UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
 
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


NB CAPITAL CORPORATION
(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)

212-632-8697
(Registrant’s telephone number, including area code)

(N/A)
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
  
Outstanding at Nov 01, 2005
  
       
Common Stock par value $0.01 per share
    
100
  


 
NB CAPITAL CORPORATION

Index
 
Page
   
 
   
1
   
2
   
3
   
4
   
5
   
8
   
9
   
11
   
11
   
 
   
12
   
12
   
References to $ are to United States dollars; references to C$ are to Canadian dollars. On September 30, 2005, the Canadian dollar exchange rate posted by the Bank of Canada was C$1.1627 = $1.00 and certain amounts stated herein reflect such exchange rate.
 
 


 ITEM 1(a). FINANCIAL STATEMENTS
                   
NB CAPITAL CORPORATION
                   
BALANCE SHEETS
 
   
September 30,
  
December 31,
  
   
2005
  
2004
  
( in thousands of US dollars )  
(Unaudited)
      
           
           
Assets  
$
  
$
  
           
Current          
Cash and cash equivalent
    
16,651
    
58,327
  
Due from an affiliated company
    
13,400
    
9,474
  
Promissory notes - current portion
    
86,659
    
51,678
  
Accrued interest on cash equivalent
    
3
    
26
  
Prepaid expenses
    
19
    
30
  
     
116,732
    
119,535
  
               
Promissory notes
   
367,349
    
358,228
  
         
484,081
    
477,763
  
               
Liabilities
              
               
Current
              
Due to the parent company
    
411
    
414
  
Accounts payable
    
68
    
30
  
         
479
    
444
  
               
Stockholders' equity
              
               
Capital stock and Additional paid-in capital
   
476,764
    
476,764
  
               
Retained earnings
    
6,838
    
555
  
                       
       
483,602
    
477,319
  
                       
        
484,081
    
477,763
  
               
               
See accompanying notes to the financial statements.
 
 
NB CAPITAL CORPORATION
                   
STATEMENTS OF INCOME
 
(Unaudited)
                  
   
Three-month periods ended
  
Nine-month periods ended
  
   
September 30,
  
September 30,
  
( in thousands of US dollars )
  
2005
  
2004
  
2005
  
2004
  
   
$
  
$
  
$
  
$
  
Revenue
                  
Interest income
                          
Cash equivalent
    
452
    
108
    
948
    
271
  
Promissory notes
    
8,241
    
9,119
    
25,612
    
27,181
  
       
8,693
    
9,227
    
26,560
    
27,452
  
                           
Expenses
                          
Servicing and advisory fees
    
411
    
402
    
1,212
    
1,184
  
Legal and other professional fees
    
94
    
83
    
261
    
211
  
        
505
    
485
    
1,473
    
1,395
  
                           
Net income
    
8,188
    
8,742
    
25,087
    
26,057
  
                           
Preferred stock dividends
    
6,268
    
6,267
    
18,804
    
18,801
  
                                         
Income available to common stockholders
    
1,920
    
2,475
    
6,283
    
7,256
  
                           
Weighted-average number of common shares outstanding
    
100
    
100
    
100
    
100
  
                                         
Earnings per common share - basic and diluted
    
19
    
25
    
63
    
73
  
                           
                           
See accompanying notes to the financial statements.
                          
 
 
NB CAPITAL CORPORATION
                   
STATEMENTS OF STOCKHOLDERS' EQUITY
 
(Unaudited)
                  
   
Three-month periods ended
  
Nine-month periods ended
  
   
September 30,
  
September 30,
  
( in thousands of US dollars )
  
2005
  
2004
  
2005
  
2004
  
                   
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
    
4,918
   
6,444
   
555
   
1,663
 
Net income
    
8,188
   
8,742
   
25,087
   
26,057
 
Preferred stock dividends
    
(6,268
)
  
(6,267
)
  
(18,804
)
  
(18,801
)
Balance, end of period
    
6,838
   
8,919
   
6,838
   
8,919
 
                           
TOTAL STOCKHOLDERS' EQUITY
    
483,602
   
485,683
   
483,602
   
485,683
 
                           
                           
See accompanying notes to the financial statements.
 
 
NB CAPITAL CORPORATION
                   
STATEMENTS OF CASH FLOWS
 
(Unaudited)
          
   
Nine-month periods ended
  
   
September 30,
  
( in thousands of US dollars )
  
2005
  
2004
  
OPERATING ACTIVITIES
          
   
$
  
$
  
Net income
    
25,087
   
26,057
 
Items not affecting cash resources
              
Prepaid expenses
    
11
   
(17
)
Due from an affiliated company
    
(3,926
)
  
654
 
Due to the parent company
    
(3
)
  
(13
)
Accounts payable
    
38
   
3
 
Accrued interest receivable on cash equivalent
    
23
   
4
 
                         
Net cash provided by (used in) operating activities
    
21,230
   
26,688
 
               
FINANCING ACTIVITIES
              
               
Dividends
    
(18,804
)
  
(18,801
)
Net cash provided by (used in) financing activities
    
(18,804
)
  
(18,801
)
               
               
INVESTING ACTIVITIES
              
               
Investment in promissory notes
    
(170,775
)
  
(170,613
)
Repayments of promissory notes
    
126,673
   
162,165
 
Net cash provided by (used in) investing activities
    
(44,102
)
  
(8,448
)
               
Cash and cash equivalents, beginning of period
    
58,327
   
19,406
 
Cash and cash equivalents, end of period
    
16,651
   
18,845
 
               
               
See accompanying notes to the financial statements.
 

NB CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
(in thousands of U.S. dollars)

1)
Incorporation and nature of operations

NB Capital Corporation (the "Company") was incorporated under the laws of the State of Maryland on August 20, 1997. The Company's principal business is to acquire, hold, finance and manage mortgage assets. The Company issued, through a Prospectus dated August 22, 1997, $300,000 of preferred stock and simultaneously, National Bank of Canada (the “Bank”), the Company’s parent company, made a capital contribution in the amount of $183,000. The Company used the aggregate net proceeds of $477,000 to acquire promissory notes (“Promissory notes”) issued by NB Finance, Ltd. (“NB Finance”), a wholly-owned subsidiary of the Bank.

2)
Significant accounting policies

Financial statements

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and are expressed in U.S. dollars.

The interim financial statements for the three-month and nine-month periods are unaudited, however, the financial statements include, in the opinion of management, all adjustments necessary for a fair presentation. The unaudited financial statements should be read in conjunction with the audited financial statements included in the Company’s annual report for the year ended December 31, 2004 filed on Form 10-K. The interim financial statements may not be an indicator of the results anticipated in the full year.

Promissory notes

In accordance with Statements of Financial Accounting Standards (‘‘SFAS’’) No.115 ‘‘Accounting for certain Investments in Debt and Equity Securities’’ and based on the Company’s intentions regarding these instruments, the Company has classified the Promissory notes as held to maturity and has accounted for them at amortized cost. 

Income taxes

The Company has elected to be taxed as a Real Estate Investment Trust ("REIT") under the Internal Revenue Code of 1986, as amended, and accordingly, is generally not liable for United States federal income tax to the extent that it distributes at least 90% of its taxable income to its stockholders, maintains its qualification as a REIT and complies with certain other requirements.

Per share data

Basic and diluted earnings per share with respect to the Company for the three-month and nine-month periods ended September 30, 2005 and 2004 are computed based on the number of common shares outstanding during the period.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 


NB CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
(in thousands of U.S. dollars) 

Interest on Promissory notes and cash equivalent

Interest income on the Promissory notes and cash equivalent is accrued using the simple interest method based on the average amount of principle outstanding for the month. The accrual of interest is discontinued when management believes that the collection of interest is doubtful.

3)
Promissory notes

The Company entered into loan agreements evidenced by Promissory notes with NB Finance, an affiliated company. The Promissory notes are collateralized by mortgage loans which are secured by residential first mortgages and insured by the Canada Mortgage and Housing Corporation.

The Promissory notes have maturities ranging from October 2005 to January 2015, at rates ranging from 5.49% to 10.21%, with a weighted average rate of approximately 7.78% per annum.

The fair value of the Promissory notes as at September 30, 2005 is $468,401. Fair value is estimated by using the present value of expected future cash flows and may not be indicative of the net realizable value.
         
Promissory notes as of December 31, 2004
  
$
409,906
  
Acquisitions
    
170,775
  
Principal repayments
    
(126,673
)
Promissory notes as of September 30, 2005
 
$
454,008
  

The scheduled principal repayments on a year end basis as of September 30, 2005 are as follows:
                     
2005
  
$
14,251
    
2011
 
$
68,459
  
2006
  
$
86,735
    
2012
 
$
40,397
  
2007
  
$
118,090
    
2013
  
$
8,307
  
2008
  
$
26,699
    
2014
  
$
4,248
  
2009
  $
35,909
  
2015
 
$
8,588
  
2010
  
$
42,325
              
 
4)
Transactions with an affiliated company

During the three-month and nine-month periods ended September 30, 2005 and September 30, 2004, the Company earned interest from NB Finance on the Promissory notes in the amount of $8,241 ($9,119 in 2004) and $25,612 ($27,181 in 2004), respectively (see Note 3).

The amount of $13,400 due from NB Finance as of September 30, 2005 and $9,474 as of December 31, 2004 represents interest and principal repayments due on the promissory notes.

5)
Transactions with the parent company

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

Advisory agreement
In exchange for a fee equal to $100 per year, payable in equal quarterly installments, the Bank will furnish advice and recommendations with respect to all aspects of the business and affairs of the Company. During the three-month and nine-month periods ended September 30, 2005 and September 30, 2004, fees of $25 ($25 in 2004) and $75 ($75 in 2004) were charged to the Company.
 

NB CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
(in thousands of U.S. dollars)
 
Servicing agreement
The Bank services and administers the Promissory notes and the collateralized mortgage loans and performs all necessary operations in connection with such servicing and administration in exchange for a monthly fee based upon the outstanding balance of the collateralized mortgage.

The monthly fee equals one-twelfth (1/12) of 0.25% per annum of the aggregate outstanding balance of the collateralized mortgage loans as of the last day of each calendar month. For the nine-month periods ended September 30, 2005 and September 30, 2004, the average outstanding balance of the collateralized mortgage loans were $539,988 and $543,160 respectively. During the three-month and nine-month periods ended September 30, 2005 and September 30, 2004, fees of $386 ($377 in 2004) and $1,137 ($1,109 in 2004) respectively, were charged to the Company.

Custodial agreement
The Bank holds all documents relating to the collateralized mortgage loans. During the three-month and nine-month periods ended September 30, 2005 and September 30, 2004, no fee was charged to the Company for custodial services.

Interest on cash equivalents
The Company received interest on cash equivalents held with National Bank of Canada for the three-month and nine-month periods ended September 30, 2005 and September 30, 2004 in the amounts of $452 ($108 in 2004) and $948 ($271 in 2004).

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

Common stock
The Company is authorized to issue up to 1,000 shares of $ 0.01 par value common stock. To date:

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

Preferred stock
The Company is authorized to issue up to 10,000,000 shares of $0.01 par value preferred stock. To date:

·  
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.

·  
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.
 
 

ITEM 1(b). NATIONAL BANK OF CANADA SUMMARIZED FINANCIAL INFORMATION

Note 6 of the Notes to the Financial Statements of NB Capital Corporation states that 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 National Bank of Canada. Below are the summarized financial information for the National Bank of Canada for the third quarter and nine month period of its 2005 fiscal year which ended July 31, 2005.
 

(unaudited)  
Quarter ended july 31
      
Nine months ended July 31
      
                           
   
2005
  
2004
  
%
 Change
  
2005
  
2004
  
%
 Change
  
Operating Results
(millions of Canadian Dollars)
                                      
Total revenues
   $
889
   $
858
    
4
   $
2,772
   $
2,653
    
4
  
Net Income
    
207
    
167
    
24
    
648
    
533
    
22
  
Return on common shareholders' equity
    
19.6
%
  
17.2
%
  
 
 
  
21.1
%
  
18.4
%
      
                                       
                                       
Per Common Share
                                      
Net earnings - basic
   $
1.20
   $
0.95
    
26
   $
3.76
   $
2.99
    
26
  
Dividends paid
    
0.44
    
0.38
    
16
    
1.28
    
1.04
    
23
  
Book value
                      
24.70
    
22.30
    
11
  
Stock trading range
                                      
High
    
58.21
    
45.50
          
58.21
    
47.93
        
Low
    
51.60
    
42.72
          
46.39
    
40.17
        
Close
    
57.30
    
44.76
          
57.30
    
44.76
        
 
Financial Position
(millions of Canadian dollars)
  
July 31
2005
  
October 31
2004
      
Total assets
   $
110,593
   $
88,721
    
25
  
Loans and acceptances
    
48,637
    
44,574
    
9
  
Cash resources and securities
   
54,991
    
38,280
    
44
  
Other assets
    
6,965
    
5,867
    
19
  
                     
Total liabilities
    
104,116
    
82,739
    
26
  
Deposits
    
60,993
    
53,432
    
14
  
Other liabilities
    
43,123
    
29,307
    
47
  
                     
Subordinated debentures
    
1,409
    
1,408
    
-
  
Non-controlling interest
    
415
    
307
    
12
  
                     
Preferred shared
    
575
    
375
    
53
  
Common shares
    
1,557
    
1,545
    
1
  
Retained earnings
    
2,521
    
2,284
    
10
  
                     
Capital ratios - BIS
                    
Tier 1
    
9.2
%
  
9.6
%
      
Total
    
12.1
%
  
13.0
%
      
Impaired loans, net of specific and general allowances
   
(219
)
  
(190
)
      
as a % of loans and acceptances
    
(0.5
)%
  
(0.4
)%
      
Assets under administration/management
    
205,982
    
180,598
        

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

Overview
(in thousands of U.S. dollars)

This report contains certain forward-looking statements and information relating to NB Capital Corporation (the “Company”) that are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. When used in this report, the words “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company’s management with respect to future events and the Company’s future performance and are subject to certain risks, uncertainties and assumptions. Should management’s current view of the future or underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements.

The Company was incorporated under the laws of the State of Maryland on August 20, 1997. The Company's principal business is to acquire, hold, finance and manage mortgage assets. The Company issued, through a Prospectus dated August 22, 1997, $300,000 of preferred stock and simultaneously, National Bank of Canada (the “Bank”), the Company’s parent company, made a capital contribution in the amount of $183,000. The Company used the aggregate net proceeds of $477,000 to acquire promissory notes (“Promissory notes”) issued by NB Finance, Ltd. (“NB Finance”), a wholly-owned subsidiary of the Bank.

The Company’s principal business objective is to acquire, hold, finance and manage assets consisting of obligations secured by real property as well as other qualifying REIT assets (“Mortgage Assets”). The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and accordingly, is generally not liable for United States federal income tax to the extent that it distributes at least 90% of its taxable income, subject to certain adjustments, to its stockholders.

This discussion summarizes the significant factors affecting the Company’s results of operations, financial condition and liquidation / cash flows for the third quarter ended September 30, 2005, compared to the same periods in 2004. This discussion should be read in connection with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2004.

Critical accounting policies

We believe that there are no critical accounting policies in connection with the preparation of the financial statements of the Company.

Results of operations
(in thousands of U.S. dollars)

For the three-month periods ended September 30, 2005 and September 30, 2004, the Company reported net income of $8,188 and $8,742 respectively. Revenues, which were comprised mostly of interest income, were $8,693 and $9,227 respectively, and expenses were $505 and $485 respectively. Since the Company has elected to be taxed as a REIT, no income tax was recorded during the period.
 

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

Ninety-five percent of revenues for the three-month period ended September 30, 2005 and ninety-nine percent of revenues for the three-month period ended September 30, 2004 were derived from the Mortgage Assets issued by NB Finance. The Mortgage Assets issued by NB Finance are collateralized by the “Mortgage Loans” that consist of 66 pools of residential first mortgages insured by the Canada Mortgage and Housing Corporation and which are secured by real property located in Canada. The balance of the revenues results from interest on cash equivalents. These revenues were higher in 2005 than 2004 due to an increase in the interest rate on term deposits held in NY (ranging from 2.25% to 3.00% in 2005 versus .75% in 2004). The Company believes that the majority of revenues will continue to be generated by the Mortgage Assets issued by NB Finance.

Expenses for the three-month periods ended September 30, 2005 and 2004 totaled $505 and $485, respectively, of which $411 and $402, respectively, represent servicing and advisory fees paid to the Bank, the Company’s direct parent, pursuant to the Servicing Agreement between the Bank and the Company (the “Servicing Agreement”) and the Advisory Agreement between the Bank and the Company (the “Advisory Agreement”), whereby the Bank performs all necessary operations in connection with administering the Mortgage Assets issued by NB Finance and the Mortgage Loans. Legal and other professional fees include payments to the transfer agent and other professional fees.

During the three-month period ended September 30, 2005, the Board of Directors of the Company authorized dividends, in the aggregate, of $6,268 compared to $6,267 for the three-month period ended September 30, 2004, on its Adjustable Rate Cumulative Senior Preferred Shares (the “Senior Preferred Shares”) and 8.35% Non-cumulative Exchangeable Preferred Stock, Series A (the “Series A Preferred Shares”) and, accordingly, the Depository Shares. Such dividends were paid on September 30, 2005.

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

The Company’s revenues are derived from interest payments from the Mortgage Assets. As of September 30, 2005, $454,008 Mortgage Assets issued by NB Finance were collateralized by C$757,945 ($567,510) of Mortgage Loans. The Company believes that the amounts generated from the payment of interest and principal on such Mortgage Loans will provide more than sufficient funds to make full payments with respect to the Mortgage Assets issued by NB Finance and that such payments will provide the Company with sufficient funds to meet its operating expenses and to pay quarterly dividends on the Senior Preferred Shares (see Note 6 of Financial Statements) and the Series A Preferred Shares (see Note 6 of Financial Statements) and, accordingly, the Depository Shares (see Note 6 of Financial Statements). To the extent that the cash flow from its Mortgage Assets exceeds those amounts, the Company will use the excess to fund the acquisition of additional Mortgage Assets and make distributions on the Common Stock.

The Company does not require any capital resources for its operations and, therefore, it is not expected to acquire any capital assets in the foreseeable future.

As of September 30, 2005, the Company had cash and cash equivalents of $16,651 representing 3.44% of total assets, compared to $58,327 representing 12.21% of total assets, as of December 31, 2004. The decrease is due to an investment in Promissory Notes that was made August 29, 2005. It is expected that the Company will invest in additional Mortgage Assets once cash resources are close to, but not exceeding, 20% of total assets. The Company expects to make an investment in Mortgage Assets in December 2005, in its normal course of business.

While this continues to be the Company’s investment policy, the Company maintains flexibility in this regard. The liquidity level is sufficient for the Company to pay fees and expenses pursuant to the Servicing Agreement and the Advisory Agreement.
 

The Company’s principal short-term and long-term liquidity needs are to pay quarterly dividends on the Senior Preferred Shares and the Series A Preferred Shares and, accordingly, the Depository Shares, to pay fees and expenses of the Bank pursuant to the Servicing Agreement and the Advisory Agreement, and to pay legal and professional fees and expenses of advisors, if any.

Disclosure of Contractual Obligations

The Company does not have any indebtedness (current or long-term), other material capital expenditures, balloon payments or other payments due on other long-term obligations. No negative covenants have been imposed on the Company.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet obligations.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in the market risks faced by the Company since December 31, 2004. For information regarding the Company’s risks refer to the information under the caption ‘Disclosure About Market Risk’ below and to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Disclosure About Market Risk

Any market risk to which the Company would be exposed would result from fluctuations in interest rates that would affect the interest payments received by the Company in respect of the Mortgage Assets issued by NB Finance. Since the Mortgage Assets are significantly overcollateralized by the Mortgage Loans, the Company believes that interest rate fluctuations should not present significant market risk. The Company expects that the interest and principal generated by the Mortgage Loans should enable full payment by NB Finance of all of its obligations as they become due.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation as of the end of the period covered by this report, the Company’s President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in the Company’s internal control over financial reporting that has occurred during the Company’s fiscal quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION


ITEM 1.
LEGAL PROCEEDINGS

The Company is not the subject of any material litigation. The Company is not currently involved in nor, to the Company's knowledge, currently threatened with any material litigation other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance.

ITEM 6.
EXHIBITS

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
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
     
  NB CAPITAL CORPORATION
 
 		  
 		  
 
Date: November 14, 2005 By:   /s/ Serge Lacroix
 
 
Serge Lacroix
Chairman of the Board and President

     
Date: November 14, 2005 By:   /s/ Jean Dagenais
 
 
Jean Dagenais
Chief Financial Officer

 
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