Company: RWT-PA
Filing Date: 2025-04-01
Form Type: DEF 14A
Source: 0000930236-25-000012
Chunk: 57

Company: REDWOOD TRUST INC
Filing Date: 2025-04-01
Form: DEF 14A
Chunk 57
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 whether alternative or additional financial performance metrics should be used within the methodology for determining performance-based annual bonuses. Although for 2024, the Committee continued to use the same financial performance metrics that had been used in 2023, it discussed that as the Company’s business model continued to evolve, additional or alternative financial performance metrics could be incorporated into the annual bonus methodology in future years to continue to maintain strong alignment between the bonus program’s incentive structure and the metrics that are strongly correlated with increasing earnings and book value and driving stockholder returns.

For 2024, the Committee determined that 50% of the target amount of the financial performance component of annual bonuses would be realized based on 2024 Adjusted ROE and the other 50% of the target amount of the financial performance component of annual bonuses would be realized based on 2024 Adjusted EAD ROE.

◦ Adjusted ROE . Adjusted ROE is a non-GAAP financial performance metric, which has historically been very closely correlated to Redwood’s ROE based on GAAP financial results, but differs in certain respects.

1 Note: Adjusted ROE and Adjusted EAD ROE should not be considered as alternatives to GAAP net income, GAAP ROE or other measurements of results of operations computed in accordance with GAAP or for federal income tax purposes. See Annex B to this Proxy Statement for additional discussion, disclosure and details regarding these non-GAAP financial performance metrics.

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▪ Adjusted ROE generally reflects adjusted earnings on average common equity capital adjusted to exclude certain unrealized mark-to-market gains and losses from equity. Because Adjusted ROE is a ratio of earnings to equity capital, the adjustment to exclude certain unrealized mark-to-market gains and losses from equity is made to enable the calculation of an “apples-to-apples” non-GAAP ratio of earnings to common equity capital for purposes of evaluating financial performance.

▪ In addition, through adjustments to earnings, Adjusted ROE, among other things, excludes certain acquisition-related expenses – e.g., excludes amortization expense related to intangible assets acquired in acquisitions and the hypothetical income taxes associated with these adjustments.

The Committee believes that Adjusted ROE is an appropriate measure of financial performance to use within its methodology for determining realization of annual bonuses for Redwood’s executive officers because, among other reasons, a key source of earnings at Redwood is income from investments in mortgage loans and other real estate-related assets, as well as from mortgage banking activities