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Filed by the Registrant:
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ý
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Filed by a Party other than the Registrant:
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o
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o
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Preliminary Proxy Statement
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o
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Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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o
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Definitive Additional Materials
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o
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Soliciting Material Pursuant to §240.14a-12
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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ý
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No fee required.
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o
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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o
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Fee paid previously with preliminary materials.
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o
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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1.
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To elect Richard D. Baum, Christopher J. Abate, Mariann Byerwalter, Douglas B. Hansen, Debora D. Horvath, Greg H. Kubicek, Fred J. Matera, Jeffrey T. Pero, and Georganne C. Proctor to serve as directors until the Annual Meeting of Stockholders in 2020 and until their successors are duly elected and qualify;
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2.
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To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019;
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3.
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To vote on a non-binding advisory resolution to approve named executive officer compensation;
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4.
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To vote on an amendment to our charter to increase the number of shares authorized for issuance;
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5.
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To vote on the amendment to our 2002 Employee Stock Purchase Plan to increase the number of shares authorized for issuance; and
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6.
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To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.
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YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY AUTHORIZE A PROXY TO CAST YOUR VOTES THROUGH THE INTERNET FOLLOWING THE VOTING PROCEDURES DESCRIBED IN THE NOTICE OR, IF YOU HAVE REQUESTED AND RECEIVED PAPER COPIES OF THE PROXY MATERIALS, BY TELEPHONE OR BY SIGNING, DATING AND RETURNING THE PROXY CARD SENT TO YOU.
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•
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For the election of each of the nine nominees to serve as directors until the Annual Meeting of Stockholders in 2020 and until their successors are duly elected and qualify;
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•
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For the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019;
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•
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For the approval of the non-binding advisory resolution approving the compensation of our named executive officers;
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•
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To vote on an amendment of our charter to increase the number of shares authorized for issuance;
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•
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To vote on an amendment to our 2002 Employee Stock Purchase Plan to increase the number of shares authorized for issuance; and
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•
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In the discretion of the proxy holder on any other matter that properly comes before the Annual Meeting.
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•
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Each executive officer is required to own stock with a value at least equal to (i) six times current salary for the Chief Executive Officer, (ii) three times current salary for the President, and (iii) two times current salary for the other executive officers;
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•
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Three years are allowed to initially attain the required level of ownership and three years are allowed to acquire additional incremental shares if promoted to a position with a higher requirement or when a salary increase results in a higher requirement (if not in compliance at the indicated times, then the executive officer is required to retain net after-tax shares delivered as compensation or from the Executive Deferred Compensation Plan until compliance is achieved);
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•
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All shares owned outright are counted, including those held in trust for the executive officer and his or her immediate family, as well as vested DSUs and any other vested shares held pursuant to other employee plans; and
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•
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Compliance with the guidelines is measured on a purchase/acquisition cost basis, and includes DSUs acquired through both voluntary and involuntary deferred compensation.
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Name
|
|
Position with Redwood
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Richard D. Baum
|
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Chairman of the Board
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Christopher J. Abate
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Director and Chief Executive Officer
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Mariann Byerwalter
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Director
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Douglas B. Hansen
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Director
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Debora D. Horvath
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Director
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Greg H. Kubicek
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Director
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Fred J. Matera
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Director
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Jeffrey T. Pero
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Director
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Georganne C. Proctor
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Director
|
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Board of Directors
|
||||||||
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Baum
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Abate
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Byerwalter
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Hansen
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Horvath
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Kubicek
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Matera
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Pero
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Proctor
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Leadership
|
ü
|
ü
|
ü
|
ü
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ü
|
ü
|
ü
|
ü
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ü
|
Real Estate Industry
|
ü
|
ü
|
|
ü
|
|
ü
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ü
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ü
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Accounting/Finance
|
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ü
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ü
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ü
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ü
|
ü
|
ü
|
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ü
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Insurance Industry
|
ü
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ü
|
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ü
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|
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Government
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ü
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Capital Markets
|
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ü
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ü
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|
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ü
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ü
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ü
|
Corporate / Institutional
Governance
|
ü
|
|
ü
|
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ü
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ü
|
|
ü
|
|
Banking / Investment
Management
|
|
|
ü
|
|
ü
|
|
ü
|
|
ü
|
Technology
|
|
|
|
|
ü
|
|
|
|
|
•
|
Leadership attributes and management experience
|
•
|
Experience as a chief executive officer
|
•
|
Experience in government service and financial regulation
|
•
|
Expertise and experience relating to the insurance industry
|
•
|
Expertise and experience relating to the real estate development industry and property management business
|
•
|
Expertise and experience relating to institutional governance
|
•
|
Professional and educational background
|
•
|
Leadership attributes and management experience, including experience as President, Chief Financial Officer, and Controller of Redwood
|
•
|
Skill and experience in managing balance sheet exposures and managing risks
|
•
|
Skill and experience in executing capital markets transactions
|
•
|
Finance and accounting expertise and experience
|
•
|
Professional and educational background
|
•
|
Leadership attributes and management and entrepreneurial experience
|
•
|
Experience as a chief financial officer
|
•
|
Expertise and experience in the banking and insurance industries
|
•
|
Expertise and experience relating to institutional governance
|
•
|
Professional and educational background
|
•
|
Leadership attributes and management experience, including experience as President of Redwood Trust since its founding in 1994 through 2008
|
•
|
Skill and experience in investing in real estate-related assets and managing portfolios of such investments
|
•
|
Skill and experience in managing balance sheet exposures and managing risks
|
•
|
Skill and experience in executing capital markets transactions
|
•
|
Experience in finance and accounting matters
|
•
|
Professional and educational background
|
•
|
Leadership attributes and management experience
|
•
|
Experience as a chief information officer
|
•
|
Expertise and experience relating to information technology and technology risk management
|
•
|
Expertise and experience relating to institutional governance
|
•
|
Professional and educational background
|
•
|
Leadership attributes
|
•
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Management and entrepreneurial experience
|
•
|
Expertise and experience in the real estate development industry
|
•
|
Experience and expertise in the property management business
|
•
|
Professional and educational background
|
•
|
Leadership attributes
|
•
|
Management and entrepreneurial experience
|
•
|
Expertise as a chief investment officer
|
•
|
Expertise and experience relating to residential and commercial mortgage finance, originations and operations
|
•
|
Expertise and experience in structuring and negotiating debt and equity financings
|
•
|
Professional and educational background
|
•
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Expertise and experience relating to corporate governance
|
•
|
Management experience
|
•
|
Expertise and experience relating to real estate investment trusts
|
•
|
Expertise and experience in structuring and negotiating debt and equity financings
|
•
|
Expertise and experience relating to the U.S. securities laws
|
•
|
Professional and educational background
|
•
|
Management experience
|
•
|
Experience as a chief financial officer
|
•
|
Expertise and experience in the banking and investment management industries
|
•
|
Professional and educational background
|
Audit
|
|
Compensation
|
|
Governance and Nominating
|
Greg H. Kubicek
|
|
Georganne C. Proctor
|
|
Jeffrey T. Pero
|
Mariann Byerwalter
|
|
Richard D. Baum
|
|
Richard D. Baum
|
Debora D. Horvath
|
|
Debora D. Horvath
|
|
Mariann Byerwalter
|
Karen R. Pallotta
|
|
Karen R. Pallotta
|
|
Greg H. Kubicek
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Georganne C. Proctor
|
|
Jeffrey T. Pero
|
|
|
|
|
Annual Period Commencing May 1,
|
||||||||||
|
|
2017
|
|
2018
|
|
2019
|
||||||
Annual Retainer *
|
|
$
|
80,000
|
|
|
$
|
85,000
|
|
|
$
|
85,000
|
|
Committee Meeting Fee (in person attendance)
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
Committee Meeting Fee (telephonic attendance)
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
|
As of
|
|
% Change from
|
|||
|
May 2019
|
|
Prior Year
|
|||
Annual Cash Retainer
|
$
|
85,000
|
|
|
—
|
%
|
Annual Equity Award
|
$
|
110,000
|
|
|
10
|
%
|
Name
|
|
Fees Earned or Paid in Cash
($)
(1)
|
|
Stock Awards
($)
(2)(3)
|
|
All Other
Compensation
($)
(4)
|
|
Total
($)
|
||||||
Richard D. Baum
|
|
$
|
167,306
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
267,292
|
|
Mariann Byerwalter
|
|
$
|
97,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
197,037
|
|
Douglas B. Hansen
|
|
$
|
91,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
191,037
|
|
Debora D. Horvath
|
|
$
|
103,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
203,037
|
|
Greg H. Kubicek
|
|
$
|
119,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
219,037
|
|
Karen R. Pallotta
|
|
$
|
102,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
202,037
|
|
Jeffrey T. Pero
|
|
$
|
122,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
222,037
|
|
Georganne C. Proctor
|
|
$
|
122,051
|
|
|
$
|
99,986
|
|
|
—
|
|
$
|
222,037
|
|
(1)
|
Fees earned are based on the non-employee director compensation policy in place for 2018: (i) annual cash retainer of $85,000 for 2018; (ii) additional annual retainer for the Chairman of the Board of $50,000 from January 1, 2018 to May 21, 2018 and $75,000 from May 22, 2018 onwards; (iii) additional annual retainer for Audit Committee Chair, Compensation Committee Chair, and Governance and Nominating Committee Chair of $20,000; (iv)
|
(2)
|
Stock awards consisted of an annual grant of vested deferred stock units. The value of deferred stock units awarded was determined in accordance with FASB Accounting Standards Codification Topic 718. The value of dividend equivalent rights associated with deferred stock units was taken into account in establishing the value of these deferred stock units and previously granted deferred stock units. Therefore, dividend equivalent rights payments made during 2018 to non-employee directors are not considered compensation or other amounts reported in the table above. Information regarding the assumptions used to value our non-employee directors' deferred stock units is provided in Note 17 to our consolidated financial statements included in our Annual Report on Form 10‑K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on March 1, 2019.
|
(3)
|
As of December 31, 2018, the aggregate number of stock awards outstanding for each non-employee director was as follows: Richard D. Baum had 18,104 vested DSUs; Douglas B. Hansen had 18,104 vested DSUs; Mariann Byerwalter had 18,104 vested DSUs; Debora D. Horvath had 19,104 vested DSUs; Greg H. Kubicek had 165,588 vested DSUs; Karen R. Pallotta had 18,104 vested DSUs; Jeffrey T. Pero had 25,944 vested DSUs; and Georganne C. Proctor had 90,931 vested DSUs.
|
(4)
|
Due to a calendar change, a year-end off-site meeting of Redwood's Board of Directors which would have ordinarily occurred in December 2018 was rescheduled to January 2019. For that meeting, certain non-employee directors traveled with a guest at a cost per guest of less than $2,000 to Redwood, and at an aggregate cost to Redwood for all guests of less than $6,000.
|
Name
|
|
Stock Units
Distributed
(#)
|
|
Aggregate Value
of Stock Units
Distributed
($)
(1)
|
|||
Richard D. Baum
(2)
|
|
5,124
|
|
|
$
|
84,392
|
|
Douglas B. Hansen
(2)
|
|
5,124
|
|
|
$
|
84,392
|
|
Mariann Byerwalter
(2)
|
|
5,124
|
|
|
$
|
84,392
|
|
Karen Pallotta
(2) (3)
|
|
6,901
|
|
|
$
|
111,651
|
|
Jeffrey T. Pero
(2)
|
|
5,124
|
|
|
$
|
84,392
|
|
(1)
|
The aggregate value of stock units distributed is calculated by multiplying the number of stock units distributed by the fair market value of Redwood common stock on the date of distribution.
|
(2)
|
Deferred stock units distributed in 2018 originally were awarded in 2015.
|
(3)
|
In addition to the awards granted in 2015, Ms. Pallotta also had deferred stock units distributed in 2018 which were granted in 2014.
|
Name
|
|
Position with Redwood as of December 31, 2018
|
|
Age
|
Christopher J. Abate
|
|
Chief Executive Officer
|
|
39
|
Dashiell I. Robinson
|
|
President
|
|
39
|
Andrew P. Stone
|
|
Executive Vice President, General Counsel & Secretary
|
|
48
|
Collin L. Cochrane
|
|
Chief Financial Officer
|
|
42
|
Garnet W. Kanouse
|
|
Managing Director - Head of Residential
|
|
46
|
Shoshone (Bo) Stern
|
|
Chief Investment Officer
|
|
41
|
Sasha G. Macomber
|
|
Chief Human Resource Officer
|
|
50
|
Executive Officers
|
|
Number of Shares
of Common Stock
Beneficially
Owned
(1)
|
|
Percent of
Class
(2)
|
Christopher J. Abate
(3)
|
|
185,140
|
|
*
|
Marty S. Hughes
(4)
|
|
878,264
|
|
*
|
Dashiell I. Robinson
(5)
|
|
44,426
|
|
*
|
Andrew P. Stone
(6)
|
|
115,448
|
|
*
|
Collin L. Cochrane
(7)
|
|
60,832
|
|
*
|
Garnet W. Kanouse
(8)
|
|
94,583
|
|
*
|
Shoshone (Bo) Stern
(9)
|
|
81,663
|
|
*
|
Sasha G. Macomber
(10)
|
|
—
|
|
*
|
Non-Employee Directors
|
|
|
|
|
Richard D. Baum
(11)
|
|
53,609
|
|
*
|
Douglas B. Hansen
(12)
|
|
356,674
|
|
*
|
Mariann Byerwalter
(13)
|
|
23,763
|
|
*
|
Debora D. Horvath
(14)
|
|
25,139
|
|
*
|
Greg H. Kubicek
(15)
|
|
273,253
|
|
*
|
Fred J. Matera
(16)
|
|
14,132
|
|
*
|
Karen R. Pallotta
(17)
|
|
28,032
|
|
*
|
Jeffrey T. Pero
(18)
|
|
83,847
|
|
*
|
Georganne C. Proctor
(19)
|
|
100,776
|
|
*
|
All directors and executive officers as a group (17 persons)
(20)
|
|
2,419,581
|
|
2.50%
|
|
(1)
|
Represents shares of common stock outstanding and common stock underlying performance stock units and deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(2)
|
Based on 96,659,250 shares of our common stock outstanding as March 1, 2019.
|
(3)
|
Includes 96,183 shares of common stock and 88,957 deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(4)
|
Includes 681,579 shares of common stock, 5,000 shares of common stock held in record by Mr. Hughes' spouse and 191,685 deferred stock units that have vested, in each case as of May 22, 2018, the date Mr. Hughes retired from the CEO position.
|
(5)
|
Includes 28,996 shares of common stock and 15,430 deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(6)
|
Includes 70,062 shares of common stock and 45,386 deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(7)
|
Includes 17,308 shares of common stock, and 43,524 deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(8)
|
Includes 33,923 shares of common stock, and 60,660 deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(9)
|
Includes 30,689 shares of common stock, and 50,974 deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(10)
|
Does not have any shares of common stock, or deferred stock units that have vested or will vest within 60 days of March 1, 2019.
|
(11)
|
Includes 35,505 shares of common stock, and 18,104 deferred stock units.
|
(12)
|
Includes 338,570 shares of common stock, and 18,104 deferred stock units.
|
(13)
|
Includes 5,659 shares of common stock, and 18,104 deferred stock units.
|
(14)
|
Includes 6,035 shares of common stock, and 19,104 deferred stock units.
|
(15)
|
Includes 105,753 shares of common stock held in direct ownership, living trusts and through an unaffiliated pension plan, 1,912 shares held of record by Mr. Kubicek’s spouse, and 165,588 vested deferred stock units.
|
(16)
|
Includes 12,792 shares of common stock, and 1,340 deferred stock units
|
(17)
|
Includes 9,928 shares of common stock, and 18,104 vested deferred stock units.
|
(18)
|
Includes 57,903 shares of common stock and 25,944 vested deferred stock units.
|
(19)
|
Includes 9,845 shares held in the Proctor Trust and 90,931 vested deferred stock units.
|
(20)
|
Includes 1,547,642 shares of common stock, and 871,938 vested deferred stock units.
|
Name of Beneficial Owner
|
|
Number of Shares
of Common Stock
Beneficially Owned
|
|
Percent of
Class
(1)
|
|
BlackRock, Inc.
(2)
|
|
14,606,132
|
|
15.1%
|
|
Wellington Management Group LLP
(3)
|
|
9,490,630
|
|
9.8
|
%
|
The Vanguard Group
(4)
|
|
8,048,089
|
|
8.3
|
%
|
Capital World Investors
(5)
|
|
5,883,159
|
|
6.1
|
%
|
FMR LLC
(6)
|
|
5,362,664
|
|
5.5
|
%
|
|
(1)
|
Based on 96,659,250 shares of our common stock outstanding as March 1, 2019.
|
(2)
|
Address: 55 East 52nd Street, New York, New York 10055. The information in the above table and this footnote concerning the shares of common stock beneficially owned by BlackRock, Inc. (BlackRock) is based on the amended Schedule 13G filed by BlackRock with the SEC on January 31, 2019, which indicates that BlackRock and certain other subsidiary entities make aggregate reports on Schedule 13G and that such entities, in the aggregate, have sole dispositive power with respect to 14,606,132 shares and sole voting power with respect to 14,194,266 shares.
|
(3)
|
Address: 280 Congress Street, Boston, Massachusetts 02210. The information in the above table and this footnote concerning the shares of common stock beneficially owned by Wellington Management Group LLP (Wellington) is based on the amended Schedule 13G filed by Wellington with the SEC on February 12, 2019, which indicates that Wellington and certain other subsidiary entities make aggregate reports on Schedule 13G and that such entities, in the aggregate, have shared dispositive power with respect to 9,490,630 shares and shared voting power with respect to 5,275,864 shares.
|
(4)
|
Address: 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The information in the above table and this footnote concerning the shares of common stock beneficially owned by The Vanguard Group (Vanguard) is based on the amended Schedule 13G filed by Vanguard with the SEC on February 11, 2019, which indicates that Vanguard and certain other subsidiary entities make aggregate reports on Schedule 13G and that such entities, in the aggregate, have sole dispositive power with respect to 7,964,236 shares, shared dispositive power with respect to 83,853 shares, sole voting power with respect to 88,185 shares, and shared voting power with respect to 11,336 shares.
|
(5)
|
Address: 333 South Hope Street, Los Angeles, California 90071. The information in the above table and this footnote concerning the shares of common stock beneficially owned by Capital World Investors (Capital World), a division of Capital Research and Management Company (CRMC), is based on the amended Schedule 13G filed by Capital World with the SEC on February 14, 2019, which indicates that Capital World has sole voting and dispositive power with respect to 5,883,159 shares.
|
(6)
|
Address: 245 Summer Street, Boston, Massachusetts 02210. The information in the above table and this footnote concerning the shares of common stock beneficially owned by FMR LLC (FMR) is based on the amended Schedule 13G filed by FMR with the SEC on February 13, 2019, which indicates that FMR and certain other subsidiary entities make aggregate reports on Schedule 13G and that the such entities, in the aggregate, have sole dispositive power with respect to 5,362,664 shares and sole voting power with respect to 112,111 shares.
|
Executive Summary of Compensation Discussion and Analysis
|
|
|
Compensation Discussion and Analysis (CD&A)
|
36
|
|
Section I - Introduction
|
36
|
|
Named Executive Officers
|
36
|
|
Compensation Committee
|
37
|
|
Redwood's Business Model and Internal Management Structure
|
37
|
|
Overall Compensation Philosophy and Objectives
|
38
|
|
Outreach to Stockholders
|
38
|
|
"Say-on-Pay" Support from Stockholders
|
39
|
|
Section II - Executive Compensation in 2018
|
40
|
|
Redwood's 2018 and Long-Term Performance
|
40
|
|
Elements of Compensation in 2018
|
40
|
|
Process for Compensation Determinations for 2018
|
42
|
|
Compensation Benchmarking for 2018
|
42
|
|
2018 Base Salaries
|
44
|
|
2018 Performance-Based Annual Bonus Compensation
|
45
|
|
Performance-Based Annual Bonuses Earned for 2018
|
50
|
|
2018 Long-Term Equity-Based Incentive Awards
|
52
|
|
Vesting and Mandatory Holding Periods for 2018 Long-Term Equity-Based Incentive Awards
|
56
|
|
Section III - Other Compensation, Plans and Benefits
|
57
|
|
Deferred Compensation
|
57
|
|
Employee Stock Purchase Plan
|
57
|
|
401(k) Plan and Other Matching Contributions
|
58
|
|
Other Compensation and Benefits
|
58
|
|
Severance and Change of Control Arrangements
|
58
|
|
Section IV - Compensation-Related Policies and Tax Considerations
|
60
|
|
Mandatory Executive Stock Ownership Requirements
|
60
|
|
Prohibition on Use of Margin, Pledging, and Hedging in Respect of Redwood Shares
|
60
|
|
Clawback Policy with Respect to Bonus and Incentive Compensation
|
61
|
|
Tax Considerations
|
61
|
|
Accounting Standards
|
61
|
|
Section V - Conclusion
|
62
|
|
Certain Compensation Determinations Relating to 2019
|
62
|
|
Compensation Committee Report
|
63
|
|
Executive Compensation Tables
|
64
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|
Compensation Risks
|
78
|
|
CEO Pay Ratio
|
79
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|
|
|
Compensation Discussion & Analysis - Executive Summary
|
Ø
|
Redwood has a performance-based executive compensation program where pay delivery appropriately adjusts up or down to reflect short- and long-term performance results
|
◦
|
2018 annual bonuses paid to executives modestly exceeded target levels, reflecting annual financial performance that modestly exceeded the goals established by the Compensation Committee (the Committee) at the beginning of 2018
|
◦
|
Realized value from prior years’ equity awards reflected longer-term total stockholder return (TSR) results, with strong three-year TSR driving above-target vesting of performance stock units (PSUs) granted to executives in December 2015
|
Ø
|
Redwood’s planned leadership transition (announced in December 2017) was successfully completed in May 2018, with Redwood’s then-President, Mr. Abate, being promoted to CEO following the scheduled retirement of the prior CEO, Mr. Hughes
|
◦
|
Mr. Abate’s compensation was adjusted in connection with his promotion to reflect Redwood’s pay philosophy, competitive compensation market practices, and the Committee’s consistent adherence to its pay-for-performance philosophy
|
Ø
|
The philosophy and key elements of Redwood’s executive compensation program have remained largely consistent in recent years, with an update in December 2018 to the structure of performance stock units (PSUs)
|
◦
|
Updated PSU structure reflects both stockholder feedback and the Committee’s view that executives should have strong “line-of-sight” between their long-term strategic and operational decisions and the key performance metric that drives PSU vesting
|
◦
|
Under the updated PSU structure, vesting is driven by both a book value TSR metric, which measures three-year book value growth and cash dividends paid, and a relative TSR metric, which adjusts vesting based on three-year TSR relative to a large group of publicly-traded mortgage REITs
|
◦
|
The Committee continues to maintain a program that balances performance-based annual bonuses with long-term equity-based compensation in the form of PSUs and deferred stock units (DSUs), as well as a limited amount of fixed compensation delivered as annual salary and standard benefits
|
Ø
|
Shareholders have provided consistently strong “Say-on-Pay” voting support and given meaningful feedback to the Committee Chair during Redwood’s ongoing outreach to stockholders regarding executive compensation
|
◦
|
In particular, feedback received during the Committee’s 2018 outreach to stockholders was an important factor prompting the update to the PSU structure, including the addition of a three-year relative TSR metric
|
◦
|
A further discussion of outreach to, engagement with, and feedback from our stockholders is set forth within the main body of CD&A under the heading "Outreach to Stockholders”
|
Contents of this Executive Summary
|
|
Ø
|
Overview of Redwood's performance-based compensation philosophy and key elements of compensation for the CEO and other named executives at Redwood
|
Ø
|
Review of Redwood’s business model and structure and how they impact the Committee’s determinations regarding the executive compensation program
|
Ø
|
Review of Redwood’s annual and longer-term performance, including comparisons to peers
|
Ø
|
Review of how annual bonuses and vesting of long-term equity awards track Redwood’s performance, using the CEO as an example
|
Redwood’s Performance-Based Compensation Philosophy
|
Ø
|
Redwood’s performance-based compensation program is administered by the independent Compensation Committee of the Board of Directors and is designed to:
|
◦
|
Incentivize attainment of both short- and long-term business and stockholder return objectives, including:
|
•
|
Achieving stable and attractive returns-on-equity (ROEs) that support payment of attractive levels of sustainable dividends and build book value
|
•
|
Meeting annual strategic, business, operational, governance, and risk-management goals
|
◦
|
Align the interests of executives with those of long-term stockholders in achieving strong stockholder returns, including relative to other publicly-traded mortgage REITs
|
◦
|
Enable Redwood to hire and retain executives in a competitive marketplace
|
•
|
Market-based compensation benchmarking is used to evaluate compensation relative to peer companies and informs the Committee’s determinations
|
◦
|
Avoid incentivizing inappropriate risk taking
|
Executive Compensation
|
||||||
|
What Redwood
Does
|
|
What Redwood
Does Not
Do
|
|
||
|
ü
|
Directly links annual bonus to performance
|
|
û
|
No guaranteed bonus arrangements
|
|
|
ü
|
Provides approximately half of named executive officers’ target compensation in long-term equity-based incentives
|
|
û
|
No significant amount of fixed compensation - base salary and standard benefits are the only fixed elements of compensation
|
|
|
ü
|
Imposes three- or four-year vesting/holding periods on annual long-term equity grants
|
|
û
|
No “single-trigger” change-in-control severance payments
|
|
|
ü
|
Maintains robust stock ownership requirements for executives
|
|
û
|
No excise tax gross-ups for any change-in-control related payments
|
|
|
ü
|
Maintains a bonus and incentive payments “clawback” policy if fraud or misconduct results in a financial restatement
|
|
û
|
No margin, pledging, or hedging transactions permitted with respect to Redwood stock
|
|
Redwood’s Business Model and Internal Management Structure
|
Ø
|
Internally-Managed Mortgage REIT
. Redwood is a specialty finance company structured as an internally-managed REIT for tax purposes. Redwood is focused on making credit-sensitive investments in single-family residential and multifamily mortgage loans and related assets and engaging in mortgage banking activities - e.g., the acquisition and sale or securitization of residential mortgage loans
|
Ø
|
REIT Dividend Requirement
. Unlike traditional corporations, under the Internal Revenue Code, REITs are required to distribute at least 90% of the income earned under their REIT status as dividends - as a result:
|
◦
|
Redwood is limited in its ability to grow book value and its equity capital base through the reinvestment of retained earnings
|
◦
|
A key element of the return to stockholders from investing in Redwood is the level of dividends paid on shares of common stock
|
Ø
|
Business Model and Structure are Important Factors in the Compensation Program
. Factoring in Redwood’s business model and structure, the Committee has made key determinations regarding executive compensation, including:
|
◦
|
Performance Metrics
. ROE, book value TSR, and other profitability-based performance measures have been considered highly relevant by the Committee in determining annual bonuses and measuring performance because:
|
•
|
these measures should correlate with Redwood’s ability to increase book value and pay attractive levels of sustainable dividends;
|
•
|
management has “line-of-sight” into how its strategic and operational decisions impact these measures; and
|
•
|
over the long-term, strong results under these measures should correlate with strong TSR results
|
◦
|
Leverage and Liquidity Risk
. Redwood’s relatively conservative use of leverage to finance its business and investments, as well as its active approach to managing liquidity risk, are factored in when the Committee sets financial performance targets, as it seeks to incentivize attractive risk-adjusted returns
|
Key Elements of the 2018 Executive Compensation Program
|
Ø
|
Base Salary and Standard Benefits.
Base salary and standard benefits together represent less than 20% of the CEO’s target compensation, with the remainder in performance-based and/or equity-based compensation
|
Ø
|
Target Annual Bonus.
Annual bonus is structured as follows:
|
◦
|
75% earned based on an ROE-based performance metric
|
•
|
Performance target for 2018 represented a level of earnings in excess of the regular annual dividend set by the Board
|
◦
|
25% earned based on individual contribution to the achievement of strategic, business, operational, governance and risk-management goals
|
•
|
Committee determines above- or below-target funding for this portion of annual bonus based on goal achievement measured against performance objectives established in the first quarter of the year
|
Ø
|
Long-Term Equity Awards: PSUs.
As noted above,
the structure of PSUs was updated in 2018 to make vesting contingent on two distinct performance metrics: book value TSR and relative TSR, with each measured over a three-year period
|
◦
|
Awarded at year-end, these equity-based awards represent 50% of total annual long-term equity incentive grant value
|
◦
|
Book value TSR is used as a financial performance metric and measures (over the three-year period) the change in GAAP book value per share, plus cash dividends paid, each a key factor in driving returns to stockholders
|
◦
|
Relative TSR is used as an additional performance metric and measures Redwood’s TSR over the three-year period compared to the component companies of the FTSE Nareit Mortgage REITs Index, a broad-based index of mortgage REITs
1
|
Ø
|
Long-Term Equity Awards: Deferred Stock Units (DSUs).
The structure of DSUs provides for full vesting and delivery only after a four-year period
|
◦
|
Awarded at year-end, these equity-based awards represent 50% of total annual long-term equity incentive grant value
|
◦
|
Directly aligns interests of executives and stockholders in enhancing long-term TSR and supports retention
|
Elements of CEO’s Target Annual Compensation - 2018
1
|
||
|
||
|
1/
Annualized 2018 target compensation for Mr. Abate in CEO role. Excludes promotion-related grant of DSUs and PSUs in May 2018 with an aggregate grant date fair value of $500,000
|
|
Ø
|
Performance Based Compensation
|
◦
|
Two key elements of compensation are earned directly based on financial/performance metrics
|
•
|
Annual bonus funding is primarily determined based on the achievement of an Adjusted ROE-performance target, as well as individual goal attainment
|
•
|
PSUs vest based on two performance metrics: three-year book value TSR and three-year relative TSR, measured against the component companies of the FTSE Nareit Mortgage REIT index
|
Ø
|
Long-Term Awards / Equity Value at Risk
|
◦
|
Long-term equity awards comprise the largest element of target annual compensation and are subject to three- and four-year vesting/holding periods, during which value is at risk and value realization is conditioned on the delivery of stockholder value and achievement of pre-defined performance goals
|
Ø
|
Limited Fixed Compensation
|
◦
|
Base salary and standard benefits of the type generally provided to full-time employees are the only fixed elements of compensation
|
Redwood's 2018 Performance
|
◦
|
This group of 14 publicly-traded mortgage REITs (“mREIT Peers”) is used in the performance comparisons shown below and on subsequent pages of this Executive Summary
1
|
◦
|
These 14 mREIT Peers are consistent with the mortgage REIT peers presented in Redwood’s prior-year CD&A, with adjustments limited to the results of merger and acquisition activity
|
Ø
|
Solid 2018 Financial Performance Relative to mREIT Peers
|
|||||||
|
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¡
|
2018 earnings per share of $1.34
|
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(fully diluted, as reported under GAAP)
|
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¡
|
2018 ROE of 9.34%
|
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||
|
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(based on GAAP financial results)
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¡
|
1-Year TSR (2018) of 9.4%
|
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|
l
|
TSR represents change in the market price for Redwood common stock, taking into account reinvestment of cash dividends paid
|
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¡
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1-Year book value TSR (2018) of 7.8%
|
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|
l
|
As noted above, book value TSR represents change in GAAP book value, plus cash dividends paid
|
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Redwood's 2018 Performance
(cont.)
|
Ø
|
The graphs below illustrate Redwood’s 2018 performance and use of financial leverage relative to the mREIT Peers, as grouped by their business/investment focus
|
◦
|
Many of these mortgage REITs have business models that employ higher leverage and liquidity risk than Redwood
|
◦
|
Redwood delivered strong book value TSR and ROE in 2018, particularly when viewed in the context of its focus on lower leverage and liquidity risk
|
Ø
|
2018 Risk-Adjusted Returns Relative to mREIT Peers
|
|||||||
|
|
|
|
|
|
|
|
|
|
¡
|
On a risk-adjusted basis, Redwood's 2018 ROE compares very favorably to mREIT peers that use higher levels of financial leverage
1
than Redwood
|
|
|
||||
|
|
|
||||||
|
|
|
||||||
|
|
l
|
Agency Peers
2
are a subset of the mREIT Peers focused on investing in Agency MBS
3
and related assets
|
|
||||
|
|
|
|
|||||
|
|
l
|
Hybrid/Credit Peers
2
are a subset of the mREIT Peers focused on investing in residential mortgages with credit risk exposure, as well as Agency MBS and other mortgage-related assets
|
|
||||
|
|
|
|
|
|
|
|
|
|
¡
|
Similarly, on a risk-adjusted basis, Redwood’s 2018 book value TSR compares very favorably to mREIT peers that use higher levels of financial leverage than Redwood
|
|
|
||||
|
|
|
||||||
|
|
|
||||||
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|
||||||
|
|
l
|
Agency Peers together with Hybrid/Credit Peers comprise all mREIT Peers
|
|
||||
|
|
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|
|||||
|
|
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|
||||
|
|
|
|
|
1
|
Financial leverage for purposes of these comparisons is measured by the ratio of recourse indebtedness (e.g. excluding non-recourse asset- backed debt) to equity.
|
CEO’s Annual Bonus Tracks With Annual ROE-Based Performance Metric
|
Ø
|
Amounts earned under the annual bonus plan are highly correlated with Redwood’s ROE and non-GAAP Adjusted ROE
3
, with solid 2018 Adjusted ROE resulting in the CEO earning a bonus for 2018 that was approximately 12% (or $138,000) above target level
|
◦
|
Consistent Pay-for-Performance Design of Annual Bonus Program
. As illustrated in the graph below, annual bonuses paid to Redwood’s CEO have, over time, correlated with Adjusted ROE performance, as well as with ROE determined based on GAAP financial results
|
•
|
A practice of the Committee, illustrated in the 2017 data below, is to deliver a portion of the CEO’s annual bonus in DSUs, in lieu of cash, when a significantly above-target annual bonus is earned based on annual financial performance
|
CEO’s Performance-Based Annual Bonuses vs. ROE Performance Measures
|
|
Ø
|
Non-GAAP Adjusted ROE Performance Metric
. Adjusted ROE is the non-GAAP financial performance metric that is the primary determinant of annual bonuses
|
◦
|
Adjusted ROE reflects GAAP earnings divided by average equity capital, adjusted to exclude certain unrealized mark-to-market gains and losses from equity
|
◦
|
The adjustment to exclude these unrealized mark-to-market gains and losses is made to enable the calculation of an “apples-to-apples” non-GAAP ratio of earnings to equity capital for purposes of evaluating financial performance - i.e., unrealized gains and losses are disregarded in both the numerator (earnings) and denominator (equity capital)
|
Value Realization From Long-Term Performance Stock Units
|
Tracks Long-Term Performance
|
Ø
|
Vesting of PSUs at year-end 2018 correlated with returns to stockholders over a three-year performance measurement period
|
◦
|
PSU vesting for Redwood’s CEO at year-end 2018 was based on absolute TSR performance over the three-year period following the original grant in December 2015
|
•
|
Redwood’s TSR for the three calendar-year period ending December 31, 2018 was 42.9%
|
•
|
PSUs granted in December 2015 vested at 129% of target
|
◦
|
As illustrated in the graphs below, returns to Redwood stockholders over the 2015-2018 three-year period were strong, as measured by not only TSR, but also as measured by ROE and book value TSR, on both an absolute basis and relative to mREIT Peers
|
◦
|
In contrast to the above-target vesting of PSUs at year-end 2018, in accordance with Redwood’s pay-for-performance philosophy, below-threshold three-year TSRs at the end of 2017 and 2016 resulted in the full forfeiture of PSUs granted to executives in December 2014 and 2013
|
End of Executive Summary
|
Section I - Introduction
|
||||
|
|
|
||
|
Ø
|
Named Executive Officers
|
||
|
|
|
||
|
Ø
|
Compensation Committee
|
||
|
|
|
||
|
Ø
|
Redwood's Business Model and Internal Management Structure
|
||
|
|
|
||
|
Ø
|
Overall Compensation Philosophy and Objectives
|
||
|
|
|
||
|
Ø
|
Outreach to Stockholders
|
||
|
|
|
||
|
Ø
|
"Say-on-Pay" Support from Stockholders
|
•
|
Christopher J. Abate, Chief Executive Officer
|
◦
|
Mr. Abate was promoted from President to Chief Executive Officer on May 22, 2018.
|
•
|
Dashiell I. Robinson, President
|
◦
|
Mr. Robinson was promoted from Executive Vice President to President on May 22, 2018.
|
•
|
Andrew P. Stone, Executive Vice President, General Counsel, and Secretary
|
•
|
Collin L. Cochrane, Chief Financial Officer
|
•
|
Garnet W. Kanouse, Managing Director - Head of Residential
|
•
|
Marty S. Hughes, retired Chief Executive Officer
|
◦
|
Mr. Hughes retired from the Chief Executive Officer position on May 22, 2018.
|
•
|
The Committee’s process for reviewing and determining the elements of the compensation of the Chief Executive Officer (CEO) and of the other NEOs.
|
•
|
The rationale for the different elements of the NEOs’ compensation and Redwood’s compensation philosophy, objectives, and methodology for competitive benchmarking.
|
•
|
The metrics and goals used for performance-based compensation and factors taken into account in the Committee’s determination of whether those measures and goals were satisfied.
|
•
|
The severance and change of control payments that NEOs may become entitled to receive under certain circumstances.
|
•
|
The role of the Committee’s independent compensation consultant.
|
•
|
Return-on-equity, book value total stockholder return, and other profitability-based measures of performance have been considered highly relevant in determining performance-based annual bonuses and measuring performance because: (i) these measures should correlate with Redwood’s ability to increase book value and pay an attractive level of sustainable dividends; (ii) management has “line-of-sight” into how its strategic and operational decisions impact these measures; and (iii) over the long-term, strong results under these measures should correlate with strong total stockholder returns.
|
•
|
Redwood’s relatively conservative use of leverage to finance its business and investments, as well as its active approach to managing liquidity risk, are factored in when the Committee sets financial performance targets, as the Committee seeks to incentivize attractive risk-adjusted returns.
|
•
|
Attract and retain highly qualified and productive executives
|
•
|
Motivate executives to enhance the overall performance and profitability of Redwood, both on a short-term and a long-term basis, with an emphasis on the long-term
|
•
|
Foster long-term alignment of the interests of executives and stockholders through ownership of Redwood common stock by executives and by rewarding stockholder value creation
|
•
|
Ensure that compensation opportunities are competitive
|
•
|
Avoid incentivizing inappropriate risk taking
|
•
|
Committee Chair Active in Outreach Efforts
. The Chair of the Committee, together with members of Redwood’s management, has engaged in these stockholder outreach efforts, which have taken the form of telephone conferences with both institutional and individual stockholders, as well as in-person outreach meetings with institutional stockholders
|
•
|
2018 Outreach Efforts
. In advance of Redwood’s 2018 annual stockholders’ meeting, outreach efforts were made with respect to Redwood’s top institutional stockholders (more than 20), as well as several other institutional and individual stockholders, which in the aggregate then-held approximately 70% of then-outstanding shares of Redwood’s common stock
|
◦
|
2018 Engagement Response
. These outreach efforts resulted in an engagement response from approximately 60% of the ownership of Redwood’s then-outstanding common stock, including direct teleconferences between the Chair of the Committee and six of Redwood’s then top 25 stockholders. Certain stockholders responded to these outreach efforts by indicating that the prior year’s engagement with Redwood continued to provide the information needed to support their 2018 proxy voting process.
|
◦
|
2018 Feedback From Stockholders
. Feedback provided to the Chair of the Committee from engagement in 2018 was generally positive about Redwood’s executive compensation program and the Say-on-Pay vote at the 2018 annual meeting of stockholders. Examples of the topics discussed during stockholder engagement included:
|
–
|
Stockholder perspectives on peer group companies, as well as financial and performance metrics
|
–
|
Discussion of the philosophy and structure of Redwood’s executive compensation program and how Redwood’s performance in 2017 and prior years was correlated with realized compensation
|
–
|
Feedback on the structure of performance-based compensation elements, including the use of both a book value-based return metric and a relative stockholder return metric in the structure of performance stock unit (PSU) equity awards
|
◦
|
Note
: Based on a number of factors and considerations, including shareholder feedback, the Committee updated the structure of PSU equity awards in 2018 to provide that performance-based vesting of PSUs will be driven by both a book value TSR metric, which measures three-year book value growth and cash dividends paid, and a relative TSR metric, which adjusts vesting based on three-year TSR relative to a large group of publicly-traded mortgage REITs
|
–
|
Review by stockholders of the policies governing their proxy voting decisions, how those policies apply to the voting of their shares of Redwood stock, and implications of those policies for Redwood's executive compensation program
|
•
|
Consistent Outreach Over Multiple Years
. Outreach to stockholders regarding executive compensation has been a consistent practice at Redwood. In addition to regularly engaging with institutional and individual stockholders following the publication of Redwood’s annual proxy statement in 2018, the Chair of the Committee traveled in past years to meet in person with institutional stockholders who then held approximately 25% of Redwood’s outstanding common stock. Additional in-person meetings and teleconferences between the Chair of the Committee and institutional stockholders are contemplated in the future.
|
Section II - Executive Compensation in 2018
|
||||
|
|
|
||
|
Ø
|
Redwood's 2018 and Longer-Term Performance
|
||
|
|
|
||
|
Ø
|
Elements of Compensation in 2018
|
||
|
|
|
||
|
Ø
|
Process for Compensation Determinations for 2018
|
||
|
|
|
||
|
Ø
|
Compensation Benchmarking for 2018
|
||
|
|
|
||
|
Ø
|
2018 Base Salaries
|
||
|
|
|
|
|
|
Ø
|
2018 Performance-Based Annual Bonus Compensation
|
||
|
|
|
|
|
|
Ø
|
Performance-Based Annual Bonuses Earned for 2018
|
||
|
|
|
|
|
|
Ø
|
2018 Long-Term Equity-Based Incentive Awards
|
||
|
|
|
|
|
|
Ø
|
Vesting and Mandatory Holding Periods for 2018 Long-Term Equity-Based Incentive Awards
|
•
|
Book value total stockholder return of 7.8%, which represents the change in GAAP book value, plus cash dividends paid
|
•
|
Three-year TSR of 42.9%
|
•
|
Three-year book value TSR of 31.7%
|
•
|
Three-year average annual ROE of 11.0%
|
•
|
Competitive pressure on NEO compensation levels from higher-paying related market sectors should be addressed with long-term equity-based awards. Annual target cash compensation amounts are generally targeted to be in a median range of the compensation benchmarking peer group, while long-term equity-based awards may be targeted above the median if justified by performance, experience, or the scope of the individual's role.
|
•
|
The terms and vesting conditions of long-term equity-based awards should result in realized compensation for NEOs that correlates with long-term stockholder value creation (through dividend distributions and share-price growth) over a minimum of three years. The value of long-term equity-based awards should also take into account Redwood’s overall performance and each NEO’s individual performance.
|
|
•
|
Each NEO's self-assessment of his or her individual performance over the year;
|
•
|
Mr. Abate's and Mr. Robinson's recommendations with respect to the compensation of the other NEOs; and
|
•
|
FW Cook's directional recommendations regarding the elements of compensation for each of the CEO and President, and opinion on the recommendations developed by the CEO and President for the other NEOs. These recommendations and opinions were based on peer comparisons, other supplemental benchmarking data, and Redwood’s compensation philosophy.
|
Step 1:
|
Begin with a broad database consisting of publicly traded, U.S.-based companies that are internally managed (externally-managed companies generally have not disclosed comprehensive compensation data and are therefore excluded)
|
Step 2:
|
Identify REITs and other companies most similar to Redwood (i.e., direct peers), including:
|
|
|
•
|
Mortgage REITs, which are considered “direct peers” along with real estate development and financial services companies with a focus on mortgage servicing or mortgage-related assets
|
|
•
|
Exclude all companies with market capitalization values outside of a 0.25 – 4.0x range compared to Redwood
|
Step 3:
|
Identify other relevant business and labor-market competitors:
|
|
|
•
|
Financial services companies with both market capitalization value and net income in a 0.5 – 2.0x range compared to Redwood
|
|
•
|
Remove bank holding companies and companies in the cash advance/pawn broker businesses, due to fundamental differences in the underlying business model
|
Step 4:
|
Select 15 to 25 companies for inclusion in the compensation benchmarking peer group:
|
|
|
•
|
Include all companies identified in Step 2
|
|
•
|
Include companies identified in Step 3 if they: (1) are included in the prior year’s compensation benchmarking peer group or (2) have been identified as a peer of Redwood’s most-direct peers (e.g., a peer of another mortgage REIT identified in Step 2)
|
|
•
|
Add additional companies identified in Step 3 to: (1) ensure that the sample size is sufficient (i.e., 15 to 25 total companies) and (2) position Redwood closer to the median on key size measures, focusing primarily on market capitalization and net income and secondarily on revenue and total assets
|
•
|
AllianceBernstein Holding L.P.
|
|
•
|
Capstead Mortgage Corporation
|
•
|
Chimera Investment Corporation
|
|
•
|
Cohen & Steers, Inc.
|
•
|
CYS Investments, Inc.
|
|
•
|
Dynex Capital, Inc.
|
•
|
Essent Group Ltd.
|
|
•
|
Federated Investors, Inc.
|
•
|
Hannon Armstrong Sustainable Infrastructure Capital, Inc.
|
|
•
|
iStar Financial Inc.
|
•
|
Ladder Capital Corp.
|
|
•
|
Main Street Capital Corporation
|
•
|
MFA Financial, Inc.
|
|
•
|
Nationstar Mortgage Holdings Inc.
|
•
|
New York Mortgage Trust, Inc.
|
|
•
|
NMI Holdings, Inc.
|
•
|
PennyMac Financial Services, Inc.
|
|
•
|
Stifel Financial Corp.
|
•
|
Mr. Abate
. In December 2017, the Committee determined that the 2018 base salary for Mr. Abate (who at that time was Redwood’s President), would be increased from $550,000 to $600,000 per annum. It was subsequently increased in May 2018 to $675,000 upon his promotion to Chief Executive Officer, to reflect his increased role and responsibilities.
|
◦
|
Base salary actually paid to Mr. Abate during 2018 was $645,833.
|
•
|
Mr. Robinson
. In December 2017, the Committee determined that the 2018 base salary for Mr. Robinson (who at that time was Redwood’s Executive Vice President), would remain at its year end level of $500,000 per annum. It was subsequently increased in May 2018 to $525,000 upon his promotion to President, to reflect his increased role and responsibilities.
|
◦
|
Base salary actually paid to Mr. Robinson during 2018 was $515,278.
|
•
|
Mr. Stone
. In December 2017, the Committee determined that the 2018 base salary for Mr. Stone, Redwood’s Executive Vice President and General Counsel, would remain at its year-end 2017 level of $400,000 per annum.
|
•
|
Mr. Cochrane
. In December 2017, the Committee determined that the 2018 base salary for Mr. Cochrane, Redwood’s Chief Financial Officer, would remain at its year-end 2017 level of $350,000 per annum.
|
•
|
Mr. Kanouse
. In December 2017, the Committee determined that the 2018 base salary for Mr. Kanouse, Redwood's Managing Director - Head of Residential, would be increased from $400,000 to $450,000 per annum.
|
•
|
Mr. Hughes
. In December 2017, the Committee determined that the 2018 base salary for Mr. Hughes (who at that time was Redwood's Chief Executive Officer), would remain at its year-end 2017 level of $750,000 per annum, until his retirement in May 2018.
|
◦
|
Following his retirement from the CEO position, Mr. Hughes continued to be employed by Redwood in an advisory role at a base salary of $150,000 per annum.
|
CEO’s Performance-Based Annual Bonuses vs. ROE Performance Measures
|
|
•
|
75% on the achievement of a predetermined target level of a company financial performance metric; and
|
•
|
25% on the achievement of pre-established individual goals relating to strategic, business, operational, governance and risk management objectives.
|
•
|
For example, under GAAP, an unrealized loss recognized in equity capital but not recognized in earnings has the impact, all other factors being equal, of increasing the ratio of earnings to equity capital. Adjusted ROE addresses this by increasing equity capital by the amount of the unrealized loss, allowing for a non-GAAP calculation of a ratio using internally consistent earnings and equity capital amounts.
|
•
|
Conversely, under GAAP, an unrealized gain recognized in equity capital but not recognized in earnings has the impact, all other factors being equal, of decreasing the ratio of earnings to equity capital. Adjusted ROE addresses this by decreasing equity capital by the amount of the unrealized gain, allowing for a non-GAAP calculation of a ratio using internally consistent earnings and equity capital amounts.
|
•
|
Mr. Abate
. In December 2017, the Committee determined that the 2018 target bonus percentage for Mr. Abate would be increased from 150% to 175% of base salary actually earned for 2018.
|
•
|
Mr. Robinson
. In December 2017, the Committee determined that the 2018 target bonus percentage for Mr. Robinson would remain at 140% of base salary for 2018.
|
◦
|
In May 2018, in connection with his promotion to President, the Committee determined that the 2018 target bonus percentage for Mr. Robinson would be increased to 150% of base salary actually earned for 2018.
|
•
|
Mr. Stone
. In December 2017, the Committee determined that the 2018 target bonus percentage for Mr. Stone would be increased from 110% to 115% of base salary for 2018.
|
•
|
Mr. Cochrane
. In December 2017, the Committee determined that the 2018 target bonus percentage for Mr. Cochrane would remain at 110% of base salary for 2018.
|
•
|
Mr. Kanouse
. In December 2017, the Committee determined that the 2018 target bonus percentage for Mr. Kanouse would be increased from 125% to 135% of base salary for 2018.
|
•
|
Mr. Hughes
. In December 2017, the Committee determined that the 2018 target bonus percentage for Mr. Hughes would remain at 175% of base salary for 2018.
|
NEO
|
|
2018 Base Salary
(per annum)
|
|
2018 Target Annual Bonus
(as % of
Base Salary)
|
|
Company Performance Component of 2018 Target Annual Bonus
($)
|
|
Individual Performance Component of 2018 Target Annual Bonus
($)
|
|
Total
2018 Target
Annual Bonus
($)
|
|||||||||
Mr. Abate,
(1)
Chief Executive Officer |
|
$
|
645,833
|
|
|
175
|
%
|
|
$
|
847,656
|
|
|
$
|
282,552
|
|
|
$
|
1,130,208
|
|
Mr. Robinson,
(2)
President |
|
$
|
515,278
|
|
|
150
|
%
|
|
$
|
579,688
|
|
|
$
|
193,229
|
|
|
$
|
772,917
|
|
Mr. Stone,
Executive Vice President and General Counsel |
|
$
|
400,000
|
|
|
115
|
%
|
|
$
|
345,000
|
|
|
$
|
115,000
|
|
|
$
|
460,000
|
|
Mr. Cochrane,
Chief Financial Officer |
|
$
|
350,000
|
|
|
110
|
%
|
|
$
|
288,750
|
|
|
$
|
96,250
|
|
|
$
|
385,000
|
|
Mr. Kanouse,
Managing Director - Head of Residential |
|
$
|
450,000
|
|
|
135
|
%
|
|
$
|
455,625
|
|
|
$
|
151,875
|
|
|
$
|
607,500
|
|
Mr. Hughes,
(3)
Retired Chief Executive Officer |
|
$
|
295,673
|
|
|
175
|
%
|
|
$
|
388,071
|
|
|
$
|
129,357
|
|
|
$
|
517,428
|
|
(2)
|
Mr. Robinson was promoted to President effective May 22, 2018 and his base salary as of December 31, 2018 was $525,000 per annum. Actual base salary earned by Mr. Robinson in 2018 was $515,278 and Mr. Robinson's total 2018 target annual bonus was determined by multiplying his actual base salary earned in 2018 by the target bonus percentage of 150% established by the Committee in connection with his promotion to President.
|
(3)
|
Mr. Hughes retired as Chief Executive Officer effective May 22, 2018 and the base salary shown is the actual base salary earned from January 2018 to his retirement as Chief Executive Officer in May 2018 and as such, the target bonus reflected in the table is calculated based on his salary as Chief Executive Officer. After his retirement, Mr. Hughes remained employed as an adviser to Redwood with an annualized salary of $150,000. Actual base salary paid to Mr. Hughes during 2018 was $387,212:
|
NEO
|
|
Company
Performance
Component of
2018 Target
Annual Bonus
($)
|
|
% of Company
Performance
Component
Earned
|
|
2018 Company
Performance
Component of
Annual Bonus
Earned
($)
|
||||
Mr. Abate,
Chief Executive Officer |
|
$
|
847,656
|
|
|
113%
|
|
$
|
956,971
|
|
Mr. Robinson,
President |
|
$
|
579,688
|
|
|
113%
|
|
$
|
654,444
|
|
Mr. Stone,
Executive Vice President and General Counsel |
|
$
|
345,000
|
|
|
113%
|
|
$
|
389,491
|
|
Mr. Cochrane,
Chief Financial Officer |
|
$
|
288,750
|
|
|
113%
|
|
$
|
325,987
|
|
Mr. Kanouse,
Managing Director - Head of Residential |
|
$
|
455,625
|
|
|
113%
|
|
$
|
514,383
|
|
Mr. Hughes,
Retired Chief Executive Officer |
|
$
|
388,071
|
|
|
113%
|
|
$
|
438,117
|
|
•
|
The Committee evaluated achievement of this goal in the context of various factors, including that during 2018 Redwood: deployed over $800 million of capital into new investment opportunities; invested significant amounts of capital in mortgage loans secured by multifamily properties, re-performing residential mortgage loans, and business purpose residential mortgage loans (such as single-family residential properties acquired for rehabilitation and resale), as well as in mortgage servicing rights related to residential mortgage loans; and
|
•
|
The Committee evaluated achievement of this goal in the context of various factors, including that during 2018 Redwood: purchased $7.1 billion of residential mortgage loans through its loan acquisition programs while maintaining annual profit margins at an attractive level; completed 12 separate Sequoia securitization transactions, for total securitization volume of $5.0 billion, while maintaining the Sequoia program’s “best-in-class” reputation; completed sales of $2.2 billion of mortgage loans to third parties; and enhanced relationships and initiated alternative loan acquisition options with key seller counterparties.
|
•
|
The Committee evaluated achievement of this goal in the context of various factors, including that during 2018 Redwood: evaluated various options for expanding its mortgage banking business to include business purpose residential mortgage loans, reviewed financial and operating risks associated with expansion into this sector of the mortgage finance market, and determined to establish a strategic relationship with an existing and established originator; following appropriate due diligence, negotiated a minority investment and exclusive loan purchase relationship with 5 Arches, LLC, an originator of business purpose residential mortgage loans, coupled with an option to acquire 5 Arches, LLC over a one-year period; and began acquiring business purpose residential mortgage loans for its investment portfolio and mortgage banking business.
|
•
|
The Committee evaluated achievement of this goal in the context of various factors, including that during 2018 Redwood: maintained expense discipline at appropriate levels in response to strategic initiatives and business activity and capital deployment levels; developed and reviewed with the Board of Directors an updated structure for management's enterprise-wide risk management practices that should enable Redwood to further scale and expand the scope of its operations while maintaining financial and operational risk discipline; improved cybersecurity infrastructure, practices, monitoring and training; and involved employees at all levels of the company and an external consultant in in updating Redwood’s values and engaging with each other about Redwood’s culture and mission, as well as participating in various charitable and community outreach efforts.
|
NEO
|
|
Individual
Performance
Component of
2018 Target
Annual Bonus
($)
|
|
% of Individual
Performance
Component
Earned
|
|
2018 Individual
Performance
Component of
Annual Bonus
Earned
($)
|
||||
Mr. Abate,
Chief Executive Officer |
|
$
|
282,552
|
|
|
110%
|
|
$
|
310,807
|
|
Mr. Robinson,
President |
|
$
|
193,229
|
|
|
110%
|
|
$
|
212,552
|
|
Mr. Stone,
Executive Vice President and General Counsel |
|
$
|
115,000
|
|
|
110%
|
|
$
|
126,500
|
|
Mr. Cochrane,
Chief Financial Officer |
|
$
|
96,250
|
|
|
85%
|
|
$
|
81,813
|
|
Mr. Kanouse,
Managing Director - Head of Residential |
|
$
|
151,875
|
|
|
95%
|
|
$
|
144,281
|
|
Mr. Hughes,
Retired Chief Executive Officer |
|
$
|
129,357
|
|
|
100%
|
|
$
|
129,357
|
|
•
|
The DSUs granted on December 12, 2018 will vest over four years, with 25% vesting on January 31, 2020, and an additional 6.25% vesting on the last day of each subsequent quarter (beginning with the quarter ending March 31, 2020), with full vesting occurring on December 11, 2022. Shares of Redwood common stock underlying these DSUs will be distributed to the recipients not earlier than December 11, 2022 and not later than December 31, 2022, unless electively deferred under the terms of Redwood’s Executive Deferred Compensation Plan. The number of DSUs granted to each officer was determined as a targeted dollar amount, divided by the closing price of Redwood’s common stock on the grant date.
|
•
|
The PSUs granted on December 12, 2018 are performance-based equity awards which provide for vesting of 0% to 250% of the target number of PSUs granted, with the target number of PSUs adjusted to reflect the value of any dividends declared on Redwood common stock during the vesting period (as further described below). Vesting of these PSUs will generally occur at the end of three years (on December 31, 2021) based on the performance metrics described below during the three-year measurement period and continued employment through January 1, 2022.
|
•
|
First, baseline vesting will range from 0% - 200% of the target number of PSUs granted based on the level of book value total stockholder return (“book value TSR”) attained over a three-year performance measurement period of January 1, 2019 through December 31, 2021, with 100% of the target number of PSUs vesting if three-year book value TSR is 25%. Book value TSR for the PSUs granted in December 2018 is defined as the percentage by which Redwood’s GAAP book value per share has increased or decreased as of the last day of the three-year performance measurement period relative to the first day of such period, plus the value of cash dividends declared and/or paid during such period on our common stock. In particular, baseline vesting of PSUs will be in accordance with the following table:
|
|
Book Value TSR (“bvTSR”)
|
|
% of
Performance-Based Vesting*
|
|
|
Less than 50% bvTSR target
|
|
0%
|
|
|
50% of bvTSR target
|
|
50%
|
|
|
100% of bvTSR target
|
|
100%
|
|
|
150% or greater of bvTSR target
|
|
200%
|
|
|
•
|
Second, the baseline vesting level would then be adjusted to increase or decrease by up to an additional 50 percentage points based on Redwood’s relative total stockholder return (“relative TSR”) over the three-year performance measurement period compared to the component companies of the FTSE Nareit Mortgage REIT Index, with median relative TSR performance correlating to no adjustment from the baseline level of vesting. In particular, adjustments to baseline vesting of PSUs will be in accordance with the following table:
|
|
Relative TSR
|
|
Relative TSR Adjustment to Baseline Vesting*
|
|
|
Less than 25th percentile
|
|
minus 50 percentage points
|
|
|
25th percentile
|
|
minus 50 percentage points
|
|
|
50th percentile
|
|
No change
|
|
|
75th percentile or greater
|
|
plus 50 percentage points
|
|
|
•
|
Third, if the vesting level after steps one and two is greater than 100% of the target number of PSUs, but absolute total shareholder return (“TSR”) is negative over the three-year performance measurement period, vesting would be capped at 100% of target number of PSUs. TSR is defined as the percentage by which the per share price of Redwood’s common stock has increased or decreased as of the last day of the three-year performance measurement period relative to the first day of such period, adjusted to reflect the reinvestment of all dividends declared and/or paid on our common stock.
|
•
|
At the time of vesting, the value of any dividends paid during the vesting period will be reflected in the PSUs by increasing the target number of PSUs granted by an amount corresponding to the incremental number of shares of Redwood common stock that a stockholder would have acquired during the three-year performance measurement period had all dividends during that period been reinvested in Redwood common stock on the applicable dividend payment dates.
|
•
|
After the vesting of these PSUs on January 1, 2022 (if any vest) and until the delivery of the underlying shares of Redwood common stock, the underlying vested award shares will have attached dividend equivalent rights, resulting in the payment of dividend equivalents each time Redwood pays a common stock dividend.
|
•
|
Mr. Abate
. In December 2018, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Abate would be $2.5 million - awarded $1.25 million in DSUs and $1.25 million in PSUs.
|
◦
|
Previously, in May 2018, in connection with his promotion to Chief Executive Officer, the Committee also awarded long-term equity-based incentive awards to Mr. Abate with aggregate grant date fair value of $500,000 - awarded $250,000 in DSUs and $250,000 in PSUs.
|
•
|
Mr. Robinson
. In December 2018, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Robinson would be $2 million - awarded $1 million in DSUs and $1 million in PSUs.
|
◦
|
Previously, in May 2018, in connection with his promotion to President, the Committee also awarded long-term equity-based incentive awards to Mr. Robinson with aggregate grant date fair value of $200,000 - awarded $100,000 in DSUs and $100,000 in PSUs.
|
•
|
Mr. Stone
. In December 2018, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Stone would be $950,000 - awarded $475,000 in DSUs and $475,000 in PSUs.
|
•
|
Mr. Cochrane
. In December 2018, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Cochrane would be $800,000 - awarded $400,000 in DSUs and $400,000 in PSUs.
|
•
|
Mr. Kanouse
. In December 2018, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Kanouse would be $1 million - awarded $500,000 in DSUs and $500,000 in PSUs.
|
•
|
Mr. Hughes
. In May 2018, Mr. Hughes retired from the CEO position. Because of his status as having retired from the CEO position, the Committee determined that Mr. Hughes would not receive a 2018 year-end long-term equity award.
|
|
|
Deferred Stock Units
(“DSUs”)
(1)
|
|
Performance Stock Units
(“PSUs”)
(1)
|
||||||||||
NEO
|
|
#
|
|
Aggregate
Grant Date
Fair Value
|
|
#
|
|
Aggregate
Grant Date
Fair Value
|
||||||
Mr. Abate,
Chief Executive Officer |
|
77,255
|
|
|
$
|
1,249,986
|
|
|
72,547
|
|
|
$
|
1,249,985
|
|
Mr. Robinson,
President |
|
61,804
|
|
|
$
|
999,989
|
|
|
58,038
|
|
|
$
|
999,995
|
|
Mr. Stone,
Executive Vice President and General Counsel |
|
29,357
|
|
|
$
|
474,996
|
|
|
27,568
|
|
|
$
|
474,997
|
|
Mr. Cochrane,
Chief Financial Officer |
|
24,721
|
|
|
$
|
399,986
|
|
|
23,215
|
|
|
$
|
399,994
|
|
Mr. Kanouse,
Managing Director - Head of Residential |
|
30,902
|
|
|
$
|
499,994
|
|
|
29,019
|
|
|
$
|
499,997
|
|
|
(1)
|
Grant date fair value determined at the time the grant was made in accordance with FASB Accounting Standards Codification Topic 718. The value of dividend equivalent rights associated with DSUs and the value of any increase in the target number of PSUs to reflect dividends paid during the performance period were taken into account in establishing the grant date fair value of these DSUs and PSUs under FASB Accounting Standards Codification Topic 718 at the time the awards were granted. Therefore, dividend equivalent right payments and any increase in the target number of PSUs to reflect dividends paid during the performance period are not considered part of the compensation or other amounts reported in the summary table of NEO compensation under “Executive Compensation Tables — Summary Compensation,” or reported below under “Executive Compensation Tables — Grants of Plan-Based Awards.”
|
(2)
|
As described above, with respect to Mr. Abate and Mr. Robinson, in addition to the long-term equity-based awards granted in December 2018 (set forth above), both received an additional grant each of DSUs and PSUs at the time of their promotions in May 2018. DSUs granted in May 2018 vest over a four-year period and PSUs granted in May 2018 vest over a three-year performance measurement period.
|
|
|
DSUs
(*)
|
|
PSUs
(*)
|
|||||||||
2018 Promotion Awards
|
|
#
|
|
Aggregate
Grant Date
Fair Value
|
|
#
|
|
Aggregate
Grant Date Fair Value |
|||||
Mr. Abate,
Chief Executive Officer |
|
15,042
|
|
|
$
|
249,998
|
|
|
16,447
|
|
|
249,994
|
|
Mr. Robinson,
President |
|
6,017
|
|
|
$
|
100,003
|
|
|
6,578
|
|
|
99,986
|
|
|
Section III - Other Compensation, Plans and Benefits
|
||||
|
|
|
||
|
Ø
|
Deferred Compensation
|
||
|
|
|
||
|
Ø
|
Employee Stock Purchase Plan
|
||
|
|
|
||
|
Ø
|
401(k) Plan and Other Matching Contributions
|
||
|
|
|
||
|
Ø
|
Other Compensation and Benefits
|
||
|
|
|
||
|
Ø
|
Severance and Change of Control Arrangements
|
Section IV - Compensation-Related Policies and Tax Considerations
|
||||
|
|
|
||
|
Ø
|
Mandatory Executive Stock Ownership Requirements
|
||
|
|
|
||
|
Ø
|
Prohibition on Use of Margin, Pledging, and Hedging in Respect of Redwood Shares
|
||
|
|
|
||
|
Ø
|
Clawback Policy with Respect to Bonus and Incentive Compensation
|
||
|
|
|
||
|
Ø
|
Tax Considerations
|
||
|
|
|
||
|
Ø
|
Accounting Standards
|
•
|
The Chief Executive Officer, the President, and the other executive officers are required to own stock with a value at least equal to (i) six times current salary in the case of the Chief Executive Officer, (ii) three times current salary in the case of the President, and (iii) two times current salary in the case of the other executive officers;
|
•
|
Executive officers are allowed three years to attain the required level of ownership and three years to acquire additional incremental shares if promoted to a position with a higher ownership requirement or when a salary increase results in a higher ownership requirement (if not in compliance at the compliance deadlines, the executive officer is required to retain net after-tax shares delivered as compensation or from the Executive Deferred Compensation Plan until compliance is achieved);
|
•
|
All shares owned outright are counted, including those held in trust for the executive officer and his or her immediate family, as well as vested DSUs and vested shares held pursuant to other employee plans; and
|
•
|
For purposes of determining compliance, the purchase or acquisition price is used as the value of shares held.
|
|
|
Base Salary
|
||||||
|
|
2018
|
|
2019
|
||||
Mr. Abate,
Chief Executive Officer
|
|
$
|
675,000
|
|
|
$
|
750,000
|
|
Mr. Robinson,
President
|
|
$
|
525,000
|
|
|
$
|
600,000
|
|
Mr. Cochrane,
Chief Financial Officer |
|
$
|
350,000
|
|
|
$
|
375,000
|
|
Mr. Kanouse,
Managing Director - Head of Residential |
|
$
|
450,000
|
|
|
$
|
475,000
|
|
Current NEO
|
|
2019 Base
Salary
|
|
2019 Target
Annual Bonus
(%)
|
|
Percentage Change from
2018 Target
Annual Bonus
(%)
(1)
|
|
Total
2019 Target
Annual Bonus
($)
|
||||
Mr. Abate,
President
|
|
$
|
750,000
|
|
|
175%
|
|
—%
|
|
$
|
1,312,500
|
|
Mr. Robinson,
Executive Vice President
|
|
$
|
600,000
|
|
|
165%
|
|
10%
|
|
$
|
990,000
|
|
Mr. Stone,
Executive Vice President and General Counsel
|
|
$
|
400,000
|
|
|
120%
|
|
4%
|
|
$
|
480,000
|
|
Mr. Cochrane,
Chief Financial Officer
|
|
$
|
375,000
|
|
|
125%
|
|
14%
|
|
$
|
468,750
|
|
Mr. Kanouse,
Managing Director - Head of Residential
|
|
$
|
475,000
|
|
|
140%
|
|
4%
|
|
$
|
665,000
|
|
|
(1)
|
Amounts set forth in the table under “Change from 2018 Target Annual Bonus Percentage (%)” reflect the increase, if any, in the 2019 Target Annual Bonus (%) from the 2018 Target Annual Bonus (%) in effect for each NEO at the end of 2018.
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
(1)
|
|
Non-Equity
Incentive
Plan Compensation
(2)
|
|
All Other
Compensation
(3)
|
|
Total
|
||||||||||||
Christopher J. Abate,
Chief Executive Officer (4) |
|
2018
|
|
$
|
645,833
|
|
|
—
|
|
|
$
|
2,999,963
|
|
|
$
|
1,267,778
|
|
|
$
|
37,000
|
|
|
$
|
4,950,574
|
|
|
2017
|
|
$
|
550,000
|
|
|
—
|
|
|
$
|
1,502,057
|
|
|
$
|
1,652,076
|
|
|
$
|
33,000
|
|
|
$
|
3,737,133
|
|
|||
2016
|
|
$
|
512,500
|
|
|
—
|
|
|
$
|
1,649,992
|
|
|
$
|
1,528,994
|
|
|
$
|
28,500
|
|
|
$
|
3,719,986
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marty S. Hughes,
Retired Chief Executive Officer (5) |
|
2018
|
|
$
|
387,212
|
|
|
—
|
|
|
$
|
—
|
|
|
567,474
|
|
|
$
|
24,163
|
|
|
$
|
978,849
|
|
||
|
2017
|
|
$
|
750,000
|
|
|
—
|
|
|
$
|
823,613
|
|
|
2,136,116
|
|
|
$
|
45,000
|
|
|
$
|
3,754,729
|
|
|||
|
2016
|
|
$
|
750,000
|
|
|
—
|
|
|
$
|
2,499,999
|
|
|
2,610,477
|
|
|
$
|
45,000
|
|
|
$
|
5,905,476
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Dashiell I. Robinson,
President (6) |
|
2018
|
|
$
|
515,278
|
|
|
—
|
|
|
$
|
2,199,973
|
|
|
866,996
|
|
|
$
|
19,625
|
|
|
$
|
3,601,872
|
|
||
2017
|
|
$
|
128,846
|
|
|
$
|
1,000,000
|
|
|
$
|
2,499,377
|
|
|
—
|
|
|
$
|
1,255,250
|
|
|
$
|
4,883,473
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Andrew P. Stone,
Executive Vice President and General Counsel |
|
2018
|
|
$
|
400,000
|
|
|
—
|
|
|
$
|
949,993
|
|
|
$
|
515,991
|
|
|
$
|
25,000
|
|
|
$
|
1,890,984
|
|
|
|
2017
|
|
$
|
400,000
|
|
|
—
|
|
|
$
|
851,093
|
|
|
$
|
881,107
|
|
|
$
|
24,000
|
|
|
$
|
2,156,200
|
|
||
|
2016
|
|
$
|
375,000
|
|
|
—
|
|
|
$
|
799,993
|
|
|
$
|
820,436
|
|
|
$
|
22,500
|
|
|
$
|
2,017,929
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collin L. Cochrane,
Chief Financial Officer (7) |
|
2018
|
|
$
|
350,000
|
|
|
—
|
|
|
$
|
799,980
|
|
|
$
|
407,800
|
|
|
$
|
21,000
|
|
|
$
|
1,578,780
|
|
|
|
2017
|
|
$
|
314,583
|
|
|
—
|
|
|
$
|
1,250,846
|
|
|
$
|
692,954
|
|
|
$
|
16,500
|
|
|
$
|
2,274,883
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Garnet W. Kanouse,
Managing Director - Head of Residential (7) |
|
2018
|
|
$
|
450,000
|
|
|
—
|
|
|
$
|
999,991
|
|
|
$
|
658,664
|
|
|
$
|
27,634
|
|
|
$
|
2,136,289
|
|
|
2017
|
|
$
|
400,000
|
|
|
—
|
|
|
$
|
1,482,484
|
|
|
$
|
1,032,508
|
|
|
$
|
23,600
|
|
|
$
|
2,938,592
|
|
|
(1)
|
Represents the grant date fair value of stock units awarded, as determined in accordance with FASB Accounting Standards Codification Topic 718. Information regarding the assumptions used to value our NEOs’ stock units is provided in Note 18 to our consolidated financial statements included in our Annual Report on Form 10-K filed
February 28, 2019
.
|
-
|
Mr. Abate and Mr. Robinson each received an additional grant of deferred stock units and performance stock units upon their promotions to Chief Executive Officer and President, respectively, in May 2018, with grant date fair values of $16.62 and $15.20 per unit, respectively.
|
-
|
For additional details regarding these awards and the vesting of performance stock units, see the “Grants of Plan-Based Awards” table.
|
(2)
|
These amounts are annual performance-based bonuses paid in cash for each fiscal year indicated with respect to performance during such fiscal year (but paid early in the following fiscal year). See pages 50-52 of this Proxy Statement under the heading "Compensation Discussion and Analysis — Performance-Based Annual Bonuses Earned for 2018" for additional details.
|
(3)
|
Represents matching contributions to our 401(k) Plan and Executive Deferred Compensation Plan, as well as amounts provided under our fitness-related activity reimbursement program. Details for these matching contributions and reimbursement program are outlined on page 58 under headings "401(k) Plan and Other Contributions" and "Other Compensation and Benefits".
|
(4)
|
Mr. Abate was promoted to Chief Executive Officer in May 2018 and his annual base salary was increased to $675,000 at that time. The actual base salary paid to Mr. Abate during 2018 was $645,833.
|
(5)
|
Mr. Hughes retired as Redwood's Chief Executive Officer in May 2018. After his retirement from the CEO position, Mr. Hughes remained employed as an advisor to Redwood with a salary of $150,000 per annum. Actual base salary paid to Mr. Hughes during 2018 was $387,212:
|
(6)
|
Mr. Robinson was promoted to President in May 2018 and his annual base salary was increased to $525,000 at that time. The actual base salary paid to Mr. Robinson during 2018 was $515,278.
|
(7)
|
Compensation data for each of Mr. Cochrane and Mr. Kanouse for 2016 is not provided as neither was an executive officer during 2016.
|
Name
|
|
Type of
Award
(1)
|
|
Grant
Date
|
|
Estimated Possible Payouts Under Non-Equity Incentive
Plan Awards ($)
(5)
|
|
Estimated Possible Payouts Under Equity Incentive Plan Awards
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
(9)
|
|
Grant Date
Fair Value
of Stock
and
Option
Awards
($)
(9)
|
|||||||||||||||||
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
(6)
|
|
|
Maximum
|
|
|
|||||||||||||||||
Christopher J. Abate
|
|
—
|
|
—
|
|
—
|
|
|
1,130,208
|
|
|
3,630,208
|
|
|
—
|
|
|
—
|
|
|
|
90,895
|
|
(7)
|
|
—
|
|
|
—
|
|
|
|
DSU
(2)
|
|
5/22/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
15,042
|
|
|
249,998
|
|
|
|
PSU
(2)
|
|
5/22/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,447
|
|
|
|
32,894
|
|
(8)
|
|
|
|
249,994
|
|
|
|
|
DSU
(3)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
77,255
|
|
|
1,249,986
|
|
|
|
PSU
(4)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72,547
|
|
|
|
181,368
|
|
(8)
|
|
—
|
|
|
1,249,985
|
|
Marty S. Hughes
|
|
—
|
|
—
|
|
—
|
|
|
517,428
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Dashiell I. Robinson
|
|
—
|
|
—
|
|
—
|
|
|
772,917
|
|
|
3,272,917
|
|
|
—
|
|
|
—
|
|
|
|
114,604
|
|
(7)
|
|
—
|
|
|
—
|
|
|
|
DSU
(2)
|
|
5/22/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
6,017
|
|
|
100,003
|
|
|
|
PSU
(2)
|
|
5/22/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,578
|
|
|
|
13,156
|
|
(8)
|
|
—
|
|
|
99,986
|
|
|
|
DSU
(3)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
61,804
|
|
|
999,989
|
|
|
|
PSU
(4)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58,038
|
|
|
|
145,095
|
|
(8)
|
|
—
|
|
|
999,995
|
|
Andrew P. Stone
|
|
—
|
|
—
|
|
—
|
|
|
460,000
|
|
|
1,960,000
|
|
|
—
|
|
|
—
|
|
|
|
69,011
|
|
(7)
|
|
—
|
|
|
—
|
|
|
|
DSU
(3)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
29,357
|
|
|
474,996
|
|
|
|
PSU
(4)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,568
|
|
|
|
68,920
|
|
(8)
|
|
—
|
|
|
474,997
|
|
Collin L. Cochrane
|
|
—
|
|
—
|
|
—
|
|
|
385,000
|
|
|
1,885,000
|
|
|
—
|
|
|
—
|
|
|
|
73,988
|
|
(7)
|
|
—
|
|
|
—
|
|
|
|
DSU
(3)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
24,721
|
|
|
399,986
|
|
|
|
PSU
(4)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,215
|
|
|
|
58,038
|
|
(8)
|
|
—
|
|
|
399,994
|
|
Garnet W. Kanouse
|
|
—
|
|
—
|
|
—
|
|
|
607,500
|
|
|
2,107,500
|
|
|
—
|
|
|
—
|
|
|
|
59,224
|
|
(7)
|
|
—
|
|
|
499,994
|
|
|
|
DSU
(3)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
30,902
|
|
|
499,994
|
|
|
|
PSU
(4)
|
|
12/12/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,019
|
|
|
|
72,548
|
|
(8)
|
|
—
|
|
|
499,997
|
|
|
(1)
|
DSU refers to deferred stock units; PSU refers to performance stock units.
|
(2)
|
Mr. Abate and Mr. Robinson each received a grant of deferred stock units upon their respective promotions to Redwood's Chief Executive Officer and President with a grant date fair value of $16.62. In addition, they also received a grant of performance stock units with a grant date fair value of $15.20 per unit, subject to a three-year performance vesting period ending May 21, 2021. Under the terms of these performance stock units the number of underlying shares of Redwood common stock that vest and that the award recipient becomes entitled to receive at the time of vesting are contingent upon Redwood’s total stockholder return (TSR) during the performance vesting period according to the following schedule, with prorated vesting for TSR percentages that fall between those set forth below (with the target number of performance stock units granted being adjusted to reflect the value of any dividends paid on Redwood common stock during the vesting period):
|
Three-Year TSR
|
|
Vesting/Crediting of
Target Shares
|
|
Less than 0%
|
|
0
|
%
|
25%
|
|
100
|
%
|
125% or greater
|
|
200
|
%
|
(3)
|
All NEOs who received a 2018 annual long-term incentive grant in December 2018 received one half of that grant in the form of deferred stock units on
December 12, 2018
with a grant date fair value of $
16.18
per unit, subject to a four-year vesting schedule (fully vesting on December 11, 2022). The distribution of shares underlying vested DSUs is deferred under Redwood’s Executive Deferred Compensation Plan, with a distribution date of December 20, 2022, unless distribution is electively further deferred by the recipient under the terms of the Company’s Executive Deferred Compensation Plan.
|
(4)
|
All NEOs who received a 2018 annual long-term incentive grant in December 2018 received one half of that grant in the form of a target number of performance stock units on December 12, 2018 with a grant date fair value of $17.23 per unit. Vesting of these PSUs will generally occur, if at all, as of January 1, 2022 based on a three-step process as described below.
|
(5)
|
The amounts reported in the "Estimated Possible Payouts Under Non-Equity Incentive Plan Awards" column reflect the target, threshold and maximum short-term incentive cash award opportunity for each of the NEOs under Redwood’s performance-based annual bonus program which could be earned based on Redwood's 2018 Adjusted ROE and pre-established individual performance goals for 2018. See “Compensation Discussion and Analysis — 2018 Performance-Based Annual Bonus Compensation” beginning on page 45 for a more complete description of the Company’s performance-based annual bonus program. Actual amounts awarded to our NEOs for fiscal year 2018 are reflected in the “Summary Compensation” table on pages 64-65.
|
(6)
|
Represents the target number of shares to be awarded upon the contingent vesting of performance stock units as discussed above in Note 4.
|
(7)
|
Represents the dollar-denominated value of the portion of 2018 performance-based annual bonuses that would have been paid in vested deferred stock units assuming a maximum performance-based annual bonus ($5 million for each of Mr. Abate and Mr. Robinson and $3 million for each of the other NEOs). The number of deferred stock units was calculated using a common stock price of $15.07 per share (the closing price of Redwood’s common stock on the NYSE on December 31, 2018).
|
(8)
|
For performance stock units, represents the maximum number of shares that could contingently vest, as discussed above in Notes 2 and 4, subject to adjustment of the target number of performance stock units granted to reflect the value of any dividends paid on Redwood common stock during the vesting period.
|
(9)
|
These awards were approved by the Compensation Committee of the Board of Directors and granted pursuant to Redwood’s 2014 Incentive Plan. The value of these awards is determined in accordance with FASB Accounting Standards Codification Topic 718 based on the closing price of Redwood’s common stock on the grant date. Information regarding the assumptions used to value our NEOs’ stock units is provided in Note 17 to our consolidated financial statements included in Redwood's Annual Report on Form 10-K filed
February 28, 2019
.
|
|
|
Stock Awards
|
||||||||||||
NEO
|
|
Number of
Shares or
Units of Stock
That Have
Not Vested
(#)
(1)
|
|
Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)
(2)
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
(3)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, That
Have Not
Vested
($)
(4)
|
||||||
Christopher J. Abate
|
|
188,764
|
|
|
$
|
2,844,673
|
|
|
207,119
|
|
|
$
|
3,121,283
|
|
Marty S. Hughes
|
|
73,018
|
|
|
$
|
1,100,381
|
|
|
94,410
|
|
|
$
|
1,422,759
|
|
Dashiell I. Robinson
|
|
117,195
|
|
|
$
|
1,766,129
|
|
|
131,760
|
|
|
$
|
1,985,623
|
|
Andrew P. Stone
|
|
80,459
|
|
|
$
|
1,212,517
|
|
|
95,828
|
|
|
$
|
1,444,128
|
|
Collin L. Cochrane
|
|
81,612
|
|
|
$
|
1,229,893
|
|
|
52,311
|
|
|
$
|
788,327
|
|
Garnet W. Kanouse
|
|
99,638
|
|
|
$
|
1,501,543
|
|
|
67,068
|
|
|
$
|
1,010,715
|
|
|
(1)
|
Represents unvested deferred stock units as of
December 31, 2018
. The table below shows the vesting schedule for unvested deferred stock units as of
December 31, 2018
. Deferred stock units are time-vested and generally vest 25% after the first year, and 6.25% every quarter thereafter. Deferred stock unit awards relating to the schedule below were granted from December 2015 through December 2018.
|
Total DSUs
Scheduled to Vest On:
|
|
Christopher J.
Abate
|
|
Marty S.
Hughes |
|
Dashiell I. Robinson
|
|
Andrew P.
Stone
|
|
Collin L. Cochrane
|
|
Garnet W. Kanouse
|
|
||||||
1/1/2019
|
|
6,693
|
|
|
10,513
|
|
|
—
|
|
|
3,316
|
|
|
3,944
|
|
|
4,898
|
|
|
1/31/2019
|
|
12,344
|
|
|
—
|
|
|
12,344
|
|
|
6,995
|
|
|
5,349
|
|
|
6,995
|
|
|
2/28/2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,308
|
|
|
2,289
|
|
|
4/1/2019
|
|
9,779
|
|
|
10,514
|
|
|
3,086
|
|
|
5,065
|
|
|
5,280
|
|
|
6,647
|
|
|
7/1/2019
|
|
13,540
|
|
|
10,514
|
|
|
4,591
|
|
|
5,065
|
|
|
5,280
|
|
|
6,647
|
|
|
10/1/2019
|
|
10,720
|
|
|
10,513
|
|
|
3,462
|
|
|
5,065
|
|
|
5,279
|
|
|
6,647
|
|
|
12/15/2019
|
|
2,640
|
|
|
5,400
|
|
|
—
|
|
|
1,680
|
|
|
—
|
|
|
—
|
|
|
1/1/2020
|
|
8,079
|
|
|
5,113
|
|
|
3,462
|
|
|
3,385
|
|
|
5,279
|
|
|
6,647
|
|
|
1/31/2020
|
|
19,313
|
|
|
—
|
|
|
15,451
|
|
|
7,339
|
|
|
6,180
|
|
|
7,725
|
|
|
2/28/2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,682
|
|
|
2,628
|
|
|
4/1/2020
|
|
12,908
|
|
|
5,113
|
|
|
7,325
|
|
|
5,220
|
|
|
5,143
|
|
|
5,951
|
|
|
6/7/2020
|
|
1,292
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7/1/2020
|
|
11,616
|
|
|
5,113
|
|
|
7,325
|
|
|
5,220
|
|
|
5,142
|
|
|
5,951
|
|
|
10/1/2020
|
|
11,616
|
|
|
5,113
|
|
|
7,325
|
|
|
5,220
|
|
|
5,142
|
|
|
5,951
|
|
|
12/13/2020
|
|
2,761
|
|
|
5,112
|
|
|
—
|
|
|
1,636
|
|
|
—
|
|
|
—
|
|
|
1/1/2021
|
|
8,855
|
|
|
—
|
|
|
7,325
|
|
|
3,583
|
|
|
5,142
|
|
|
5,950
|
|
|
2/26/2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,513
|
|
|
2,269
|
|
|
4/1/2021
|
|
8,855
|
|
|
—
|
|
|
7,325
|
|
|
3,583
|
|
|
3,629
|
|
|
3,680
|
|
|
7/1/2021
|
|
8,855
|
|
|
—
|
|
|
7,325
|
|
|
3,583
|
|
|
3,629
|
|
|
3,679
|
|
|
8/31/2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
747
|
|
|
—
|
|
|
10/1/2021
|
|
8,853
|
|
|
—
|
|
|
7,324
|
|
|
3,583
|
|
|
2,882
|
|
|
3,679
|
|
|
12/12/2021
|
|
3,085
|
|
|
—
|
|
|
3,085
|
|
|
1,748
|
|
|
1,337
|
|
|
—
|
|
|
1/1/2022
|
|
5,768
|
|
|
—
|
|
|
4,239
|
|
|
1,835
|
|
|
1,545
|
|
|
3,679
|
|
|
4/1/2022
|
|
5,768
|
|
|
—
|
|
|
4,239
|
|
|
1,835
|
|
|
1,545
|
|
|
1,931
|
|
|
5/21/2022
|
|
940
|
|
|
—
|
|
|
376
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7/1/2022
|
|
4,828
|
|
|
—
|
|
|
3,862
|
|
|
1,835
|
|
|
1,545
|
|
|
1,931
|
|
|
10/1/2022
|
|
4,828
|
|
|
—
|
|
|
3,862
|
|
|
1,834
|
|
|
1,545
|
|
|
1,931
|
|
|
12/11/2022
|
|
4,828
|
|
|
—
|
|
|
3,862
|
|
|
1,834
|
|
|
1,545
|
|
|
1,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
TOTAL
|
|
188,764
|
|
|
73,018
|
|
|
117,195
|
|
|
80,459
|
|
|
81,612
|
|
|
99,638
|
|
|
(2)
|
Assumes a common stock value of
$15.07
per share (the closing price of Redwood’s common stock on the NYSE on
December 31, 2018
).
|
(3)
|
Represents unearned performance stock units as of
December 31, 2018
. Performance stock units are performance-based equity awards under which the number of underlying shares of Redwood common stock that vest and that the award recipient becomes entitled to receive at the time of vesting will generally range from 0% to 250% based on absolute, book value, and/or relative total shareholder return goals over the three-year performance period. Performance stock units are granted annually and vest, if at all, at the end of the three-year performance period. The table below shows the vesting schedule for unearned performance stock units as of
December 31, 2018
. The number of PSUs shown below is dependent on the interim performance of the respective PSU grants as of
December 31, 2018
. Grant(s) performing at below-target on December 31, 2018 are reflected as target number of shares, and grant(s) performing above-target on December 31, 2018 are reflected as the maximum number of shares that can be earned. The performance stock unit awards relating to the schedule below were granted from December 2016 through December 2018.
|
Total PSUs
Scheduled to Vest On:
|
|
PSUs Shown
|
|
Christopher J.
Abate |
|
Marty S. Hughes
|
|
Dashiell I. Robinson
|
|
Andrew P.
Stone |
|
Collin L. Cochrane
|
|
Garnet W. Kanouse
|
|
||||||
12/13/2019
|
|
Target
|
|
50,981
|
|
|
94,410
|
|
|
—
|
|
|
30,211
|
|
|
—
|
|
|
—
|
|
|
12/12/2020
|
|
Target
|
|
67,144
|
|
|
—
|
|
|
67,144
|
|
|
38,049
|
|
|
29,096
|
|
|
38,049
|
|
|
5/21/2021
|
|
Target
|
|
16,447
|
|
|
—
|
|
|
6,578
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12/31/2021
|
|
Target
|
|
72,547
|
|
|
—
|
|
|
58,038
|
|
|
27,568
|
|
|
23,215
|
|
|
29,019
|
|
|
|
|
Total
|
|
207,119
|
|
|
94,410
|
|
|
131,760
|
|
|
95,828
|
|
|
52,311
|
|
|
67,068
|
|
|
(4)
|
Represents the applicable number of award shares multiplied by a value per share of
$15.07
(the closing price of Redwood common stock on the NYSE on
December 31, 2018
).
|
|
|
Stock Awards
|
|||||
NEO
|
|
Number of
Shares Acquired
on Vesting
(#)
|
|
Value
Realized on
Vesting
($)
(1)
|
|||
Christopher J. Abate
|
|
138,332
|
|
|
$
|
2,185,089
|
|
Marty S. Hughes
|
|
332,041
|
|
|
$
|
5,181,693
|
|
Dashiell I. Robinson
|
|
—
|
|
|
$
|
—
|
|
Andrew P. Stone
|
|
84,380
|
|
|
$
|
1,333,295
|
|
Collin L. Cochrane
|
|
24,091
|
|
|
$
|
383,168
|
|
Garnet W. Kanouse
|
|
35,508
|
|
|
$
|
560,857
|
|
|
NEO
|
|
Executive
Contributions
in 2018
|
|
Redwood Matching Contributions
in 2018
|
|
Aggregate
Earnings in
2018
(1)
|
|
Aggregate
Withdrawals/
Distributions
in 2018
|
|
Aggregate
Balance at
12/31/2018
(2)
|
||||||||||
Christopher J. Abate
(3)
|
|
$
|
2,238,589
|
|
|
$
|
26,750
|
|
|
$
|
5,779
|
|
|
$
|
(1,894,175
|
)
|
|
$
|
1,065,608
|
|
Marty S. Hughes
(4)
|
|
$
|
5,253,193
|
|
|
$
|
13,913
|
|
|
$
|
7,776
|
|
|
$
|
(4,226,354
|
)
|
|
$
|
2,482,809
|
|
Dashiell I. Robinson
(5)
|
|
$
|
20,750
|
|
|
$
|
10,375
|
|
|
$
|
1,119
|
|
|
$
|
(994,489
|
)
|
|
$
|
48,026
|
|
Andrew P. Stone
(6)
|
|
$
|
1,362,795
|
|
|
$
|
14,750
|
|
|
$
|
2,887
|
|
|
$
|
(1,232,827
|
)
|
|
$
|
544,605
|
|
Collin L. Cochrane
(7)
|
|
$
|
404,668
|
|
|
$
|
11,750
|
|
|
$
|
2,526
|
|
|
$
|
(23,979
|
)
|
|
$
|
802,669
|
|
Garnet W. Kanouse
(8)
|
|
$
|
596,357
|
|
|
$
|
17,750
|
|
|
$
|
3,514
|
|
|
$
|
(22,812
|
)
|
|
$
|
1,254,457
|
|
|
(1)
|
Represents market rate interest earned on cash balances in our Executive Deferred Compensation Plan. “Market rate interest” is defined as 120% of long-term applicable federal rate compounded monthly, as published by the IRS.
|
(2)
|
The balance indicated reflects the value of vested deferred stock units in the plan assuming the price of
$15.07
per share (the closing price of Redwood common stock on the NYSE on
December 31, 2018
) and the cash balance in Redwood’s Deferred Compensation Plan, all of which has been previously reported as compensation in prior years.
|
(3)
|
Mr. Abate's contribution included $53,500 in voluntary cash deferrals from his 2018 compensation (reported as compensation in the “Summary Compensation” table above) and $2,185,089 as a result of vesting of previously awarded deferred stock units and performance stock units (reported as compensation in previous years). Mr. Abate received a distribution of 120,436 shares of common stock underlying deferred stock units and performance stock units which were previously awarded in 2014 and 2015 respectively.
|
(4)
|
Mr. Hughes’ contribution included $71,500 in voluntary cash deferrals from his 2018 compensation (reported as compensation in the “Summary Compensation” table above) and $5,181,693 as a result of vesting of previously awarded deferred stock units and performance stock units (reported as compensation in previous years). Mr. Hughes
|
(5)
|
Mr. Robinson’s contribution included $20,750 in voluntary cash deferrals from his 2018 compensation (reported as compensation in the “Summary Compensation” table above) and distribution of 61,237 shares of common stock underlying deferred stock units which were previously awarded in 2017.
|
(1)
|
any one person, or more than one person acting as a group (within the meaning of Section 409A of the Code), acquires ownership of stock of Redwood that, together with other stock held by such person or group constitutes more than 50 percent of the total fair market value or total voting power of all stock of Redwood; or
|
(2)
|
any one person, or more than one person acting as a group (within the meaning of Section 409A of the Code), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Redwood possessing 30 percent or more of the total voting power of the stock of Redwood; or
|
(3)
|
during any 12-month period, a majority of the members of Redwood’s Board of Directors is replaced by directors whose appointment or election is not endorsed by a majority of the members of Redwood’s Board of Directors prior to such appointment or election; or
|
(4)
|
any one person, or more than one person acting as a group (within the meaning of Section 409A of the Code), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Redwood that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of Redwood immediately before such acquisition or acquisition; provided, that no change of control shall be deemed to occur when the assets are transferred to (x) a stockholder of Redwood in exchange for or with respect to its stock, (y) a person, or more than one person acting as a group (within the meaning of Section 409A of the Code), that owns, directly or indirectly, 50 percent or more of the total value or voting power of all of the outstanding stock of Redwood, or (z) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person that owns directly or indirectly 50 percent or more of the total value or voting power of all of the outstanding stock of Redwood, in each case with such persons status determined immediately after the transfer of assets.
|
Name
|
|
Cash
Severance
Payment
|
|
Accelerated
Vesting of
Deferred
Stock Units
(1)
|
|
Benefits
(2)
|
|
Total Value
Involuntary
Termination
Without
“Cause” or
Voluntary
Termination
for “Good
Reason”
(3)
|
||||||||
Christopher J. Abate
|
|
$
|
2,025,000
|
|
|
$
|
2,844,673
|
|
|
$
|
88,361
|
|
|
$
|
4,958,034
|
|
Marty S. Hughes
|
|
$
|
371,371
|
|
|
$
|
1,100,381
|
|
|
$
|
235,869
|
|
|
$
|
1,707,621
|
|
Dashiell I. Robinson
|
|
$
|
1,575,000
|
|
|
$
|
1,766,129
|
|
|
$
|
87,717
|
|
|
$
|
3,428,846
|
|
Andrew P. Stone
|
|
$
|
1,200,000
|
|
|
$
|
1,212,517
|
|
|
$
|
77,246
|
|
|
$
|
2,489,763
|
|
|
(1)
|
The value of acceleration of deferred stock units assumes a common stock price of $15.07 per share (the closing price of Redwood’s common stock on the NYSE on December 31, 2018). Although unvested performance stock units are not forfeited following a termination without “Cause” or, for Mr. Abate, Mr. Robinson, or Mr. Stone, a voluntary termination for "Good Reason," no value for unvested performance stock units was included due to the fact that under the applicable award agreements the performance stock units would vest, if at all, only at the end of the performance period and only to the extent the performance vesting threshold is met at the end of the performance period.
|
(2)
|
Each of Mr. Abate, Mr. Robinson, Mr. Stone, and Mr. Hughes are entitled to a continuation of health insurance, life insurance, and long-term disability insurance for the respective periods specified above following a termination without "Cause" or, for Mr. Abate, Mr. Robinson, or Mr. Stone, a voluntary termination for "Good Reason".
|
Name
|
|
Cash
Severance
Payment
|
|
Accelerated
Vesting of
Deferred
Stock Units
(1)
|
|
Accelerated
Vesting of
Performance
Stock Units
(1)(2)
|
|
Benefits
(3)
|
|
Total Value
Involuntary
Termination
Without
“Cause” or
Voluntary
Termination
for “Good
Reason”
(4)
|
||||||||||
Christopher J. Abate
|
|
$
|
2,025,000
|
|
|
$
|
2,844,673
|
|
|
$
|
963,411
|
|
|
$
|
88,361
|
|
|
$
|
5,921,445
|
|
Marty S. Hughes
|
|
$
|
371,371
|
|
|
$
|
1,100,381
|
|
|
$
|
837,761
|
|
|
$
|
235,869
|
|
|
$
|
2,545,382
|
|
Dashiell I. Robinson
|
|
$
|
1,575,000
|
|
|
$
|
1,766,129
|
|
|
$
|
456,863
|
|
|
$
|
87,717
|
|
|
$
|
3,885,709
|
|
Andrew P. Stone
|
|
$
|
1,200,000
|
|
|
$
|
1,212,517
|
|
|
$
|
506,518
|
|
|
$
|
77,246
|
|
|
$
|
2,996,281
|
|
Collin L. Cochrane
|
|
-
|
|
|
$
|
1,229,893
|
|
|
$
|
182,332
|
|
|
-
|
|
|
$
|
1,412,225
|
|
||
Garnet W. Kanouse
|
|
-
|
|
|
$
|
1,501,543
|
|
|
$
|
238,437
|
|
|
-
|
|
|
$
|
1,739,980
|
|
|
(1)
|
The value of acceleration of deferred stock units and performance stock units assumes a "change in control" price of $15.07 per share (the closing price of Redwood’s common stock on the NYSE on December 31, 2018).
|
(2)
|
The number of performance-based equity awards eligible to vest is determined by reference to the performance attainment through December 31, 2018. Further details regarding the terms of the 2018 PSUs are provided on pages 58-59 of this Proxy Statement under the heading "Executive Compensation - Severance and Change of Control Arrangements."
|
(3)
|
Each of Mr. Abate, Mr. Robinson, Mr. Stone, and Mr. Hughes are entitled to a continuation of health insurance, life insurance, and long-term disability insurance for the period specified above following a termination without "Cause" or, for Mr. Abate, Mr. Robinson, or Mr. Stone, a voluntary termination for "Good Reason".
|
(4)
|
For all four executives, the total value reflected is equivalent to the full amount to be delivered, as it was less than the safe harbor calculation for purposes of Section 280G of the Code.
|
•
|
Median Total Compensation - 2018
. The annual total compensation of the employee who represents Redwood's median compensated employee (other than our CEO) was $132,000; and
|
•
|
CEO's Total Annualized Compensation - 2018
. The annualized total compensation of Redwood's CEO was $5,040,489.
|
•
|
Employee Population
|
•
|
Methodology for Determining Redwood's Median Compensated Employee
|
•
|
Compensation Measure and Annual Total Compensation of Median Compensated Employee
|
•
|
Annualized Total Compensation of CEO
|
Plan Category
|
|
Plan Name
|
|
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights (a)
|
|
Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants and
Rights (b)
|
|
Number of
Securities
Remaining
Available for
Future Issuance
under Equity
Compensation
Plans (excluding
securities
reflected in
column (b))
|
|||||||
Equity compensation plan approved by security holders
|
|
2014 Incentive
Award Plan
|
|
2,965,250
|
|
|
(1)(2)
|
|
—
|
|
|
(3)
|
|
4,616,776
|
|
|
|
2002 Employee
Stock Purchase Plan
|
|
—
|
|
|
|
|
—
|
|
|
|
|
59,431
|
|
Equity compensation plan not approved by security holders
|
|
Amended and Restated Executive Deferred Compensation Plan
|
|
97,218
|
|
|
(4)
|
|
|
|
(3)
|
|
200,755
|
|
|
Total
|
|
|
|
3,062,468
|
|
|
|
|
—
|
|
|
|
|
4,876,962
|
|
(1)
|
As of December 31, 2018, 2,965,250 shares of common stock may be issued pursuant to 2014 Incentive Award Plan (i) 2,244,510 outstanding deferred stock units (DSUs) and restricted stock units (RSUs), and (ii) 725,616 outstanding performance stock units (PSUs) based on target number of shares awarded. Does not include 334,606 shares of restricted stock where the restrictions have not yet lapsed, but which shares are issued and outstanding. For additional information regarding each category of equity awards, please refer to Note 2 below.
|
(2)
|
As of December 31, 2018, 2,244,510 outstanding DSUs and RSUs issuable under the 2014 Incentive Award Plan, consisted of 1,084,539 units which were vested and 1,159,971 units which were unvested. As of December 31, 2018, there were no outstanding stock options. As of December 31, 2018, all 725,616 PSUs were unearned and outstanding (based on the target number of shares to be awarded upon the contingent vesting of PSUs). PSUs are performance-based equity awards under which the number of shares of common stock that may be issued at the time of vesting will generally range from 0% to 250% of the number of PSUs granted based on the level of satisfaction of the applicable performance-based vesting condition over the vesting period, with the number of PSUs granted being adjusted to reflect the value of any dividends paid on shares of common stock during the vesting period.
|
(3)
|
As of December 31, 2018, there were no outstanding stock options and under our equity compensation plans no exercise price is applicable to DSUs, RSUs and PSUs.
|
(4)
|
As of December 31, 2018, 97,218 shares of common stock may be issued pursuant to Redwood's Amended and Restated Executive Deferred Compensation Plan. Through this plan, directors may elect to defer receipt of cash compensation and/or dividend equivalent rights, and instead acquire DSUs, which are 100% vested.
|
|
|
Fiscal Year
2018
|
|
Fiscal Year
2017
|
||||
Audit Fees
|
|
$
|
1,555,675
|
|
|
$
|
1,466,970
|
|
Audit-Related Fees
|
|
190,193
|
|
|
85,600
|
|
||
Total Fees
|
|
$
|
1,745,868
|
|
|
$
|
1,552,570
|
|
•
|
Attract and retain highly qualified and productive executives
|
•
|
Motivate executives to enhance the overall performance and profitability of Redwood, both on a short-term and a long-term basis, with an emphasis on the long-term
|
•
|
Foster long-term alignment of the interests of Redwood’s executives and its stockholders through ownership of Redwood common stock by executives and by rewarding stockholder value creation
|
•
|
Ensure that compensation opportunities are competitive
|
•
|
Avoid incentivizing inappropriate risk taking
|
•
|
The Compensation Committee’s process for reviewing and determining the elements of the CEO’s compensation and that of the other NEOs
|
•
|
The rationale for the different elements of the NEOs' compensation and Redwood’s compensation philosophy, objectives, and methodology for competitive benchmarking
|
•
|
The metrics and goals used for performance-based compensation and factors taken into account in the Committee’s determination of whether those measures and goals were satisfied
|
•
|
The severance and change of control payments that NEOs may become entitled to receive under certain circumstances
|
•
|
The role of the Compensation Committee’s independent compensation consultant
|
2002 Redwood Trust, Inc. Employee Stock Purchase Plan
|
||||||
Name and Position
|
|
No. of Shares
|
Dollar Value ($)
(1)
|
|||
Christopher J. Abate,
CEO
|
|
760
|
|
$
|
27,221
|
|
Marty S. Hughes,
(Retired) CEO
(2)
|
|
—
|
|
—
|
|
|
Dashiell I. Robinson,
President
|
|
—
|
|
—
|
|
|
Andrew P. Stone,
Executive VP and General Counsel
|
|
845
|
|
$
|
12,578
|
|
Collin L. Cochrane,
CFO
|
|
—
|
|
—
|
|
|
Garnet W. Kanouse,
Managing Director - Head of Residential
|
|
11,760
|
|
$
|
208,882
|
|
All current Executive Officers (as a group)
(3)
|
|
27,951
|
|
$
|
540,248
|
|
All current Non-Executive Officer Directors (as a group)
(4)
|
|
—
|
|
—
|
|
|
ESPP Participant who is 5% holder
|
|
—
|
|
—
|
|
|
All current Employees (as a group)
|
|
362,618
|
|
$
|
7,175,638
|
|
|
|
Calculation of:
|
||||||
|
|
GAAP
ROE
|
|
Adjusted
ROE
|
||||
2018 GAAP Net Income
|
|
$
|
119,600
|
|
|
$
|
119,600
|
|
2018 Average GAAP Equity
|
|
$
|
1,280,287
|
|
|
$
|
1,280,287
|
|
Adjustment: Subtract average 2018 GAAP Accumulated Other Comprehensive Income
(1)
|
|
—
|
|
|
$
|
76,309
|
|
|
2018 Average Equity
|
|
$
|
1,280,287
|
|
|
$
|
1,203,978
|
|
Calculation: Divide 2018 GAAP Net Income by 2018 Average Equity
|
|
9.3
|
%
|
|
9.9
|
%
|
|
(1)
|
Represents cumulative net unrealized mark-to-market gains and losses on available-for-sale securities and cash flow hedges on certain of Redwood’s long-term debt.
|
|
|
Calculation of:
|
||||||
|
|
GAAP
ROE
|
|
Adjusted
ROE
|
||||
2017 GAAP Net Income
|
|
$
|
140,406
|
|
|
$
|
140,406
|
|
2017 Average GAAP Equity
|
|
$
|
1,181,056
|
|
|
$
|
1,181,056
|
|
Adjustment: Subtract average 2017 GAAP Accumulated Other Comprehensive Income
(1)
|
|
—
|
|
|
$
|
74,202
|
|
|
2017 Average Equity
|
|
$
|
1,181,056
|
|
|
$
|
1,106,854
|
|
Calculation: Divide 2017 GAAP Net Income by 2017 Average Equity
|
|
11.9
|
%
|
|
12.7
|
%
|
|
(1)
|
Represents cumulative net unrealized mark-to-market gains and losses on available-for-sale securities and cash flow hedges on certain of Redwood’s long-term debt.
|
|
|
Calculation of:
|
||||||
|
|
GAAP
ROE
|
|
Adjusted
ROE
|
||||
2016 GAAP Net Income
|
|
$
|
131,252
|
|
|
$
|
131,252
|
|
2016 Average GAAP Equity
|
|
$
|
1,112,313
|
|
|
$
|
1,112,313
|
|
Adjustment: Subtract average 2016 GAAP Accumulated Other Comprehensive Income
(1)
|
|
—
|
|
|
$
|
58,803
|
|
|
2016 Average Equity
|
|
$
|
1,112,313
|
|
|
$
|
1,053,510
|
|
Calculation: Divide 2016 GAAP Net Income by 2016 Average Equity
|
|
11.8
|
%
|
|
12.5
|
%
|
|
(1)
|
Represents cumulative net unrealized mark-to-market gains and losses on available-for-sale securities and cash flow hedges on certain of Redwood’s long-term debt.
|
|
|
Calculation of:
|
||||||
|
|
GAAP
ROE
|
|
Adjusted
ROE
|
||||
2015 GAAP Net Income
|
|
$
|
102,088
|
|
|
$
|
102,088
|
|
2015 Average GAAP Equity
|
|
$
|
1,240,345
|
|
|
$
|
1,240,345
|
|
Adjustment: Subtract average 2015 GAAP Accumulated Other Comprehensive Income
(1)
|
|
—
|
|
|
$
|
129,858
|
|
|
2015 Average Equity
|
|
$
|
1,240,345
|
|
|
$
|
1,110,487
|
|
Calculation: Divide 2015 GAAP Net Income by 2015 Average Equity
|
|
8.2
|
%
|
|
9.2
|
%
|
|
(1)
|
Represents cumulative net unrealized mark-to-market gains and losses on available-for-sale securities and cash flow hedges on certain of Redwood’s long-term debt.
|
|
|
Calculation of:
|
||||||
|
|
GAAP
ROE
|
|
Adjusted
ROE
|
||||
2014 GAAP Net Income
|
|
$
|
100,569
|
|
|
$
|
100,569
|
|
2014 Average GAAP Equity
|
|
$
|
1,250,627
|
|
|
$
|
1,250,627
|
|
Adjustment: Subtract average 2014 GAAP Accumulated Other Comprehensive Income
(1)
|
|
—
|
|
|
$
|
157,521
|
|
|
2014 Average Equity
|
|
$
|
1,250,627
|
|
|
$
|
1,093,106
|
|
Calculation: Divide 2014 GAAP Net Income by 2014 Average Equity
|
|
8.0
|
%
|
|
9.2
|
%
|
|
(1)
|
Represents cumulative net unrealized mark-to-market gains and losses on available-for-sale securities and cash flow hedges on certain of Redwood’s long-term debt.
|
◦
|
This group of publicly-traded mortgage REITs ("mREIT Peers") is used in the performance comparisons in the Executive Summary of CD&A. Each mREIT peer is listed below, together with its ticker symbol.
|
•
|
AG Mortgage Investment Trust Inc. (MITT)
|
•
|
AGNC Investment Corp. (AGNC)
|
•
|
Annaly Capital Management, Inc. (NLY)
|
•
|
Anworth Mortgage Asset Corp. (ANH)
|
•
|
Armour Residential REIT, Inc. (ARR)
|
•
|
Capstead Mortgage Corp. (CMO)
|
•
|
Chimera Investment Corporation (CIM)
|
•
|
Dynex Capital Inc. (DX)
|
•
|
Invesco Mortgage Capital Inc. (IVR)
|
•
|
MFA Financial, Inc. (MFA)
|
•
|
New Residential Investment Corp. (NRZ)
|
•
|
New York Mortgage Trust Inc. (NYMT)
|
•
|
PennyMac Mortgage Investment Trust (PMT)
|
•
|
Two Harbors Investment Corp. (TWO)
|
◦
|
A subset of the mREIT peers ("Agency Peers") are publicly-traded mortgage REITs that focus on investing in mortgage-backed securities issued or guaranteed by, Fannie Mae, Freddie Mac, or other government-sponsored enterprises or Federal agencies (“Agency MBS”). This subset of Agency Peers is comprised of the following:
|
•
|
AGNC Investment Corp. (AGNC)
|
•
|
Annaly Capital Management, Inc. (NLY)
|
•
|
Anworth Mortgage Asset Corp. (ANH)
|
•
|
Capstead Mortgage Corp. (CMO)
|
•
|
Two Harbors Investment Corp. (TWO)
|
◦
|
Another subset of the mREIT peers ("Hybrid/Credit Peers") are publicly-traded mortgage REITs that focus on investing in residential mortgages with credit risk exposure, as well as Agency MBS. This subset of Agency Peers is comprised of the following:
|
•
|
AG Mortgage Investment Trust Inc. (MITT)
|
•
|
Armour Residential REIT, Inc. (ARR)
|
•
|
Chimera Investment Corporation (CIM)
|
•
|
Dynex Capital Inc. (DX)
|
•
|
Invesco Mortgage Capital Inc. (IVR)
|
•
|
MFA Financial, Inc. (MFA)
|
•
|
New Residential Investment Corp. (NRZ)
|
•
|
New York Mortgage Trust Inc. (NYMT)
|
•
|
PennyMac Mortgage Investment Trust (PMT)
|
◦
|
Redwood Trust, Inc. is identified by its ticker symbol (RWT)
|
•
|
Arbor Realty Trust, Inc. (ABR)
|
•
|
Ares Commercial Real Estate Corporation (ACRE)
|
•
|
AGNC Investment Corp. (AGNC)
|
•
|
Great Ajax Corp. (AJX)
|
•
|
Anworth Mortgage Asset Corporation (ANH)
|
•
|
Apollo Commercial Real Estate Finance, Inc. (ARI)
|
•
|
ARMOUR Residential REIT, Inc. (ARR)
|
•
|
Blackstone Mortgage Trust, Inc. (BXMT)
|
•
|
Cherry Hill Mortgage Investment Corporation (CHMI)
|
•
|
Chimera Investment Corporation (CIM)
|
•
|
Capstead Mortgage Corporation (CMO)
|
•
|
Dynex Capital, Inc. (DX)
|
•
|
Ellington Residential Mortgage REIT (EARN)
|
•
|
Granite Point Mortgage Trust Inc. (GPMT)
|
•
|
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI)
|
•
|
Hunt Companies Finance Trust, Inc. (HCFT)
|
•
|
Invesco Mortgage Capital Inc. (IVR)
|
•
|
Jernigan Capital, Inc. (JCAP)
|
•
|
KKR Real Estate Finance Trust Inc. (KREF)
|
•
|
Ladder Capital Corp (LADR)
|
•
|
MFA Financial, Inc. (MFA)
|
•
|
AG Mortgage Investment Trust, Inc. (MITT)
|
•
|
Annaly Capital Management, Inc. (NLY)
|
•
|
New Residential Investment Corp. (NRZ)
|
•
|
New York Mortgage Trust, Inc. (NYMT)
|
•
|
Orchid Island Capital, Inc. (ORC)
|
•
|
Owens Realty Mortgage, Inc. (ORM)
|
•
|
PennyMac Mortgage Investment Trust (PMT)
|
•
|
Ready Capital Corporation (RC)
|
•
|
Sachem Capital Corp. (SACH)
|
•
|
iStar Inc. (STAR)
|
•
|
Starwood Property Trust, Inc. (STWD)
|
•
|
Tremont Mortgage Trust (TRMT)
|
•
|
TPG RE Finance Trust, Inc. (TRTX)
|
•
|
Two Harbors Investment Corp. (TWO)
|
•
|
Western Asset Mortgage Capital Corporation (WMC)
|
•
|
Exantas Capital Corp. (XAN)
|