**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 JUNE                  30, 2007 |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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** |   |  **(I.R.S.                Employer** |
| **incorporation                or                organization)**  |   | **Identification                No.)**    |

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

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

**(N/A)**

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

| **Class**                 |   | **Outstanding                at ****August                9, 2007** |
|---------------------------|--------|--------------------------------------------------------------------------|
| Common Stock              |   |                                                                     |
| par value $0.01 per share |   | 100                                                                      |

----

** **

|                                                                                                                              |   | Page   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| Part                I. FINANCIAL INFORMATION:                                                                                     |   |   |
|                                                                                                                              |   |   |
| Item                1(a). Financial Statements                                                                                    |   |   |
|                                                                                                                              |   |   |
| Balance                Sheets -                                                                                                   |   |   |
| As                of June 30, 2007 and December 31, 2006                                                                          |   | 1      |
|                                                                                                                              |   |   |
| Statements                of Income -                                                                                             |   |   |
| For                the three-month and six-month periods ended June 30, 2007 and                2006                              |   | 2      |
|                                                                                                                              |   |   |
| Statements                of Stockholders’ Equity -                                                                         |   |   |
| For                the three-month and six-month periods ended June 30, 2007 and                2006                              |   | 3      |
|                                                                                                                              |   |   |
| Statements                of Cash Flows -                                                                                         |   |   |
| For                the six-month periods ended June 30, 2007 and 2006                                                             |   | 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                6. Exhibits                                                                                                   |   | 11     |

----

----

PART      I FINANCIAL INFORMATION

***NB      CAPITAL CORPORATION***

***BALANCE      SHEETS***

|                                                                |   | **June                30,** |                                                                                                                                   | December                31, |   |
|---------------------------------------------------------------------|--------|-----------------------------|----------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|--------|
|                                                                |   | **2007**                    |                                                                                                                                   | 2006                        |   |
| ***(                in thousands of US dollars )***                 |   | **(Unaudited)**             |                                                                                                                                   |                        |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |
|                                                                |   |                        | **$**                                                                                                                                  |                        |   | $ |   |
| **Assets**                                                          |   |                        |                                                                                                                                   |                        |   |   |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| Current                Assets                                       |   |                        |                                                                                                                                   |                        |   |   |   |
| Cash                and cash equivalents                            |   |                        | **91,994**                                                                                                                             |                        |   | 90,212 |   |
| Due                from an affiliated company                       |   |                        | **18,730**                                                                                                                             |                        |   | 8,801 |   |
| Promissory                notes - current portion                   |   |                        | **228,477**                                                                                                                            |                        |   | 186,718 |   |
| Prepaid                expenses                                     |   |                        | **20**                                                                                                                                 |                        |   | 34 |   |
| Accrued                interest on cash equivalents       |   |                        | **24**                                                                                                                                 |                        |   | 47 |   |
| Total                Current Assets                                 |   |                        | **339,245**                                                                                                                            |                        |   | 285,812 |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| Promissory                notes                                     |   |                        | **143,228**                                                                                                                            |                        |   | 193,805 |   |
| **Total                assets**    ** **             |   |                        | **482,473**                                                                                                                            |                        |   | 479,617 |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| **Liabilities**                                                     |   |                        |                                                                                                                                   |                        |   |   |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| Current                Liabilities                                  |   |                        |                                                                                                                                   |                        |   |   |   |
| Due                to the parent company                            |   |                        | **387**                                                                                                                                |                        |   | 365 |   |
| Accounts                payable                                     |   |                        | **34**                                                                                                                                 |                        |   | 44 |   |
| **Total                liabilities**                 |   |                        | **421**                                                                                                                                |                        |   | 409 |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| **Stockholders'                equity**                             |   |                        |                                                                                                                                   |                        |   |   |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| Capital                stock and Additional paid-in capital         |   |                        | **476,764**                                                                                                                            |                        |   | 476,764 |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| Retained                earnings                                    |   |                        | **5,288**                                                                                                                              |                        |   | 2,444 |   |
|                                                                |   |                        |                                    |                        |   |                            |   |
| **Total                stockholders' equity**             |   |                        | **482,052**                                                                                                                            |                        |   | 479,208 |   |
|                                                                |   |                        |                                                                                                                                   |                        |   |   |   |
| **Total                liabilities and stockholders' equity**  |   |                        | **482,473**                                                                                                                            |                        |   | 479,617 |   |

----

***NB      CAPITAL CORPORATION***

***STATEMENTS      OF INCOME***

***(Unaudited)***

|                                                                  |   | **Three-month                  periods ended** |                                                                                     | **Six-month                  periods ended** |   |
|-----------------------------------------------------------------------|--------|------------------------------------------------|------------------------------------------------------------------------------------------|----------------------------------------------|--------|
| ***(                  in thousands of US dollars, except number***    |   | **June                  30,**                  |                                                                                     | **June                  30,**                |   |
| ***of                  common shares)***                              |   | **2007**                                       |                                                                                     | 2006                                         |   | **2007** |   | 2006 |   |
|                                                                  |   |                                           |                                                                                     |                                         |   |   |   |   |   |
|                                                                  |   |                                           | **$**                                                                                    |                                         |   | $ |   |   | **$** |   |   | $ |   |
| **Revenue**                                                           |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| Interest                  income                                      |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                            |   |                                           | **759**                                                                                  |                                         |   | 491 |   |   | **1,701** |   |   | 929 |   |
| Promissory                  notes                                     |   |                                           | **7,614**                                                                                |                                         |   | 7,928 |   |   | **14,587** |   |   | 16,072 |   |
| Total                  revenue ** **                             |   |                                           | **8,373**                                                                                |                                         |   | 8,419 |   |   | **16,288** |   |   | 17,001 |   |
|                                                                  |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| **Expenses**                                                          |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| Servicing                  and advisory fees                          |   |                                           | **387**                                                                                  |                                         |   | 406 |   |   | **751** |   |   | 827 |   |
| Legal                  and other professional fees                    |   |                                           | **92**                                                                                   |                                         |   | 74 |   |   | **153** |   |   | 123 |   |
| Total                  expenses ** **                            |   |                                           | **479**                                                                                  |                                         |   | 480 |   |   | **904** |   |   | 950 |   |
|                                                                  |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| **Net                  income**                                       |   |                                           | **7,894**                                                                                |                                         |   | 7,939 |   |   | **15,384** |   |   | 16,051 |   |
|                                                                  |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| Preferred                  stock dividends                            |   |                                           | **6,270**                                                                                |                                         |   | 6,269 |   |   | **12,540** |   |   | 12,539 |   |
|                                                                  |   |                                           |                                             |                                         |   |                            |   |   |                             |   |   |           |   |
| **Income                  available to common stockholders**          |   |                                           | **1,624**                                                                                |                                         |   | 1,670 |   |   | **2,844** |   |   | 3,512 |   |
|                                                                  |   |                                           |                                                                                     |                                         |   |   |   |   |   |   |   |   |   |
| Weighted-average                  number of common shares outstanding |   |                                           | **100**                                                                                  |                                         |   | 100 |   |   | **100** |   |   | 100 |   |
|                                                                  |   |                                           |                              |                                         |   |                                  |   |   |                            |   |   |         |   |
| **Earnings                  per common share - basic and diluted**    |   |                                           | **16**                                                                                   |                                         |   | 17 |   |   | **28** |   |   | 35 |   |

----

***NB        CAPITAL CORPORATION***

***STATEMENTS        OF STOCKHOLDERS' EQUITY***

***(Unaudited)***

|                                                                                |   | **Three-month                  periods ended** |                           | **Six-month                  periods ended** |   |
|-------------------------------------------------------------------------------------|--------|------------------------------------------------|--------------------------------|----------------------------------------------|--------|
|                                                                                |   | **June                  30,**                  |                           | **June                  30,**                |   |
| ***(                  in thousands of US dollars )***                     |   | **2007**                                       |                           | 2006                                         |   | **2007** |   | 2006 |   |
|                                                                                |   |                                           |                           |                                         |   |   |   |   |   |
|                                                                                |   |                                           | **$**                          |                                         |   | $ |   |   | **$** |   |  | $ |   |
| **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                                       |   |                                           | **3,664**                      |                                         |   | 4,170 |   |   | **2,444** |   |   | 2,328 |   |
| Net                  income                                                         |   |                                           | **7,894**                      |                                         |   | 7,939 |   |   | **15,384** |   |   | 16,051 |   |
| Preferred                  stock dividends                                          |   |                                           | **(6,270**                     | **)**                                        |   | (6,269 | ) |   | **(12,540** | **)** |   | (12,539 | ) |
| **Balance,                  end of period    **                           |   |                                           | **5,288**                      |                                         |   | 5,840 |   |   | **5,288** |   |   | 5,840 |   |
|                                                                                |   |                                           |                           |                                         |   |   |   |   |   |   |   |   |   |
| **Total                  stockholders' equity    **                       |   |                                           | **482,052**                    |                                         |   | 482,604 |   |   | **482,052** |   |   | 482,604 |   |

----

***NB      CAPITAL CORPORATION***

***STATEMENTS      OF CASH FLOWS***

***(Unaudited)***

|                                                                                |   | **Six-month                periods ended**  |                                                                     |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------------------------------------------------------------------------|
|                                                                                |   | **June                30,**                 |                                                                     |
| ***(                in thousands of US dollars )***                 ** ** |   | **2007**                                         |                                                                     | 2006 |   |
|                                                                                |   |                                             |                                                                     |   |   |
|                                                                                |   |                                             | **$**                                                                    |   |   | $ |   |
| **OPERATING                ACTIVITIES**                                             |   |                                             |                                                                     |   |   |   |   |
|                                                                                |   |                                             |                                                                     |   |   |   |   |
| Net                income                                                           |   |                                             | **15,384**                                                               |   |   | 16,051 |   |
| Item                not affecting cash resources                                    |   |                                             |                                                                     |   |   |   |   |
| Prepaid                expenses                                                     |   |                                             | **14**                                                                   |   |   | 15 |   |
| Due                from an affiliated company                                       |   |                                             | **(9,929**                                                               | **)** |   | (7,016 | ) |
| Due                to the parent company                                            |   |                                             | **22**                                                                   |   |   | 4 |   |
| Accounts                payable                                                     |   |                                             | **(10**                                                                  | **)** |   | (98 | ) |
| Accrued                interest receivable on cash equivalents                      |   |                                             | **23**                                                                   |   |   | 2 |   |
|                                                                                |   |                                             |              |   |   |         |   |
| Net                cash provided by operating activities                            |   |                                             | **5,504**                                                                |   |   | 8,958 |   |
|                                                                                |   |                                             |                                                                     |   |   |   |   |
| **FINANCING                ACTIVITIES**                                             |   |                                             |                                                                     |   |   |   |   |
|                                                                                |   |                                             |                                                                     |   |   |   |   |
| Dividends                                                                           |   |                                             | **(12,540**                                                              | **)** |   | (12,539 | ) |
| Net                cash used in financing activities                           |   |                                             | **(12,540**                                                              | **)** |   | (12,539 | ) |
|                                                                                |   |                                             |                                                                     |   |   |   |   |
| **INVESTING                ACTIVITIES**                                             |   |                                             |                                                                     |   |   |   |   |
|                                                                                |   |                                             |                                                                     |   |   |   |   |
| Investment                in promissory notes                                       |   |                                             | **(191,298**                                                             | **)** |   | (82,898 | ) |
| Repayments                of promissory notes                                       |   |                                             | **200,116**                                                              |   |   | 95,915 |   |
| Net                cash used in investing activities                           |   |                                             | **8,818**                                                                |   |   | 13,017 |   |
|                                                                                |   |                                             |                                                                     |   |   |   |   |
| Cash                and cash equivalents, beginning of period                       |   |                                             | **90,212**                                                               |   |   | 59,901 |   |
| **Cash                and cash equivalents, end of period**                         |   |                                             | **91,994**                                                               |   |   | 69,337 |   |

----

***NB      CAPITAL CORPORATION***

***NOTES      TO THE FINANCIAL STATEMENTS***

*June      30, 2007*

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

**1)      Incorporation and nature of operations**

**2)      Significant accounting policies**

***Financial      statements***

***Cash      and cash equivalents***

***Promissory      notes***

***Income      taxes***

*Internal      Revenue Code of 1986*

***Per      share data***

----

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

***Estimates***

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

**3)      Promissory notes**

| Promissory                      notes as of December                      31, 2006 |   |   | $380,523 |   |
|------------------------------------------------------------------------------------|--------|--------|----------|--------|
| Acquisitions                                                                       |   |   | 191,298  |   |
| Principal                      repayments                                          |   |   | (200,116 | )      |
| Promissory                      notes as of June                      30, 2007     |   |   | $371,705 |   |

| 2007 |   |   | $156,590 |   |
|------|--------|--------|----------|--------|
| 2008 |   |   | $81,461  |   |
| 2009 |   |   | $26,183  |   |
| 2010 |   |   | $25,221  |   |
| 2011 |   |   | $40,997  |   |
| 2012 |   |   | $22,967  |   |
| 2013 |   |   | $6,372   |   |
| 2014 |   |   | $3,373   |   |
| 2015 |   |   | $8,541   |   |

**4)      Transactions with an affiliated company**

**5)      Transactions with the parent company**

***Advisory      agreement***

----

***5)      Transactions with the parent company (continued)***

***Servicing      agreement***

***Custodial      agreement***

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

**6)      Stockholders' equity **

*(in      U.S. Dollars)*

***Common      stock***

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

***Preferred      stock***

|  | · | 300,000                shares of preferred stock have been authorized and issued as 8.35%                Noncumulative Exchangeable Preferred Stock, Series A (“Series A Preferred                Shares”), non-voting, ranked senior to the common stock and junior to the                Adjustable Rate Cumulative Senior Preferred Shares, with a liquidation                value of $1,000 per share, redeemable at the Company's option on                or after                September 3, 2007, except upon the occurrence of certain changes                in tax                laws in the United States or in Canada, on or after September 3,                2002.                These Series A Preferred Shares are traded on the New York Stock                Exchange                in the form of Depository Shares, each Depository Share representing                a                one-fortieth interest therein. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

**Highlights**

|                                                                    |   | **Quarter                  ended April 30** |       | **Six                  months ended April 30** |   |
|-------------------------------------------------------------------------|--------|---------------------------------------------|------------|------------------------------------------------|--------|
|                                                                         |   |                                        |       |                                                |   | % |   |   |   |  |   | % |   |
| (unaudited)                                                             |   | **2007**                                    |       | 2006                                           |   | **Change** |   | **2007** |   | 2006 |   | **Change** |   |
| **Operating                  results**                                  |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |
| (millions                  of Canadian dollars)                         |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |
| Total                  revenues                                         |   |                                        | **$1,022** |                                           |   | $941 |   |   | 9 |   |   | **$2,011** |   |   | $1,912 |   |   | 5 |   |
| Net                  income                                             |   |                                        | 233        |                                           |   | 214 |   |   | 9 |   |   | 473 |   |   | 431 |   |   | 10 |   |
| Return                  on common shareholders' equity                  |   |                                        | 20.3       | %                                              |   | 20.4 | % |   |   |   |   | 20.5 | % |   | 20.2 | % |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                  common share**                                   |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  - basic                                       |   |                                        | **$1.42**  |                                           |   | $1.29 |   |   | 10 |   |   | **$2.87** |   |   | $2.57 |   |   | 12 |   |
| Earnings                  - diluted                                     |   |                                        | **1.40**   |                                           |   | 1.26 |   |   | 11 |   |   | **2.83** |   |   | 2.52 |   |   | 12 |   |
| Dividends                  declared                                     |   |                                        | **0.54**   |                                           |   | 0.48 |   |   | 13 |   |   | **1.08** |   |   | 0.96 |   |   | 13 |   |
| Book                  value                                             |   |                                        |       |                                           |   |   |   |   |   |   |   | **28.92** |   |   | 25.77 |   |   | 12 |   |
| Stock                  trading range                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                                    |   |                                        | **65.87**  |                                           |   | 65.60 |   |   |   |   |   | **66.59** |   |   | 65.60 |   |   |   |   |
| Low                                                                     |   |                                        | **61.96**  |                                           |   | 61.35 |   |   |   |   |   | **61.36** |   |   | 58.35 |   |   |   |   |
| Close                                                                   |   |                                        | **61.96**  |                                           |   | 62.34 |   |   |   |   |   | **61.96** |   |   | 62.34 |   |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Financial                  position**                                 |   |                                        |       |                                           |   |   |   |   |   |   |   | **April                  30** |   |   | October                  31 |   |   |   |   |
| (millions                  of Canadian dollars)                         |   |                                        |       |                                           |   |   |   |   |   |   |   | **2007** |   |   | 2006 |   |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  resources and securities                          |   |                                        |       |                                           |   |   |   |   |   |   |   | **71,507** |   |   | 57,149 |   |   | 25 |   |
| Loans                  and acceptances                                  |   |                                        |       |                                           |   |   |   |   |   |   |   | **53,246** |   |   | 50,488 |   |   | 5 |   |
| Other                  assets                                           |   |                                        |       |                                           |   |   |   |   |   |   |   | **11,927** |   |   | 9,248 |   |   | 29 |   |
| Total                  assets                                           |   |                                        |       |                                           |   |   |   |   |   |   |   | **$136,680** |   |   | $116,885 |   |   | 17 |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                |   |                                        |       |                                           |   |   |   |   |   |   |   | **76,791** |   |   | 71,989 |   |   | 7 |   |
| Other                  liabilities                                      |   |                                        |       |                                           |   |   |   |   |   |   |   | **52,034** |   |   | 38,083 |   |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subordinated                  debentures                                |   |                                        |       |                                           |   |   |   |   |   |   |   | **1,935** |   |   | 1,449 |   |   | 34 |   |
| Non-controlling                  interest                               |   |                                        |       |                                           |   |   |   |   |   |   |   | **908** |   |   | 576 |   |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferres                  shares                                       |   |                                        |       |                                           |   |   |   |   |   |   |   | **400** |   |   | 400 |   |   |   |   |
| Common                  shares                                          |   |                                        |       |                                           |   |   |   |   |   |   |   | **1,576** |   |   | 1,566 |   |   |   |   |
| Retained                  earnings                                      |   |                                        |       |                                           |   |   |   |   |   |   |   | **3,036** |   |   | 2,822 |   |   |   |   |
| Total                  liabilities and shareholder's equity             |   |                                        |       |                                           |   |   |   |   |   |   |   | **$136,680** |   |   | $116,885 |   |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital                  ratios - BIS                                   |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                  1                                                 |   |                                        |       |                                           |   |   |   |   |   |   |   | **9.3** | **%** |   | 9.9 | % |   |   |   |
| Total                                                                   |   |                                        |       |                                           |   |   |   |   |   |   |   | **13.3** | **%** |   | 14.0 | %(1) |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired                  loans, net of specific and general allowances |   |                                        |       |                                           |   |   |   |   |   |   |   | **(198** | **)** |   | (192 | ) |   |   |   |
| as                  a % of loans and acceptances                        |   |                                        |       |                                           |   |   |   |   |   |   |   | **(0.4** | **)%** |   | (0.4 | )% |   |   |   |
|                                                                    |   |                                        |       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                  under administration/management                 |   |                                        |       |                                           |   |   |   |   |   |   |   | **243,004** |   |   | 228,749 |   |   |   |   |

| (1) | Taking                  into account the issuances of $500 million of subordinated debentures                  on                  November 2, 2006. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

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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)*

----

**Capital      Resources and Liquidity**

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

**Disclosure      of Contractual Obligations**

**Off-Balance      Sheet Arrangements**

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**Disclosure      About Market Risk**

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

----

**SIGNATURES**

|                                                         |                                                                         |         |
|--------------------------------------------------------------|------------------------------------------------------------------------------|--------------|
|                                                         | NB CAPITAL CORPORATION                                                       |
|                                                    |                                                                    |    |
| Date              :              August              9, 2007 | /s/ Donna Goral                                                              |
|                                                         | Donna                GoralChairman                of the Board and President |
|                                                         |                                                               |   |
|--------------------------------------------------------------|--------------------------------------------------------------------|--------|
|                                                         |                                                               |
| Date              :              August              9, 2007 | /s/ Jean Dagenais                                                  |
|                                                         | Jean                DagenaisChief                Financial Officer |
|                                                         |                                                                    |

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