Annaly Capital Management (NYSE:NLY) reported second-quarter financial results on Wednesday. The transcript from the company's second-quarter earnings call has been provided below.
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Summary
Annaly Capital Management grew its agency portfolio by $3 billion, ending the quarter with a market value of $95 billion, increasing the capital allocation to agency to 57%.
The company reported a book value per share increase of 1.7% to $20.15 and a positive economic return of 5.5% for the quarter.
Annaly set a quarterly record by purchasing $7.1 billion in loans and closed 13 deals for $6.8 billion in principal balance in Q2, maintaining its position as a leading issuer in the non-agency market.
The MSR portfolio remained stable at $4.1 billion, with strategic purchases and sales to enhance return profiles.
Annaly's residential credit platform showed strong performance, with significant securitization activity and a focus on non-QM and DSCR loans.
The company increased its quarterly dividend to $0.75 per share, reflecting confidence in its earnings power and future outlook.
Management emphasized the benefits of a diversified housing finance platform, disciplined risk management, and structural advantages over origination-dependent models.
Full Transcript
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Income inflows, increased purchases from overseas investors and a robust CMO market which is absorbing roughly 30% of gross issuance and broadly distributing the risk to a diversified set of investors. Given this attractive environment, we grew our agency portfolio by roughly 3 billion, ending the quarter at 95 billion in market value, which increased our capital allocation to agency to 57%. As far as portfolio activity, we rotated slightly up in coupon by reducing our exposure to four-and-a-halfs in favor of five-and-a-halfs and sixes, and we invested capital raised primarily into production coupon MBS and agency CMBS.
Over the first half of the year, specified pools outperformed in spite of relatively benign rate volatility and a subdued prepayment outlook which typically favors more generic collateral and TBAs. Notably, pool outperformance was largely driven by strong GSE demand and we took advantage of these valuations and reduced our pay-up exposure by moving to lower pay-up pools and increasing our TBA holdings. Late in the second quarter, pool valuations became more attractive as GSE demand waned and as a consequence we expect new investments to be more balanced across TBAs and specified pools.
With respect to our hedge profile, we were conservative in managing our rate exposure and proactively added additional swap hedges to protect against rising rates. Our portfolio remains diversified across Treasury futures and swaps, with a preference for the latter given more attractive carry and comfort around balance sheet availability going forward. Now moving to residential credit, our portfolio ended the second quarter at 10.4 billion in market value, virtually unchanged quarter over quarter and representing 22% of the firm's capital.
Residential credit spreads moved in tandem with broader fixed income markets, with AAAs ending the quarter approximately 10 basis points tighter. Our Onslow Bay correspondent channel produced another strong quarter of volume with 6.7 billion of locks and 5.1 billion of fundings including whole loan bulk purchases and our partnerships. Annaly purchased 7.1 billion of loans in Q2 which is a new quarterly record for the firm; despite record volumes, the credit quality of our loan pipeline continues to improve, best evidenced by the locked pipeline: 765 FICO, 67% CLTV.
Non-agency gross securitization issuance totaled over 150 billion year-to-date, up approximately 50% year over year, putting the private label market on pace for its largest gross issuance year since 2007. And Annaly remains the largest issuer of expanded credit mortgages and the second largest issuer overall as we closed 13 deals for 6.8 billion in principal balance in the second quarter, creating approximately 780 million in proprietary investments.
Year to date the OBX platform has priced 25 transactions totaling 14.2 billion and notably we have securitized eight different forms of residential collateral, underscoring the depth and diversity of our platform. The OBX securitization program also had the distinction of closing the first billion-dollar new origination non-QM transaction, demonstrating Annaly's leadership position in the non-agency market. This inaugural billion-dollar deal was well received by investors which allowed us to price a second equally sizable transaction approximately two weeks later.
Our residential credit platform is well positioned for continued growth of the non-agency market given the substantial investments we've made over the last number of years which we believe is a key differentiator and should continue to result in Annaly manufacturing high-yielding proprietary investments difficult to duplicate at scale. Now shifting to MSR, our portfolio was roughly unchanged at 4.1 billion in market value with our allocation to the sector representing 21% of the firm's capital during the quarter.
We've modestly rotated the portfolio higher in loan balance as we committed to purchase approximately $200 million in market value of MSR across our various sourcing channels while also committing to sell two bulk pools with lower loan balances for $220 million in proceeds. These transactions capitalized on differing buyer economics across the MSR market, highlighting our relative value approach and portfolio flexibility. Moving into higher average loan balance MSR meaningfully enhances our return profile as our cost to service is contractually a fixed amount per loan in contrast to in-house servicers with high fixed costs and a variable cost per incremental loan. Bulk supply in the second quarter decreased modestly from Q1, though we expect supply to remain healthy throughout the balance of the year given ongoing originator profitability constraints and industry consolidation. In a minor note, our flow purchase channel is picking up with 31 million in market value purchased this quarter and it should become an increasingly important avenue to acquire current coupon MSR and allows us to offset portfolio paydowns.
Our MSR portfolio fundamentals remain compelling as prepayment speeds increased in line with seasonals to 5.2 CPR in Q2 that were still below our initial model projections, providing potential upside returns. The credit quality of the portfolio remains exceptional with serious delinquencies range-bound at approximately 50 basis points at a weighted average note rate of 3.3%, the lowest among the 20 largest MSR holders. Our portfolio continues to generate durable, predictable cash flows with meaningful prepayment protection.
MSR valuations remain well supported in the current interest rate environment and our multiple increased marginally to 5.97 largely driven by the increase in rates, offset by a flatter curve. And finally, to touch on our outlook, we continue to see compelling opportunities across our three strategies underpinned by a healthy fixed income and housing finance investment environment. Agency spreads remain at attractive levels with mid-teens levered returns and very favorable technicals and we'll look to further deploy new capital in the sector balanced against relative value opportunities in our other businesses.
Our residential credit platform continues to exhibit substantial growth supported by our loan sourcing and capital markets capabilities, long-standing originator relationships and skilled platforms. Our MSR business is performing well ahead of our expectations, anchored by a deliberately constructed portfolio, low note rate, high credit quality that would be difficult to replicate at scale in today's market. Importantly, Annaly offers investors a differentiated way to access value across the housing finance sector without assuming the operational intensity and volume dependency of a traditional origination model.
We're not relying on loan volumes to sustain the economics of our portfolios, which allows us to remain selective, invest with scale and allocate capital to the opportunities offering the most attractive risk-adjusted returns. And that is a structural advantage that transcends market cycles and it has contributed to our ability to generate double-digit economic returns while operating with less leverage than our peers. And in an environment that continues to challenge origination-dependent business models, the capital efficiency, scale and flexibility of our platform meaningfully sets us apart.
And now with that, I'll hand it over to Serena to discuss the financials.
Serena Wolfe, Chief Financial Officer
Thank you, David. Today I will briefly review the financial highlights for the quarter ended June 30, 2026. As in prior quarters, our earnings release discloses GAAP and non-GAAP earnings metrics and my comments will focus on our non-GAAP EAD and related key performance metrics which exclude PAA. As David noted, the second quarter was characterized by a constructive fixed income investment environment despite geopolitical uncertainty and rising yields.
Against this backdrop, our diversified platform delivered strong performance. Elevated portfolio yields, tighter mortgage spreads, favorable hedge performance and disciplined risk management supported both earnings and book value during the quarter. As of June 30, 2026, our book value per share increased by 1.7% from the prior quarter to $20.15, including our $0.75 quarterly dividend. We generated a positive economic return of 5.5% for the quarter, bringing our economic return for the first half of the year to 6.9%.
Earnings available for distribution per share increased by $0.03 to $0.79 per share and exceeded our newly increased quarterly dividend of $0.75 per share. The increase was primarily driven by higher average yields on our agency portfolio as our weighted average coupon increased 11 basis points to 5.11% as well as higher securitization volumes within our residential credit business and favorable funding costs, with average repo rate declining 6 basis points to 3.84% during the quarter.
These benefits were partially offset by lower levels of swap income reflecting lower average receive rates. As SOFR declined during the quarter, net interest margin increased 5 basis points to 1.76% while net interest spread improved 8 basis points to 1.5%, with both measures benefiting from higher asset yields which more than offset modest increases in economic funding costs. Our balance sheet remained conservatively positioned with economic leverage declining slightly to 5.6 times from 5.7 times in the prior quarter, a reflection of the increase in our book value for Q2.
Our reported ending repo rate decreased 2 basis points to 3.85% while weighted average repo days to maturity ended the quarter at 33 days, down three days from the prior quarter. Our residential credit platform continued to demonstrate strong momentum, generating significant securitization activity during the quarter as David discussed earlier. Additionally, to support continued growth across our residential credit and MSR businesses, total warehouse capacity increased to 8.3 billion, including 2.8 billion of committed capacity.
We maintain ample available capacity in both businesses with utilization rates of 61% for residential credit and 50% for MSR. We ended the second quarter with 8 billion in unencumbered assets, including 5.5 billion in cash and unencumbered agency MBS. In addition, we had approximately $1.6 billion in fair value of MSR pledged committed warehouse facilities, which remains undrawn and provides an additional source of liquidity subject to market advance rates.
In total, we had $9.6 billion of total assets available for financing at quarter end, up approximately $580 million from the prior quarter. This represented approximately 57% of our total capital base and provides us with significant liquidity and financial flexibility to support portfolio growth while maintaining a conservative risk profile. Finally, our OPEX to equity ratio increased 11 basis points to 1.4% this quarter, bringing our year-to-date ratio to 1.34%.
The increase was driven in part by elevated expenses incurred during the quarter, which we expect to moderate in future periods. Overall, the quarter highlighted the benefits of our diversified housing finance platform and disciplined risk management approach. We generated book value growth, a positive economic return, strong earnings and maintained our conservative yet flexible balance sheet positioning. That concludes our remarks. We will now take questions.
Thank you, operator.
OPERATOR
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1. Again, we'll take our first question from Bose George at KBW.
Bose George, Analyst at KBW
Hey everyone, good morning. Actually, first a question just on the mark-to-market book value. Could we get an update?
Serena Wolfe, Chief Financial Officer
Sure, Bose. Good morning. So as of Friday, book value was off a little over a percent. So economic return off roughly half a percent.
Bose George, Analyst at KBW
Okay, great, thanks. And then just wanted to ask about dividend coverage. Obviously you raised the dividend, so clearly you're comfortable with it, but just, can you, can you just discuss the, you know, the economic return of the portfolio relative to the required ROE that's needed to cover the dividend, which looks like it's a little under 15%?
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Sure. So in terms of the economic return and the, in the returns available in the market, you know, we obviously show that depiction in the investor supplement with agency 14 to 16% and upwards of 15% resi and upwards of 13% for MSR funded through warehouse financing. So the way we look at it is we have line of sight, I think, into the near term using the forwards and when the board sets the dividend, they're very methodical and we want to make sure that it is earnable and we don't take these decisions lightly.
So, so we were certainly encouraged by the fact that we feel like it's earnable over the foreseeable future and we're on track to modestly outearn the dividend this quarter, all else equal. Now, in terms of the portfolio, where we own our assets is in a very good position and it covers very well and prepayments are relatively low and we have assets locked in for a very long time. So generally we feel very good about dividend coverage on a go forward basis.
Bose George, Analyst at KBW
Okay, great, thanks.
OPERATOR
Thank you, Bose. We'll move next to Crispin Love at Piper Sandler.
Crispin Love, Analyst at Piper Sandler
Thank you. Good morning. David, can you just kind of building on that prior question, but just give us a little bit of a view of where you're looking to add incremental capital across your three strategies. Looking at slide seven and the returns you referenced, the returns are pretty stable with last quarter or are stable with last quarter and last quarter. You seem to be leaning a little bit more into resi credit. So just curious on any shifts that you have, kind of where you're most interested in putting the incremental dollar across the three strategies, especially as agency technicals remain strong.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Sure, Crispin. So both agency technicals and MSR technicals are very strong, as strong as we've seen in quite some time. However, residential credit, we believe exhibits the best risk adjusted returns. So yes, we would like to incrementally add to residential credit, but we have to be responsible as it relates to the underlying credit. But we're making a lot of progress. You know, we priced four transactions already in July and we're in the market with another deal as we speak.
So we do expect to add in resi credit. But you know, agency is certainly very investable, particularly when you consider the technicals and how broad the demand is. And so we feel it's a safe place to invest. Volume has come down, notwithstanding the recent turbulence geopolitically, and so we feel good about it. So I'd say, you know, the marginal dollar will probably go into agency with resi credit as we can add. And MSR is still right there. As a matter of fact, we added up a package just yesterday.
We purchased an MSR package with a sub 3% note rate that we feel very good about with a strong OAS. And so that's it. You know, when it comes to raising capital, Crispin, and investing it, I think we would like to just take a second here and talk about what we've accomplished over the past couple of years. When we started raising capital again beginning in the third quarter of 2024, we raised 5.4 billion in capital in the last two years, including our preferred last summer.
And it's been very intentional. Obviously, price to book has to be accretive, assets have to be attractive. And to your question, we have to be able to nurture these other businesses, namely resi and MSR. And when you look at the capital allocation associated with those raises, you know, we added 2.6 billion in capital to both residential credit and MSR over the past two years and that's helped grow those businesses. And so the capital raising has fostered the development of these businesses and has been very accretive.
We generated nearly $280 million in accretion. It's added considerable scale, enabled us to develop more partnerships and really been a game changer for us. And as a consequence, over the past two years, we've generated just over a 33% economic return since starting to raise capital again. And the shareholder has noticed and we've delivered a 53% TSR in those eight quarters. So we feel really good about what we've accomplished, both from a capital allocation standpoint as well as a capital raising standpoint.
Crispin Love, Analyst at Piper Sandler
Great, David, appreciate that. Just one last question for me just on the administration, FHFA, GSEs, from your seat. How do you think they've been acting? Just the impacts of the mortgage markets and spreads. They were definitely very vocal earlier in the year. Would you expect additional actions in the balance of the year? Do you think it's enough for the GSEs to continue buying agency MBS, which they have been doing in what seems to be a pretty prudent way with definitely some more room to go in the coming months?
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Yes. So we can't say whether there'll be more action, whether it be raising the caps or anything otherwise. But they do have plenty of dry powder left. I think through May, they've settled roughly 45 billion in pools. And, you know, obviously the mandate was 200 billion. What I'd say about the GSEs and their approach broadly is it's been very constructive for the agency market. You know, in January, when spreads tightened as much as they did on the announcement, we were obviously quite concerned about being crowded out. But what it feels like today is they are acting much like a relative value market participant. When spreads are wider, they provide support and add, and they slow down the pace or stop buying when spreads tighten.
And so that's served to help stabilize mortgage spreads and it's made it an easier investment environment. And we welcome their participation. You know, when it's all said and done, let's say, you know, they get to the 200 billion and that's it. We expect them to be, you know, a generally responsible participant. They're very good. We know the people there. A lot of them are from, you know, prior lives that we worked with in the past, and we respect them a great deal. And so we're welcoming their participation and we expect them to be a positive force in the agency market.
Crispin Love, Analyst at Piper Sandler
Great, great. Thank you, David.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Thanks, Crispin.
OPERATOR
We'll move next to Marissa Lobo at UBS.
Marissa Lobo, Analyst at UBS
Thank you and good morning. Just looking at current coupon spreads compared to prior periods of Fed leadership transitions, do you feel that today's mortgage market is pricing in a larger uncertainty premium than normal, or how much of the current coupon spread do you think reflects the uncertainty?
Serena Wolfe, Chief Financial Officer
Thanks, Marissa. I think when you look at mortgages today, what's really driving it is realized and implied volatility is very low and the supply-demand technicals are very strong. As David mentioned after the Iran crisis, we saw after the de-escalation we saw both realized and implied vols come down and the basis tightened. And supply has been more muted than what we expected at the beginning of the year, with most people expecting net supply around 160 billion for 2026 compared to what we had penciled in at about 200 billion at the beginning of the year.
And fixed income flows have been really strong. Thirty percent of gross issuance is going into CMOs, which is distributed to a wide range of accounts. So I think market pricing is really not looking at the uncertainty from the Fed. They're basically looking at where markets are pricing volatility and markets basically are pricing volatility like there is not a lot of uncertainty from the Fed.
Marissa Lobo, Analyst at UBS
That's helpful. Thank you. And just shifting to growth in the other segments. So you've spoken about scale being a competitive advantage. And as you grow resi credit and MSRs, where do you still see the greatest opportunities for operating leverage here?
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Well, look, when it comes to operating leverage, we are an operating-light company and it served us very well. I talked in the prepared remarks about the lack of origination and servicing and we feel like we can scale these businesses with the current operating leverage and it's been beneficial for us. We're not obligated to invest in any one sector because we don't have a lot of operating leverage. Relying on partnerships has been a distinct advantage, particularly in times like these.
And we're here ready with capital to deploy it. To the extent there's an opportunity, you know, to add operating leverage, we'll look at it. But for the time being, being a capital participant has served us very well. And given where we're at in the cycle, we think it'll continue to for the foreseeable future. Marissa,
Marissa Lobo, Analyst at UBS
Great. Thank you for the answers.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Thank you, Marissa.
OPERATOR
We'll take our next question from Doug Harter at BTIG.
Doug Harter, Analyst at BTIG
Thanks and good morning. Can you talk a little bit about on the resi credit side, you know, the ability to source, the magnitude of loans, the diversity of loans. You know, in talking to others across the industry, it definitely seems like sourcing is enough. Volume is a challenge. Can you sort of talk about where you're seeing the volume coming from, the advantages you have there and kind of how that translates into the returns on the portfolio?
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Sure. Thanks, Doug.
Mike Haylon
This, this is Mike. I think that there's, you know, a number of key advantages that we have. One is that we've been in this market. We've been buying non-QM and DSCR loans for over 10 years. We've been doing it through the correspondent channel for over five years. You know, Annaly Capital Management has, you know, given the capital that we've raised, we've always delivered consistent pricing. I think that's something that not all of our peers and competitors can say.
A lot of our peers are private equity. There are certain times where they're not able to deliver a rate sheet that is competitive because they are raising capital or in a different component of the fund's life. So I think, you know, having that stability, having that capital, the reputation that we've earned I think has been, you know, has been, has been well earned. I think it's been hard earned. We've been buying loans, you know, during COVID where we've honored commitments that others have not done.
Originators don't always have short memories. So I think that there's a lot of goodwill that's been built up through time on the operational side. We are much deeper than a lot of our competitors and a lot of our peers. We face at this point now over 350 correspondents. You know, when you look at a lot of the other correspondent channels that we're competing against, they may be trying to face the top 50 originators. We have gone much further down the chain.
We also recently expanded into non-delegated correspondent. We did that in the beginning of the year. So that's added significant volume and it's added volume that's a little bit more price insensitive than the delegated channel. The service level is very strong. We have a fully staffed scenario desk. We have a fully staffed exception desk. We've invested a lot, as David mentioned, in terms of technology infrastructure. The ability to face 350 originators is very challenging.
And then lastly, I'll say that our execution on the back end is better than our peers and better than our competitors. We are pricing larger deals which is able to spread fixed costs and have lower fixed costs because it's a larger balance. Our variable costs, including underwriting fees, are lower than our peers because of the size of the deals that we're able to bring. And then we're also pricing tighter than the majority of other issuers. So that means at the same level of margin as some of our peers and competitors, you know, we're able to offer a higher price.
Right. So we're getting the same ROE at a higher price given some of that secondary, you know, execution. So, you know, there's a lot of new entrants and the market is competitive. We actually, our lot volume actually decreased quarter over quarter. It was 6.7 billion, is actually down 9 to 10%. Part of that is because, you know, as David mentioned, you know, we're looking to earn mid-teens ROEs. We're not just going to, you know, be out in the market and leading with, you know, pricing and leading with the rate sheet.
So we'll be diligent. But I think the infrastructure that we built, the number of originators, the relationships that we had, the pricing advantages, that has allowed us to source these assets at a greater clip than a lot of our competitors.
Doug Harter, Analyst at BTIG
Appreciate that, Mike. And then just one clarification. You talked about in the presentation how kind of like the economic assets and residential credit were relatively flat. How do I square that with the level of activity that you talked about? Kind of what are the puts and takes there?
Serena Wolfe, Chief Financial Officer
Yeah. So if you look at the actual portfolio, loans are effectively flat quarter over quarter, 4.7 billion of residential loans. So this is on an economic basis. Those are loans that are held on balance sheet that have yet to be securitized. Then when you look at our OBX portfolio on an economic basis, obviously we report GAAP, but when you look at an economic basis, the OBX portfolio was up 400 million. That's through retained securities. But the third-party securities portfolio was down a little over 350 million.
We sold 260 million of AAA CRE CLOs. As they tightened in, we took advantage of redeploying that into agency. And then our CRT portfolio was also down close to 65 million. So credit spreads did tighten and especially across third-party securities, we have the ability to monetize that. So that's really why you see that, you know, the flattish portfolio, quarter over quarter. Yeah.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
And Doug, just to add, OBX and whole loans represent over 80% of the resi credit balance sheet. And that's been the objective. You know, we've used third-party securities to generate yield over time, but manufactured securities in-house are higher returning assets. And so the objective is to have the portfolio predominantly characterized by OBX-related assets.
Doug Harter, Analyst at BTIG
Great. Appreciate it. Thank you guys.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Thanks, Doug.
OPERATOR
We'll move to our next question from Harsh Hemnani at Green Street.
Harsh Hemnani, Analyst at Green Street
Thank you. I guess given what we've seen happen with rates recently, prepayment risk in the market has certainly decreased and we're sort of seeing average coupons move up again across mortgage REIT portfolios. How are you sort of balancing that against maybe your outlook for prepayments going forward? I know you added some agency CMBS, but is there anything we should be thinking about on, you know, how you may see the vols in the other directions and deal with them?
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Again, Harsh, from another big picture standpoint, if you look at the overall prepayment risk and where we take it, we're taking prepayment risk in the agency portfolio with higher note rate collateral obviously. But we're taking virtually no prepayment risk in the MSR portfolio. And the reason being is you want your prepayment risk in more liquid securities because you can trade around them easier when there are surprises. And then the MSR portfolio being very stable, we don't have to worry about prepayment risk nearly to that extent.
Harsh Hemnani, Analyst at Green Street
Got it. That's helpful. Thank you.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Thanks, Harsh.
OPERATOR
We'll go next to Jason Stewart at Compass Point.
Jason Stewart, Analyst at Compass Point
Thanks. A question on the MSR market. It sounds activity was pretty consistent and the market remains relatively liquid throughout the second quarter. Could you just give us some more color on whether there are any opportunities to be opportunistic? I mean, to your point about originators needing or being more reliant on selling MSR for tech, has that created any idiosyncratic opportunities or any impact from that trend?
Ken
Yeah, yeah. Hi, this is Ken. Thanks for the question. You know, our model is, as Dave mentioned in the comments, being, you know, operational light and kind of working with partners and being, you know, primarily variable cost has really allowed us to kind of, you know, participate in a way most others can't. So those MSR holders who service their own loans, when they need liquidity, you know, if they sell MSR to another buyer who also services their own loans, not only do they have the gain or loss from selling the MSR, but they're left often with stranded costs.
So our model is pretty unique because we're operating at this scale and utilizing subservicers. So we're generally the favored buyer because we're not competing for those units on our platform. So that's been a real niche that we've been able to capitalize. So we have this portfolio of not just subservicers, but many of them are also MSR sellers to us. And in those situations, you know, we're really not competing with the bulk of the buyers. I think another niche is in the flow market Dave mentioned.
We kind of picked up some activity there. What's going on there is we're also an opportunistic buyer there and we're not forced to generically buy flow. So now we've increased and we're seeing that volume increase because, you know, we've grown our network of sellers. We're now up to over, you know, close to 200, over 175. And what we're seeing there is we're utilizing very granular pricing. So we're the only large MSR holder who also maintains a large specified pool portfolio.
So all the analytics that go into our specified pool pricing goes into very granular MSR pricing that we don't really see others doing. So, you know, we're able to pick up better OAS, better convexity in that way. And we think we're very differentiated there as well.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Yeah, Jason, another way to characterize it is we don't want to compete with banks, and banks do have demand for MSR in the current environment, particularly considering, you know, the capital rule reproposals. And the way we operate, the channel in which we operate using subservicers and buying MSR servicing retained, we're not competing in that channel. And that enables us to extract better value than that which, you know, appears to be apparent in the market and headline pricing.
Jason Stewart, Analyst at Compass Point
Yeah. Okay, that makes sense. And then follow up to Doug's question, Mike, on Resi Credit, you know, to the extent pricing on the origination side changes, is there in theory a point at which you would find, and I guess I understand this is completely theoretical point, you would find secondary security opportunities more attractive and if it were, would you pivot back to securities rather than organically created assets?
Mike Haylon
Yeah, and I think that. Thanks, Jason. I think that we did show that in Q1 where there was significant growth. Part of the, you know, the CRE CLO portfolio that got to be 395 million was. It was, you know, it was a reallocation from agency MBS tightening early in January, given the GSE announcement, as that has tightened 5 to 10 basis points. We've subsequently taken that off and redeployed in the first quarter. We also were active in buying non-QNB1s from third party shelves.
We were also active buying unrated A2s, MPL, RPLs, which at the time were like 13 to 14% ROEs. Now most of the third party securities that we see, they're closer to 11 to 12% ROEs. Q2 is actually a really good environment to show how important it is to have a manufacturing entity. So when you look at actual spreads, AAA spreads, as Dave mentioned on the call, they were 10 basis points tighter, quarter over quarter on the AAA level. On the BBB level, spreads were actually 25 basis points tighter.
The credit curve actually flattened. So I think this quarter was a reflection of our ability to move out of third party securities and continue to invest in the proprietary assets that we have. Better line of sight and we also have the ability to set those margins. But yes, I think that we have a flexible capital allocation model, both on the actual three businesses, but then also within the three businesses. So if that becomes an opportunity, we certainly have the acumen and the personnel to be able to capitalize on it.
OPERATOR
Okay, thanks a lot. Thanks, Jason. We'll go next to Hongliang Zhang at J.P. Morgan.
Hongliang Zhang, Analyst at J.P. Morgan
Yeah. Hey guys, I guess how do you guys think about your ability to tap the equity markets at your current stock price?
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Well, look, the three criteria, obviously price to book assets need to be attractive. And as I mentioned earlier, we need to be able to feed the businesses. So when we look at the stock price, we certainly think it warrants a premium, given what we've created and the franchise value and the fact that nobody can replicate what we can do in our track record, you know, we've just completed the 11th straight quarter of a positive economic return and investors are valuing it.
Where our premium isn't very high, it's modest, we think it's actually low given the value creation and what we built and the proprietary ability to acquire assets and manage those. And as we look at raising capital, we want to be gentle with the market. We did raise nearly 450 million last quarter. We were very, very soft with respect to our footprint. We weren't in the market on days when the stock wasn't performed. We were very low percentage of volume.
And in fact, the overall capital raise was, you know, a little over two and a half percent of the outstanding, which relative to, you know, some participants in the, in the space, is very low as a percentage of cap, as a percentage of overall capital. So that's how we'll behave. We don't want to disrupt the stock price. We need to make sure we can buy assets and we need to make sure we could generate positive returns. And to the extent that's available and we're gentle and we respect the stock, we'll continue to do so.
Hongliang Zhang, Analyst at J.P. Morgan
Got it. Thank you.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Thank you, Hong Ling. Give Rick our best, please.
OPERATOR
We'll move to our next question from Trevor Cranston at Citizens JMP.
Trevor Cranston, Analyst at Citizens JMP
Thanks. One more question. On the residential credit side, you guys mentioned that you were able to price a couple of large non-QM transactions. I was curious as you look ahead to the second half of the year, you know, if there's any particular collateral type that you guys are focused on as the best opportunity to deploy capital. And generally if you see much kind of dispersion in risk adjusted returns available across the different collateral types that you guys are focused on.
Mike Haylon
Yeah, thanks. Thanks, Trevor. This is Mike. So as Dave mentioned, we've priced 25 deals, 14.2 billion. Of that number, 70% is non-QM and DSCR. That will continue to remain the core collateral that Annaly Capital Management is well suited to purchase. We still believe that that actually is the highest ROE, but it's also the highest capital that you can commit, you know, relative to some of these other products. So owner-occupied agency loans, investor loans, HELOCs, closed-end seconds.
They are not as scalable at this point in time. And a lot of it is just our competitive advantage is the infrastructure. It is facing those 350 originators. So our cost basis is lower because we're able to buy that much deeper in the chain. So I think what really the point we're trying to make is that we have, you know, the ability to flex into other areas of the residential credit market. But non-QM and DSCR really will remain, you know, the core competency of the company in terms of, you know, some of our goals, you know, for this year it really was to bring larger deals.
So Dave mentioned it again on the script. But you know, we did a billion dollar deal. It was, it was non-QM 8 and then subsequently we did another billion dollar deal within two weeks, non-QM 9. A lot of that is just a reflection of the growth in the market itself. There's already been 65 billion of non-QM issuance this year, probably be north of 100 billion. So it's 40% of the entire residential credit market. But a lot of it is a reflection of our team's hard work in terms of the OBX securitizations.
We treat our investors as business partners. We have a long term view in terms of trying to increase demand towards our securitizations which has led to us being able to do those billion dollar deals. We certainly want best economics for our shareholders, but I think we act in a little bit more equitable way than some of our peers. We're not trying to tighten and test every single deal that we bring. We want both our investors and ourselves to walk away from these transactions and feel good about the process and the experience.
And the reason is because we're averaging three and a half deals per month. So it doesn't benefit us to have our investors not have really strong experiences. So I think that we feel really good with where we're positioned. The average deal size within non-QM this year it's been over 900 million. There's no other company that can say that. And we really would like to move to a programmatic issuance where we are doing a billion dollar plus transaction.
And you know, the increase in the non-QM market and then also our investor base has also increased. We've had over 250 investors participate in the OBX securitization platform since 2018. And our average deal, I'll say that we probably have between 45 to 50 different investors participate on our non-QM transactions. So that is where we see the bulk of the opportunity. But you know, we can, we can pivot to other collateral pipes as we've shown here this quarter.
Trevor Cranston, Analyst at Citizens JMP
Got it. Okay. Very helpful. Color. Thank you.
Mike Haylon
Thanks Trevor.
OPERATOR
And next we'll go to Kenneth Lee at RBC Capital Markets.
Kenneth Lee, Analyst at RBC Capital Markets
Hey, good morning. Thanks for taking my question. Just one more on the recent dividend increase here. Want to get your thoughts around the resiliency or how you think about the resiliency of the earnings power, especially in the context of any continued geopolitical uncertainty and the flattening yield curve. Thanks.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Sure. As I mentioned earlier, Ken, we take the dividend decision very seriously and our board is very thoughtful about it. And we do stress the environment to make sure that the dividend is earnable. We expect to be able to cover the dividend over a period of time. You know, there will be quarters where we'll outearn it and maybe we might, you know, be on top or even a touch below. But over a longer period of time, with all the information we have today, we expect to earn the dividend and that's what informed the decision to increase it. Now there is a lot of uncertainty. We're still living beneath the lion's paw, so to speak, as it relates to the geopolitical environment and volatility. Volatility. But generally speaking, we feel good about it. So we made the decision and we expect it to be a good one.
Kenneth Lee, Analyst at RBC Capital Markets
Gotcha. Very helpful there. And just one follow up, if I may. You mentioned the prepared remarks modestly rotating into higher loan balances within the MSRs. Wondering if you could just talk a little bit more about that, some of the motivations behind that. Thanks.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Yeah. And as I mentioned again, we're on a pretty much a completely variable cost model. So we pay a fixed cost per loan to have our collateral subserviced so that, that, that impact on the yield changes with the actual average loan size being being serviced. So it has, you know, less impact on higher loan balance than it does on lower loan balance. So what we found is, you know, the costs we're paying are really the best in class of the industry's marginal cost plus a marginal profit margin as opposed to something closer to the average cost of the industry. So our cost to service our portfolio is, we believe, materially lower than the average cost in the industry through using subservicers. Again because we're priced at marginal costs plus a profit margin.
Now when portfolios come out for the market, those participants that service their own loans, they model things at their marginal cost. So they're much more aggressive on low loan balance collateral. So our selling low loan balance and buying high loan balance is a total pickup in economics and yield for us where when you service your own loans. You really need to keep units on the platform. Right. We can be an opportunistic buyer where these other participants are forced buyers. Does that make sense?
Kenneth Lee, Analyst at RBC Capital Markets
Yep, that makes sense. Very helpful there. Thanks again.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Thank you, Ken.
OPERATOR
And that concludes our Q and A session. I will now turn the conference back over to David for closing remarks.
David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer
Much appreciated, Audra. And thank you, everybody, for joining us. And enjoy the rest of your summer, and we'll talk to you soon.
OPERATOR
And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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