Company: RWT-PA
Filing Date: 2025-04-01
Form Type: DEF 14A
Source: 0000930236-25-000012
Chunk: 60

Company: REDWOOD TRUST INC
Filing Date: 2025-04-01
Form: DEF 14A
Chunk 60
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ed ROE financial performance necessary to meet stockholders’ return and dividend yield expectations, the Committee reviewed the level of Adjusted ROE performance necessary to support the payment of regular quarterly dividends declared by the Board of Directors.

The Committee believes that setting an Adjusted ROE performance target at an appropriate level above the risk-free interest rate (by adding the incremental premium to the risk-free interest rate) establishes an incentive for executives to achieve attractive financial performance for Redwood (and aligns the interests of executives and stockholders in seeking this level of financial performance), without exposing Redwood to inappropriate risk. Overall, the Committee believes that the use of a performance target that can vary from year to year provides the ability to adjust compensation incentives in a manner consistent with Redwood’s business model and the market environment in which Redwood operates. For example, leading into 2024, when the 2024 target for Adjusted ROE was established, the market environment that Redwood would operate within during 2024 was generally contemplated to be one characterized by, among other things, declining benchmark interest rates, which would, all other factors being equal, support or increase the market value of certain portfolio assets and contribute to near-term mark-to-market gains that would be reflected in 2024 Adjusted ROE. This was one of various factors taken into account by the Committee in maintaining the Adjusted ROE target for 2024 at the 11.5% level that had been in place in 2023. Had the outlook for benchmark interest rates leading into 2024 been for a “higher-for-longer” benchmark interest rate environment, or for increasing benchmark interest rates, this would have been expected, all other factors being equal, to decrease the near-term market value of certain portfolio assets and contribute to mark-to-market losses, which could have contributed to a determination to lower the Adjusted ROE target to reflect these more challenging market conditions. Similarly, the outlook for credit spreads – which measure the yield on an investment demanded by the market based on that investment’s credit profile relative to benchmark interest rates – is an aspect of the market environment that Redwood operates in that is one of the factors the Committee considers when setting financial performance targets.

In setting an Adjusted EAD ROE financial performance target for 2024, the Committee took into account the factors described above with respect to its process for setting an Adjusted ROE target and also considered factors relating to the adjustments made to calculate Adjusted EAD ROE and how those adjustments assist management and investors