UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 1-12378

NVR, Inc.

(Exact name of registrant as specified in its charter)


Virginia						54-1394360
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

11700 Plaza America Drive, Suite 500

Reston, Virginia 20190

(703) 956-4000

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Not Applicable

(Former name, former address, and former fiscal year if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

NVR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 2, 2020~~October 31, 2021 there were ~~3,720,432~~3,482,747 total shares of common stock outstanding.

NVR, Inc.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NVR, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
September 30, 2020 December 31, 2019
ASSETS
Homebuilding:
Cash and cash equivalents $ 2,539,460 $ 1,110,892
Restricted cash 28,026 17,943
Receivables 21,461 18,278
Inventory:
Lots and housing units, covered under sales agreements with customers 1,541,587 1,075,420
Unsold lots and housing units 124,371 184,352
Land under development 63,608 69,196
Building materials and other 33,620 18,320
1,763,186 1,347,288
Contract land deposits, net 377,105 413,851
Property, plant and equipment, net 58,570 52,260
Operating lease right-of-use assets 54,964 63,825
Reorganization value in excess of amounts allocable to identifiable assets, net 41,580 41,580
Other assets 204,343 176,144
5,088,695 3,242,061
Mortgage Banking:
Cash and cash equivalents 21,546 29,412
Restricted cash 3,172 2,276
Mortgage loans held for sale, net 340,927 492,125
Property and equipment, net 4,896 5,828
Operating lease right-of-use assets 13,376 13,345
Reorganization value in excess of amounts allocable to identifiable assets, net 7,347 7,347
Other assets 19,961 17,421
411,225 567,754
Total assets $ 5,499,920 $ 3,809,815


NVR, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

	September 30, 2021		December 31, 2020
ASSETS
Homebuilding:
Cash and cash equivalents	$	2,681,110	$	2,714,720
Restricted cash	41,820		28,912
Receivables	22,525		18,299
Inventory:
Lots and housing units, covered under sales agreements with customers	1,697,959		1,484,936
Unsold lots and housing units	130,427		123,197
Land under development	8,151		62,790
Building materials and other	26,988		38,159
	1,863,525		1,709,082

Contract land deposits, net	453,255		387,628
Property, plant and equipment, net	55,253		57,786
Operating lease right-of-use assets	60,605		53,110
Reorganization value in excess of amounts allocable to identifiable assets, net	41,580		41,580
Other assets	211,557		203,399
	5,431,230		5,214,516
Mortgage Banking:
Cash and cash equivalents	21,999		63,547
Restricted cash	2,860		2,334
Mortgage loans held for sale, net	287,525		449,760
Property and equipment, net	3,948		4,544
Operating lease right-of-use assets	10,747		12,439
Reorganization value in excess of amounts allocable to identifiable assets, net	7,347		7,347
Other assets	23,238		22,654
	357,664		562,625
Total assets	$	5,788,894	$	5,777,141

See notes to condensed consolidated financial statements.


NVR, Inc.	NVR, Inc.					NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)	Condensed Consolidated Balance Sheets (Continued)					Condensed Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)	(in thousands, except share and per share data)					(in thousands, except share and per share data)
(unaudited)	(unaudited)					(unaudited)

		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Homebuilding:	Homebuilding:					Homebuilding:
Accounts payable	Accounts payable	$	342,412	$	262,987	Accounts payable	$	329,863	$	339,867
Accrued expenses and other liabilities	Accrued expenses and other liabilities	387,757		346,035		Accrued expenses and other liabilities	416,266		440,671
Customer deposits	Customer deposits	211,122		131,886		Customer deposits	381,594		240,758
Operating lease liabilities	Operating lease liabilities	61,382		71,095		Operating lease liabilities	66,002		59,357
Senior notes	Senior notes	1,517,982		598,301		Senior notes	1,516,544		1,517,395
		2,520,655		1,410,304			2,710,269		2,598,048
Mortgage Banking:	Mortgage Banking:					Mortgage Banking:
Accounts payable and other liabilities	Accounts payable and other liabilities	45,906		43,985		Accounts payable and other liabilities	50,077		62,720
Operating lease liabilities	Operating lease liabilities	14,366		14,282		Operating lease liabilities	11,497		13,299
		60,272		58,267			61,574		76,019
Total liabilities	Total liabilities	2,580,927		1,468,571		Total liabilities	2,771,843		2,674,067

Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2020 and December 31, 2019		206		206
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2021 and December 31, 2020						Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2021 and December 31, 2020	206		206
Additional paid-in capital	Additional paid-in capital	2,188,207		2,055,407		Additional paid-in capital	2,349,000		2,214,426
Deferred compensation trust – 106,697 and 107,295 shares of NVR, Inc. common stock as of September 30, 2020 and December 31, 2019, respectively		(16,710)		(16,912)
Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both September 30, 2021 and December 31, 2020						Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both September 30, 2021 and December 31, 2020	(16,710)		(16,710)
Deferred compensation liability	Deferred compensation liability	16,710		16,912		Deferred compensation liability	16,710		16,710
Retained earnings	Retained earnings	8,506,116		7,909,872		Retained earnings	9,713,258		8,811,120
Less treasury stock at cost – 16,836,943 and 16,922,558 shares as of September 30, 2020 and December 31, 2019, respectively		(7,775,536)		(7,624,241)
Less treasury stock at cost – 17,042,644 and 16,859,753 shares as of September 30, 2021 and December 31, 2020, respectively						Less treasury stock at cost – 17,042,644 and 16,859,753 shares as of September 30, 2021 and December 31, 2020, respectively	(9,045,413)		(7,922,678)
Total shareholders' equity	Total shareholders' equity	2,918,993		2,341,244		Total shareholders' equity	3,017,051		3,103,074
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	5,499,920	$	3,809,815	Total liabilities and shareholders' equity	$	5,788,894	$	5,777,141

See notes to condensed consolidated financial statements.

Table of Contents

NVR, Inc.

Condensed Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Homebuilding:
Revenues $ 1,920,751 $ 1,873,331 $ 5,065,216 $ 5,273,985
Other income 1,988 6,696 9,732 18,266
Cost of sales (1,536,044) (1,518,276) (4,115,280) (4,282,470)
Selling, general and administrative (105,741) (109,969) (318,610) (337,913)
Operating income 280,954 251,782 641,058 671,868
Interest expense (11,309) (6,008) (26,689) (18,034)
Homebuilding income 269,645 245,774 614,369 653,834
Mortgage Banking:
Mortgage banking fees 69,261 37,933 127,692 124,484
Interest income 2,222 3,340 6,545 8,910
Other income 887 819 2,215 2,039
General and administrative (20,180) (20,407) (57,149) (57,999)
Interest expense (378) (285) (1,009) (775)
Mortgage banking income 51,812 21,400 78,294 76,659
Income before taxes 321,457 267,174 692,663 730,493
Income tax expense (64,991) (43,387) (96,419) (108,091)
Net income $ 256,466 $ 223,787 $ 596,244 $ 622,402
Basic earnings per share $ 69.19 $ 60.94 $ 161.85 $ 171.43
Diluted earnings per share $ 65.11 $ 56.11 $ 153.03 $ 156.61
Basic weighted average shares outstanding 3,706 3,672 3,684 3,631
Diluted weighted average shares outstanding 3,939 3,988 3,896 3,974


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Homebuilding:
Revenues	$	2,336,615	$	1,920,751	$	6,524,886	$	5,065,216
Other income	1,496		1,988		4,714		9,732
Cost of sales	(1,817,939)		(1,536,044)		(5,117,065)		(4,115,280)
Selling, general and administrative	(112,226)		(105,741)		(347,051)		(318,610)
Operating income	407,946		280,954		1,065,484		641,058
Interest expense	(12,838)		(11,309)		(38,694)		(26,689)
Homebuilding income	395,108		269,645		1,026,790		614,369

Mortgage Banking:
Mortgage banking fees	59,025		69,261		195,798		127,692
Interest income	2,336		2,222		6,577		6,545
Other income	1,022		887		2,877		2,215
General and administrative	(22,959)		(20,180)		(67,228)		(57,149)
Interest expense	(405)		(378)		(1,216)		(1,009)
Mortgage banking income	39,019		51,812		136,808		78,294

Income before taxes	434,127		321,457		1,163,598		692,663
Income tax expense	(102,046)		(64,991)		(261,460)		(96,419)

Net income	$	332,081	$	256,466	$	902,138	$	596,244

Basic earnings per share	$	93.25	$	69.19	$	249.30	$	161.85

Diluted earnings per share	$	86.44	$	65.11	$	231.75	$	153.03

Basic weighted average shares outstanding	3,561		3,706		3,619		3,684

Diluted weighted average shares outstanding	3,842		3,939		3,893		3,896

See notes to condensed consolidated financial statements.

Table of Contents

NVR, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended September 30,
2020 2019
Cash flows from operating activities:
Net income $ 596,244 $ 622,402
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,801 15,369
Equity-based compensation expense 35,565 58,680
Contract land deposit and other impairments (recoveries), net 32,751 (456)
Gain on sale of loans, net (100,348) (95,690)
Mortgage loans closed (3,663,220) (3,749,567)
Mortgage loans sold and principal payments on mortgage loans held for sale 3,914,000 3,885,688
Distribution of earnings from unconsolidated joint ventures 0 3,376
Net change in assets and liabilities:
Increase in inventory (416,488) (243,339)
Decrease (increase) in contract land deposits 4,585 (8,217)
Increase in receivables (3,060) (8,481)
Increase in accounts payable and accrued expenses 109,921 27,995
Increase in customer deposits 79,236 4,691
Other, net (26,647) (3,015)
Net cash provided by operating activities 579,340 509,436
Cash flows from investing activities:
Investments in and advances to unconsolidated joint ventures (435) (335)
Distribution of capital from unconsolidated joint ventures 0 8,237
Purchase of property, plant and equipment (12,329) (16,740)
Proceeds from the sale of property, plant and equipment 665 1,517
Net cash used in investing activities (12,099) (7,321)
Cash flows from financing activities:
Purchase of treasury stock (216,582) (365,542)
Proceeds from the issuance of senior notes 923,905 0
Debt issuance costs (4,750) 0
Principal payments on finance lease liabilities (665) (116)
Proceeds from the exercise of stock options 162,522 247,355
Net cash provided by (used in) financing activities 864,430 (118,303)
Net increase in cash, restricted cash, and cash equivalents 1,431,671 383,812
Cash, restricted cash, and cash equivalents, beginning of the period 1,160,804 732,248
Cash, restricted cash, and cash equivalents, end of the period $ 2,592,475 $ 1,116,060
Supplemental disclosures of cash flow information:
Interest paid during the period, net of interest capitalized $ 24,957 $ 24,040
Income taxes paid during the period, net of refunds $ 86,214 $ 109,116


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	902,138	$	596,244
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,720		16,801
Equity-based compensation expense	42,859		35,565
Contract land deposit and other (recoveries) impairments, net	(17,474)		32,751
Gain on sale of loans, net	(162,729)		(100,348)
Mortgage loans closed	(4,599,324)		(3,663,220)
Mortgage loans sold and principal payments on mortgage loans held for sale	4,918,464		3,914,000
Distribution of earnings from unconsolidated joint ventures	7,500		—
Net change in assets and liabilities:
Increase in inventory	(154,443)		(416,488)
(Increase) decrease in contract land deposits	(48,153)		4,585
Increase in receivables	(2,349)		(3,060)
(Decrease) increase in accounts payable and accrued expenses	(44,970)		109,921
Increase in customer deposits	140,836		79,236
Other, net	(14,783)		(26,647)
Net cash provided by operating activities	982,292		579,340

Cash flows from investing activities:
Investments in and advances to unconsolidated joint ventures	(861)		(435)

Purchase of property, plant and equipment	(11,946)		(12,329)
Proceeds from the sale of property, plant and equipment	821		665
Net cash used in investing activities	(11,986)		(12,099)

Cash flows from financing activities:
Purchase of treasury stock	(1,152,855)		(216,582)
Proceeds from senior notes	—		923,905
Debt issuance costs	—		(4,750)

Principal payments on finance lease liabilities	(1,008)		(665)
Proceeds from the exercise of stock options	121,835		162,522
Net cash (used in) provided by financing activities	(1,032,028)		864,430

Net (decrease) increase in cash, restricted cash, and cash equivalents	(61,722)		1,431,671
Cash, restricted cash, and cash equivalents, beginning of the period	2,809,782		1,160,804

Cash, restricted cash, and cash equivalents, end of the period	$	2,748,060	$	2,592,475

Supplemental disclosures of cash flow information:
Interest paid during the period, net of interest capitalized	$	39,473	$	24,957
Income taxes paid during the period, net of refunds	$	289,850	$	86,214

See notes to condensed consolidated financial statements.

Table of Contents

NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements include the accounts of NVR, Inc. (“NVR”, the “Company”, "we", "us" or "our") and its subsidiaries and certain other entities in which the Company is deemed to be the primary beneficiary (see Notes 2 and 3 to the accompanying condensed consolidated financial statements). Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Because the accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP, they should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. In the opinion of management, all adjustments (consisting only of normal recurring accruals except as otherwise noted herein) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

For the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying condensed consolidated financial statements.

Cash and Cash Equivalents

The beginning-of-period and end-of-period cash, restricted cash, and cash equivalent balances presented on the accompanying condensed consolidated statements of cash flows includes cash related to a consolidated joint venture which is included in homebuilding "Other assets" on the accompanying condensed consolidated balance sheets. The cash related to this consolidated joint venture as of September 30, 2021 and December 31, 2020 was $271 and $269, respectively, and as of September 30, 2020 and December 31, 2019 was $271 and $281, ~~respectively, and as of September 30, 2019 and December 31, 2018 was $293 and $320,~~ respectively.

Revenue Recognition

Homebuilding revenue is recognized on the settlement date at the contract sales price, when control is transferred to our customers. Our contract liabilities, which consist of deposits received from customers ~~(“Handmoney”)~~ on homes not settled, were ~~$211,122~~$381,594 and ~~$131,886~~$240,758 as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We expect that substantially all of the customer deposits held at December 31, ~~2019 Handmoney balance~~2020 will be recognized in revenue in ~~2020.~~2021. Our contract assets consist of prepaid sales compensation and totaled approximately ~~$27,513~~$24,300 and ~~$14,600~~$22,500, as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Prepaid sales compensation is included in homebuilding “Other assets” on the accompanying condensed consolidated balance sheets.

~~Recently Adopted Accounting Pronouncements~~

~~Effective January 1, 2020, we adopted Accounting Standards Update ("ASU") 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326),~~ which changed the impairment recognition of financial assets from an as incurred recognition methodology to requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Our adoption of this standard did not have a material effect on our consolidated financial statements and related disclosures.

Table of Contents

NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

~~Effective January 1, 2020, we adopted ASU 2017-04,~~ ~~Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment~~. Under the standard, an impairment charge to goodwill is recorded in the amount that the carrying amount of a reporting unit's goodwill exceeds its fair value, not to exceed the amount of goodwill allocated to that reporting unit. Our adoption of this standard had no impact on our consolidated financial statements and related disclosures.

2. Variable Interest Entities ("VIEs")

Fixed Price Finished Lot Purchase Agreements (“~~Lot Purchase Agreements”~~LPAs”)

We generally do not engage in the land development business. Instead, we typically acquire finished building lots at market prices from various development entities under ~~Lot Purchase Agreements.~~LPAs. The ~~Lot Purchase Agreements~~LPAs require deposits that may be forfeited if we fail to perform under the ~~Lot Purchase Agreements.~~LPAs. The deposits required under the ~~Lot Purchase Agreements~~LPAs are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots.

We believe this lot acquisition strategy reduces the financial requirements and risks associated with direct land ownership and land development. We may, at our option, choose for any reason and at any time not to perform under these Lot Purchase Agreements by delivering notice of our intent not to acquire the finished lots under contract. Our sole legal obligation and economic loss for failure to perform under these Lot Purchase Agreements is limited to the amount of the deposit pursuant to the liquidated damage provisions contained within the Lot Purchase Agreements. None of the creditors of any of the development entities with which we enter Lot Purchase Agreements have recourse to our general credit. We generally do not have any specific performance obligations to purchase a certain number or any of the lots, nor do we guarantee completion of the development by the developer or guarantee any of the developers’ financial or other liabilities.

We are not involved in the design or creation of the development entities from which we purchase lots under Lot Purchase Agreements. The developer’s equity holders have the power to direct 100% of the operating activities of the development entity. We have no voting rights in any of the development entities. The sole purpose of the development entity’s activities is to generate positive cash flow returns for the equity holders. Further, we do not share in any of the profit or loss generated by the project’s development. The profits and losses are passed directly to the developer’s equity holders.

The deposit placed by us pursuant to the ~~Lot Purchase Agreement~~LPA is deemed to be a variable interest in the respective development entities. Those development entities are deemed to be VIEs. Therefore, the development entities with which we enter into ~~Lot Purchase Agreements,~~LPAs, including the joint venture limited liability corporations discussed below, are evaluated for possible consolidation by us. An enterprise must consolidate a VIE when that enterprise has a controlling financial interest in the VIE. An enterprise is deemed to have a controlling financial interest if it has (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE.

We believe the activities that most significantly impact a development entity’s economic performance are the operating activities of the entity. The development entity’s equity investors bear the full risk during the development process. Unless and until a development entity completes finished building lots through the development process, the entity does not earn any revenues. The operating development activities are managed solely by the development entity’s equity investors.

The development entities with which we contract to buy finished lots typically select the respective projects, obtain the necessary zoning approvals, obtain the financing required with no support or guarantees from us, select who will purchase the finished lots and at what price, and manage the completion of the infrastructure improvements, all for the purpose of generating a cash flow return to the development entity’s equity holders and all independent of us. We possess no more than limited protective legal rights through the Lot Purchase Agreement in the specific finished lots that we are purchasing, and we possess no participative rights in the development

~~Table of Contents~~

~~NVR, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

~~entities. Accordingly, we do not have the power to direct the activities of a developer that most significantly impact the developer’s economic performance. For this reason, we~~ have concluded that we are not the primary beneficiary of the development entities with which we enter into ~~Lot Purchase Agreements,~~LPAs, and therefore, we do not consolidate any of these VIEs.

As of September 30, ~~2020,~~2021, we controlled approximately ~~100,000~~116,550 lots under ~~Lot Purchase Agreements~~LPAs with third parties through deposits in cash and letters of credit totaling approximately ~~$434,200~~$483,600 and ~~$6,800,~~$10,700, respectively. ~~As noted above, our~~Our sole legal obligation and economic loss for failure to perform under these ~~Lot Purchase Agreements~~LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained in the ~~Lot Purchase Agreements. During~~LPAs. For the ~~first quarter of 2020,~~three and nine month periods ended September 30, 2021, we ~~incurred pre-tax charges~~recorded a net reversal of approximately ~~$36,400~~$4,100 and $17,500, respectively, related to ~~the impairment of~~previously impaired lot deposits ~~under Lot Purchase Agreements ("lot deposits") due primarily to deteriorating~~as market conditions ~~in certain of our markets related to the COVID-19 pandemic.~~have improved. For the three month period ended September 30, 2020, we recorded a net reversal of approximately $4,800 related to previously impaired lot ~~deposits, as market conditions have improved.~~deposits. For the nine months ended September 30, 2020, we incurred net pre-tax lot deposit charges of approximately $32,500. ~~The impairment charges and reversals are recorded in cost of sales on the accompanying condensed consolidated statements of income.~~ Our contract land deposit is shown net of a ~~$58,781~~$34,704 and ~~$27,572~~$52,205 impairment reserve at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

In addition, we have certain properties under contract with land owners that are expected to yield approximately ~~6,300~~12,500 lots, which are not included in the number of total lots controlled. Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with deposits in cash and letters of credit totaling approximately ~~$1,700~~$4,400 and $100, respectively, as of September 30, ~~2020,~~2021, of which approximately ~~$1,100~~$3,300 is refundable if certain contractual conditions are not met. We generally expect to assign the raw land contracts to a land developer and simultaneously enter into ~~a Lot Purchase Agreement~~an LPA with the assignee if the project is determined to be feasible.

Our total risk of loss related to contract land deposits asis limited to the amount of the deposits pursuant to the liquidated damages provision of the LPAs. As of September 30, ~~2020~~2021 and December 31, ~~2019~~2020, our total risk of loss was as follows:

September 30, 2020 December 31, 2019
Contract land deposits $ 435,886 $ 441,423
Loss reserve on contract land deposits (58,781) (27,572)
Contract land deposits, net 377,105 413,851
Contingent obligations in the form of letters of credit 6,942 5,606
Total risk of loss $ 384,047 $ 419,457


	September 30, 2021		December 31, 2020
Contract land deposits	$	487,959	$	439,833
Loss reserve on contract land deposits	(34,704)		(52,205)
Contract land deposits, net	453,255		387,628
Contingent obligations in the form of letters of credit	10,755		8,249
Total risk of loss	$	464,010	$	395,877

3. Joint Ventures

On a limited basis, we obtain finished lots using joint venture limited liability corporations (“JVs”). The JVs are typically structured such that we are a non-controlling member and are at risk only for the amount we have invested, or have committed to invest, in addition to any deposits placed under ~~Lot Purchase Agreements~~LPAs with the ~~joint venture.~~JV. We are not a borrower, guarantor or obligor on any debt of the JVs, as applicable. We enter into ~~Lot Purchase Agreements~~LPAs to purchase lots from these JVs, and as a result have a variable interest in these JVs.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

At September 30, ~~2020,~~2021, we had an aggregate investment totaling approximately ~~$28,700~~$20,800 in 4 JVs that are expected to produce approximately ~~6,050~~2,300 finished lots, of which approximately ~~2,700~~1,950 lots were controlled by us and the remaining approximately ~~3,350~~350 lots were either under contract with unrelated parties or not currently under contract. ~~In addition, we~~We had additional funding commitments totaling approximately ~~$3,800~~$2,900 to 1one of the JVs at September 30, ~~2020.~~2021. We have determined that we are not the primary beneficiary of 3 of the JVs because we either share power with the other JV partner or the other JV partner has the controlling financial interest. The

~~Table of Contents~~

~~NVR, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

aggregate investment in unconsolidated JVs was approximately ~~$28,700~~$20,800 and ~~$26,700~~$23,600 at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is reported in the “Other assets” line item on the accompanying condensed consolidated balance sheets. None of the unconsolidated JVs had any indicators of impairment as of September 30, ~~2020.~~2021. For the remaining JV, we have concluded that we are the primary beneficiary because we have the controlling financial interest in the JV. As of December 31, ~~2019,~~2020, all activities under the consolidated JV had been completed. As of September 30, ~~2020,~~2021, we had no investment remaining in the JV and the JV had remaining balances of $271 in cash and ~~$247~~$250 in accrued expenses, which are included in homebuilding "Other assets" and "Accrued expenses and other liabilities," respectively, in the accompanying condensed consolidated balance sheets.

We recognize income from the JVs as a reduction to the lot cost of the lots purchased from the respective JVs when the homes are settled, based on the expected total profitability and the total number of lots expected to be produced by the respective JVs.

We classify distributions received from unconsolidated JVs using the cumulative earnings approach. As a result, distributions received up to the amount of cumulative earnings recognized by us are reported as distributions of earnings and those in excess of that amount are reported as a distribution of capital. These distributions are classified within the accompanying condensed consolidated statements of cash flows as cash flows from operating activities and investing activities, respectively.

4. Land Under Development

On a limited basis, we directly acquire raw land parcels already zoned for ~~their~~its intended use to develop into finished lots. Land under development includes the land acquisition costs, direct improvement costs, capitalized interest, where applicable, and real estate taxes.

During 2021, we had the following significant land under development transactions:

–Sold a land parcel to a developer for approximately $45,800, which approximated our carrying value of the property as of the sale date. In conjunction with the sale, we entered into an LPA with the developer for the option to purchase the finished lots expected to be developed from the parcel.

–Completed the development of 1 land parcel and transferred development costs totaling approximately $16,500 to inventory.

–Purchased a raw land parcel for approximately $7,200, which is expected to produce approximately 80 lots.

As of September 30, ~~2020,~~2021, we directly owned 32 separate raw land parcels with ~~an aggregate~~a carrying value of ~~$63,608~~$8,151 that are expected to produce approximately ~~500~~100 finished lots. We ~~also had~~have additional funding commitments of approximately ~~$5,200~~$2,700 under a joint development agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately ~~$2,900.~~$800. None of the raw parcels had any indicators of impairment as of September 30, ~~2020.~~2021.

5. Capitalized Interest

We capitalize interest costs to land under development during the active development of finished lots. In addition, we capitalize interest costs on our JV investments while the investments are considered qualified assets pursuant to ASC Topic 835-20 - Interest. Capitalized interest is transferred to sold or unsold inventory as the development of finished lots is completed, then charged to cost of sales upon our settlement of homes and the

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

respective lots. Interest incurred in excess of the interest capitalizable based on the level of qualified assets is expensed in the period incurred.

The following table reflects the changes in our capitalized interest during the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Interest capitalized, beginning of period	$	644	$	2,673	$	1,025	$	3,499
Interest incurred	13,263		11,792		39,977		28,092
Interest charged to interest expense	(13,243)		(11,687)		(39,910)		(27,698)
Interest charged to cost of sales	(100)		(370)		(528)		(1,485)
Interest capitalized, end of period	$	564	$	2,408	$	564	$	2,408

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Interest capitalized, beginning of period $ 2,673 $ 3,854 $ 3,499 $ 4,154
Interest incurred 11,792 6,596 28,092 19,702
Interest charged to interest expense (11,687) (6,293) (27,698) (18,809)
Interest charged to cost of sales (370) (581) (1,485) (1,471)
Interest capitalized, end of period $ 2,408 $ 3,576 $ 2,408 $ 3,576

6. Earnings per Share

The following weighted average shares and share equivalents were used to calculate basic and diluted earnings per share ("EPS") for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Weighted average number of shares outstanding used to calculate basic EPS	3,561	3,706	3,619	3,684
Dilutive securities:
Stock options and restricted share units	281	233	274	212
Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS	3,842	3,939	3,893	3,896

The following non-qualified stock options ("Options") issued under equity incentive plans were outstanding during the three and nine months ended September 30, 2021 and 2020, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Anti-dilutive securities	16	21	22	30

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

~~6. Earnings per Share~~

~~The following weighted average shares and share equivalents were used to calculate basic and diluted earnings per share for the three and nine months ended September 30, 2020 and 2019:~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Weighted average number of shares outstanding used to calculate basic EPS 3,706 3,672 3,684 3,631
Dilutive securities:
Stock options and restricted share units 233 316 212 343
Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS 3,939 3,988 3,896 3,974

The following non-qualified stock options ("Options") issued under equity incentive plans were outstanding during the three and nine months ended September 30, 2020 and 2019, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Anti-dilutive securities 21 251 30 319

7. Shareholders’ Equity

A summary of changes in shareholders’ equity for the three months ended September 30, ~~2020~~2021 is presented below:


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, June 30, 2021	$	206	$	2,314,564	$	9,381,177	$	(8,653,659)	$	(16,710)	$	16,710	$	3,042,288

Net income	—		—		332,081		—		—		—		332,081

Purchase of common stock for treasury	—		—		—		(398,489)		—		—		(398,489)
Equity-based compensation	—		15,009		—		—		—		—		15,009
Proceeds from Options exercised	—		26,162		—		—		—		—		26,162
Treasury stock issued upon option exercise and restricted share vesting	—		(6,735)		—		6,735		—		—		—
Balance, September 30, 2021	$	206	$	2,349,000	$	9,713,258	$	(9,045,413)	$	(16,710)	$	16,710	$	3,017,051

A summary of changes in shareholders’ equity for the nine months ended September 30, 2021 is presented below:


		Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total			Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, June 30, 2020		$	206	$	2,151,623	$	8,249,650	$	(7,789,067)	$	(16,710)	$	16,710	$	2,612,412
Balance, December 31, 2020																Balance, December 31, 2020	$	206	$	2,214,426	$	8,811,120	$	(7,922,678)	$	(16,710)	$	16,710	$	3,103,074

Net income	Net income	—		—		256,466		—		—		—		256,466		Net income	—		—		902,138		—		—		—		902,138

Purchase of common stock for treasury																Purchase of common stock for treasury	—		—		—		(1,152,855)		—		—		(1,152,855)
Equity-based compensation	Equity-based compensation	—		13,639		—		—		—		—		13,639		Equity-based compensation	—		42,859		—		—		—		—		42,859
Proceeds from Options exercised	Proceeds from Options exercised	—		36,476		—		—		—		—		36,476		Proceeds from Options exercised	—		121,835		—		—		—		—		121,835
Treasury stock issued upon option exercise and restricted share vesting	Treasury stock issued upon option exercise and restricted share vesting	—		(13,531)		—		13,531		—		—		0		Treasury stock issued upon option exercise and restricted share vesting	—		(30,120)		—		30,120		—		—		—
Balance, September 30, 2020		$	206	$	2,188,207	$	8,506,116	$	(7,775,536)	$	(16,710)	$	16,710	$	2,918,993
Balance, September 30, 2021																Balance, September 30, 2021	$	206	$	2,349,000	$	9,713,258	$	(9,045,413)	$	(16,710)	$	16,710	$	3,017,051

We repurchased approximately 80 and 245 shares of our common stock during the three and nine months ended September 30, 2021, respectively. We settle Option exercises and vesting of RSUs by issuing shares of treasury stock. Approximately 13 and 62 shares were issued from the treasury account during the three and nine months ended September 30, 2021, respectively, in settlement of Option exercises and vesting of RSUs. Shares are relieved from the treasury account based on the weighted average cost basis of treasury shares.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

A summary of changes in shareholders’ equity for the three months ended September 30, 2020 is presented below:


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, June 30, 2020	$	206	$	2,151,623	$	8,249,650	$	(7,789,067)	$	(16,710)	$	16,710	$	2,612,412


Net income	—		—		256,466		—		—		—		256,466


Equity-based compensation	—		13,639		—		—		—		—		13,639
Proceeds from Options exercised	—		36,476		—		—		—		—		36,476
Treasury stock issued upon option exercise and restricted share vesting	—		(13,531)		—		13,531		—		—		—
Balance, September 30, 2020	$	206	$	2,188,207	$	8,506,116	$	(7,775,536)	$	(16,710)	$	16,710	$	2,918,993

A0A summary of changes in shareholders’ equity for the nine months ended September 30, 2020 is presented below:

Common
Stock Additional
Paid-In
Capital Retained
Earnings Treasury
Stock Deferred
Compensation
Trust Deferred
Compensation
Liability Total
Balance, December 31, 2019 $ 206 $ 2,055,407 $ 7,909,872 $ (7,624,241) $ (16,912) $ 16,912 $ 2,341,244
Net income — — 596,244 — — — 596,244
Deferred compensation activity, net — — — — 202 (202) 0
Purchase of common stock for treasury — — — (216,582) — — (216,582)
Equity-based compensation — 35,565 — — — — 35,565
Proceeds from Options exercised — 162,522 — — — — 162,522
Treasury stock issued upon option exercise and restricted share vesting — (65,287) — 65,287 — — 0
Balance, September 30, 2020 $ 206 $ 2,188,207 $ 8,506,116 $ (7,775,536) $ (16,710) $ 16,710 $ 2,918,993


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, December 31, 2019	$	206	$	2,055,407	$	7,909,872	$	(7,624,241)	$	(16,912)	$	16,912	$	2,341,244


Net income	—		—		596,244		—		—		—		596,244
Deferred compensation activity, net	—		—		—		—		202		(202)		—
Purchase of common stock for treasury	—		—		—		(216,582)		—		—		(216,582)
Equity-based compensation	—		35,565		—		—		—		—		35,565
Proceeds from Options exercised	—		162,522		—		—		—		—		162,522
Treasury stock issued upon option exercise and restricted share vesting	—		(65,287)		—		65,287		—		—		—
Balance, September 30, 2020	$	206	$	2,188,207	$	8,506,116	$	(7,775,536)	$	(16,710)	$	16,710	$	2,918,993

We repurchased approximately 58 shares of our common stock during the nine months ended September 30, 2020, all of which were repurchased in the first quarter. ~~We settle Option exercises and vesting of RSUs by issuing shares of treasury stock.~~ Approximately 29 and 143 shares were issued from the treasury account during the three and nine months ended September 30, 2020, ~~respectively, in settlement of Option exercises and vesting of RSUs. Shares are relieved from the treasury account based on the weighted average cost basis of treasury shares.~~

~~A summary of changes in shareholders’ equity for the three months ended September 30, 2019 is presented below:~~

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Deferred Compensation Trust Deferred Compensation Liability Total
Balance, June 30, 2019 $ 206 $ 1,962,156 $ 7,429,948 $ (7,272,871) $ (16,912) $ 16,912 $ 2,119,439
Net income — — 223,787 — — — 223,787
Purchase of common stock for treasury — — — (61,063) — — (61,063)
Equity-based compensation — 20,770 — — — — 20,770
Proceeds from Options exercised — 68,524 — — — — 68,524
Treasury stock issued upon option exercise and restricted share vesting — (31,270) — 31,270 — — 0
Balance, September 30, 2019 $ 206 $ 2,020,180 $ 7,653,735 $ (7,302,664) $ (16,912) $ 16,912 $ 2,371,457

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~~NVR, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

~~A summary of changes in shareholders’ equity for the nine months ended September 30, 2019 is presented below:~~

Common
Stock Additional
Paid-In
Capital Retained
Earnings Treasury
Stock Deferred
Compensation
Trust Deferred
Compensation
Liability Total
Balance, December 31, 2018 $ 206 $ 1,820,223 $ 7,031,333 $ (7,043,200) $ (16,937) $ 16,937 $ 1,808,562
Net income — — 622,402 — — — 622,402
Deferred compensation activity, net — — — — 25 (25) 0
Purchase of common stock for treasury — — — (365,542) — — (365,542)
Equity-based compensation — 58,680 — — — — 58,680
Proceeds from Options exercised — 247,355 — — — — 247,355
Treasury stock issued upon option exercise and restricted share vesting — (106,078) — 106,078 — — 0
Balance, September 30, 2019 $ 206 $ 2,020,180 $ 7,653,735 $ (7,302,664) $ (16,912) $ 16,912 $ 2,371,457

We repurchased approximately 18 and 130 shares of our common stock during the three and nine months ended September 30, 2019, respectively. Approximately 73 and 250 shares were issued from the treasury account during the three and nine months ended September 30, 2019, respectively, in settlement of Option exercises and vesting of RSUs.

8. Product Warranties

We establish warranty and product liability reserves (“Warranty Reserve”) to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to our homebuilding business. Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the estimated current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with our general counsel and outside counsel retained to handle specific product liability cases.

~~The following table reflects the changes in our Warranty Reserve during the three and nine months ended September 30, 2020 and 2019:~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Warranty reserve, beginning of period $ 111,219 $ 100,659 $ 108,053 $ 103,700
Provision 20,894 20,217 48,992 48,486
Payments (18,564) (17,205) (43,496) (48,515)
Warranty reserve, end of period $ 113,549 $ 103,671 $ 113,549 $ 103,671

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Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

The following table reflects the changes in our Warranty Reserve during the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Warranty reserve, beginning of period	$	127,502	$	111,219	$	119,638	$	108,053
Provision	22,789		20,894		66,878		48,992
Payments	(20,188)		(18,564)		(56,413)		(43,496)
Warranty reserve, end of period	$	130,103	$	113,549	$	130,103	$	113,549

9. Segment Disclosures

We disclose 4 homebuilding reportable segments that aggregate geographically our homebuilding operating segments, and our mortgage banking operations presented as 1 reportable segment. The homebuilding reportable segments are comprised of operating divisions in the following geographic areas:


Mid Atlantic:						Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East:						New Jersey and Eastern Pennsylvania
Mid East:						New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East:						North Carolina, South Carolina, Florida and Tennessee

Homebuilding profit before tax includes all revenues and income generated from the sale of homes, less the cost of homes sold, selling, general and administrative expenses and a corporate capital allocation charge. The corporate capital allocation charge is eliminated in consolidation and is based on the segment’s average net assets employed. The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker (“CODM”) to determine whether the operating segment’s results are providing the desired rate of return after covering our cost of capital.

Assets not allocated to the operating segments are not included in either the operating segment’s corporate capital allocation charge or the CODM’s evaluation of the operating segment’s performance. We record charges on contract land deposits when it is determined that it is probable that recovery of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of ~~a Lot Purchase Agreement~~an LPA with the developer, or the restructuring of ~~a Lot Purchase Agreement~~an LPA resulting in the forfeiture of the deposit. Mortgage banking profit before tax consists of revenues generated from mortgage financing, title insurance and closing services, less the costs of such services and general and administrative costs. Mortgage banking operations are not charged a corporate capital allocation charge.

In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between segment profit and consolidated profit before tax include unallocated corporate overhead (including all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense. ~~Overhead~~Our overhead functions such as accounting, treasury and human resources are centrally performed and these costs are not allocated to our operating segments. Consolidation adjustments consist of such items necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to our operating segments. ~~Our external~~External corporate interest expense primarily consists of interest charges on our 3.95% Senior Notes due 2022 and 3.00% Senior Notes due 2030 ~~and is~~(collectively, the “Senior Notes”), which are not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

~~The~~ f~~ollowing tables present segment revenues, profit and assets with reconciliations to the amounts reported for the consolidated enterprise, where applicable:~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Revenues:
Homebuilding Mid Atlantic $ 949,472 $ 1,012,056 $ 2,563,375 $ 2,875,411
Homebuilding North East 157,973 120,478 362,328 364,909
Homebuilding Mid East 404,992 406,145 1,025,642 1,104,603
Homebuilding South East 408,314 334,652 1,113,871 929,062
Mortgage Banking 69,261 37,933 127,692 124,484
Total consolidated revenues $ 1,990,012 $ 1,911,264 $ 5,192,908 $ 5,398,469

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Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

The following tables present segment revenues, profit and assets with reconciliations to the amounts reported for the consolidated enterprise, where applicable:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Homebuilding Mid Atlantic	$	1,082,710	$	949,472	$	3,067,267	$	2,563,375
Homebuilding North East	213,087		157,973		568,524		362,328
Homebuilding Mid East	503,232		404,992		1,406,364		1,025,642
Homebuilding South East	537,586		408,314		1,482,731		1,113,871
Mortgage Banking	59,025		69,261		195,798		127,692
Total consolidated revenues	$	2,395,640	$	1,990,012	$	6,720,684	$	5,192,908


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Income before taxes:	Income before taxes:									Income before taxes:
Homebuilding Mid Atlantic	Homebuilding Mid Atlantic	$	104,700	$	124,900	$	284,440	$	348,067	Homebuilding Mid Atlantic	$	222,504	$	104,700	$	526,052	$	284,440
Homebuilding North East	Homebuilding North East	14,272		13,164		31,081		36,187		Homebuilding North East	33,885		14,272		70,622		31,081
Homebuilding Mid East	Homebuilding Mid East	45,109		50,210		103,575		125,976		Homebuilding Mid East	81,021		45,109		189,849		103,575
Homebuilding South East	Homebuilding South East	52,554		39,721		142,463		105,582		Homebuilding South East	100,688		52,554		236,272		142,463
Mortgage Banking	Mortgage Banking	52,890		22,835		80,461		78,566		Mortgage Banking	40,249		52,890		140,183		80,461
Total segment profit before taxes	Total segment profit before taxes	269,525		250,830		642,020		694,378		Total segment profit before taxes	478,347		269,525		1,162,978		642,020
Reconciling items:	Reconciling items:									Reconciling items:
Contract land deposit reserve adjustment (1)		4,867		248		(31,208)		1,572
Contract land deposit recoveries (impairments) (1)										Contract land deposit recoveries (impairments) (1)	4,126		4,867		17,500		(31,208)
Equity-based compensation expense ~~(2)~~	Equity-based compensation expense ~~(2)~~	(13,639)		(20,770)		(35,565)		(58,680)		Equity-based compensation expense ~~(2)~~	(15,009)		(13,639)		(42,859)		(35,565)
Corporate capital allocation ~~(3)~~(2)	Corporate capital allocation ~~(3)~~(2)	60,662		57,887		177,184		168,621		Corporate capital allocation ~~(3)~~(2)	64,055		60,662		188,638		177,184
Unallocated corporate overhead	Unallocated corporate overhead	(26,915)		(27,914)		(87,912)		(89,003)		Unallocated corporate overhead	(27,801)		(26,915)		(101,605)		(87,912)
Consolidation adjustments and other ~~(4)~~(3)	Consolidation adjustments and other ~~(4)~~(3)	38,244		12,859		54,769		31,569		Consolidation adjustments and other ~~(4)~~(3)	(56,786)		38,244		(22,456)		54,769
Corporate interest expense	Corporate interest expense	(11,287)		(5,966)		(26,625)		(17,964)		Corporate interest expense	(12,805)		(11,287)		(38,598)		(26,625)
Reconciling items sub-total	Reconciling items sub-total	51,932		16,344		50,643		36,115		Reconciling items sub-total	(44,220)		51,932		620		50,643
Consolidated income before taxes	Consolidated income before taxes	$	321,457	$	267,174	$	692,663	$	730,493	Consolidated income before taxes	$	434,127	$	321,457	$	1,163,598	$	692,663

(1)This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments. See further discussion of lot deposit impairment charges in Note 2.

(2)The decrease in equity-based compensation expense for the three and nine month periods ended September 30, 2020 was primarily attributable to stock options issued in 2014 under the 2014 Equity Incentive Plan becoming fully vested in 2019. In addition, stock compensation expense for both the three and nine month periods ended September 30, 2020 was favorably impacted by higher stock option forfeitures during 2020.

~~(3)~~This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments. The corporate capital allocation charge is based on the segment’s monthly average asset balance, and was as follows for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Corporate capital allocation charge:
Homebuilding Mid Atlantic $ 31,383 $ 31,504 $ 92,720 $ 93,297
Homebuilding North East 5,793 5,028 17,142 14,381
Homebuilding Mid East 10,386 9,791 29,436 28,303
Homebuilding South East 13,100 11,564 37,886 32,640
Total $ 60,662 $ 57,887 $ 177,184 $ 168,621

(4) The increase in our consolidation adjustments and other reconciling item for both the three and nine month periods ended September 30, 2020 relates primarily to the significant increase in lumber prices during the third quarter of 2020. Our reportable segments' results include intercompany profits of our production facilities, which were negatively impacted by the increase in lumber costs. The increase in lumber costs related to homes not yet settled is eliminated through the consolidation adjustment. As these homes currently in inventory are settled in subsequent quarters, our consolidated homebuilding margins will be negatively impacted by the higher lumber costs.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	31,057	$	31,383	$	92,788	$	92,720
Homebuilding North East	6,719		5,793		19,214		17,142
Homebuilding Mid East	11,114		10,386		32,804		29,436
Homebuilding South East	15,165		13,100		43,832		37,886
Total	$	64,055	$	60,662	$	188,638	$	177,184

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

September 30, 2020 December 31, 2019
Assets:
Homebuilding Mid Atlantic $ 1,198,050 $ 1,024,996
Homebuilding North East 199,162 166,860
Homebuilding Mid East 395,668 293,773
Homebuilding South East 474,484 400,979
Mortgage Banking 403,878 560,407
Total segment assets 2,671,242 2,447,015
Reconciling items:
Cash and cash equivalents 2,539,460 1,110,892
Deferred taxes 125,743 115,731
Intangible assets and goodwill 49,717 49,834
Homebuilding operating lease right-of-use assets 54,964 63,825
Finance lease right-of-use assets 15,674 7,052
Contract land deposit reserve (58,781) (27,572)
Consolidation adjustments and other 101,901 43,038
Reconciling items sub-total 2,828,678 1,362,800
Consolidated assets $ 5,499,920 $ 3,809,815

(3) The decrease in consolidation adjustments and other for the three and nine month periods of 2021 compared to the respective 2020 periods is driven by changes in lumber prices in 2021. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. For homes not yet settled, these intercompany profits are reversed through the consolidation adjustments. Due to the significantly higher lumber prices in the first half of 2021, the previously reversed intercompany profits were recognized in the third quarter through the consolidation adjustment as homes were settled, and our consolidated homebuilding margins were negatively impacted by the higher lumber costs.


	September 30, 2021		December 31, 2020
Assets:
Homebuilding Mid Atlantic	$	1,183,206	$	1,140,910
Homebuilding North East	230,813		202,591
Homebuilding Mid East	432,723		377,448
Homebuilding South East	581,646		494,295
Mortgage Banking	350,317		555,278
Total segment assets	2,778,705		2,770,522
Reconciling items:
Cash and cash equivalents	2,681,110		2,714,720
Deferred taxes	136,446		132,980
Intangible assets and goodwill	49,562		49,678
Operating lease right-of-use assets	60,605		53,110
Finance lease right-of-use assets	14,706		15,772
Contract land deposit reserve	(34,704)		(52,205)
Consolidation adjustments and other	102,464		92,564
Reconciling items sub-total	3,010,189		3,006,619
Consolidated assets	$	5,788,894	$	5,777,141

10. Fair Value

GAAP assigns a fair value hierarchy to the inputs used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets and liabilities. Level 2 inputs are inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs.

Financial Instruments

The following table presents the estimated fair values and carrying values of our Senior Notes as of September 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The estimated fair value is based on recent market prices of similar ~~transactions, which is classified as Level 2 within the fair value hierarchy.~~

September 30, 2020 December 31, 2019
Estimated Fair Values:
3.95% Senior Notes due 2022 $ 633,708 $ 626,520
3.00% Senior Notes due 2030 970,227 0
Total $ 1,603,935 $ 626,520
Carrying Values:
3.95% Senior Notes due 2022 $ 598,768 $ 598,301
3.00% Senior Notes due 2030 919,214 0
Total $ 1,517,982 $ 598,301

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

transactions, which is classified as Level 2 within the fair value hierarchy.


	September 30, 2021		December 31, 2020
Estimated Fair Values:
3.95% Senior Notes due 2022	$	614,568	$	630,000
3.00% Senior Notes due 2030	941,697		982,620
Total	$	1,556,265	$	1,612,620
Carrying Values:
3.95% Senior Notes due 2022	$	599,396	$	598,925
3.00% Senior Notes due 2030	917,148		918,470
Total	$	1,516,544	$	1,517,395

Except as otherwise noted below, we believe that insignificant differences exist between the carrying ~~values~~value and the fair ~~values~~value of our financial instruments, which consist primarily of cash equivalents, due to their short term nature.

Derivative Instruments and Mortgage Loans Held for Sale

In the normal course of business, our wholly-owned mortgage subsidiary, NVR Mortgage Finance, Inc. (“NVRM”), enters into contractual commitments to extend credit to our homebuyers with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by NVRM. All mortgagors are evaluated for credit worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the "lock-in" of rates by the borrower and the sale date of the loan to a broker/dealer. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, NVRM enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers. The forward sales contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. NVRM does not engage in speculative or trading derivative activities. Both the rate lock commitments to borrowers and the forward sale contracts to broker/dealers are undesignated derivatives and, accordingly, are marked to fair value through earnings. At September 30, ~~2020,~~2021, there were rate lock commitments to extend credit to borrowers aggregating ~~$791,352~~$961,557 and open forward delivery contracts aggregating ~~$958,681,~~$1,107,575, which hedge both the rate lock commitments and closed loans held for sale.

The fair value of NVRM’s rate lock commitments to borrowers and the related input levels include, as applicable:

i)the assumed gain/loss of the expected resultant loan sale (Level 2);

ii)the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and

iii)the value of the servicing rights associated with the loan (Level 2).

The assumed gain/loss considers the excess servicing to be received or buydown fees to be paid upon securitization of the loan. The excess servicing and buydown fees are calculated pursuant to contractual terms with investors. To calculate the effects of interest rate movements, NVRM utilizes applicable published mortgage-backed security prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount. NVRM sells all of its loans on a servicing released basis, and receives a servicing released premium upon sale. Thus, the value of the servicing rights is included in the fair value measurement and is based upon contractual terms with investors and varies depending on the loan type. NVRM assumes a fallout rate when measuring the fair value of rate lock commitments. Fallout is defined as locked loan commitments for which NVRM does not close a mortgage loan and is based on historical experience.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

The fair value of NVRM’s forward sales contracts to broker/dealers solely considers the market price movement of the same type of security between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.

Mortgage loans held for sale are recorded at fair value when closed, and thereafter are carried at the lower of cost or fair value, net of deferred origination costs, until sold. Fair value is measured using Level 2 inputs. As of September 30, 2021, the fair value of loans held for sale of $287,525 included on the accompanying condensed consolidated balance sheet has been increased by $2,687 from the aggregate principal balance of $284,838. As of December 31, 2020, the fair value of loans held for sale of ~~$340,927 included on the accompanying condensed consolidated balance sheet~~$449,760 were increased by ~~$4,285~~$10,042 from the aggregate principal balance of ~~$336,642. As of December 31, 2019, the fair value of loans held for sale of $492,125 were increased by $7,019 from the aggregate principal balance of $485,106.~~$439,718.

~~Table of Contents~~

~~NVR, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

The fair value measurement of NVRM's undesignated derivative instruments was as follows:

September 30, 2020 December 31, 2019
Rate lock commitments:
Gross assets $ 8,996 $ 8,132
Gross liabilities 667 497
Net rate lock commitments $ 8,329 $ 7,635
Forward sales contracts:
Gross assets $ 607 $ 377
Gross liabilities 1,078 920
Net forward sales contracts $ (471) $ (543)


	September 30, 2021		December 31, 2020
Rate lock commitments:
Gross assets	$	11,540	$	10,844
Gross liabilities	3,578		87
Net rate lock commitments	$	7,962	$	10,757
Forward sales contracts:
Gross assets	$	3,800	$	1
Gross liabilities	397		5,217
Net forward sales contracts	$	3,403	$	(5,216)

As of ~~both~~ September 30, ~~2020~~2021 the net rate lock commitments and the net forward sales contracts are reported in mortgage banking "Other assets" on the accompanying condensed consolidated balance sheets. As of December 31, ~~2019,~~2020, the net rate lock commitments are reported in mortgage banking "Other assets" and the net forward sales contracts are reported in mortgage banking ~~"Accounts payable~~"Accrued expenses and other liabilities" ~~on the accompanying condensed consolidated balance sheets.~~.

The fair value measurement adjustment as of September 30, ~~2020~~2021 was as follows:


	Notional or Principal Amount		Assumed Gain/(Loss) From Loan Sale		Interest Rate Movement Effect		Servicing Rights Value		Security Price Change		Total Fair Value Measurement Gain/(Loss)
Rate lock commitments	$	961,557	$	1,912	$	(2,466)	$	8,516	$	—	$	7,962
Forward sales contracts	$	1,107,575	—		—		—		3,403		3,403
Mortgages held for sale	$	284,838	858		(1,174)		3,003		—		2,687
Total fair value measurement			$	2,770	$	(3,640)	$	11,519	$	3,403	$	14,052

Notional or
Principal
Amount Assumed
Gain/(Loss)
From Loan
Sale Interest
Rate
Movement
Effect Servicing
Rights
Value Security
Price
Change Total Fair
Value
Measurement
Gain/(Loss)
Rate lock commitments $ 791,352 $ 1,995 $ 820 $ 5,514 $ — $ 8,329
Forward sales contracts $ 958,681 — — — (471) (471)
Mortgages held for sale $ 336,642 1,398 (63) 2,950 — 4,285
Total fair value measurement $ 3,393 $ 757 $ 8,464 $ (471) $ 12,143

The total fair value measurement adjustment as of December 31, ~~2019~~2020 was ~~$14,111.~~$15,583. NVRM recorded a fair value adjustment to expense of $3,771 and $1,531 for the three and nine months ended September 30, 2021, respectively. NVRM recorded a fair value adjustment to income of $1,735 for the three months ended September 30, 2020, and a fair value adjustment to expense of $1,968 for the nine months ended September 30, 2020. NVRM recorded a fair value adjustment to expense of $8,711 for the three months ended September 30, 2019, and recorded a fair value adjustment to income of $2,842 for the nine months ended September 30, 2019.

Unrealized gains/losses from the change in the fair value measurements are included in earnings as a component of mortgage banking fees in the accompanying condensed consolidated statements of income. The fair value measurement will be impacted in the future by the change in the value of the servicing rights, interest rate movements, security price fluctuations, and the volume and product mix of NVRM’s closed loans and locked loan commitments.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

11. Debt

As of September 30, ~~2020,~~2021, we had the following debt instruments outstanding:

3.95% Senior Notes due 2022 ("2022 Senior Notes")

The 2022 Senior Notes have a principal balance of $600,000. The 2022 Senior Notes mature on September 15, 2022 and bear interest at 3.95%, payable semi-annually in arrears on March 15 and September 15. The 2022 Senior Notes were issued at a discount to yield 3.97% and have been reflected net of the unamortized discount and unamortized debt issuance costs in the accompanying condensed consolidated balance sheet.

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~~NVR, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars and shares in thousands, except per share data)~~

~~(unaudited)~~

~~3.00% Senior Notes due 2030~~

~~On May 4, 2020, the Company issued $600,000 of~~ 3.00% Senior Notes due 2030 ~~(the "2030~~("2030 Senior Notes" ~~and together with the 2022 Senior Notes, the "Senior Notes"~~).

The 2030 Senior Notes ~~were issued at a discount to yield 3.02%~~have an aggregate principal balance of $900,000 and have been reflected net of the unamortized discount and unamortized debt issuance costs in the accompanying condensed consolidated balance sheet. The offering of the 2030 Senior Notes resulted in aggregate net proceeds of approximately $595,300, after deducting underwriting discount and offering expenses.mature on May 15, 2030. The 2030 Senior Notes ~~mature on May 15, 2030 and~~ bear interest at 3.00%, payable semi-annually in arrears on May 15 and November 15. The 2030 Senior Notes ~~are senior unsecured obligations~~were issued in three separate issuances, $600,000 issued at a discount to yield 3.02%, and ~~rank equal in right of payment to all of our existing and future unsecured senior indebtedness and other obligations that are not, by their terms, expressly subordinated in right of payment to~~ the ~~2030 Senior Notes.~~

~~On September 9 and September 17, 2020, the Company issued an~~two additional ~~$250,000 and $50,000, respectively, of the 2030 Senior Notes (the "Additional Senior Notes"). The Additional Senior Notes were~~issuances totaling $300,000 issued at a premium to yield 2.00% ~~and~~. The 2030 Senior Notes have been reflected net of the unamortized discount or premium, as applicable, and the unamortized debt issuance costs in the accompanying condensed consolidated balance sheet. The offering of the Additional Senior Notes resulted in aggregate net proceeds of approximately $323,900, including the underwriting premium, less offering expenses. The Additional Senior Notes form a single series with the 2030 Senior Notes and have substantially identical terms as the 2030 Senior Notes.

Credit Agreement

We have an unsecured Credit Agreement (the “Credit Agreement”), which provides for aggregate revolving loan commitments of ~~$200,000~~$300,000 (the “Facility”). Under the Credit Agreement, we may request increases of up to $300,000 to the Facility in the form of revolving loan commitments or term loans to the extent that new or existing lenders agree to provide additional revolving loan or term loan commitments. The Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit, of which approximately ~~$11,450~~$15,600 was outstanding at September 30, ~~2020, and a $25,000 sublimit for a swing line commitment.~~2021. The Credit Agreement termination date is ~~July 15, 2021.~~February 12, 2026. There was 0no debt outstanding under the Facility at September 30, ~~2020.~~2021.

Repurchase Agreement

NVRM provides for its mortgage origination and other operating activities using cash generated from its operations, borrowings from its parent company, NVR, as well as a revolving mortgage repurchase agreement (the “Repurchase Agreement”), which is non-recourse to NVR. The Repurchase Agreement provides for loan purchases up to $150,000, subject to certain sub-limits. Amounts outstanding under the Repurchase Agreement are collateralized by the Company’s mortgage loans held for sale.

In July ~~2020,~~2021, NVRM entered into the ~~Twelfth~~Thirteenth Amendment to the Repurchase Agreement, which extended the term of the Repurchase Agreement through July ~~21, 2021.~~20, 2022. All other terms and conditions under the amended Repurchase Agreement remained materially consistent. At September 30, ~~2020,~~2021, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. There was 0no debt outstanding under the Repurchase Agreement at September 30, ~~2020.~~2021.

12. Commitments and Contingencies

We are involved in various litigation arising in the ordinary course of business. In the opinion of management, and based on advice of legal counsel, this litigation is not expected to have a material adverse effect on our financial position, results of operations or cash flows. Legal costs incurred in connection with outstanding litigation are expensed as incurred.

13. Leases

We have operating leases for our corporate and division offices, production facilities, model homes, and certain office and production equipment. Additionally, we have finance leases for certain plant equipment and one of our production facilities which are recorded in homebuilding "Property, plant and equipment, net" and "Accrued expenses and other liabilities" on the accompanying condensed consolidated balance sheets. Our finance lease

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

~~13. Leases~~

~~We have operating leases for our corporate~~ROU assets and ~~division offices, production facilities, model homes,~~finance lease liabilities were $14,706 and ~~certain office~~$15,441, respectively, as of September 30, 2021, and ~~production equipment. Additionally, we have entered into finance leases for one~~$15,772 and $16,173, respectively, as of our production facilities and certain plant equipment, which are recorded in homebuilding "Property, plant and equipment, net" and "Accrued expenses and other liabilities" on the accompanying condensed consolidated balance sheets.December 31, 2020. Our leases have remaining lease terms of up to ~~19.9~~18.9 years, some of which include options to extend the leases for up to 1020 years, and some of which include options to terminate the lease.

We recognize operating lease expense on a straight-line basis over the lease term. We have elected to use the portfolio approach for certain equipment leases which have similar lease terms and payment schedules. Additionally, for certain equipment we account for the lease and non-lease components as a single lease component. Our sublease income is de minimis.

We have certain leases, primarily the leases of model homes, which have initial lease terms of twelve months or less ("Short-term leases"). We elected to exclude these leases from the recognition requirements under Topic 842, and these leases have not been included in our recognized ROU assets and lease liabilities.

The components of lease expense were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Lease expense	Lease expense									Lease expense
Operating lease expense	Operating lease expense	$	7,689	$	8,829	$	23,542	$	24,776	Operating lease expense	$	7,906	$	7,689	$	23,395	$	23,542
Finance lease expense:	Finance lease expense:									Finance lease expense:
Amortization of ROU assets	Amortization of ROU assets	327		125		874		146		Amortization of ROU assets	454		327		1,342		874
Interest on lease liabilities	Interest on lease liabilities	70		25		170		30		Interest on lease liabilities	107		70		324		170
Short-term lease expense	Short-term lease expense	5,625		5,530		18,236		16,775		Short-term lease expense	6,001		5,625		17,752		18,236

Total lease expense	Total lease expense	$	13,711	$	14,509	$	42,822	$	41,727	Total lease expense	$	14,468	$	13,711	$	42,813	$	42,822

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars and shares in thousands, except per share data)

(unaudited)

Other information related to leases was as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 7,339 $ 5,757 $ 20,733 $ 19,515
Operating cash flows from finance leases 70 46 170 30
Financing cash flows from finance leases 253 190 665 116
ROU assets obtained in exchange for lease obligations:
Operating leases $ 1,806 $ 5,532 $ 7,491 $ 11,546
Finance leases $ 9,056 $ 1,065 $ 9,496 $ 6,369
September 30, 2020 December 31, 2019
Weighted-average remaining lease term (in years):
Operating leases 4.8 5.1
Finance leases 12.9 6.7
Weighted-average discount rate:
Operating leases 3.4 % 3.6 %
Finance leases 2.8 % 2.8 %


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021			2020
Supplemental Cash Flows Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,143	$	7,339	$	20,831		$	20,733
Operating cash flows from finance leases	107		70		324			170
Financing cash flows from finance leases	347		253		1,008			665

ROU assets obtained in exchange for lease obligations:
Operating leases	$	3,711	$	1,806	$	23,282		$	7,491
Finance leases	$	187	$	9,056	$	276		$	9,496


					September 30, 2021			December 31, 2020
Weighted-average remaining lease term (in years):
Operating leases					6.7			4.7
Finance leases					11.9			12.5

Weighted-average discount rate:
Operating leases					3.0		%	3.4		%
Finance leases					2.8		%	2.8		%

14. Income Taxes

Our effective tax rate for the three and nine months ended September 30, ~~2020~~2021 was ~~20.2%~~23.5% and ~~13.9%~~22.5%, respectively, compared to ~~16.2%~~20.2% and ~~14.8%~~13.9% for the three and nine months ended September 30, ~~2019,~~2020, respectively. The increase in the effective tax rate in ~~each period was favorably impacted by~~ the ~~recognition~~three and nine month periods of an2021 compared to the same periods in 2020 is primarily attributable to the impact of the income tax benefit recognized related to excess tax benefits from stock option exercises totaling $9,244 and $37,834 for the three and nine months ended September 30, 2021, respectively, and $17,834 and $80,343 for the three and nine months ended September 30, 2020, ~~respectively, and $27,604 and $86,809 for the three and nine months ended September 30, 2019,~~ respectively.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands, except per share data)

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases or other public communications, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “will,” “should,” "intends" or “anticipates” or the negative thereof or other comparable terminology. All statements other than of historical facts are forward-looking statements. Forward-looking statements contained in this document may include those regarding market trends, our financial position and financial results, business strategy, the impact of the COVID-19 pandemic on our business and customers, supply chain disruptions, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or performance to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to the following: the impact of COVID-19 on us and the economy generally; general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by us and our customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by us in our homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which we have little or no control. We undertake no obligation to update such forward-looking statements except as required by law. For additional information regarding risk factors, see Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of NVR’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019 and other public filings.~~2020.

Unless the context otherwise requires, references to “NVR,” “we,” “us,” or “our” include NVR and its consolidated subsidiaries.

Results of Operations for the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Overview

Impact of COVID-19

The COVID-19 pandemic ~~caused by the novel strain of coronavirus ("COVID-19"),~~ has had a significant impact on all facets of our business. Our primary focus as we face this challenge is to do everything we can to ensure the safety and well-being of our employees, customers and trade partners. ~~Residential construction has been deemed an essential business in each of our markets since the beginning of the pandemic, except Pennsylvania and New York, where we faced closures into May.~~ In each of our markets, we continue to operate in accordance with the guidelines issued by the Centers for Disease Control and Prevention as well as state and local guidelines, which ~~has~~have resulted in significant changes to the way we conduct business.

~~We experienced elevated sales cancellations and decreased new orders during March and April; however, the~~Although current demand for new homes began to strengthen in May and continued to do so through September. Despite high unemployment rates attributable to the COVID-19 pandemic, demand in the third quarter increased primarily as a result of historically low mortgage interest rates coupled with low resale inventory levels.

~~From March through May,~~is strong, there were significant disruptions in the mortgage market as investors tightened their credit standards or exited the market, which resulted in significantly lower values for mortgage servicing rights and fewer customers able to qualify for a mortgage. From June through September, the mortgage market stabilized as mortgage demand increased.

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~~There is~~remains uncertainty regarding the extent and timing of disruption to our business that may result from COVID-19 and related governmental actions. There is also uncertainty as to the effects of ~~the pandemic and related~~ economic relief efforts on the U.S. economy, unemployment, consumer confidence, demand for our homes and the mortgage market, including lending standards and secondary mortgage markets. We are unable to predict the extent to which this will impact our operational and financial performance, including the impact of future developments such as the duration and spread of COVID-19, corresponding governmental actions, and the impact of such on our employees, customers and trade partners.

~~Business~~

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Outlook

Demand for new homes remained strong in the third quarter of 2021, driven by historically low mortgage interest rates and limited housing supply. This has resulted in strong sales absorptions and rising home prices. Additionally, the strong demand has led to increased construction activity and demand for building materials, which, along with the impacts of COVID-19, has resulted in some supply chain disruptions. We expect these issues to continue over the next several quarters as suppliers continue to work through the disruptions to meet the increased demand.

Business

Our primary business is the construction and sale of single-family detached homes, townhomes and condominiums, all of which are primarily constructed on a pre-sold basis. To fully serve customers of our homebuilding operations, we also operate a mortgage banking and title services business. We primarily conduct our operations in mature markets. Additionally, we generally grow our business through market share gains in our existing markets and by expanding into markets contiguous to our current active markets. Our four homebuilding reportable segments consist of the following regions:


Mid Atlantic:						Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East:						New Jersey and Eastern Pennsylvania
Mid East:						New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East:						North Carolina, South Carolina, Florida and Tennessee

Our lot acquisition strategy is predicated upon avoiding the financial requirements and risks associated with direct land ownership and development. We generally do not engage in land development (see discussion below of our land development activities). Instead, we typically acquire finished building lots ~~at market prices~~ from various third party land developers pursuant to fixed price finished lot purchase agreements (“~~Lot Purchase Agreements”~~LPAs”). These ~~Lot Purchase Agreements~~LPAs require deposits, typically ranging up to 10% of the aggregate purchase price of the finished lots, in the form of cash or letters of credit that may be forfeited if we fail to perform under the ~~Lot Purchase Agreement.~~LPA. This strategy has allowed us to maximize inventory turnover, which we believe enables us to minimize market risk and to operate with less capital, thereby enhancing rates of return on equity and total capital.

In addition to constructing homes primarily on a pre-sold basis and utilizing what we believe is a conservative lot acquisition strategy, we focus on obtaining and maintaining a leading market position in each market we serve. This strategy allows us to gain valuable efficiencies and competitive advantages in our markets, which we believe contributes to minimizing the adverse effects of regional economic cycles and provides growth opportunities within these markets. Our continued success is contingent upon our ability to control an adequate supply of finished lots on which to build.

In certain specific strategic circumstances, we deviate from our historical lot acquisition strategy and engage in joint venture arrangements with land developers or directly acquire raw ground already zoned for its intended use for development. Once we acquire control of raw ground, we determine whether to sell the raw parcel to a developer and enter into ~~a Lot Purchase Agreement~~an LPA with the developer to purchase the finished lots or to hire a developer to develop the land on our behalf. While joint venture arrangements and direct land development activity are not our preferred method of acquiring finished building lots, we may enter into additional transactions in the future on a limited basis where there exists a compelling strategic or prudent financial reason to do so. We expect, however, to continue to acquire substantially all our finished lot inventory using ~~Lot Purchase Agreements~~LPAs with forfeitable deposits.

As of September 30, ~~2020,~~2021, we controlled approximately ~~103,200~~118,600 lots as described below.

Lot Purchase Agreements

We controlled approximately ~~100,000~~116,550 lots under ~~Lot Purchase Agreements~~LPAs with third parties through deposits in cash and letters of credit totaling approximately ~~$434,200~~$483,600 and ~~$6,800,~~$10,700, respectively. Included in the number of controlled lots are approximately ~~8,600~~5,700 lots for which we have recorded a contract land deposit impairment reserve of approximately ~~$58,800~~$34,700 as of September 30, ~~2020.~~2021.

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Joint Venture Limited Liability Corporations (“JVs”)

We had an aggregate investment totaling approximately ~~$28,700~~$20,800 in four JVs, expected to produce approximately ~~6,050~~2,300 lots. Of the lots to be produced by the JVs, approximately ~~2,700~~1,950 lots were controlled by us and approximately ~~3,350~~350 were either under contract with unrelated parties or currently not under contract. We had additional funding commitments totaling approximately ~~$3,800~~$2,900 to one of the JVs at September 30, ~~2020.~~2021.

Land Under Development

We directly owned ~~three~~two separate raw land parcels, zoned for their intended use, with ~~an aggregate~~a cost basis, including development costs, of approximately ~~$63,600~~$8,200 that we intend to develop into approximately ~~500~~100 finished lots. We had additional funding commitments of approximately ~~$5,200~~$2,700 under a joint development agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately ~~$2,900.~~$800.

See Notes 2, 3 and 4 to the condensed consolidated financial statements included herein for additional information regarding ~~Lot Purchase Agreements,~~LPAs, JVs and land under development, respectively.

Raw Land Purchase Agreements

Key Financial Results

Our consolidated revenues for the third quarter of ~~2020~~2021 totaled ~~$1,990,012,~~$2,395,640, a 4%20% increase from the third quarter of ~~2019.~~2020. Net income for the third quarter ended September 30, ~~2020~~2021 was ~~$256,466,~~$332,081, or ~~$65.11~~$86.44 per diluted share, increases of ~~15%~~29% and ~~16%~~33% when compared to net income and diluted earnings per share in the third quarter of ~~2019,~~2020, respectively. Our homebuilding gross profit margin percentage increased to 22.2% in the third quarter of 2021 from 20.0% in the third quarter of ~~2020 from 19.0% in the third quarter of 2019.~~2020. New orders, net of cancellations (“New Orders”) ~~increased~~decreased by ~~40%~~22% to 5,201 units in the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019.~~2020. The average sales price for New Orders in the third quarter of ~~2020~~2021 increased by 4%15% to ~~$384.2~~$442.0 compared to the third quarter of 2019. Income before tax from our mortgage banking segment totaled $51,812 in the third quarter of 2020, an increase of 142% when compared to $21,400 in the third quarter of 2019 due primarily to an increase in secondary marketing gains on sales of loans.2020.

2221

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Homebuilding Operations

The following table summarizes the results of operations and other data for ~~our~~the consolidated homebuilding operations:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Financial Data:
Revenues $ 1,920,751 $ 1,873,331 $ 5,065,216 $ 5,273,985
Cost of sales $ 1,536,044 $ 1,518,276 $ 4,115,280 $ 4,282,470
Gross profit margin percentage 20.0 % 19.0 % 18.8 % 18.8 %
Selling, general and administrative expenses $ 105,741 $ 109,969 $ 318,610 $ 337,913
Operating Data:
New orders (units) 6,681 4,766 17,597 15,144
Average new order price $ 384.2 $ 369.2 $ 374.5 $ 364.8
Settlements (units) 5,180 5,124 13,706 14,337
Average settlement price $ 370.8 $ 365.5 $ 369.5 $ 367.8
Backlog (units) 12,124 9,172
Average backlog price $ 384.0 $ 371.0
New order cancellation rate 11.8 % 15.7 % 15.8 % 14.3 %


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Financial Data:
Revenues	$	2,336,615		$	1,920,751		$	6,524,886		$	5,065,216
Gross Profit Margin	518,676			384,707			1,407,821			949,936
Gross profit margin percentage	22.2		%	20.0		%	21.6		%	18.8		%
Selling, general and administrative expenses	$	112,226		$	105,741		$	347,051		$	318,610
Operating Data:
New orders (units)	5,201			6,681			17,036			17,597
Average new order price	$	442.0		$	384.2		$	429.8		$	374.5
Settlements (units)	5,683			5,180			16,440			13,706
Average settlement price	$	411.1		$	370.8		$	396.9		$	369.5
Backlog (units)							12,145			12,124
Average backlog price							$	442.4		$	384.0
New order cancellation rate	9.2		%	11.8		%	9.1		%	15.8		%
Average active communities	414			465			426			475

Consolidated Homebuilding - Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Homebuilding revenues increased 3%22% in the third quarter of ~~2020~~2021 compared to the same period in ~~2019, due primarily to 1% increases~~2020, as a result of a 10% increase in ~~both~~ the number of units settled and an 11% increase in the average settlement price. The ~~increases~~increase in the number of units settled ~~and~~was attributable to a 19% higher backlog unit balance entering the third quarter of 2021 compared to the same period in 2020, offset partially by a lower backlog turnover rate quarter over quarter. The increase in the average settlement price ~~were favorably impacted by an 11% higher backlog unit balance and 2%~~was primarily attributable to a 14% higher average sales price of ~~homes, respectively,~~units in backlog entering the third quarter of ~~2020~~2021 compared to the same period in ~~2019.~~2020.

Gross profit margin percentage in the third quarter of ~~2020~~2021 increased to ~~20.0%~~22.2%, from ~~19.0%~~20.0% in the third quarter of ~~2019.~~2020. Gross profit ~~margin in the third quarter of 2020 was~~margins were favorably impacted by ~~a relative shift~~the increase in ~~settlements~~the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increase in settlement activity quarter over quarter. These favorable factors were partially offset by higher ~~margin communities.~~prices for lumber, certain other commodities and labor quarter over quarter.

The number of New Orders ~~and~~decreased 22% while the average sales price of New Orders increased ~~40% and 4%, respectively,~~15% in the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019.~~2020. New Orders ~~and~~were lower due primarily to an 11% decrease in the average number of active communities in the third quarter of 2021 compared to the same period in 2020. The increase in the average sales price of New Orders ~~were higher in each of our market segments~~ quarter over quarter ~~due~~was attributable to favorable market conditions ~~driven primarily by historically low mortgage interest rates~~which, coupled with low ~~resale~~housing inventory ~~levels.~~ levels, drove demand and has provided us sustained pricing power since the second half of 2020.

Selling, general and administrative (“SG&A”) expense in the third quarter of ~~2020 decreased~~2021 increased by approximately ~~4%, and~~$6,500 compared to the third quarter of 2020, but as a percentage of revenue decreased to 4.8% from 5.5% ~~in the third~~ quarter over quarter due to improved leveraging of ~~2020 from 5.9% in the third quarter of 2019.~~SG&A costs. The ~~decrease~~increase in SG&A expense quarter over quarter was attributable primarily to ~~a decrease in stock based compensation expense of approximately $6,600~~increased personnel costs due to ~~the stock options issued in 2014 under the 2014 Equity Incentive Plan becoming fully vested in 2019 and higher stock option forfeitures quarter over quarter.~~increased headcount.

Consolidated Homebuilding - Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Homebuilding revenues ~~decreased 4% for~~increased 29% in the first nine months ~~ended September 30, 2020~~of 2021 compared to the same period in ~~2019, due primarily to~~2020, as a ~~4% decrease~~result of a 20% increase in the number of units ~~settled. Settlements were negatively impacted~~settled and a 7% increase in the average settlement price. The increase in the number of units settled was attributable to a 40% higher backlog unit balance entering 2021 compared to the backlog unit balance entering 2020, offset partially by a lower backlog turnover rate year over year.

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The increase in the ~~COVID-19 pandemic~~average settlement price was primarily ~~during~~attributable to a 4% higher average sales price of units in backlog entering 2021 compared to backlog entering 2020 coupled with a 15% increase in the average sales price of New Orders in the first ~~and second quarters~~six months of 2021 compared to the same period in 2020.

Gross profit margin percentage in the first nine months of ~~2020~~2021 increased to 21.6% from 18.8% in the first nine months of 2020. Gross profit margins were ~~flat compared~~favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the ~~same period of 2019. Gross~~increase in settlement activity year over year. These favorable factors were partially offset by higher prices for lumber, certain other commodities and labor year over year. Additionally, the increase in gross profit margin year over year was attributable to gross profit margin in 2020 ~~was~~being negatively impacted by contract land deposit impairment charges of approximately $32,500, or 65 basis ~~points of revenue. The impact of the impairment charge was offset by improved gross profit margin attributable to a relative shift in settlements to higher margin communities.~~

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points.

The number of New Orders ~~and~~decreased 3% while the average sales price of New Orders increased ~~16% and 3%, respectively,~~15% in the first nine months of ~~2020~~2021 compared to the same period in ~~2019. New Orders were higher as a result~~2020. The number of ~~the increase in~~ New Orders in the ~~third quarter~~current year were lower due primarily to a 10% decrease in the average number of ~~2020, as discussed above.~~ active communities year over year. The increase in the average sales price of New Orders was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us sustained pricing power since the second half of 2020.

SG&A expense in the first nine months of ~~2020 decreased~~2021 increased by approximately ~~6%, and~~$28,400, but as a percentage of revenue ~~was essentially flat~~decreased to 5.3% from 6.3% year over ~~year.~~year due to improved leveraging of SG&A costs. The increase in SG&A expense year over year was ~~favorably impacted by a decrease in stock based~~attributable primarily to increased incentive compensation ~~expense of approximately $22,800~~attributable to stronger performance year over year, as well as increased personnel costs due to ~~the stock options issued in 2014 under the 2014 Equity Incentive Plan becoming fully vested in 2019 and higher stock option forfeitures year over year.~~increased headcount.

Our backlog represents homes sold but not yet settled with our customers. ~~Backlog~~As of September 30, 2021, our backlog was flat on a unit basis at 12,145 units and ~~dollars were~~increased on a dollar basis by 15% to $5,372,859 when compared to 12,124 units and $4,655,510, respectively, as of September 30, ~~2020, compared~~2020. Backlog units were flat year over year primarily due to ~~9,172 units and $3,402,933, respectively, as of September 30, 2019. The 32% increase in backlog units is primarily attributable to the increase~~a 15% decrease in New Orders during the six-month period ended September 30, 2021 compared to the same period in ~~the third quarter of~~ 2020, ~~as discussed above, coupled with~~offset partially by a lower backlog turnover rate ~~year~~period over ~~year.~~period. Our backlog turnover rate was negatively impacted by a longer production cycle attributable to subcontractor capacity constraints as we work to expand production to meet our increased sales pace. Backlog dollars were higher due to an 18% increase in the average sales price of New Orders during the six-month period ended September 30, 2021 compared to the same period in 2020.

In addition to the potential impact of the ongoing COVID-19 pandemic, our backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as failure to obtain mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons. In any period, a portion of the cancellations that we experience are related to new sales that occurred during the same period, and a portion are related to sales that occurred in prior periods and therefore appeared in the opening backlog for the current period. ~~Expressed~~Calculated as the total of all cancellations during the period as a percentage of gross sales during ~~the~~that same period, our cancellation rate was approximately ~~16%~~9% and ~~14%~~16% in the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. During the most recent four quarters, approximately 7%3% of a reporting quarter’s opening backlog cancelled during the fiscal quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur during the remainder of ~~2020~~2021 or future years. Other than those units that are cancelled, and subject to potential construction delays resulting from COVID-19 related restrictions, we expect to settle substantially all of our September 30, ~~2020~~2021 backlog within the next twelve months.

The backlog turnover rate is impacted by various factors, including, but not limited to, changes in New Order activity, internal production capacity, external subcontractor capacity, building material supply chain disruptions and other external factors over which we do not exercise control, such as the impact of governmental orders to ~~cease or~~ limit construction activities as a result of COVID-19.

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Reportable Segments

Homebuilding segment profit includes all revenues and income generated from the sale of homes, less the cost of homes sold, SG&A expenses, and a corporate capital allocation charge determined by corporate management. The corporate capital allocation charge eliminates in consolidation and is based on the segment’s average net assets employed. The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment is providing the desired rate of return after covering our cost of capital.

We record ~~impairment~~ charges on contract land deposits when we determine that it is probable that recovery of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of ~~a Lot Purchase Agreement~~an LPA with the developer, or the restructuring of ~~a Lot Purchase Agreement~~an LPA resulting in the forfeiture of the deposit. We evaluate our entire net contract land deposit portfolio for impairment each quarter. For presentation purposes below, the contract land deposit reserve at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 has been allocated to the respective year’s reportable segments to show contract land deposits on a net basis. The net contract land deposit balances below also include approximately ~~$6,800~~$10,700 and ~~$5,500~~$8,100 at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, of letters of credit issued as deposits in lieu of cash.

The following tables summarize certain homebuilding operating activity by reportable segment for the three and nine months ended September 30, ~~2020~~2021 and ~~2019 or as of September 30, 2020 and December 31, 2019, as indicated.~~2020.

Selected Segment Financial Data:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Mid Atlantic	$	1,082,710	$	949,472	$	3,067,267	$	2,563,375
North East	213,087		157,973		568,524		362,328
Mid East	503,232		404,992		1,406,364		1,025,642
South East	537,586		408,314		1,482,731		1,113,871


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Gross profit margin:
Mid Atlantic	$	285,563	$	167,314	$	712,809	$	471,839
North East	48,904		27,265		113,940		69,512
Mid East	111,465		73,630		278,672		187,181
South East	135,577		83,520		338,166		231,594


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Gross profit margin percentage:
Mid Atlantic	26.4	%	17.6	%	23.2	%	18.4	%
North East	23.0	%	17.3	%	20.0	%	19.2	%
Mid East	22.2	%	18.2	%	19.8	%	18.3	%
South East	25.2	%	20.5	%	22.8	%	20.8	%

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~~Selected Segment Financial Data:~~


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues:
Segment profit:										Segment profit:
Mid Atlantic	Mid Atlantic	$	949,472	$	1,012,056	$	2,563,375	$	2,875,411	Mid Atlantic	$	222,504	$	104,700	$	526,052	$	284,440
North East	North East	157,973		120,478		362,328		364,909		North East	33,885		14,272		70,622		31,081
Mid East	Mid East	404,992		406,145		1,025,642		1,104,603		Mid East	81,021		45,109		189,849		103,575
South East	South East	408,314		334,652		1,113,871		929,062		South East	100,688		52,554		236,272		142,463

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gross profit margin:
Mid Atlantic $ 167,314 $ 189,535 $ 471,839 $ 540,060
North East 27,265 25,364 69,512 71,452
Mid East 73,630 79,227 187,181 208,870
South East 83,520 66,836 231,594 182,940

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gross profit margin percentage:
Mid Atlantic 17.6 % 18.7 % 18.4 % 18.8 %
North East 17.3 % 21.1 % 19.2 % 19.6 %
Mid East 18.2 % 19.5 % 18.3 % 18.9 %
South East 20.5 % 20.0 % 20.8 % 19.7 %

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Segment profit:
Mid Atlantic $ 104,700 $ 124,900 $ 284,440 $ 348,067
North East 14,272 13,164 31,081 36,187
Mid East 45,109 50,210 103,575 125,976
South East 52,554 39,721 142,463 105,582

Operating Activity:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price
New orders, net of cancellations:
Mid Atlantic	2,024	$	523.7	2,592	$	455.5	6,405	$	519.8	7,034	$	447.4
North East	403	$	496.7	542	$	441.1	1,237	$	489.7	1,269	$	405.4
Mid East	1,190	$	376.8	1,644	$	335.5	4,305	$	365.4	4,405	$	326.0
South East	1,584	$	372.9	1,903	$	313.0	5,089	$	356.2	4,889	$	305.3
Total	5,201	$	442.0	6,681	$	384.2	17,036	$	429.8	17,597	$	374.5


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2020			2019			2020			2019				2021			2020			2021			2020
		Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price			Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price
New orders, net of cancellations:
Settlements:														Settlements:
Mid Atlantic	Mid Atlantic	2,592	$	455.5	2,086	$	427.7	7,034	$	447.4	6,852	$	419.1	Mid Atlantic	2,177	$	497.3	2,172	$	437.1	6,411	$	478.4	5,898	$	434.6
North East	North East	542	$	441.1	323	$	379.0	1,269	$	405.4	1,000	$	378.9	North East	455	$	468.3	396	$	398.9	1,260	$	451.2	939	$	385.9
Mid East	Mid East	1,644	$	335.5	1,141	$	328.6	4,405	$	326.0	3,631	$	322.0	Mid East	1,430	$	351.8	1,250	$	324.0	4,097	$	343.2	3,180	$	322.5
South East	South East	1,903	$	313.0	1,216	$	304.2	4,889	$	305.3	3,661	$	301.6	South East	1,621	$	331.6	1,362	$	299.8	4,672	$	317.3	3,689	$	301.9
Total	Total	6,681	$	384.2	4,766	$	369.2	17,597	$	374.5	15,144	$	364.8	Total	5,683	$	411.1	5,180	$	370.8	16,440	$	396.9	13,706	$	369.5


	As of September 30,
	2021			2020
	Units	Average Price		Units	Average Price
Backlog:
Mid Atlantic	4,473	$	530.3	4,748	$	457.7
North East	927	$	499.0	917	$	427.8
Mid East	3,082	$	375.4	3,038	$	333.2
South East	3,663	$	377.0	3,421	$	315.1
Total	12,145	$	442.4	12,124	$	384.0


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
New order cancellation rate:
Mid Atlantic	9.3	%	11.3	%	8.9	%	16.1	%
North East	7.6	%	8.1	%	8.4	%	14.5	%
Mid East	11.7	%	11.5	%	9.9	%	15.3	%
South East	7.6	%	13.7	%	8.7	%	16.3	%

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		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,		Nine Months Ended September 30,
		2020			2019			2020			2019				2021	2020	2021	2020
		Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price
Settlements:
Average active communities:														Average active communities:
Mid Atlantic	Mid Atlantic	2,172	$	437.1	2,421	$	418.0	5,898	$	434.6	6,890	$	417.3	Mid Atlantic	151	170	154	183
North East	North East	396	$	398.9	316	$	381.3	939	$	385.9	933	$	391.0	North East	34	41	34	41
Mid East	Mid East	1,250	$	324.0	1,255	$	323.5	3,180	$	322.5	3,382	$	326.5	Mid East	125	135	130	138
South East	South East	1,362	$	299.8	1,132	$	295.6	3,689	$	301.9	3,132	$	296.6	South East	104	119	108	113
Total	Total	5,180	$	370.8	5,124	$	365.5	13,706	$	369.5	14,337	$	367.8	Total	414	465	426	475

As of September 30,
2020 2019
Units Average
Price Units Average
Price
Backlog:
Mid Atlantic 4,748 $ 457.7 4,110 $ 426.4
North East 917 $ 427.8 630 $ 383.3
Mid East 3,038 $ 333.2 2,055 $ 327.0
South East 3,421 $ 315.1 2,377 $ 310.0
Total 12,124 $ 384.0 9,172 $ 371.0

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
New order cancellation rate:
Mid Atlantic 11.3 % 16.2 % 16.1 % 14.7 %
North East 8.1 % 13.9 % 14.5 % 12.3 %
Mid East 11.5 % 15.9 % 15.3 % 13.9 %
South East 13.7 % 15.0 % 16.3 % 14.2 %

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Average active communities:
Mid Atlantic 170 201 183 208
North East 41 34 41 32
Mid East 135 136 138 131
South East 119 102 113 93
Total 465 473 475 464

~~Table of Contents~~

Homebuilding Inventory:


	September 30, 2021		December 31, 2020
Sold inventory:
Mid Atlantic	$	758,804	$	704,595
North East	160,800		140,461
Mid East	339,963		278,510
South East	418,756		336,902
Total (1)	$	1,678,323	$	1,460,468

September 30, 2020 December 31, 2019
Sold inventory:
Mid Atlantic $ 752,793 $ 575,216
North East 133,008 77,965
Mid East 296,421 190,700
South East 323,304 230,640
Total (1) $ 1,505,526 $ 1,074,521

September 30, 2020 December 31, 2019
Unsold lots and housing units inventory:
Mid Atlantic $ 79,913 $ 104,459
North East 10,173 28,331
Mid East 11,398 15,333
South East 20,613 35,420
Total (1) $ 122,097 $ 183,543


	September 30, 2021		December 31, 2020
Unsold lots and housing units inventory:
Mid Atlantic	$	94,841	$	76,690
North East	12,471		7,941
Mid East	9,228		13,252
South East	13,085		23,220
Total (1)	$	129,625	$	121,103

(1) The reconciling items between segment inventory and consolidated inventory include certain consolidation adjustments necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes. These consolidation adjustments are not allocated to our operating segments.

Lots Controlled and Land Deposits:


	September 30, 2021	December 31, 2020
Total lots controlled:
Mid Atlantic	46,900	42,100
North East	11,200	10,500
Mid East	22,800	22,000
South East	37,700	31,100
Total	118,600	105,700

September 30, 2020 December 31, 2019
Total lots controlled:
Mid Atlantic 42,300 42,400
North East 9,900 9,900
Mid East 21,600 24,200
South East 29,400 28,400
Total 103,200 104,900

September 30, 2020 December 31, 2019
Contract land deposits, net:
Mid Atlantic $ 208,869 $ 205,433
North East 32,911 50,348
Mid East 49,861 57,053
South East 92,306 106,523
Total $ 383,947 $ 419,357


	September 30, 2021		December 31, 2020
Contract land deposits, net:
Mid Atlantic	$	248,306	$	212,742
North East	41,485		32,949
Mid East	51,776		49,222
South East	122,343		100,864
Total	$	463,910	$	395,777

2726

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		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Contract land deposit impairments (recoveries), net:	Contract land deposit impairments (recoveries), net:									Contract land deposit impairments (recoveries), net:
Mid Atlantic	Mid Atlantic	$	114	$	(247)	$	114	$	42	Mid Atlantic	$	8	$	114	$	16	$	114
North East	North East	56		—		60		1,050		North East	—		56		—		60
Mid East	Mid East	(1)		41		293		50		Mid East	—		(1)		11		293
South East	South East	25		21		927		21		South East	—		25		—		927
Total	Total	$	194	$	(185)	$	1,394	$	1,163	Total	$	8	$	194	$	27	$	1,394

Mid Atlantic

Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

The Mid Atlantic segment had an approximate ~~$20,200,~~$117,800, or ~~16%~~113%, ~~decrease~~increase in segment profit in the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019.~~2020. The ~~decrease~~increase in segment profit was driven by ~~a decrease~~an increase in segment revenues of approximately ~~$62,600,~~$133,200, or 6%14%, quarter over quarter. Segment revenues ~~decreased~~increased primarily due to a ~~10% decrease in the number of units settled, offset partially by a 5%~~14% increase in the average settlement price quarter over quarter. The increase in the average settlement price was primarily attributable to a 15% higher average sales price of units in backlog entering the third quarter of 2021 compared to the same period in 2020. The Mid Atlantic segment’s gross profit margin percentage increased to 26.4% in the third quarter of 2021 from 17.6% in the third quarter of 2020. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increase in settlement activity quarter over quarter. These favorable factors were partially offset by higher prices for certain commodities and labor quarter over quarter.

Segment New Orders decreased 22% while the average sales price of New Orders increased 15% in the third quarter of 2021 compared to the third quarter of 2020. New Orders were lower due primarily to a 12% decrease in the average number of active communities in the third quarter of 2021 compared to the same period in 2020, coupled with a decline in absorption rates quarter over quarter. The increase in the average sales price of New Orders was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us sustained pricing power since the second half of 2020.

Nine Months Ended September 30, 2021 and 2020

The Mid Atlantic segment had an approximate $241,600, or 85%, increase in segment profit in the first nine months of 2021 compared to the first nine months of 2020. The increase in segment profit was driven by an increase in segment revenues of approximately $503,900, or 20%, year over year. Segment revenues increased due to increases in the number of units settled and the average settlement price of 9% and 10%, respectively, year over year. The increase in the number of units settled was ~~impacted by~~attributable to a ~~3% lower~~24% higher backlog unit balance entering ~~the third quarter of 2020~~2021 compared to the backlog unit balance entering ~~the third quarter of 2019, coupled with~~2020, offset partially by a lower backlog turnover rate ~~quarter~~year over ~~quarter.~~year. The increase in the average settlement price was primarily attributable to a 7% higher average sales price of units in backlog entering ~~the third quarter of 2020~~2021 compared to ~~backlog entering~~ the ~~third quarter~~same period in 2020, coupled with a 17% increase in the average sales price of ~~2019.~~New Orders in the first six months of 2021 compared to the same period in 2020. The Mid Atlantic segment’s gross profit margin percentage ~~decreased~~increased to ~~17.6%~~23.2% in the ~~third quarter~~first nine months of ~~2020~~2021 from ~~18.7%~~18.4% in the ~~third quarter~~first nine months of ~~2019 due~~2020. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to ~~increases~~improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increase in settlement activity year over year. These favorable factors were partially offset by higher prices for lumber, ~~and~~ certain other ~~commodity prices quarter~~commodities and labor year over ~~quarter.~~year.

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Segment New Orders ~~and~~decreased 9% while the average sales price of New Orders increased ~~24% and 6%, respectively,~~16% in the ~~third quarter~~first nine months of ~~2020~~2021 compared to the ~~third quarter~~first nine months of ~~2019.~~2020. New Orders ~~increased despite~~were negatively impacted primarily by a 16% decrease in the average number of active communities ~~quarter over quarter, due~~in the first nine months of 2021 compared to ~~higher absorption rates attributable to favorable market conditions driven primarily by historically low mortgage interest rates and low resale inventory levels.~~the same period in 2020. The increase in the average sales price of New Orders year over year was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and have provided us sustained pricing power since the second half of 2020.

North East

Three Months Ended September 30, 2021 and 2020

The North East segment had an approximate $19,600, or 137%, increase in segment profit in the third quarter of 2021 compared to the third quarter of 2020, due primarily to an increase in segment revenues of approximately $55,100, or 35%, quarter over quarter. Segment revenues increased due to increases in the number of units settled and the average settlement price of 15% and 17%, respectively, quarter over quarter. The increase in the number of units settled and the average settlement price were attributable to a 27% higher backlog unit balance and 20% higher average sales price of units in backlog entering the third quarter of 2021, respectively, compared to the backlog unit balance and average sales price of units in backlog entering the third quarter of 2020. The segment’s gross profit margin percentage increased to 23.0% in the third quarter of 2021 from 17.3% in the third quarter of 2020. Gross profit margins were favorably impacted by the ~~previously mentioned~~increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increased settlement activity quarter over quarter. These favorable factors were partially offset by higher prices for certain commodities and labor quarter over quarter.

Segment New Orders decreased 26% while the average sales price of New Orders increased 13% in the third quarter of 2021 compared to the third quarter of 2020. New Orders were lower due primarily to a 16% decrease in the average number of active communities in the third quarter of 2021 compared to the same period in 2020, coupled with a decline in absorption rates quarter over quarter. The increase in the average sales price of New Orders quarter over quarter was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us ~~some~~sustained pricing power ~~as well as to a relative market shift in New Orders to higher priced communities within certain markets in~~since the ~~segment.~~ second half of 2020.

Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

The ~~Mid Atlantic~~North East segment had an approximate ~~$63,600,~~$39,500, or ~~18%~~127%, ~~decrease~~increase in segment profit in the first nine months of ~~2020~~2021 compared to the first nine months of ~~2019.~~2020. The ~~decrease~~increase in segment profit was driven by ~~a decrease~~an increase in segment revenues of approximately ~~$312,000,~~$206,200, or ~~11%~~57%, year over year. Segment revenues ~~decreased~~increased due to ~~a 14% decrease~~increases in the number of units settled ~~offset partially by a 4% increase in~~and the average settlement price of 34% and 17%, respectively, year over year. The ~~decrease~~increase in the number of units settled was ~~impacted by~~attributable to a ~~13% lower~~62% higher backlog unit balance entering ~~2020~~2021 compared to the backlog unit balance entering ~~2019,~~2020, offset partially by a lower backlog turnover rate year over year. The increase in the average settlement price was primarily attributable to a 10% higher average sales price of units in backlog entering 2021 compared to backlog entering 2020, coupled with a 28% increase in the average sales price of New Orders in the first six months of 2021 compared to the same period in 2020. The segment’s gross profit margin percentage increased to 20.0% in the first nine months of 2021 from 19.2% in the same period in 2020. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increase in settlement activity year over year. These favorable factors were partially offset by higher prices for lumber, certain other commodities and labor year over year.

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Segment New Orders decreased 3% while the average sales price of New Orders increased 21% in the first nine months of 2021 compared to the first nine months of 2020. New Orders were negatively impacted primarily by a 17% decrease in the average number of active communities in the first nine months of 2021 compared to the same period in 2020. The increase in the average sales price of New Orders year over year was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us sustained pricing power since the second half of 2020.

Mid East

Three Months Ended September 30, 2021 and 2020

The Mid East segment had an approximate $35,900, or 80%, increase in segment profit in the third quarter of 2021 compared to the third quarter of 2020, due primarily to an increase in segment revenues of approximately $98,200, or 24%, quarter over quarter. Segment revenues increased primarily due to a 14% increase in the number of units settled and a 9% increase in the average settlement price quarter over quarter. The increase in the number of units settled was attributable to a 26% higher backlog unit balance entering the third quarter of 2021 compared to the backlog unit balance entering the third quarter of 2020, offset partially by a lower backlog turnover rate quarter over quarter. The increase in the average settlement price was primarily attributable to an 11% higher average sales price of units in backlog entering the third quarter of 2021 compared to same period in 2020. The segment's gross profit margin percentage increased to 22.2% in the third quarter of 2021 from 18.2% in the third quarter of 2020. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increased settlement activity quarter over quarter. These favorable factors were partially offset by higher prices for certain commodities and labor quarter over quarter.

Segment New Orders decreased 28% while the average sales price of New Orders increased 12% in the third quarter of 2021 compared to the third quarter of 2020. New Orders were negatively impacted by an 8% decrease in the average number of active communities coupled with a decline in absorption rates quarter over quarter. The increase in the average sales price of New Orders was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us sustained pricing power since the second half of 2020.

Nine Months Ended September 30, 2021 and 2020

The Mid East segment had an approximate $86,300, or 83%, increase in segment profit in the first nine months of 2021 compared to the first nine months of 2020. The increase in segment profit was driven by an increase in segment revenues of approximately $380,700, or 37%, year over year. Segment revenues increased due to increases in the number of units settled and the average settlement price of 29% and 6%, respectively, year over year. The increase in the number of units settled was attributable to a 9% higher backlog unit balance entering 2021 compared to the backlog unit balance entering 2020, offset partially by a lower backlog turnover rate year over year. The increase in the average settlement price was primarily attributable to a 4% higher average sales price of units in backlog entering ~~2020~~2021 compared to backlog entering ~~2019.~~2020, coupled with a 13% increase in the average sales price of New Orders in the first six months of 2021 compared to the same period in 2020. The ~~Mid Atlantic segment’s~~segment's gross profit margin percentage ~~remained relatively flat~~increased to 19.8% in the first nine months of ~~2020 compared~~2021 from 18.3% in the same period in 2020. Gross profit margins were favorably impacted by improved leveraging of certain operating costs attributable to the ~~first nine months of 2019.~~increase in settlement activity year over year, offset partially by higher prices for lumber, certain other commodities and labor year over year.

Segment New Orders ~~and~~decreased 2% while the average sales price of New Orders increased ~~3% and 7%, respectively,~~12% in the first nine months of ~~2020~~2021 compared to the first nine months of ~~2019.~~2020. New Orders ~~increased despite~~were negatively impacted primarily by a ~~12%~~6% decrease in the average number of active communities ~~year over year, primarily due to the increase in New Orders~~ in the ~~third quarter~~first nine months of ~~2020 as discussed above.~~

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~~North East~~

~~Three Months Ended September 30, 2020 and 2019~~

~~The North East segment had an approximate $1,100, or 8%, increase in segment profit in the third quarter of 2020~~2021 compared to the ~~third quarter of 2019 due primarily to an increase~~same period in ~~segment revenues of approximately $37,500, or 31%, quarter over quarter.~~2020. The increase in segment revenues was attributable to a 25% increase in the number of units settled and a 5% increase in the average settlement price quarter over quarter. The increases in units settled and the average settlement price were primarily attributable to a 24% higher backlog unit balance and a 5% higher average price of homes in backlog entering the third quarter of 2020 compared to the backlog unit balance and average price of homes in backlog entering the third quarter of 2019. The segment’s gross profit margin percentage decreased to 17.3% in the third quarter of 2020 from 21.1% in the third quarter of 2019 due to increases in lumber and certain other commodity prices quarter over quarter.

~~Segment New Orders and~~ the average sales price of New Orders ~~increased 68% and 16%, respectively, in the third quarter of 2020 compared to the third quarter of 2019. New Orders increased due to higher absorption rates~~was attributable to favorable market conditions ~~driven primarily by historically~~which, coupled with low ~~mortgage interest rates and low resale~~housing inventory levels, drove demand and by a 20% increase in the average number of active communities quarter over quarter. The average sales price of New Orders was favorably impacted by the previously mentioned favorable market conditions which provided us ~~some~~sustained pricing power ~~as well as to a relative market shift in New Orders to higher priced communities within certain markets in~~since the ~~segment.~~

~~Nine Months Ended September 30, 2020 and 2019~~

~~The North East segment had an approximate $5,100, or 14%, decrease in segment profit in the first nine months~~second half of ~~2020 compared to the first nine months of 2019. Segment revenues decreased approximately $2,600, or 1%, year over year.~~The decrease in segment revenues was attributable to a 1% decrease in the average settlement price year over year due to a relative shift in settlements to lower priced markets within the segment. The segment’s gross profit margin percentage decreased to 19.2% in the first nine months of 2020 from 19.6% in the first nine months of 2019 due to increases in lumber and certain other commodity prices year over year.

~~Segment New Orders and the average sales price of New Orders increased 27% and 7%, respectively, in the first nine months of 2020 compared to the first nine months of 2019.~~ ~~New~~ Orders were higher primarily as a result of the increase in New Orders in the third quarter of 2020 as discussed above, coupled with a 25% increase in the average number of active communities year over year.

~~Mid East~~

~~Three Months Ended September 30, 2020 and 2019~~

The Mid East segment had an approximate $5,100, or 10%, decrease in segment profit in the third quarter of 2020 compared to the third quarter of 2019. Segment revenues were relatively flat quarter over quarter, as both the number of units settled and the average settlement price were flat quarter over quarter. The segment’s gross profit margin percentage decreased to 18.2% in the third quarter of 2020 from 19.5% in the third quarter of 2019 due to increases in lumber and certain other commodity prices quarter over quarter.

Segment New Orders and the average sales price of New Orders increased 44% and 2%, respectively, in the third quarter of 2020 compared to the third quarter of 2019. New Orders increased due to higher absorption rates attributable to favorable market conditions driven primarily by historically low mortgage interest rates and low resale inventory levels.2020.

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~~Nine Months Ended September 30, 2020 and 2019~~

The Mid East segment had an approximate $22,400, or 18%, decrease in segment profit in the first nine months of 2020 compared to the first nine months of 2019 due primarily to a decrease in segment revenues of approximately $79,000, or 7%, year over year. Segment revenues decreased primarily due to a 6% decrease in the number of units settled and a 1% decrease in the average settlement price year over year. The decrease in units settled was largely attributable to a decrease in settlements in our Western Pennsylvania and New York markets due to the state and local governments in those markets issuing various orders that prohibited residential construction from the end of March through April 2020 as a result of the COVID-19 pandemic.The segment’s gross profit margin percentage decreased to 18.3% in the first nine months of 2020 from 18.9% in the first nine months of 2019 due to increases in lumber and certain other commodity prices year over year.

Segment New Orders and the average sales price of New Orders increased 21% and 1%, respectively, in the first nine months of 2020 compared to the first nine months of 2019. New Orders were higher primarily as a result of the increase in New Orders in the third quarter of 2020 and by a 6% increase in the average number of active communities year over year.

South East

Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

The South East segment had an approximate ~~$12,800,~~$48,100, or ~~32%~~92%, increase in segment profit in the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019.~~2020. The increase in segment profit was primarily driven by an increase in segment revenues of approximately ~~$73,700,~~$129,300, or ~~22%~~32%, ~~coupled with improved gross profit margins~~ quarter over quarter. The increase in revenues is attributable to a ~~20%~~19% increase in the number of units settled and ~~a 1%~~an 11% increase in the average settlement price quarter over quarter. The increase in the number of units settled was ~~favorably impacted by~~attributable to a ~~26%~~28% higher backlog unit balance entering the third quarter 2021 compared to the backlog unit balance entering the third quarter of 2020, offset partially by a lower backlog turnover rate quarter over quarter. The increase in the average settlement price was primarily attributable to a 16% higher average sales price of units in backlog entering the third quarter of 2021 compared to the same period in ~~2019.~~2020. The segment’s gross profit margin percentage increased to 25.2% in the third quarter of 2021 from 20.5% in the third quarter of ~~2020 from 20.0%~~2020. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increase in settlement activity quarter over quarter. These favorable factors were partially offset by higher prices for certain commodities and labor quarter over quarter.

Segment New Orders decreased 17% while the average sales price of New Orders increased 19% in the third quarter of ~~2019~~2021 compared to the third quarter of 2020. New Orders were negatively impacted primarily by a 12% decrease in the average number of active communities in the first nine months of 2021 compared to the same period in 2020, coupled with a decline in absorption rates quarter over quarter. The increase in the average sales price of New Orders was attributable to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us sustained pricing power since the second half of 2020.

Nine Months Ended September 30, 2021 and 2020

The South East segment had an approximate $93,800, or 66%, increase in segment profit in the first nine months of 2021 compared to the first nine months of 2020. The increase in segment profit was driven by an increase in segment revenues of approximately $368,900, or 33%, year over year. Segment revenues increased due to increases in the number of units settled and the average settlement price of 27% and 5%, respectively, year over year. The increase in the number of units settled was attributable to a ~~relative shift~~46% higher backlog unit balance entering 2021 compared to the backlog unit balance entering 2020, offset partially by a lower backlog turnover rate year over year. The increase in ~~settlements~~the average settlement price was primarily attributable to a 3% higher average sales price of units in backlog entering 2021 compared to backlog entering 2020, coupled with a 16% increase in the average sales price of New Orders in the first six months of 2021 compared to the same period in 2020. The segment’s gross profit margin ~~communities.~~percentage increased to 22.8% in the first nine months of 2021 from 20.8% in the first nine months of 2020. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters and improved leveraging of certain operating costs attributable to the increase in settlement activity year over year. These favorable factors were partially offset by higher prices for lumber, certain other commodities and labor year over year.

Segment New Orders and the average sales price of New Orders increased ~~57%~~4% and 3%17%, respectively, in the third quarter of 2020 compared to the third quarter of 2019. New Orders increased due to higher absorption rates attributable to favorable market conditions driven primarily by historically low mortgage interest rates and low resale inventory levels and by a 17% increase in the average number of active communities quarter over quarter.

~~Nine Months Ended September 30, 2020 and 2019~~

~~The South East segment had an approximate $36,900, or 35%, increase in segment profit~~ in the first nine months of ~~2020~~2021 compared to the first nine months of ~~2019. The increase in segment profit was primarily driven by an increase in segment revenues of approximately $184,800, or 20%, coupled with improved gross profit margins year over year.The increase in revenues is attributable to an 18% increase in the number of units settled and a 2% increase in the average settlement price year over year.~~The number of units settled and the average settlement price were favorably impacted by a 20% higher backlog unit balance and 3% higher average sales price of units in backlog entering 2020 compared to the same period in 2019. The segment’s gross profit margin percentage increased to 20.8% in the first nine months of 2020 from 19.7% in the first nine months of 2019 due to a relative shift in settlements to higher margin communities.

~~Segment~~2020. New Orders and the average sales price of New Orders ~~increased 34% and 1%, respectively, in the first nine months of 2020 compared to the first nine months of 2019. New Orders~~ were higher ~~as a result~~due to favorable market conditions which, coupled with low housing inventory levels, drove demand and provided us sustained pricing power since the second half of ~~the increase in New Orders in the third quarter of 2020 as discussed above and by a 21% increase in the average number of active communities year over year.~~2020.

Homebuilding Segment Reconciliations to Consolidated Homebuilding Operations

In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between homebuilding segment profit and homebuilding consolidated income before tax include unallocated corporate overhead (which includes all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense. Our overhead functions, such as accounting, treasury and human resources, are centrally performed and the costs are not allocated to our

~~Table of Contents~~

operating segments. Consolidation adjustments consist of such items to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to our operating segments. ~~Our external~~External corporate interest expense primarily

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consists of interest charges on our Senior Notes, and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Homebuilding consolidated gross profit:
Mid Atlantic	$	285,563	$	167,314	$	712,809	$	471,839
North East	48,904		27,265		113,940		69,512
Mid East	111,465		73,630		278,672		187,181
South East	135,577		83,520		338,166		231,594
Consolidation adjustments and other	(62,833)		32,978		(35,766)		(10,190)
Homebuilding consolidated gross profit	$	518,676	$	384,707	$	1,407,821	$	949,936

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Homebuilding consolidated gross profit:
Mid Atlantic $ 167,314 $ 189,535 $ 471,839 $ 540,060
North East 27,265 25,364 69,512 71,452
Mid East 73,630 79,227 187,181 208,870
South East 83,520 66,836 231,594 182,940
Consolidation adjustments and other (1) 32,978 (5,907) (10,190) (11,807)
Homebuilding consolidated gross profit $ 384,707 $ 355,055 $ 949,936 $ 991,515

~~(1)~~The increase in our consolidation adjustments and other reconciling item for the three month period ended September 30, 2020 relates primarily to the significant increase in lumber prices during the third quarter of 2020. Our reportable segments' results include intercompany profits of our production facilities, which were negatively impacted by the increase in lumber costs. This increase in lumber costs related to homes not yet settled is eliminated through the consolidation adjustment. As these homes currently in inventory are settled in subsequent quarters, our consolidated homebuilding margins will be negatively impacted by the higher lumber costs. For the nine month period ended September 30, 2020, the increase in the consolidation adjustment due to higher lumber prices was offset by the lot deposit reserve recorded in the first quarter of 2020.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Homebuilding consolidated income before taxes:	Homebuilding consolidated income before taxes:									Homebuilding consolidated income before taxes:
Mid Atlantic	Mid Atlantic	$	104,700	$	124,900	$	284,440	$	348,067	Mid Atlantic	$	222,504	$	104,700	$	526,052	$	284,440
North East	North East	14,272		13,164		31,081		36,187		North East	33,885		14,272		70,622		31,081
Mid East	Mid East	45,109		50,210		103,575		125,976		Mid East	81,021		45,109		189,849		103,575
South East	South East	52,554		39,721		142,463		105,582		South East	100,688		52,554		236,272		142,463
Reconciling items:	Reconciling items:									Reconciling items:
Contract land deposit impairment reserve (1)		4,867		248		(31,208)		1,572
Contract land deposit recoveries (impairments) (1)										Contract land deposit recoveries (impairments) (1)	4,126		4,867		17,500		(31,208)
Equity-based compensation expense ~~(2)~~	Equity-based compensation expense ~~(2)~~	(12,561)		(19,335)		(33,398)		(56,773)		Equity-based compensation expense ~~(2)~~	(13,779)		(12,561)		(39,484)		(33,398)
Corporate capital allocation ~~(3)~~(2)	Corporate capital allocation ~~(3)~~(2)	60,662		57,887		177,184		168,621		Corporate capital allocation ~~(3)~~(2)	64,055		60,662		188,638		177,184
Unallocated corporate overhead	Unallocated corporate overhead	(26,915)		(27,914)		(87,912)		(89,003)		Unallocated corporate overhead	(27,801)		(26,915)		(101,605)		(87,912)
Consolidation adjustments and other ~~(4)~~(3)	Consolidation adjustments and other ~~(4)~~(3)	38,244		12,859		54,769		31,569		Consolidation adjustments and other ~~(4)~~(3)	(56,786)		38,244		(22,456)		54,769
Corporate interest expense	Corporate interest expense	(11,287)		(5,966)		(26,625)		(17,964)		Corporate interest expense	(12,805)		(11,287)		(38,598)		(26,625)
Reconciling items sub-total	Reconciling items sub-total	53,010		17,779		52,810		38,022		Reconciling items sub-total	(42,990)		53,010		3,995		52,810
Homebuilding consolidated income before taxes	Homebuilding consolidated income before taxes	$	269,645	$	245,774	$	614,369	$	653,834	Homebuilding consolidated income before taxes	$	395,108	$	269,645	$	1,026,790	$	614,369

~~(2)~~The decrease in equity-based compensation expense for the three and nine month periods ended September 30, 2020 was primarily attributable to stock options issued in 2014 under the 2014 Equity Incentive Plan becoming fully vested in 2019. In addition, stock compensation expense for both the three and nine month periods ended September 30, 2020 was favorably impacted by higher stock option forfeitures during 2020.

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~~(3)~~(2)This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments. The corporate capital allocation charge is based on the segment’s monthly average asset balance, and is as follows for the periods presented:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Corporate capital allocation charge:	Corporate capital allocation charge:									Corporate capital allocation charge:
Mid Atlantic	Mid Atlantic	$	31,383	$	31,504	$	92,720	$	93,297	Mid Atlantic	$	31,057	$	31,383	$	92,788	$	92,720
North East	North East	5,793		5,028		17,142		14,381		North East	6,719		5,793		19,214		17,142
Mid East	Mid East	10,386		9,791		29,436		28,303		Mid East	11,114		10,386		32,804		29,436
South East	South East	13,100		11,564		37,886		32,640		South East	15,165		13,100		43,832		37,886
Total	Total	$	60,662	$	57,887	$	177,184	$	168,621	Total	$	64,055	$	60,662	$	188,638	$	177,184

~~(4)~~ (3)The ~~increase~~decrease in ~~our~~ consolidation adjustments and other ~~reconciling item~~ for ~~both~~ the three and nine month periods ~~ended September 30, 2020 relates primarily~~of 2021 compared to the ~~significant increase~~respective 2020 periods is driven by changes in lumber prices ~~during the third quarter of 2020.~~in 2021. Our reportable segments' results include the intercompany profits of our production facilities ~~which were negatively impacted by the increase in lumber costs. The increase in lumber costs related~~for home packages delivered to our homebuilding divisions. For homes not yet settled, ~~is eliminated~~these intercompany profits are reversed through the consolidation ~~adjustment. As these~~adjustments. Due to the significantly higher lumber prices in the first half of 2021, the previously reversed intercompany profits were recognized in the third quarter through the consolidation adjustment as homes ~~currently in inventory are~~were settled, ~~in subsequent quarters,~~and our consolidated homebuilding margins ~~will be~~were negatively impacted by the higher lumber costs.

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Mortgage Banking Segment

Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

We conduct our mortgage banking activity through NVR Mortgage Finance, Inc. (“NVRM”), a wholly owned subsidiary. NVRM focuses exclusively on serving the homebuilding segment customer base. NVRM sells all of the mortgage loans it closes to investors in the secondary markets on a servicing-released basis, typically within 30 days from the loan closing. The following table summarizes the results of our mortgage banking operations and certain statistical data for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Loan closing volume:
Total principal $ 1,382,060 $ 1,373,946 $ 3,658,591 $ 3,745,983
Loan volume mix:
Adjustable rate mortgages 2 % 7 % 2 % 9 %
Fixed-rate mortgages 98 % 93 % 98 % 91 %
Operating profit:
Segment profit $ 52,890 $ 22,835 $ 80,461 $ 78,566
Equity-based compensation expense (1,078) (1,435) (2,167) (1,907)
Mortgage banking income before tax $ 51,812 $ 21,400 $ 78,294 $ 76,659
Capture rate: 89 % 90 % 90 % 89 %
Mortgage banking fees:
Net gain on sale of loans $ 58,774 $ 27,771 $ 100,348 $ 95,690
Title services 10,237 10,005 26,755 28,297
Servicing fees 250 157 589 497
$ 69,261 $ 37,933 $ 127,692 $ 124,484

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Loan closing volume:
Total principal	$	1,615,880		$	1,382,060		$	4,593,854		$	3,658,591

Loan volume mix:
Adjustable rate mortgages	4		%	2		%	3		%	2		%
Fixed-rate mortgages	96		%	98		%	97		%	98		%

Operating profit:
Segment profit	$	40,249		$	52,890		$	140,183		$	80,461
Equity-based compensation expense	(1,230)			(1,078)			(3,375)			(2,167)
Mortgage banking income before tax	$	39,019		$	51,812		$	136,808		$	78,294

Capture rate:	88		%	89		%	89		%	90		%

Mortgage banking fees:
Net gain on sale of loans	$	47,577		$	58,774		$	162,729		$	100,348
Title services	11,246			10,237			32,478			26,755
Servicing fees	202			250			591			589
	$	59,025		$	69,261		$	195,798		$	127,692

Loan closing volume for the three ~~months ended September 30, 2020 increased by approximately $8,100 or 1%,~~ and ~~decreased by approximately $87,400, or 2% for the~~ nine months ended September 30, ~~2020~~2021 increased by approximately $233,800, or 17%, and $935,300, or 26%, from the same periods in ~~2019.~~2020, respectively. The increase in loan closing volume during the three and nine months ended September 30, ~~2020~~2021 was primarily attributable to the ~~1% increase~~10% and 20% increases in the homebuilding ~~segment's~~segment’s number of units settled during the three and nine months ended September 30, ~~2020,~~2021, respectively, compared to the same periods in 2020.

Segment profit for the three months ended September 30, 2021 decreased by approximately $12,600, or 24% from the same period in ~~2019. The~~2020. This decrease was primarily attributable to a decrease in ~~loan closing volume during~~mortgage banking fees of approximately $10,200 primarily due to a decrease in secondary marketing gains on sales of loans quarter over quarter.

Segment profit for the nine months ended September 30, ~~2020~~2021 increased by approximately $59,700, or 74%, from the same period in 2020. This increase was primarily attributable to ~~the 4% decrease~~an increase in mortgage banking fees of approximately $68,100, primarily due to increased mortgage volume in 2021, coupled with 2020 results being negatively impacted by disruptions in the ~~homebuilding segment's number~~mortgage markets related to the COVID-19 pandemic.

Table of ~~units settled during~~Contents

Seasonality

We generally have higher New Order activity in the first half of the year and higher home settlements, revenue and net income in the second half of the year.

Effective Tax Rate

Our effective tax rate for the three and nine months ended September 30, ~~2020,~~2021 was 23.5% and 22.5%, respectively, compared to ~~the same period in 2019.~~

~~Segment profit~~20.2% and 13.9% for the three and nine months ended September 30, 2020, ~~increased by approximately $30,100, or 132%,~~respectively. The increase in the effective tax rate in the three and ~~$1,900, or 2%, respectively, from~~nine month periods of 2021 compared to the same periods in ~~2019. These increases were~~2020 is primarily attributable to ~~increases in mortgage banking fees~~the impact of ~~approximately $31,300~~the income tax benefit recognized related to excess tax benefits from stock option exercises totaling $9,244 and ~~$3,200~~$37,834 for the three and nine months ended September 30, ~~2020,~~2021, respectively, ~~primarily due to an increase in secondary marketing gains on sales of loans.~~

~~Effective Tax Rate~~

~~Our effective tax rates during the three~~ and nine months ended September 30, 2020 were 20.2% and 13.9%, respectively, compared to 16.2% and 14.8% for the three and nine months ended September 30, 2019, respectively. The effective tax rate in each period was favorably impacted by the recognition of an income tax benefit related to excess tax benefits from stock option exercises totaling $17,834 and $80,343 for the three and nine months ended September 30, 2020, ~~respectively, and $27,604 and $86,809 for the three and nine months ended September 30, 2019,~~ respectively.

We expect to experience volatility in our effective tax rate in future quarters as the amount of the excess tax benefit from equity-based awards is dependent on our stock price when awards are exercised as well as on the timing of exercises, which historically has varied from quarter to quarter.

Liquidity and Capital Resources

Overview

We had a very strong liquidity position as of September 30, ~~2020,~~2021, with approximately ~~$2,500,000~~$2,700,000 in cash and cash equivalents, approximately ~~$188,550~~$284,400 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility.

Our homebuilding business segment funds its operations from cash flows provided by operating activities, a short-term unsecured working capital revolving credit facility and capital raised in the public debt and equity markets.

~~2030 Senior Notes~~

On May 4, 2020, we issued $600,000 of 3.00% Senior Notes due 2030 (the "2030 Senior Notes"). The 2030 Senior Notes were issued at a discount to yield 3.02% and have been reflected net of the unamortized discount and unamortized debt issuance costs in the accompanying condensed consolidated balance sheet. The offering of the 2030 Senior Notes resulted in aggregate net proceeds of approximately $595,300, after deducting underwriting discount and offering expenses. The 2030 Senior Notes mature on May 15, 2030 and bear interest at 3.00%, payable semi-annually in arrears on May 15 and November 15. The 2030 Senior Notes are senior unsecured obligations and rank equal in right of payment to all of our existing and future unsecured senior indebtedness Our mortgage banking subsidiary, NVRM, provides for its mortgage origination and other ~~obligations that are not, by their terms, expressly subordinated in right of payment to the 2030 Senior Notes.~~

~~On September 9 and September 17, 2020, we issued an additional $250,000 and $50,000, respectively, of~~operating activities using cash generated from its ~~2030 Senior Notes (the "Additional Senior Notes"). The Additional Senior Notes were issued at~~operations, borrowings from its parent company, NVR, as well as a premium to yield 2.00% and have been reflected net of the unamortized premium and unamortized debt issuance costs in the accompanying condensed consolidated balance sheet. The offering of the Additional Senior Notes resulted in aggregate net proceeds of approximately $323,900, including the underwriting premium, less offering expenses. The Additional Senior Notes form a single series with the 2030 Senior Notes and have substantially identical terms as the 2030 Senior Notes.revolving mortgage repurchase facility.

Credit Agreement

~~Table of Contents~~

~~We have an~~Our unsecured Credit Agreement (the “Credit Agreement”) ~~which~~ provides for aggregate revolving loan commitments of ~~$200,000 (the "Facility").~~$300,000. Under the Credit Agreement, we may request increases of up to $300,000 to the ~~Facility~~facility in the form of revolving loan commitments or term loans to the extent that new or existing lenders agree to provide additional revolving loan or term loan commitments. The Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit of which there was approximately ~~$11,450~~$15,600 outstanding at September 30, ~~2020, and a $25,000 sublimit for a swing line commitment.~~2021. The Credit Agreement termination date is ~~July 15, 2021.~~February 12, 2026. There was no debt outstanding under the ~~Facility~~Credit Agreement at September 30, ~~2020.~~2021.

Repurchase Agreement

Our mortgage banking subsidiary, NVRM, provides for its mortgage origination and other operating activities using cash generated from its operations, borrowings from its parent company, NVR, as well as a $150,000NVRM's revolving mortgage repurchase facility (the “Repurchase Agreement”)~~, which~~ provides for aggregate borrowings up to $150,000 and is non-recourse to NVR. In July ~~2020,~~2021, NVRM entered into the ~~Twelfth~~Thirteenth Amendment to the Repurchase Agreement, which extended the term of the Repurchase Agreement through July ~~21, 2021.~~20, 2022. All other terms and conditions under the amended Repurchase Agreement remained materially consistent. At September 30, ~~2020,~~2021, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. There was no debt outstanding under the Repurchase Agreement at September 30, ~~2020.~~2021.

For additional information regarding lines of credit and notes payable, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Cash Flows

For the nine months ended September 30, ~~2020,~~2021, cash, restricted cash, and cash equivalents ~~increased~~decreased by ~~$1,431,671.~~$61,722. Cash provided by operating activities was ~~$579,340.~~$982,292. Cash was provided by earnings for the nine months ended September 30, ~~2020 and~~2021, net proceeds of ~~$250,780~~$319,140 from mortgage loan ~~activity.~~activity and a $140,836 increase in customer deposits due to an increase in backlog value coupled with an increase in the average deposit collected per

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home in backlog at September 31, 2021 compared to December 31, 2020. Cash was primarily used to fund the increase in homebuilding inventory of ~~$416,488~~$154,443 due to an increase in the number of units under construction at September 30, ~~2020~~2021 compared to December 31, ~~2019.~~2020.

Net cash used in investing activities for the nine months ended September 30, ~~2020~~2021 was ~~$12,099~~$11,986, attributable primarily ~~due~~ to cash used for purchases of property, plant and equipment of ~~$12,329.~~$11,946.

Net cash ~~provided by~~used in financing activities was $1,032,028 for the nine months ended September 30, ~~2020 was $864,430 due primarily to the net proceeds received from the issuance of the 2030 Senior Notes, as discussed above, and $162,522 provided from stock option exercise proceeds.~~2021. Cash was used ~~during the period~~ to repurchase ~~57,611~~244,595 shares of our common stock at an aggregate purchase price of ~~$216,582, all of which were repurchased in the first quarter,~~$1,152,855 under our ongoing common stock repurchase program, discussed below. Cash was provided from stock option exercise proceeds totaling $121,835.

Equity Repurchases

In addition to funding growth in our homebuilding and mortgage banking operations, we historically have used a substantial portion of our excess liquidity to repurchase outstanding shares of our common stock in open market and privately negotiated transactions. This ongoing repurchase activity is conducted pursuant to publicly announced Board authorizations, and is typically executed in accordance with the safe-harbor provisions of Rule 10b-18 promulgated under the Exchange Act. In addition, the Board resolutions authorizing us to repurchase shares of our common stock specifically prohibit us from purchasing shares from our officers, directors, Profit Sharing/401(k) Plan Trust or Employee Stock Ownership Plan Trust. The repurchase program assists us in accomplishing our primary objective of creating increases in shareholder value. ~~We did not~~See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this Quarterly Report on Form 10-Q for further discussion of repurchase ~~any outstanding shares of our common stock~~activity during the third quarter of ~~2020.~~2021.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as previously disclosed in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in our market risks during the nine months ended September 30, ~~2020.~~2021. For additional information regarding our market risks, see Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have been no changes in our internal control over financial reporting in the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

~~We are supplementing~~There have been no material changes to the risk factors ~~described under "Item 1A. Risk Factors"~~as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019 with the additional risk factor set forth below, which supplements, and to the extent inconsistent, supersedes such risk factors.~~

Health epidemics, including the recent COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business and operations, and the markets, states and local communities in which we operate.

Our business and operations could be adversely affected by health epidemics, including the recent COVID-19 pandemic, impacting the markets, states and local communities in which we operate. The COVID-19 pandemic has been declared a national emergency. Efforts to contain the virus have led to significant disruptions to commerce, increased unemployment, lower consumer confidence and consumer demand for goods and services and general uncertainty regarding the near-term and long-term impact of the COVID-19 virus on the domestic and international economy and on public health. These developments and other consequences of the outbreak could materially and adversely affect our operations, profitability and cash flows.

~~The duration, severity, and scope of the COVID-19 outbreak is highly uncertain.~~ The COVID-19 pandemic has adversely impacted and may continue to adversely impact our business. To date, our primary focus as we face this challenge has been to do everything we can to ensure the safety and well-being of our employees, customers and trade partners.

~~Homebuilding~~: State governments in every market where we operate have instituted social distancing and other restrictions, which have resulted in significant changes to the way we conduct business. We are operating in accordance with the guidelines issued by the Centers for Disease Control and Prevention, as well as state and local guidelines, in all of our markets.

~~Mortgage~~: We are operating in accordance with state and local guidelines with respect to our mortgage banking and settlement services activities. As a result of the COVID-19 pandemic, the mortgage market experienced significant disruption earlier in 2020 as investors tightened their credit standards or exited the market.

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The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. There is uncertainty regarding governmental actions that may occur, and the effects of economic relief efforts on the U.S. economy, either of which could be potential disruptors to our business. Over the long term, these disruptions related to COVID-19 could lower demand for our products, impair our ability to sell and/or build homes in our normal manner, increase our losses on contract land deposits, and negatively impact our lending and secondary mortgage market activities.

The full extent to which the COVID-19 pandemic will affect our operations cannot be predicted at this time, including, but not limited to, the duration and severity of the outbreak, governmental reactions and policies, the impact of such on our employees, customers and trade partners, and the length of time required for normal economic and operating conditions to resume. While the spread of COVID-19 may eventually be mitigated, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the U.S. economy will recover, either of which could seriously harm our business.2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(dollars in ~~thousands)~~thousands, except per share data)

We had two share repurchase authorizations outstanding during the quarter ended September 30, ~~2020.~~2021. On ~~November 6, 2019~~May 5, 2021 and ~~February 12, 2020,~~August 4, 2021, we publicly announced that our Board of Directors authorized the repurchase of our outstanding common stock in one or more open market and/or privately negotiated transactions, up to an aggregate of ~~$300,000~~$500,000 per each authorization. The repurchase authorizations do not have expiration dates. We ~~did not repurchase any~~repurchased the following shares of our common stock during the third quarter of ~~2020. As of~~2021:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 - 31, 2021	19,740	$	4,915.16	19,740	$	194,670
August 1 - 31, 2021	8,545	$	5,110.07	8,545	$	651,005
September 1 -30, 2021 (1)	51,335	$	5,021.87	51,335	$	393,207
Total	79,620	$	5,004.88	79,620

(1) Of the shares repurchased in September ~~30, 2020, we had a total of $400,559 available~~2021, 29,888 shares were repurchased under the ~~outstanding~~May 5, 2021 share repurchase ~~authorizations.~~authorization, which fully utilized the May authorization. The remaining 21,447 shares were repurchased under the August 4, 2021 share repurchase authorization.

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Item 6. Exhibits

Incorporated by Reference
Exhibit Number Exhibit Description Form File
Number Exhibit
Number Filing Date
4.1
Seventh Supplemental Indenture dated September 9, 2020 between NVR, Inc. and U.S. Bank Trust National Association.
8-K 4.1 9/9/2020
4.2
Eighth Supplemental Indenture dated September 17, 2020 between NVR, Inc. and U.S. Bank Trust National Association.
8-K 4.1 9/17/2020
10.1
Extension of Emplo yment Agreement between NVR, Inc. and Paul C. Saville dated November 4, 2020. Filed herewith.
10.2
Exten sion of Employment Agreement between NVR, Inc. and Daniel D. Malzahn dated November 4, 2020. Filed herewith.
10.3
Extension of Employment Agreement between NVR, Inc. and Paul W. Praylo dated November 4, 2020. Filed herewith.
10.4
Extension of Employment Agreement between NVR, Inc. and Eugene J. Bredow dated November 4, 2020. Filed herewith.
31.1
Certification of NVR’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2
Certification of NVR’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32
Certification of NVR’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

99.1
NVR Third Qua rter 2020 Earnin gs Release dated October 20, 2 020
8-K 99.1 10/20/2020
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Exhibit Number

Exhibit Description

31.1

Certification of NVR’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2

Certification of NVR’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

Certification of NVR’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NVR, Inc.

Date: November ~~4, 2020~~2, 2021	By:	/s/ Daniel D,D. Malzahn
		Daniel D. Malzahn
		Senior Vice President, Chief Financial Officer and Treasurer


		Page
PART I	FINANCIAL INFORMATION	1

Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets (unaudited)	1
	Condensed Consolidated Statements of Income (unaudited)	3
	Condensed Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2019
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	35
Item 4.	Controls and Procedures	35

PART II	OTHER INFORMATION	3536
Item 1.	Legal Proceedings	3536
Item 1A.	Risk Factors	3536
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6.	Exhibits	37

	SIGNATURE	38