The real estate sector has underperformed the S&P 500 in recent years, and by a wide margin.I won't keep you in suspense. If you had invested $1,000 in the Vanguard Real Estate ETF (VNQ -0.51%) a decade ago, you would have about $1,770 today, assuming you reinvested your dividends along the way.This isn't a terrible outcome. After all, you wouldn't have lost money. But when you consider that $1,000 invested in an S&P 500 index fund such as the Vanguard S&P 500 ETF (VOO -0.37%) 10 years ago would be worth $3 ...

Real Estate Investment Analysis - Real estate is more sensitive to interest rates than inflation [1][2] - In the current environment, real estate is likely to decrease in real terms [2] - Real estate is a fixed asset, making it easily taxable [1][2] - The fixed nature of real estate limits diversification [2] - Real estate's immobility hinders the movement of money [2][3] Ray Dalio's Perspective - Ray Dalio considers real estate a poor investment [1][3]

Financial Performance Highlights - Net interest income increased to $467 million in 2Q 2025, which included $29.1 million in contractual accretion income and $13.1 million from accelerated loan payoffs[54] - Noninterest income rose to $222.2 million in 2Q 2025, driven by strong fund services income, higher card purchase volume, and increased 12b-1 fees, including a $37.7 million gain on investment securities[54] - Operating PTPP (Pre-Tax, Pre-Provision) income reached $309.2 million, or $4.06 per diluted share[54] - Average total deposits grew to $55.649 billion in 2Q 2025, with average noninterest-bearing deposits (DDA) increasing by $975 million to $14.403 billion[55] - The FTE Net Interest Margin was 3.10%, which included a $42.2 million benefit from purchase accounting accretion; excluding PAA, the core NIM was 2.83%[55] Balance Sheet and Credit Quality - Average loans increased to $36.407 billion in 2Q 2025, led by C&I growth, followed by owner-occupied and investment CRE[55] - The allowance for credit losses on total loans was 1.06%[55] - Net charge-offs were 0.17% of average loans, with legacy UMB NCOs at 0.13%[55] HTLF Acquisition Impact - $42.2 million in net interest income accretion was recognized in 2Q 2025 related to the HTLF acquisition[44] - Core deposit intangible amortization related to the HTLF acquisition was $(21.6) million in 2Q 2025[45] Business Segment Performance - Commercial & Personal Banking Services revenue was $514.9 million in 2Q 2025, with average deposits of $39 billion[8] - Institutional Banking Services revenue was $174.3 million in 2Q 2025, with average deposits of $16.6 billion and $600.6 billion in AUA[10]

Core Insights - AGNC Investment Corp. (AGNC) and Annaly Capital Management (NLY) are leading players in the mortgage real estate investment trusts (mREITs) sector, both providing attractive long-term returns and substantial dividend yields, but differing in portfolio strategies and risk profiles [1] Capital Distribution & Dividend Yield - AGNC has a dividend yield of 15.34% with a payout ratio of 81%, but has not increased its dividend in the last five years [2] - NLY announced a cash dividend of 70 cents per share for Q1 2025, a 7.7% increase from the previous payout, with a current dividend yield of 14.37% and a payout ratio of 101% [3] - AGNC has a share repurchase plan authorizing up to $1 billion of common stock until December 31, 2026 [6] - NLY has a share repurchase program allowing for the repurchase of up to $1.5 billion of common stock until December 31, 2029, but has not executed any repurchases since its announcement [7] Business Model & Portfolio Diversification - AGNC focuses exclusively on agency mortgage-backed securities (MBS), which exposes it to volatility, while NLY employs a diversified capital allocation strategy that includes residential credit and mortgage servicing rights, reducing rate sensitivity [8][11] - NLY's diversified strategy is expected to contribute to long-term growth and stability, allowing it to capitalize on various market cycles [12] Interest Rate Sensitivity - AGNC is significantly affected by interest rate changes due to its concentrated agency MBS exposure, leading to increased borrowing costs and profit margin pressures [13][14] - AGNC's interest expenses surged from $75 million in 2021 to $2.9 billion in 2024, reflecting its vulnerability to rate hikes [15] - NLY's diversified portfolio allows it to better withstand interest rate volatility, resulting in lower increases in borrowing costs compared to AGNC [16] Benefits From Mortgage Rates - Both AGNC and NLY are expected to benefit from declining mortgage rates, with the average 30-year fixed-rate mortgage dropping from 6.95% to 5.80% year-over-year [19] - NLY is likely to see stronger book value appreciation due to tightening spreads in the Agency MBS market, while AGNC may benefit from increased refinancing activity [20][21] Earnings Estimates - AGNC's earnings estimates for 2025 and 2026 indicate year-over-year declines of 11.2% and 3.9%, respectively [22] - NLY's earnings estimates for the same period suggest year-over-year growth of 6.3% and 1.4% [25] Price Performance & Valuations - Over the past year, AGNC gained 12.6% and NLY rose 17.7%, outperforming the industry average of 8.6% [29] - AGNC trades at a forward price-to-tangible book (P/TB) multiple of 1.10X, while NLY trades at 0.99X, both above the industry average of 0.98X [31][34] Conclusion - NLY's recent dividend hike and diversified strategy position it as a more attractive option for long-term stability and growth compared to AGNC, which has faced challenges due to its concentrated agency MBS exposure [36][38]