During the second quarter of 2023, Redwood shareholders approved an additional 9,650,000 shares of common stock for grant under our Incentive Plan. At December 31, 2023 and 2022, 10,211,459 and 2,896,604 shares of common stock, respectively, were available for grant under our Incentive Plan. The unamortized compensation cost of awards issued under the Incentive Plan which are settled by delivery of shares of common stock, and purchases under the Employee Stock Purchase Plan, totaled $38 million at December 31, 2023, as shown in the following table.


	Year Ended December 31, 2023
(In Thousands)	Restricted Stock Units		Deferred Stock Units		Performance Stock Units		Employee Stock Purchase Plan		Total
Unrecognized compensation cost at beginning of period	$	5,068	$	19,849	$	15,271	$	—	$	40,188
Equity grants	2,167		11,107		8,755		282		22,311
Performance-based valuation adjustment	—		—		(4,553)		—		(4,553)
Equity grant forfeitures	(1,115)		(719)		—		—		(1,834)
Equity compensation expense	(2,954)		(11,317)		(3,954)		(282)		(18,507)
Unrecognized Compensation Cost at End of Period	$	3,166	$	18,920	$	15,519	$	—	$	37,605


	Years Ended December 31,
	2023			2022			2021
	Shares	Weighted Average Grant Date Fair Market Value		Shares	Weighted Average Grant Date Fair Market Value		Shares	Weighted Average Grant Date Fair Market Value
Outstanding at beginning of period	—	$	—	28,141	$	14.74	78,998	$	15.23
Granted	—	—		—	—		—	—
Vested	—	—		(27,800)	14.74		(50,857)	15.50
Forfeited	—	—		(341)	14.66		—
Outstanding at End of Period	—	$	—	—	$	—	28,141	$	14.74

The expenses recorded for RSAs were zero, $0.1 million, and $0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there were no restricted stock awards outstanding or any remaining unrecognized compensation costs related to these awards.


	Years Ended December 31,
	2023			2022			2021
	Shares	Weighted Average Grant Date Fair Market Value		Shares	Weighted Average Grant Date Fair Market Value		Shares	Weighted Average Grant Date Fair Market Value
Outstanding at beginning of period	806,119	$	9.22	431,072	$	11.55	282,424	$	16.09
Granted	275,005	7.88		558,388	8.38		272,261	8.80
Vested	(354,813)	9.21		(134,426)	12.56		(78,270)	15.93
Forfeited	(132,741)	8.40		(48,915)	11.04		(45,343)	15.75
Outstanding at End of Period	593,570	$	8.79	806,119	$	9.22	431,072	$	11.55

We generally grant RSUs annually, as part of our compensation process. In addition, RSUs are granted from time to time in connection with hiring and promotions. RSUs generally vest over the course of a four-year vesting period, and are distributed annually, at the end of each vesting period.

The expenses recorded for RSUs were $3 million, $3 million, and $2 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there was $3 million of unrecognized compensation cost related to unvested RSUs. This cost will be recognized over a weighted average period of less than 2 years. Restrictions on shares underlying RSUs outstanding lapse through 2027.


	Years Ended December 31,
	2023			2022			2021
	Units	Weighted Average Grant Date Fair Market Value		Units	Weighted Average Grant Date Fair Market Value		Units	Weighted Average Grant Date Fair Market Value
Outstanding at beginning of period	4,831,338	$	11.31	4,022,088	$	12.93	2,805,144	$	13.84
Granted	1,499,621	7.77		1,759,344	8.83		1,588,862	12.04
Distributions	(1,459,666)	11.71		(551,401)	11.35		(340,757)	15.82
Forfeitures	(50,121)	7.54		(398,693)	12.07		(31,161)	17.65
Balance at End of Period	4,821,172	$	10.13	4,831,338	$	11.31	4,022,088	$	12.93

We generally grant DSUs annually, as part of our compensation process. In addition, DSUs are granted from time to time in connection with hiring and promotions and in lieu of the payment in cash of a portion of annual bonus earned. DSUs generally vest over the course of a four-year vesting period, and are distributed after the end of the final vesting period or after an employee is terminated. At December 31, 2023 and 2022, the number of outstanding DSUs that were unvested was 2,536,692 and 2,335,551, respectively, and the weighted average grant-date fair value of these unvested DSUs was $9.05 and $10.74 at December 31, 2023 and 2022, respectively. Unvested DSUs at December 31, 2023 will vest through 2027.

Expenses related to DSUs were $11 million, $13 million, and $9 million for the years ended December 31, 2023, 2022, and 2021, respectively. At December 31, 2023, there was $19 million of unrecognized compensation cost related to unvested DSUs. This cost will be recognized over a weighted average period of less than 2 years.

We generally grant PSUs annually, as part of our compensation process. PSUs generally have performance-based vesting over the course of a three-year vesting/performance period, and, subject to meeting certain performance criteria, will vest and be distributed after the end of the vesting period.

At December 31, 2023 and 2022, the target number of PSUs that were unvested was 3,072,039 and 2,354,002, respectively. During 2023, 2022, and 2021, 993,868, 1,086,153, and 518,173 target number of PSUs were granted, respectively, with per unit grant date fair values of $8.81, $9.09, and $15.68, respectively. The end of the vesting period for 473,845 target PSU awards that were granted in 2020 was January 1, 2024, and based upon the performance-based vesting criteria of these awards, approximately 560,000 shares of our common stock underlying these PSUs qualified for vesting, subject to approval by our Board of Directors during the first quarter of 2024. During the years ended December 31, 2023, 2022, and 2021 there were no PSUs forfeited due to employee departures.

With respect to 993,868, 1,086,153, 518,173, and 473,845 target number of PSUs granted in December 2023, December 2022, December 2021, and December 2020, respectively, and outstanding at December 31, 2023, the number of underlying shares of common stock that vest and that the recipient becomes entitled to receive at the time of vesting will generally range from 0% to 250% of the target number of PSUs granted, with the target number of PSUs granted being adjusted to reflect the value of any dividends declared on our common stock during the vesting period. Vesting of these PSUs will generally occur as of January 1, 2027 for the December 2023 awards, January 1, 2026 for the December 2022 awards, January 1, 2025 for the December 2021 awards, and occurred

•First, vesting would range from 0% - 250% of two-thirds of the Target PSUs granted based on the level of book value total shareholder return ("bvTSR") attained over the three-year vesting period, with 100% of this two-thirds of the Target PSUs vesting if three-year bvTSR is 25%. bvTSR is defined as the percentage by which our book value "per share price" has increased or decreased as of the last day of the three-year vesting period relative to the first day of such vesting period, adjusted to reflect the reinvestment of all dividends declared and/or paid on our common stock.

•Second, vesting would range from 0% - 250% of one-third of the Target PSUs granted based on Redwood’s relative total shareholder return (“rTSR”) against a comparator group of companies measured over the three-year vesting period, with 100% of this one-third of the Target PSUs vesting if three-year rTSR corresponds to 55th percentile rTSR.

•Third, if the aggregate vesting level after steps one and two is greater than 100% of the Target PSUs, but the Company's absolute total shareholder return ("TSR") is negative over the three-year performance period, vesting would be capped at 100% of Target PSUs. TSR is defined as the percentage by which our common stock “per share price” has increased or decreased as of the last day of the three-year vesting period relative to the first day of such vesting period, adjusted to reflect the reinvestment of all dividends declared and/or paid on our common stock.

•First, Target PSUs are divided into three equal tranches. Baseline vesting for each tranche would range from 0% - 200% of the Target PSUs in such tranche based on the level of the Company's bvTSR attained over a corresponding calendar year measurement period within the three-year vesting period, with 100% of the Target PSUs in each tranche vesting if one-year bvTSR for such tranche is 7.7%.

•Second, at the end of the three-year vesting period, the aggregate vesting level of the three tranches, or total baseline vesting, would then be adjusted to increase or decrease by up to 50 percentage points based on the Company's three-year rTSR against a comparator group of companies measured over the three-year vesting period, with median rTSR performance correlating to no adjustment from the total baseline level of vesting.

•Third, if the aggregate vesting level after steps one and two is greater than 100% of the Target PSUs, but the Company's absolute TSR is negative over the three-year performance period, vesting would be capped at 100% of Target PSUs.

The grant date fair value of the December 2023 PSUs of $8.81 per unit was determined through Monte-Carlo simulations using the following assumptions: the common stock closing price at the grant date for Redwood and each member of the comparator group, the average closing price of the common stock price for the 60 trading days beginning January 1, 2024 for Redwood and each member of the comparator group, and the range of performance-based vesting based on absolute TSR over three years from the grant date. For the 2023 PSU grant, an implied volatility assumption of 35.85% (based on historical volatility), a risk-free rate of 4.04% (the applicable interpolated U.S. Treasury benchmark rate), and a 0% dividend yield (the mathematical equivalent to reinvesting the dividends over the three-year performance period as is consistent with the terms of the PSUs) were used.

The grant date fair value of the December 2022 PSUs of $9.09 per unit was determined through Monte-Carlo simulations using the following assumptions: the common stock closing price at the grant date for Redwood and each member of the comparator group, the average closing price of the common stock price for the 60 trading days beginning January 1, 2023 for Redwood and each member of the comparator group, and the range of performance-based vesting based on absolute TSR over three years from the grant date. For the 2022 PSU grant, an implied volatility assumption of 69% (based on historical volatility), a risk-free rate of 3.91% (the applicable interpolated U.S. Treasury benchmark rate), and a 0% dividend yield (the mathematical equivalent to reinvesting the dividends over the three-year performance period as is consistent with the terms of the PSUs) were used.

The grant date fair value of the December 2021 PSUs of $15.68 per unit was determined through Monte-Carlo simulations using the following assumptions: the common stock closing price at the grant date for Redwood and each member of the comparator group, the average closing price of the common stock price for the 60 trading days beginning January 1, 2022 for Redwood and each member of the comparator group, and the range of performance-based vesting based on absolute TSR over three years from the grant date. For the 2021 PSU grant, an implied volatility assumption of 59% (based on historical volatility), a risk-free rate of 0.98% (the three-year U.S. Treasury benchmark rate on the grant date), and a 0% dividend yield (the mathematical equivalent to reinvesting the dividends over the three-year performance period as is consistent with the terms of the PSUs) were used.

The grant date fair value of the December 2020 PSUs of $10.42 per unit was determined through Monte-Carlo simulations using the following assumptions: the common stock closing price at the grant date for Redwood and each member of the comparator group, the average closing price of the common stock price for the 60 trading days beginning January 1, 2021 for Redwood and each member of the comparator group, and the range of performance-based vesting based on absolute TSR over three years from the grant date. For the 2020 PSU grant, an implied volatility assumption of 54% (based on historical volatility), a risk-free rate of 0.18% (the three-year Treasury rate on the grant date), and a 0% dividend yield (the mathematical equivalent to reinvesting the dividends over the three-year performance period as is consistent with the terms of the PSUs) were used.

Expenses related to PSUs were $4 million for the year ended December 31, 2023, $4 million for the year ended December 31, 2022, and $3 million for the year ended December 31, 2021. As of December 31, 2023, there was $16 million of unrecognized compensation cost related to unvested PSUs.

During 2023, for PSUs granted in 2022, 2021 and 2020, we adjusted the cumulative expected amortization expense down by $5 million to reflect our revised vesting estimates for certain PSU grants. For PSUs granted in 2021 and 2020, our revised estimates were that none of the shares would vest in relation to the bvTSR performance condition for the second-year vesting tranche of the 2021 PSU grant and the third-year vesting tranche of the 2020 PSU grant. For PSUs granted in 2022, our revised estimate was that 75% of the shares would vest in relation to the bvTSR performance condition.

During 2022, for PSUs granted in 2021 and 2020, we adjusted the cumulative expected amortization expense down by $3 million to reflect our revised vesting estimate that none of the shares would vest in relation to the bvTSR performance condition for the initial one-year vesting tranche of the 2021 PSU grant and the second-year vesting tranche of the 2020 PSU grant. During 2021, for PSUs granted in 2020, we adjusted the cumulative expected amortization expense up by $1 million to reflect our revised estimate that 200% of the target shares would vest in relation to the bvTSR performance condition for the initial one-year vesting tranche.

The ESPP allows a maximum of 850,000 shares of common stock to be purchased in aggregate for all employees. As of December 31, 2023, 763,369 shares had been purchased, and there remained a negligible amount of uninvested employee contributions in the ESPP at December 31, 2023.


	Years Ended December 31,
(In Thousands)	2023		2022		2021
Balance at beginning of period	$	36	$	7	$	17
Employee purchases	567		584		595
Cost of common stock issued	(597)		(555)		(605)
Balance at End of Period	$	6	$	36	$	7


	Years Ended December 31,
(In Thousands)	2023		2022		2021
Balance at beginning of period	$	3,307	$	2,730	$	2,289
New deferrals	1,069		1,083		1,017
Accrued interest	155		108		56
Withdrawals	(1,333)		(614)		(632)
Balance at End of Period	$	3,198	$	3,307	$	2,730

In November 2023, our Board of Directors approved an amendment to the EDCP to increase by 100,000 shares the shares available to allow non-employee directors to defer certain cash payments and dividends into DSUs. At December 31, 2023, there were 169,969 shares available for grant under this plan.