   |                                                                                | **22,646**  |     |   | **21,230** |   |
|                                                             |   |                                                                                |        |     |   |   |   |
| **FINANCING                  ACTIVITIES**                        |   |                                                                                |        |     |   |   |   |
|                                                             |   |                                                                                |        |     |   |   |   |
| Dividends                                                        |   |                                                                                | (18,808     | )        |   | (18,804 | ) |
| Net                  cash used in financing activities           |   |                                                                                | **(18,808** | **)**    |   | **(18,804** | **)** |
|                                                             |   |                                                                                |        |     |   |   |   |
|                                                             |   |                                                                                |        |     |   |   |   |
| **INVESTING                  ACTIVITIES**                        |   |                                                                                |        |     |   |   |   |
|                                                             |   |                                                                                |        |     |   |   |   |
| Investment                  in promissory notes                  |   |                                                                                | (174,604    | )        |   | (170,775 | ) |
| Repayments                  of promissory notes                  |   |                                                                                | 152,492     |     |   | 126,673 |   |
| Net                  cash provided by investing activities       |   |                                                                                | **(22,112** | **)**    |   | **(44,102** | **)** |
|                                                             |   |                                                                                |        |     |   |   |   |
|                                                             |   |                                                                                |        |     |   |   |   |
| Cash                  and cash equivalents, beginning of period  |   |                                                                                | 59,901      |     |   | 58,327 |   |
| **Cash                  and cash equivalents, end of period**    |   |                                                                                | **41,627**  |     |   | **16,651** |   |

----

***NB        CAPITAL CORPORATION***

***NOTES        TO THE FINANCIAL STATEMENTS***

*September        30, 2006*

*(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***

----

***NB        CAPITAL CORPORATION***

***NOTES        TO THE FINANCIAL STATEMENTS***

*September        30, 2006*

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

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

***Estimates***

***Interest        on Promissory notes and cash equivalent***

**3)        Promissory notes**

| Promissory                    notes as of December 31, 2005  |   | $      | 409,979  |   |
|--------------------------------------------------------------|--------|--------|----------|--------|
| Acquisitions                                                 |   |   | 174,604  |   |
| Principal                    repayments                      |   |   | (152,492 | )      |
| Promissory                    notes as of September 30, 2006 |   | $      | 432,091  |   |

| 2006 |   | $ | 34,004  |   |   | 2011 |   | $ | 52,386 |   |
|------|--------|---|---------|--------|--------|------|--------|---|--------|--------|
| 2007 |   | $ | 193,101 |   |   | 2012 |   | $ | 29,692 |   |
| 2008 |   | $ | 42,593  |   |   | 2013 |   | $ | 7,019  |   |
| 2009 |   | $ | 29,350  |   |   | 2014 |   | $ | 3,987  |   |
| 2010 |   | $ | 31,370  |   |   | 2015 |   | $ | 8,589  |   |

**4)        Transactions with an affiliated company**

----

***NB        CAPITAL CORPORATION***

***NOTES        TO THE FINANCIAL STATEMENTS***

*September        30, 2006*

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

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

----

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

| ·   | Each                  Series A Preferred Share is exchangeable, upon the occurrence of                  certain                  events, for one newly issued 8.45% Non-cumulative First Preferred                  Share,                  Series Z, of the Bank. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| **Highlights**                                                                |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                           |   |       |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|--------|--------------------------------------------------|--------------|--------|----------|--------------------|--------|--------|--------------------------------|--------|------------|--------|
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                           |   |       |   |
| (unaudited)                                                                   |   | Quarter                        ended July 31 |      |   |   | Nine                        months ended July 31 |         |   |     |               |
|                                                                          |   |                                         |      |   |   |                                             | **%**        |   |     |               |   |   |                           |   | **%**      |   |
|                                                                          |   | **2006**                                     |      |   | 2005   |                                             | **Change**   |   | **2006** |               |   | 2005   |                           |   | **Change** |   |
| **Operating                        results**                                  |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                           |   |       |   |
| (millions                        of Canadian dollars)                         |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                           |   |       |   |
| Total                        revenues                                         |   | **$**                                        | **933**   |   |   | $                                                | 889          |   |     | 5                  |   | **$**  | **2,861**                      |   |       | $      | 2,772 |   |   |   | 3 |   |
| Net                        income                                             |   |                                         | **220**   |   |   |                                             | 207          |   |     | 6                  |   |   | **651**                        |   |       |   | 648 |   |   |   | — |   |
| Return                        on common shareholders' equity                  |   |                                         |           |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
|                                                                          |   |                                         | 20.2      | %      |   |                                             | 19.6         | %      |     |     |   |   | 20.2                           | %      |       |   | 21.1 | % |   |   |     |   |
| **Per                        common share**                                   |   |                                         |           |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Earnings                        - basic                                       |   | **$**                                        | **1.32**  |   |   | $                                                | 1.20         |   |     | 10                 |   | **$**  | **3.89**                       |   |       | $      | 3.76 |   |   |   | 3 |   |
| Earnings                        - diluted                                     |   | **$**                                        | **1.30**  |   |   | $                                                | 1.18         |   |     | 10                 |   | **$**  | **3.83**                       |   |       | $      | 3.70 |   |   |   | 4 |   |
| Dividends                        declared                                     |   |                                         | **0.50**  |   |   |                                             | 0.44         |   |     | 14                 |   |   | **1.46**                       |   |       |   | 1.28 |   |   |   | 14 |   |
| Book                        value                                             |   |                                         |           |   |   |                                             |         |   |     |               |   |   | **26.57**                      |   |       |   | 24.70 |   |   |   | 8 |   |
| Stock                        trading range                                    |   |                                         |           |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| High                                                                          |   |                                         | **62.69** |   |   |                                             | 58.21        |   |     |               |   |   | **65.60**                      |   |       |   | 58.21 |   |   |   |   |   |
| Low                                                                           |   |                                         | **56.14** |   |   |                                             | 51.60        |   |     |               |   |   | **56.14**                      |   |       |   | 46.39 |   |   |   |   |   |
| Close                                                                         |   |                                         | **58.55** |   |   |                                             | 57.30        |   |     |     |   |   | **58.55**                      |   |       |   | 57.30 |   |   |   |    |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| **Financial                        position**                                 |   |                                         |      |   |   |                                             |         |   |     |               |   |   | July                        31 |   |       |   | October                        31 |   |   |   |   |   |
| (millions                        of Canadian dollars)                         |   |                                         |      |   |   |                                             |         |   |     |          |   |   | 2006                           |   |       |   | 2005 |   |   |   |   |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Cash                        resources and securities                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **50,660**                     |   |       |   | 50,389 |   |   |   | 1 |   |
| Loans                        and acceptances                                  |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **51,943**                     |   |       |   | 50,360 |   |   |   | 3 |   |
| Other                        assets                                           |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **6,042**                      |   |       |   | 6,849 |   |   |   | (12 | ) |
| Total                        assets                                           |   |                                         |      |   |   |                                             |         |   |     |               |   | **$**  | **108,645**                    |   |       | $      | 107,598 |   |   |   | 1 |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Deposits                                                                      |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **68,094**                     |   |       |   | 61,977 |   |   |   | 10 |   |
| Other                        liabilities                                      |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **33,728**                     |   |       |   | 39,435 |   |   |   | (14 | ) |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Subordinated                        debentures                                |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **1,599**                      |   |       |   | 1,102 |   |   |   | 45 |   |
| Non-controlling                        interest                               |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **522**                        |   |       |   | 487 |   |   |   | 7 |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Preferred                        shares                                       |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **400**                        |   |       |   | 400 |   |   |   | — |   |
| Common                        shares                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **1,563**                      |   |       |   | 1,565 |   |   |   | — |   |
| Retained                        earnings                                      |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **2,739**                      |   |       |   | 2,632 |   |   |   | 4 |   |
| Total                        liabilities and shareholder's equity             |   |                                         |      |   |   |                                             |         |   |     |               |   | **$**  | **108,645**                    |   |       | $      | 107,598 |   |   |   | 1 |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Capital                        ratios - BIS                                   |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Tier                        1                                                 |   |                                         |      |   |   |                                             |         |   |     |               |   |   | 9.4                            | %      |       |   | 9.6 | % |   |   |   |   |
| Total                                                                         |   |                                         |      |   |   |                                             |         |   |     |               |   |   | 12.4                           | %      |       |   | 12.8 | % | (1) |   |   |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Impaired                        loans, net of specific and general allowances |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **(210**                       | **)**  |       |   | (191 | ) |   |   |   |   |
| as                        a % of loans and acceptances                        |   |                                         |      |   |   |                                             |         |   |     |               |   |   | (0.4                           | )%     |       |   | (0.4 | )% |   |   |   |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                                |   |       |   |   |   |   |   |   |   |
| Assets                        under administration/management                 |   |                                         |      |   |   |                                             |         |   |     |               |   |   | **227,699**                    |   |       |   | 221,132 |   |   |   |   |   |
|                                                                          |   |                                         |      |   |   |                                             |    |   |     |          |   |   |                      |   |       |   |    |   |   |   |    |   |
|                                                                          |   |                                         |      |   |   |                                             |         |   |     |               |   |   |                           |   |       |   |   |   |   |   |   |   |

| (1)                        Taking                        into account the issuance of $500 million of subordinated                        debentures on                        November 2, 2005. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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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)*

----

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

**Capital        Resources and Liquidity**

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

----

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

**Disclosure        of Contractual Obligations**

**Off-Balance        Sheet Arrangements**

| ITEM                      3. | QUANTITATIVE                          AND QUALITATIVE DISCLOSURES ABOUT MARKET                          RISK |
|------------------------------|--------------------------------------------------------------------------------------------------------------|

**Disclosure        About Market Risk**

----

| ITEM                4. | CONTROLS                  AND PROCEDURES |
|------------------------|------------------------------------------|

| ITEM                1. | LEGAL                  PROCEEDINGS |
|------------------------|------------------------------------|

| ITEM                5. | OTHER                  INFORMATION |
|------------------------|------------------------------------|

| ITEM                6. | EXHIBITS |
|------------------------|----------|

|   | Exhibit                      No. | Description                                                                                                                                                                                                           |
|--------|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                             |                                                                                                                                                                                                                  |
|   | 11                               | Computation                      of Earnings Per Share**                                                                                                                                                              |
|   |                             |                                                                                                                                                                                                                  |
|   | 14                               | Code                      of Ethics (as revised)**                                                                                                                                                                    |
|   |                             |                                                                                                                                                                                                                  |
|   | 31.1                             | Certification                      of Chairman and President pursuant to Section 302 of the Sarbanes-Oxley                      Act of 2002**                                                                         |
|   |                             |                                                                                                                                                                                                                  |
|   | 31.2                             | Certification                      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                      Act of 2002**                                                                        |
|   |                             |                                                                                                                                                                                                                  |
|   | 32.1                             | Written                      Statement of Chairman and President Pursuant to Section 906                      of the                      Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)**                       |
|   |                             |                                                                                                                                                                                                                  |
|   | 32.2                             | Written                      Statement of Chief Financial Officer Pursuant to Section 906                      of the                      Sarbanes-Oxley Act of 2002 (18 U.S.C. Section                      1350)** |

| ** | As                  filed herewith. |
|----|-------------------------------------|

----

**SIGNATURES**

|                                   |                                                                                 |                           |
|----------------------------------------|--------------------------------------------------------------------------------------|--------------------------------|
|                                   | NB                CAPITAL                CORPORATION                                 |
|                              |                                                                            |                      |
| Date: November                10, 2006 | By:                                                                        | /s/                Donna Goral |
|                                   | Donna                Goral Chairman                  of the Board and President |

|                                     |                                                                                                      |                                                |
|------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
|                                |                                                                                                 |                                           |
| Date: November                  10, 2006 | By:                                                                                             | /s/                  Jean                  Dagenais |
|                                     | Jean                    Dagenais  Chief                    Financial                    Officer |

----