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, ~~2021~~2022


☐			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 ~~October 31, 2021~~November 1, 2022 there were ~~3,482,747~~3,195,887 total shares of common stock outstanding.

NVR, Inc.

FORM 10-Q

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


NVR, Inc.	NVR, Inc.					NVR, Inc.
Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets					Condensed Consolidated Balance Sheets
(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, 2021		December 31, 2020			September 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Homebuilding:	Homebuilding:					Homebuilding:
Cash and cash equivalents	Cash and cash equivalents	$	2,681,110	$	2,714,720	Cash and cash equivalents	$	1,748,506	$	2,545,069
Restricted cash	Restricted cash	41,820		28,912		Restricted cash	51,239		60,730
Receivables	Receivables	22,525		18,299		Receivables	28,378		18,552
Inventory:	Inventory:					Inventory:
Lots and housing units, covered under sales agreements with customers	Lots and housing units, covered under sales agreements with customers	1,697,959		1,484,936		Lots and housing units, covered under sales agreements with customers	1,931,639		1,777,862
Unsold lots and housing units	Unsold lots and housing units	130,427		123,197		Unsold lots and housing units	194,882		127,434
Land under development	Land under development	8,151		62,790		Land under development	15,230		12,147
Building materials and other	Building materials and other	26,988		38,159		Building materials and other	28,698		29,923
		1,863,525		1,709,082			2,170,449		1,947,366

Contract land deposits, net	Contract land deposits, net	453,255		387,628		Contract land deposits, net	521,572		497,139
Property, plant and equipment, net	Property, plant and equipment, net	55,253		57,786		Property, plant and equipment, net	55,982		56,979
Operating lease right-of-use assets	Operating lease right-of-use assets	60,605		53,110		Operating lease right-of-use assets	69,933		59,010
Reorganization value in excess of amounts allocable to identifiable assets, net	Reorganization value in excess of amounts allocable to identifiable assets, net	41,580		41,580		Reorganization value in excess of amounts allocable to identifiable assets, net	41,580		41,580
Other assets	Other assets	211,557		203,399		Other assets	230,255		229,018
		5,431,230		5,214,516			4,917,894		5,455,443
Mortgage Banking:	Mortgage Banking:					Mortgage Banking:
Cash and cash equivalents	Cash and cash equivalents	21,999		63,547		Cash and cash equivalents	18,431		28,398
Restricted cash	Restricted cash	2,860		2,334		Restricted cash	2,924		2,519
Mortgage loans held for sale, net	Mortgage loans held for sale, net	287,525		449,760		Mortgage loans held for sale, net	316,094		302,192
Property and equipment, net	Property and equipment, net	3,948		4,544		Property and equipment, net	3,250		3,658
Operating lease right-of-use assets	Operating lease right-of-use assets	10,747		12,439		Operating lease right-of-use assets	14,534		9,758
Reorganization value in excess of amounts allocable to identifiable assets, net	Reorganization value in excess of amounts allocable to identifiable assets, net	7,347		7,347		Reorganization value in excess of amounts allocable to identifiable assets, net	7,347		7,347
Other assets	Other assets	23,238		22,654		Other assets	109,060		25,160
		357,664		562,625			471,640		379,032
Total assets	Total assets	$	5,788,894	$	5,777,141	Total assets	$	5,389,534	$	5,834,475

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, 2021		December 31, 2020			September 30, 2022		December 31, 2021
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Homebuilding:	Homebuilding:					Homebuilding:
Accounts payable	Accounts payable	$	329,863	$	339,867	Accounts payable	$	393,941	$	336,560
Accrued expenses and other liabilities	Accrued expenses and other liabilities	416,266		440,671		Accrued expenses and other liabilities	427,072		435,860
Customer deposits	Customer deposits	381,594		240,758		Customer deposits	376,160		417,463
Operating lease liabilities	Operating lease liabilities	66,002		59,357		Operating lease liabilities	74,670		64,128
Senior notes	Senior notes	1,516,544		1,517,395		Senior notes	915,346		1,516,255
		2,710,269		2,598,048			2,187,189		2,770,266
Mortgage Banking:	Mortgage Banking:					Mortgage Banking:
Accounts payable and other liabilities	Accounts payable and other liabilities	50,077		62,720		Accounts payable and other liabilities	102,101		51,394
Operating lease liabilities	Operating lease liabilities	11,497		13,299		Operating lease liabilities	15,405		10,437
		61,574		76,019			117,506		61,831
Total liabilities	Total liabilities	2,771,843		2,674,067		Total liabilities	2,304,695		2,832,097

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies

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, 2021 and December 31, 2020		206		206
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2022 and December 31, 2021						Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2022 and December 31, 2021	206		206
Additional paid-in capital	Additional paid-in capital	2,349,000		2,214,426		Additional paid-in capital	2,538,812		2,378,191
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 trust – 106,697 shares of NVR, Inc. common stock as of both September 30, 2022 and December 31, 2021						Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both September 30, 2022 and December 31, 2021	(16,710)		(16,710)
Deferred compensation liability	Deferred compensation liability	16,710		16,710		Deferred compensation liability	16,710		16,710
Retained earnings	Retained earnings	9,713,258		8,811,120		Retained earnings	11,318,646		10,047,839
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)
Less treasury stock at cost – 17,343,353 and 17,107,889 shares as of September 30, 2022 and December 31, 2021, respectively						Less treasury stock at cost – 17,343,353 and 17,107,889 shares as of September 30, 2022 and December 31, 2021, respectively	(10,772,825)		(9,423,858)
Total shareholders' equity	Total shareholders' equity	3,017,051		3,103,074		Total shareholders' equity	3,084,839		3,002,378
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	5,788,894	$	5,777,141	Total liabilities and shareholders' equity	$	5,389,534	$	5,834,475

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Homebuilding:	Homebuilding:									Homebuilding:
Revenues	Revenues	$	2,336,615	$	1,920,751	$	6,524,886	$	5,065,216	Revenues	$	2,739,445	$	2,336,615	$	7,658,734	$	6,524,886
Other income	Other income	1,496		1,988		4,714		9,732		Other income	10,211		1,496		15,446		4,714
Cost of sales	Cost of sales	(1,817,939)		(1,536,044)		(5,117,065)		(4,115,280)		Cost of sales	(2,092,457)		(1,817,939)		(5,668,549)		(5,117,065)
Selling, general and administrative	Selling, general and administrative	(112,226)		(105,741)		(347,051)		(318,610)		Selling, general and administrative	(129,416)		(112,226)		(391,358)		(347,051)
Operating income	Operating income	407,946		280,954		1,065,484		641,058		Operating income	527,783		407,946		1,614,273		1,065,484
Interest expense	Interest expense	(12,838)		(11,309)		(38,694)		(26,689)		Interest expense	(6,854)		(12,838)		(31,510)		(38,694)
Homebuilding income	Homebuilding income	395,108		269,645		1,026,790		614,369		Homebuilding income	520,929		395,108		1,582,763		1,026,790

Mortgage Banking:	Mortgage Banking:									Mortgage Banking:
Mortgage banking fees	Mortgage banking fees	59,025		69,261		195,798		127,692		Mortgage banking fees	37,455		59,025		155,518		195,798
Interest income	Interest income	2,336		2,222		6,577		6,545		Interest income	3,437		2,336		8,283		6,577
Other income	Other income	1,022		887		2,877		2,215		Other income	1,294		1,022		3,669		2,877
General and administrative	General and administrative	(22,959)		(20,180)		(67,228)		(57,149)		General and administrative	(24,252)		(22,959)		(70,646)		(67,228)
Interest expense	Interest expense	(405)		(378)		(1,216)		(1,009)		Interest expense	(348)		(405)		(1,115)		(1,216)
Mortgage banking income	Mortgage banking income	39,019		51,812		136,808		78,294		Mortgage banking income	17,586		39,019		95,709		136,808

Income before taxes	Income before taxes	434,127		321,457		1,163,598		692,663		Income before taxes	538,515		434,127		1,678,472		1,163,598
Income tax expense	Income tax expense	(102,046)		(64,991)		(261,460)		(96,419)		Income tax expense	(127,122)		(102,046)		(407,665)		(261,460)

Net income	Net income	$	332,081	$	256,466	$	902,138	$	596,244	Net income	$	411,393	$	332,081	$	1,270,807	$	902,138

Basic earnings per share	Basic earnings per share	$	93.25	$	69.19	$	249.30	$	161.85	Basic earnings per share	$	125.97	$	93.25	$	383.68	$	249.30

Diluted earnings per share	Diluted earnings per share	$	86.44	$	65.11	$	231.75	$	153.03	Diluted earnings per share	$	118.51	$	86.44	$	358.61	$	231.75

Basic weighted average shares outstanding	Basic weighted average shares outstanding	3,561		3,706		3,619		3,684		Basic weighted average shares outstanding	3,266		3,561		3,312		3,619

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	3,842		3,939		3,893		3,896		Diluted weighted average shares outstanding	3,471		3,842		3,544		3,893

See notes to condensed consolidated financial statements.

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NVR, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	902,138	$	596,244	Net income	$	1,270,807	$	902,138
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	14,720		16,801		Depreciation and amortization	13,237		14,720
Equity-based compensation expense	Equity-based compensation expense	42,859		35,565		Equity-based compensation expense	58,441		42,859
Contract land deposit and other (recoveries) impairments, net		(17,474)		32,751
Contract land deposit impairments (recoveries), net						Contract land deposit impairments (recoveries), net	2,482		(17,474)
Gain on sale of loans, net	Gain on sale of loans, net	(162,729)		(100,348)		Gain on sale of loans, net	(120,035)		(162,729)
Mortgage loans closed	Mortgage loans closed	(4,599,324)		(3,663,220)		Mortgage loans closed	(4,791,742)		(4,599,324)
Mortgage loans sold and principal payments on mortgage loans held for sale	Mortgage loans sold and principal payments on mortgage loans held for sale	4,918,464		3,914,000		Mortgage loans sold and principal payments on mortgage loans held for sale	4,925,431		4,918,464
Distribution of earnings from unconsolidated joint ventures	Distribution of earnings from unconsolidated joint ventures	7,500		—		Distribution of earnings from unconsolidated joint ventures	7,500		7,500
Net change in assets and liabilities:	Net change in assets and liabilities:					Net change in assets and liabilities:
Increase in inventory	Increase in inventory	(154,443)		(416,488)		Increase in inventory	(223,083)		(154,443)
(Increase) decrease in contract land deposits		(48,153)		4,585
Increase in contract land deposits						Increase in contract land deposits	(26,915)		(48,153)
Increase in receivables	Increase in receivables	(2,349)		(3,060)		Increase in receivables	(69,132)		(2,349)
(Decrease) increase in accounts payable and accrued expenses		(44,970)		109,921
Increase in customer deposits		140,836		79,236
Increase (decrease) in accounts payable and accrued expenses						Increase (decrease) in accounts payable and accrued expenses	42,087		(44,970)
(Decrease) increase in customer deposits						(Decrease) increase in customer deposits	(41,303)		140,836
Other, net	Other, net	(14,783)		(26,647)		Other, net	5,131		(14,783)
Net cash provided by operating activities	Net cash provided by operating activities	982,292		579,340		Net cash provided by operating activities	1,052,906		982,292

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Investments in and advances to unconsolidated joint ventures	Investments in and advances to unconsolidated joint ventures	(861)		(435)		Investments in and advances to unconsolidated joint ventures	(9,222)		(861)

Purchase of property, plant and equipment	Purchase of property, plant and equipment	(11,946)		(12,329)		Purchase of property, plant and equipment	(11,972)		(11,946)
Proceeds from the sale of property, plant and equipment	Proceeds from the sale of property, plant and equipment	821		665		Proceeds from the sale of property, plant and equipment	553		821
Net cash used in investing activities	Net cash used in investing activities	(11,986)		(12,099)		Net cash used in investing activities	(20,641)		(11,986)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Purchase of treasury stock	Purchase of treasury stock	(1,152,855)		(216,582)		Purchase of treasury stock	(1,384,193)		(1,152,855)
Proceeds from senior notes		—		923,905
Debt issuance costs		—		(4,750)
Redemption of senior notes						Redemption of senior notes	(600,000)		—

Principal payments on finance lease liabilities	Principal payments on finance lease liabilities	(1,008)		(665)		Principal payments on finance lease liabilities	(1,107)		(1,008)
Proceeds from the exercise of stock options	Proceeds from the exercise of stock options	121,835		162,522		Proceeds from the exercise of stock options	137,406		121,835
Net cash (used in) provided by financing activities		(1,032,028)		864,430
Net cash used in financing activities						Net cash used in financing activities	(1,847,894)		(1,032,028)

Net (decrease) increase in cash, restricted cash, and cash equivalents		(61,722)		1,431,671
Net decrease in cash, restricted cash, and cash equivalents						Net decrease in cash, restricted cash, and cash equivalents	(815,629)		(61,722)
Cash, restricted cash, and cash equivalents, beginning of the period	Cash, restricted cash, and cash equivalents, beginning of the period	2,809,782		1,160,804		Cash, restricted cash, and cash equivalents, beginning of the period	2,636,984		2,809,782

Cash, restricted cash, and cash equivalents, end of the period	Cash, restricted cash, and cash equivalents, end of the period	$	2,748,060	$	2,592,475	Cash, restricted cash, and cash equivalents, end of the period	$	1,821,355	$	2,748,060

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Interest paid during the period, net of interest capitalized	Interest paid during the period, net of interest capitalized	$	39,473	$	24,957	Interest paid during the period, net of interest capitalized	$	33,475	$	39,473
Income taxes paid during the period, net of refunds	Income taxes paid during the period, net of refunds	$	289,850	$	86,214	Income taxes paid during the period, net of refunds	$	403,875	$	289,850

See notes to condensed consolidated financial statements.

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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, ~~2020.~~2021. 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, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022.

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, ~~2021~~2022 and ~~2020,~~2021, 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, 2022 and December 31, 2021 was $255 and $268, respectively, and 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.

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 on homes not settled, were ~~$381,594~~$376,160 and ~~$240,758~~$417,463 as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. We expect that substantially all of the customer deposits held at December 31, ~~2020~~2021 will be recognized in revenue in ~~2021.~~2022. Our contract assets consist of prepaid sales compensation and totaled approximately ~~$24,300~~$20,100 and ~~$22,500,~~$25,200, as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Prepaid sales compensation is included in homebuilding “Other assets” on the accompanying condensed consolidated balance sheets.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

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

(unaudited)

2. Variable Interest Entities ("VIEs")

Fixed Price Finished 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 LPAs. The LPAs require deposits that may be forfeited if we fail to perform under the LPAs. The deposits required under the 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.

The deposit placed by us pursuant to the 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 LPAs, including the joint venture limited liability corporations discussed below, are evaluated for possible consolidation by us. We have concluded that we are not the primary beneficiary of the development entities with which we enter into LPAs, and therefore, we do not consolidate any of these VIEs.

As of September 30, ~~2021,~~2022, we controlled approximately ~~116,550~~125,600 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately ~~$483,600~~$543,400 and ~~$10,700,~~$7,300, respectively. Our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained in the ~~LPAs.~~LPAs and, in very limited circumstances, specific performance obligations. For the three and nine ~~month periods~~months ended September 30, 2022, we incurred pre-tax impairment charges on lot deposits of approximately $8,800 and $2,500, respectively, based on current market conditions. For the three and nine months ended September 30, 2021, we recorded a net reversal of approximately $4,100 and $17,500, respectively, related to previously impaired lot ~~deposits as market conditions 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. ~~For the nine months ended September 30, 2020, we incurred net pre-tax lot deposit charges of approximately $32,500.~~ Our contract land deposit asset is shown net of a ~~$34,704~~$32,240 and ~~$52,205~~$30,041 impairment reserve at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

In addition, we have certain properties under contract with land owners that are expected to yield approximately ~~12,500~~23,100 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 ~~$4,400 and $100, respectively,~~$10,400 as of September 30, ~~2021,~~2022, of which approximately ~~$3,300~~$4,600 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 an LPA with the assignee if the project is determined to be feasible.

Our total risk of loss related to contract land deposits is limited to the amount of the deposits pursuant to the liquidated damages provision of the LPAs. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, our total risk of loss was as follows:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Contract land deposits	Contract land deposits	$	487,959	$	439,833	Contract land deposits	$	553,812	$	527,180
Loss reserve on contract land deposits	Loss reserve on contract land deposits	(34,704)		(52,205)		Loss reserve on contract land deposits	(32,240)		(30,041)
Contract land deposits, net	Contract land deposits, net	453,255		387,628		Contract land deposits, net	521,572		497,139
Contingent obligations in the form of letters of credit	Contingent obligations in the form of letters of credit	10,755		8,249		Contingent obligations in the form of letters of credit	7,266		10,145
Total risk of loss	Total risk of loss	$	464,010	$	395,877	Total risk of loss	$	528,838	$	507,284

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 LPAs with the ~~JV.~~joint venture. We are not a borrower, guarantor or obligor on any debt of the JVs, as applicable. We enter into 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, ~~2021,~~2022, we had an aggregate investment totaling approximately ~~$20,800~~$27,800 in 4five JVs that are expected to produce approximately ~~2,300~~5,400 finished lots, of which approximately ~~1,950~~5,000 lots were controlled by us and the remaining approximately ~~350~~400 lots were either under contract with unrelated parties or not currently under contract. We had additional funding commitments totaling approximately ~~$2,900~~$13,500 to one of the JVs at September 30, ~~2021.~~ 2022.

We ~~have~~ determined that we are not the primary beneficiary ~~of 3~~in four of the JVs because we ~~either share power with~~and the other JV partner either share power or the other JV partner has the controlling financial interest. The aggregate investment in unconsolidated JVs was approximately ~~$20,800~~$27,800 and ~~$23,600~~$20,300 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and is reported in the homebuilding “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, ~~2021.~~2022. 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, 2020, all~~All activities under the consolidated JV ~~had~~have been ~~completed.~~completed and we have no remaining investment in the JV. As of September 30, ~~2021, we had no investment remaining in the JV and~~2022, the JV had remaining balances of ~~$271~~$255 in cash and ~~$250~~$229 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 ~~its~~their 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, ~~2021,~~2022, we ~~directly~~ owned ~~2 separate raw~~ land parcels with a carrying value of ~~$8,151~~$15,230 that ~~are expected~~we intend to ~~produce~~develop into approximately ~~100~~800 finished lots. We have additional funding commitments of approximately ~~$2,700~~$2,200 under a joint development agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately ~~$800.~~$900. None of the raw parcels had any indicators of impairment as of September 30, ~~2021.~~2022.

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.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

The following table reflects the changes in our capitalized interest during the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Interest capitalized, beginning of period	Interest capitalized, beginning of period	$	644	$	2,673	$	1,025	$	3,499	Interest capitalized, beginning of period	$	680	$	644	$	593	$	1,025
Interest incurred	Interest incurred	13,263		11,792		39,977		28,092		Interest incurred	7,118		13,263		32,721		39,977
Interest charged to interest expense	Interest charged to interest expense	(13,243)		(11,687)		(39,910)		(27,698)		Interest charged to interest expense	(7,202)		(13,243)		(32,625)		(39,910)
Interest charged to cost of sales	Interest charged to cost of sales	(100)		(370)		(528)		(1,485)		Interest charged to cost of sales	(32)		(100)		(125)		(528)
Interest capitalized, end of period	Interest capitalized, end of period	$	564	$	2,408	$	564	$	2,408	Interest capitalized, end of period	$	564	$	564	$	564	$	564

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~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2021	2020	2021	2020		2022	2021	2022	2021
Weighted average number of shares outstanding used to calculate basic EPS	Weighted average number of shares outstanding used to calculate basic EPS	3,561	3,706	3,619	3,684	Weighted average number of shares outstanding used to calculate basic EPS	3,265,914	3,561,374	3,312,145	3,618,724
Dilutive securities:	Dilutive securities:					Dilutive securities:
Stock options and restricted share units	Stock options and restricted share units	281	233	274	212	Stock options and restricted share units	205,473	280,559	231,559	273,953
Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS	Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS	3,842	3,939	3,893	3,896	Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS	3,471,387	3,841,933	3,543,704	3,892,677

The following non-qualified stock options ("Options") and restricted stock units ("RSUs") issued under equity incentive plans were outstanding during the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, but were not included in the computation of diluted ~~earnings per share~~EPS 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


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Anti-dilutive securities	203,340	16,022	193,248	22,132

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

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

(unaudited)

7.Equity-Based Compensation

Our equity-based compensation plans provide for the granting of Options and RSUs to key management employees, including executive officers and members of our Board of Directors ("Directors"). The exercise price of Options granted is equal to the closing price of our common stock on the New York Stock Exchange (the “NYSE”) on the day prior to the date of grant. Options are granted for a 10-year term and typically vest in separate tranches over periods of 3 to 6 years. RSUs generally vest in separate tranches over periods of 2 to 6 years. Grants to key management employees are generally divided such that vesting for 50% of the grant is contingent solely on continued employment, while vesting for the remaining 50% of the grant is contingent upon both continued employment and the achievement of a performance metric based on our return on capital performance relative to a peer group during a 3-year period specified on the date of grant. Grants to directors generally vest solely based on continued service as a Director.

During the second quarter of 2022, we issued 165,456 Options and 16,864 RSUs in a block grant to key management employees and Directors. Block grants are generally made once every four years. Option and RSU grants for the nine month period ended September 30, 2022 totaled 170,806 and 17,906, respectively, and were granted under the NVR, Inc. 2014 Equity Incentive Plan (the "2014 Plan") and the NVR, Inc. 2018 Equity Incentive Plan (the "2018 Plan") as follows:


Options Granted	2014 Plan	2018 Plan
Options - service-only (1)	55,655	32,331
Options - performance-based (2)	55,655	27,165
Total Options Granted	111,310	59,496
RSUs Granted
RSUs - service-only (3)	—	8,976
RSUs - performance-based (4)	—	8,930
Total RSUs Granted	—	17,906

(1)Of the 87,986 service-only Options granted, 69,361 Options will vest in 25% increments on December 31, 2024, 2025, 2026, and 2027; 16,415 Options will vest in 50% increments on December 31, 2026 and 2027; and the remaining 2,210 Options will vest in 50% increments on December 31, 2024 and 2025. Vesting for the Options is contingent solely upon continued employment or continued service as a Director.

(2)Of the 82,820 performance-based Options granted, 64,195 will vest in 25% increments on December 31, 2024, 2025, 2026, and 2027; 16,415 Options will vest in 50% increments on December 31, 2026 and 2027; and the remaining 2,210 Options will vest in 50% increments on December 31, 2024 and 2025. Vesting for the performance-based Options is contingent upon both continued employment and the Company's return on capital performance during 2022 through 2024.

(3)Of the 8,976 service-only RSUs granted, 5,215 will vest in 50% increments on December 31, 2024 and 2025; 3,119 RSUs will vest in 25% increments on December 31, 2024, 2025, 2026, and 2027; and the remaining 642 RSUs will vest in 50% increments on December 31, 2026 and 2027. Vesting for the RSUs is contingent solely upon continued employment.

(4)Of the 8,930 performance-based RSUs granted, 5,215 will vest in 50% increments on December 31, 2024 and 2025; 3,119 RSUs will vest in 25% increments on December 31, 2024, 2025, 2026, and 2027; and the remaining 596 RSUs will vest in 50% increments on December 31, 2026 and 2027. Vesting for the performance-based RSUs is contingent upon both continued employment and the Company's return on capital performance during 2022 through 2024.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

All Options were granted at an exercise price equal to the closing price of the Company’s common stock on the day prior to the date of grant, and expire ten years from the date of grant.

The following table provides additional information relative to our equity-based compensation plans for the nine months ended September 30, 2022:


	Shares	Weighted Avg. Per Share Exercise Price		Weighted Avg. Remaining Contract Life (years)	Aggregate Intrinsic Value
Stock Options
Outstanding at December 31, 2021	534,695	$	2,424.62
Granted	170,806	4,481.92
Exercised	(59,559)	2,303.55
Forfeited	(12,126)	3,352.37
Outstanding at September 30, 2022	633,816	$	2,972.67	5.9	$	740,513
Exercisable at September 30, 2022	281,825	$	1,952.12	3.5	$	573,502

RSUs
Outstanding at December 31, 2021	16,564
Granted	17,906
Vested	—
Forfeited	(1,438)
Outstanding at September 30, 2022	33,032				$	131,701
Vested, but not issued at September 30, 2022	—				$	—

To estimate the grant-date fair value of our Options, we use the Black-Scholes option-pricing model (the “Pricing Model”). The Pricing Model estimates the per share fair value of an option on its date of grant based on the following factors: the Option’s exercise price, the price of the underlying stock on the date of grant, the estimated dividend yield, a risk-free interest rate, the estimated option term, and the expected volatility. For the risk-free interest rate, we use U.S. Treasury STRIPS which mature at approximately the same time as the Option’s expected holding term. For expected volatility, we have concluded that our historical volatility over the Option’s expected holding term provides the most reasonable basis for this estimate.

The fair value of the Options granted during the first nine months of 2022 was estimated on the grant date using the Pricing Model, based on the following assumptions:



Estimated option life (years)	5.60
Risk free interest rate (range)	1.17%-3.40%
Expected volatility (range)	24.93%-30.89%
Expected dividend rate	—%
Weighted average grant-date fair value per share of options granted	$	1,432.72

The weighted average grant date fair value per share of $4,505.90 for the RSUs was the closing price of our common stock on the day immediately preceding the date of grant.

Compensation cost for Options and RSUs is recognized on a straight-line basis over the requisite service period for the entire award (from the date of grant through the period of the last separately vesting portion of the grant). For the recognition of equity-based compensation, the Options and RSUs that are subject to a performance

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

condition are treated as a separate award from the “service-only” Options and RSUs, and compensation cost is recognized when it becomes probable that the stated performance target will be achieved. We currently believe that it is probable that the stated performance condition will be satisfied at the target level for all of our Options and RSUs granted. Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid to the respective employees.

We recognize forfeitures of equity-based awards as a reduction to compensation costs in the period in which they occur. During the three and nine months ended September 30, 2022, we recognized $26,686 and $58,441 in equity-based compensation costs, respectively. During the three and nine months ended September 30, 2021, we recognized $15,009 and $42,859 in equity-based compensation costs, respectively.

As of September 30, 2022, the total unrecognized compensation cost for all outstanding Options and RSUs equaled approximately $381,700. The unrecognized compensation cost will be recognized over each grant’s applicable vesting period with the latest vesting date being December 31, 2027. The weighted-average period over which the unrecognized compensation cost will be recorded is equal to approximately 2.6 years.

8. Shareholders’ Equity

A summary of changes in shareholders’ equity for the three months ended September 30, 2022 is presented below:


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, June 30, 2022	$	206	$	2,498,123	$	10,907,253	$	(10,413,916)	$	(16,710)	$	16,710	$	2,991,666

Net income	—		—		411,393		—		—		—		411,393

Purchase of common stock for treasury	—		—		—		(368,490)		—		—		(368,490)
Equity-based compensation	—		26,686		—		—		—		—		26,686
Proceeds from Options exercised	—		23,584		—		—		—		—		23,584
Treasury stock issued upon Option exercise	—		(9,581)		—		9,581		—		—		—
Balance, September 30, 2022	$	206	$	2,538,812	$	11,318,646	$	(10,772,825)	$	(16,710)	$	16,710	$	3,084,839

A summary of changes in shareholders’ equity for the nine months ended September 30, 2022 is presented below:


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, December 31, 2021	$	206	$	2,378,191	$	10,047,839	$	(9,423,858)	$	(16,710)	$	16,710	$	3,002,378

Net income	—		—		1,270,807		—		—		—		1,270,807

Purchase of common stock for treasury	—		—		—		(1,384,193)		—		—		(1,384,193)
Equity-based compensation	—		58,441		—		—		—		—		58,441
Proceeds from Options exercised	—		137,406		—		—		—		—		137,406
Treasury stock issued upon Option exercise	—		(35,226)		—		35,226		—		—		—
Balance, September 30, 2022	$	206	$	2,538,812	$	11,318,646	$	(10,772,825)	$	(16,710)	$	16,710	$	3,084,839

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

We repurchased 88,016 and 295,148 shares of our outstanding common stock during the three and nine months ended September 30, 2022, respectively. We settle Option exercises and vesting of RSUs by issuing shares of treasury stock. We issued 15,840 and 59,559 shares from the treasury account during the three and nine months ended September 30, 2022, respectively, in settlement of Option exercises. 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, 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, 2021	Balance, June 30, 2021	$	206	$	2,314,564	$	9,381,177	$	(8,653,659)	$	(16,710)	$	16,710	$	3,042,288	Balance, June 30, 2021	$	206	$	2,314,564	$	9,381,177	$	(8,653,659)	$	(16,710)	$	16,710	$	3,042,288

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

Purchase of common stock for treasury	Purchase of common stock for treasury	—		—		—		(398,489)		—		—		(398,489)		Purchase of common stock for treasury	—		—		—		(398,489)		—		—		(398,489)
Equity-based compensation	Equity-based compensation	—		15,009		—		—		—		—		15,009		Equity-based compensation	—		15,009		—		—		—		—		15,009
Proceeds from Options exercised	Proceeds from Options exercised	—		26,162		—		—		—		—		26,162		Proceeds from Options exercised	—		26,162		—		—		—		—		26,162
Treasury stock issued upon option exercise and restricted share vesting		—		(6,735)		—		6,735		—		—		—
Treasury stock issued upon Option exercise and RSU vesting																Treasury stock issued upon Option exercise and RSU vesting	—		(6,735)		—		6,735		—		—		—
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	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
Balance, December 31, 2020 $ 206 $ 2,214,426 $ 8,811,120 $ (7,922,678) $ (16,710) $ 16,710 $ 3,103,074
Net income — — 902,138 — — — 902,138
Purchase of common stock for treasury — — — (1,152,855) — — (1,152,855)
Equity-based compensation — 42,859 — — — — 42,859
Proceeds from Options exercised — 121,835 — — — — 121,835
Treasury stock issued upon option exercise and restricted share vesting — (30,120) — 30,120 — — —
Balance, September 30, 2021 $ 206 $ 2,349,000 $ 9,713,258 $ (9,045,413) $ (16,710) $ 16,710 $ 3,017,051


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Deferred Compensation Trust		Deferred Compensation Liability		Total
Balance, December 31, 2020	$	206	$	2,214,426	$	8,811,120	$	(7,922,678)	$	(16,710)	$	16,710	$	3,103,074


Net income	—		—		902,138		—		—		—		902,138

Purchase of common stock for treasury	—		—		—		(1,152,855)		—		—		(1,152,855)
Equity-based compensation	—		42,859		—		—		—		—		42,859
Proceeds from Options exercised	—		121,835		—		—		—		—		121,835
Treasury stock issued upon Option exercise and RSU vesting	—		(30,120)		—		30,120		—		—		—
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~~79,620 and ~~245~~244,595 shares of our outstanding common stock during the three and nine months ended September 30, 2021, respectively. We ~~settle Option exercises~~issued 13,116 and ~~vesting of RSUs by issuing~~61,704 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.~~

912

Table of Contents

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

~~0A 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) —
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. 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.

8.9. 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.

~~Table of Contents~~

~~NVR, Inc.~~

~~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~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Warranty reserve, beginning of period	Warranty reserve, beginning of period	$	127,502	$	111,219	$	119,638	$	108,053	Warranty reserve, beginning of period	$	138,240	$	127,502	$	134,859	$	119,638
Provision	Provision	22,789		20,894		66,878		48,992		Provision	28,624		22,789		71,142		66,878
Payments	Payments	(20,188)		(18,564)		(56,413)		(43,496)		Payments	(23,066)		(20,188)		(62,203)		(56,413)
Warranty reserve, end of period	Warranty reserve, end of period	$	130,103	$	113,549	$	130,103	$	113,549	Warranty reserve, end of period	$	143,798	$	130,103	$	143,798	$	130,103

9.10. Segment Disclosures

~~We disclose 4~~Our homebuilding ~~reportable segments that aggregate~~operations are aggregated geographically ~~our~~into four homebuilding ~~operating~~reportable segments and our mortgage banking operations are presented as 1one 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, Tennessee, Florida and ~~Tennessee~~Georgia

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 an LPA with the developer, or the restructuring of 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. 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

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to our operating segments. External corporate interest expense primarily consists of interest charges on our 3.95% Senior Notes due 2022 and 3.00% Senior Notes due 2030 ~~(collectively, the~~(the “Senior Notes”), which are not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

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~~NVR, Inc.~~

~~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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenues:	Revenues:									Revenues:
Homebuilding Mid Atlantic	Homebuilding Mid Atlantic	$	1,082,710	$	949,472	$	3,067,267	$	2,563,375	Homebuilding Mid Atlantic	$	1,282,504	$	1,082,710	$	3,632,524	$	3,067,267
Homebuilding North East	Homebuilding North East	213,087		157,973		568,524		362,328		Homebuilding North East	250,067		213,087		663,012		568,524
Homebuilding Mid East	Homebuilding Mid East	503,232		404,992		1,406,364		1,025,642		Homebuilding Mid East	569,991		503,232		1,552,434		1,406,364
Homebuilding South East	Homebuilding South East	537,586		408,314		1,482,731		1,113,871		Homebuilding South East	636,883		537,586		1,810,764		1,482,731
Mortgage Banking	Mortgage Banking	59,025		69,261		195,798		127,692		Mortgage Banking	37,455		59,025		155,518		195,798
Total consolidated revenues	Total consolidated revenues	$	2,395,640	$	1,990,012	$	6,720,684	$	5,192,908	Total consolidated revenues	$	2,776,900	$	2,395,640	$	7,814,252	$	6,720,684


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Income before taxes:	Income before taxes:									Income before taxes:
Homebuilding Mid Atlantic	Homebuilding Mid Atlantic	$	222,504	$	104,700	$	526,052	$	284,440	Homebuilding Mid Atlantic	$	272,860	$	222,504	$	774,380	$	526,052
Homebuilding North East	Homebuilding North East	33,885		14,272		70,622		31,081		Homebuilding North East	49,614		33,885		116,839		70,622
Homebuilding Mid East	Homebuilding Mid East	81,021		45,109		189,849		103,575		Homebuilding Mid East	92,364		81,021		246,059		189,849
Homebuilding South East	Homebuilding South East	100,688		52,554		236,272		142,463		Homebuilding South East	145,619		100,688		409,895		236,272
Mortgage Banking	Mortgage Banking	40,249		52,890		140,183		80,461		Mortgage Banking	18,993		40,249		97,899		140,183
Total segment profit before taxes	Total segment profit before taxes	478,347		269,525		1,162,978		642,020		Total segment profit before taxes	579,450		478,347		1,645,072		1,162,978
Reconciling items:	Reconciling items:									Reconciling items:
Contract land deposit recoveries (impairments) (1)		4,126		4,867		17,500		(31,208)
Contract land deposit reserve adjustment (1)										Contract land deposit reserve adjustment (1)	(8,736)		4,126		(2,391)		17,500
Equity-based compensation expense(2)	Equity-based compensation expense(2)	(15,009)		(13,639)		(42,859)		(35,565)		Equity-based compensation expense(2)	(26,686)		(15,009)		(58,441)		(42,859)
Corporate capital allocation ~~(2)~~(3)	Corporate capital allocation ~~(2)~~(3)	64,055		60,662		188,638		177,184		Corporate capital allocation ~~(2)~~(3)	81,020		64,055		228,276		188,638
Unallocated corporate overhead	Unallocated corporate overhead	(27,801)		(26,915)		(101,605)		(87,912)		Unallocated corporate overhead	(22,565)		(27,801)		(100,109)		(101,605)
Consolidation adjustments and other ~~(3)~~(4)	Consolidation adjustments and other ~~(3)~~(4)	(56,786)		38,244		(22,456)		54,769		Consolidation adjustments and other ~~(3)~~(4)	(57,165)		(56,786)		(2,561)		(22,456)
Corporate interest expense	Corporate interest expense	(12,805)		(11,287)		(38,598)		(26,625)		Corporate interest expense	(6,803)		(12,805)		(31,374)		(38,598)
Reconciling items sub-total	Reconciling items sub-total	(44,220)		51,932		620		50,643		Reconciling items sub-total	(40,935)		(44,220)		33,400		620
Consolidated income before taxes	Consolidated income before taxes	$	434,127	$	321,457	$	1,163,598	$	692,663	Consolidated income before taxes	$	538,515	$	434,127	$	1,678,472	$	1,163,598

(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 increase in equity-based compensation expense for the three and nine months ended September 30, 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022. See Note 7 for additional discussion of equity-based compensation.

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Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

(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,
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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~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	37,305	$	31,057	$	108,514	$	92,788
Homebuilding North East	7,994		6,719		23,238		19,214
Homebuilding Mid East	14,509		11,114		38,801		32,804
Homebuilding South East	21,212		15,165		57,723		43,832
Total	$	81,020	$	64,055	$	228,276	$	188,638

~~(3)~~ (4)The ~~decrease in~~ consolidation adjustments and other for the three and nine month periods of 2022 and 2021 ~~compared to the respective 2020 periods~~ is primarily driven by changes in lumber prices in ~~2021.~~the respective periods. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. ~~For~~Costs related to homes not yet settled ~~these intercompany profits~~ are reversed through the consolidation ~~adjustments.~~adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled. Due to ~~the significantly~~ higher lumber prices in the first half of both 2022 and 2021, the previously reversed intercompany profits were recognized in the third quarter of the respective years through the consolidation adjustment as homes were settled, ~~and our consolidated homebuilding margins were~~which negatively impacted bymargins in the ~~higher lumber costs.~~

respective periods.


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Assets:	Assets:					Assets:
Homebuilding Mid Atlantic	Homebuilding Mid Atlantic	$	1,183,206	$	1,140,910	Homebuilding Mid Atlantic	$	1,289,036	$	1,322,818
Homebuilding North East	Homebuilding North East	230,813		202,591		Homebuilding North East	268,794		235,048
Homebuilding Mid East	Homebuilding Mid East	432,723		377,448		Homebuilding Mid East	515,947		438,700
Homebuilding South East	Homebuilding South East	581,646		494,295		Homebuilding South East	791,054		629,198
Mortgage Banking	Mortgage Banking	350,317		555,278		Mortgage Banking	464,293		371,685
Total segment assets	Total segment assets	2,778,705		2,770,522		Total segment assets	3,329,124		2,997,449
Reconciling items:	Reconciling items:					Reconciling items:
Cash and cash equivalents	Cash and cash equivalents	2,681,110		2,714,720		Cash and cash equivalents	1,748,506		2,545,069
Deferred taxes	Deferred taxes	136,446		132,980		Deferred taxes	144,590		132,894
Intangible assets and goodwill	Intangible assets and goodwill	49,562		49,678		Intangible assets and goodwill	49,368		49,368
Operating lease right-of-use assets	Operating lease right-of-use assets	60,605		53,110		Operating lease right-of-use assets	69,933		59,010
Finance lease right-of-use assets	Finance lease right-of-use assets	14,706		15,772		Finance lease right-of-use assets	13,875		14,578
Contract land deposit reserve	Contract land deposit reserve	(34,704)		(52,205)		Contract land deposit reserve	(32,240)		(30,041)
Consolidation adjustments and other	Consolidation adjustments and other	102,464		92,564		Consolidation adjustments and other	66,378		66,148
Reconciling items sub-total	Reconciling items sub-total	3,010,189		3,006,619		Reconciling items sub-total	2,060,410		2,837,026
Consolidated assets	Consolidated assets	$	5,788,894	$	5,777,141	Consolidated assets	$	5,389,534	$	5,834,475

~~10.~~

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Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

11. 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, ~~2021~~2022 and December 31, ~~2020.~~2021. 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, 2022		December 31, 2021
Estimated Fair Values:
3.95% Senior Notes due 2022	$	—	$	610,452
3.00% Senior Notes due 2030	735,804		942,192
Total	$	735,804	$	1,552,644
Carrying Values:
3.95% Senior Notes due 2022	$	—	$	599,553
3.00% Senior Notes due 2030	915,346		916,702
Total	$	915,346	$	1,516,255

1316

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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 value and the fair 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, ~~2021,~~2022, there were rate lock commitments to extend credit to borrowers aggregating ~~$961,557~~$2,213,239 and open forward delivery contracts aggregating ~~$1,107,575,~~$2,446,322, 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, 2022, the fair value of loans held for sale of $316,094 included on the accompanying condensed consolidated balance sheet was decreased by $14,407 from the aggregate principal balance of $330,501. As of

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

December 31, 2021, the fair value of loans held for sale of ~~$287,525 included on the accompanying condensed consolidated balance sheet has been~~$302,192 was increased by ~~$2,687~~$4,296 from the aggregate principal balance of ~~$284,838. As of December 31, 2020, the fair value of loans held for sale of $449,760 were increased by $10,042 from the aggregate principal balance of $439,718.~~$297,896.

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


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Rate lock commitments:	Rate lock commitments:					Rate lock commitments:
Gross assets	Gross assets	$	11,540	$	10,844	Gross assets	$	36,695	$	15,949
Gross liabilities	Gross liabilities	3,578		87		Gross liabilities	88,697		1,790
Net rate lock commitments	Net rate lock commitments	$	7,962	$	10,757	Net rate lock commitments	$	(52,002)	$	14,159
Forward sales contracts:	Forward sales contracts:					Forward sales contracts:
Gross assets	Gross assets	$	3,800	$	1	Gross assets	$	41,536	$	708
Gross liabilities	Gross liabilities	397		5,217		Gross liabilities	3,148		926
Net forward sales contracts	Net forward sales contracts	$	3,403	$	(5,216)	Net forward sales contracts	$	38,388	$	(218)

As of September 30, ~~2021~~2022, the net rate lock commitments are reported in mortgage banking "Accrued expenses and other liabilities," and the net forward sales contracts are reported in mortgage banking "Other assets" on the accompanying condensed consolidated balance sheets. As of December 31, ~~2020,~~2021, the net rate lock commitments are reported in mortgage banking "Other assets" and the net forward sales contracts are reported in mortgage banking "Accrued expenses and other liabilities".

The fair value measurement ~~adjustment~~ as of September 30, ~~2021~~2022 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)			Notional or Principal Amount		Assumed Gain From Loan Sale		Interest Rate Movement Effect		Servicing Rights Value		Security Price Change		Total Fair Value Measurement
Rate lock commitments	Rate lock commitments	$	961,557	$	1,912	$	(2,466)	$	8,516	$	—	$	7,962	Rate lock commitments	$	2,213,239	$	3,359	$	(85,498)	$	30,137	$	—	$	(52,002)
Forward sales contracts	Forward sales contracts	$	1,107,575	—		—		—		3,403		3,403		Forward sales contracts	$	2,446,322	—		—		—		38,388		38,388
Mortgages held for sale	Mortgages held for sale	$	284,838	858		(1,174)		3,003		—		2,687		Mortgages held for sale	$	330,501	710		(19,807)		4,690		—		(14,407)
Total fair value measurement	Total fair value measurement			$	2,770	$	(3,640)	$	11,519	$	3,403	$	14,052	Total fair value measurement			$	4,069	$	(105,305)	$	34,827	$	38,388	$	(28,021)

The total fair value measurement ~~adjustment~~ as of December 31, ~~2020~~2021 was ~~$15,583.~~$18,237. NVRM recorded a fair value adjustment to expense of ~~$3,771~~$28,828 and ~~$1,531~~$46,258 for the three and nine months ended September 30, ~~2021,~~2022, 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.~~ 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.

12. Debt

~~Table~~During the second quarter of ~~Contents~~

~~NVR, Inc.~~

2022, we redeemed the outstanding $600,000 principal amount of 3.95% Senior Notes ~~to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

~~11. Debt~~due September 15, 2022, at par, plus accrued interest.

As of September 30, ~~2021,~~2022, 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.

3.00% Senior Notes due 2030 ("2030 Senior Notes")

The 2030 Senior Notes have an aggregate principal balance of $900,000 and mature on May 15, 2030. The 2030 Senior Notes bear interest at 3.00%, payable semi-annually in arrears on May 15 and November 15. The 2030 Senior Notes were issued in three separate issuances, $600,000 issued at a discount to yield 3.02%, and the two additional issuances totaling $300,000 issued at a premium to yield 2.00%. The 2030 Senior Notes have been

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

reflected net of the unamortized discount or premium, as applicable, and the unamortized debt issuance costs in the accompanying condensed consolidated balance sheet.

Credit Agreement

We have an unsecured Credit Agreement (the “Credit Agreement”), which provides for aggregate revolving loan commitments of $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 ~~$15,600~~$13,400 was outstanding at September 30, ~~2021.~~2022. The Credit Agreement termination date is February 12, 2026. There was no debt outstanding under the Facility at September 30, ~~2021.~~2022.

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 ~~2021,~~2022, NVRM entered into ~~the Thirteenth Amendment to~~The Second Amended and Restated Master Repurchase Agreement with U.S. Bank National Association, as Agent and a Buyer (the "Amended MRA"), which replaced the Repurchase Agreement ~~which extended~~in its entirety. The Amended MRA provides for loan purchases up to $150,000, subject to certain sub-limits. Advances under the ~~term~~Amended MRA bear interest at the secured overnight financing rate published by the Board of Governors of the ~~Repurchase Agreement through July 20, 2022.~~Federal Reserve System ("SOFR") plus the SOFR Margin of 1.70%, per annum. All other terms and conditions ~~under~~of the ~~amended~~Amended MRA are materially consistent with the Repurchase ~~Agreement remained materially consistent.~~Agreement. The Amended MRA expires on July 19, 2023. At September 30, ~~2021,~~2022, there were no borrowing base limitations reducing the amount available under the ~~Repurchase Agreement. There~~Amended MRA and there was no debt outstanding under the ~~Repurchase Agreement at September 30, 2021.~~Amended MRA.

~~12.~~13. 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.~~14. 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)~~

ROU assets and finance lease liabilities were ~~$14,706~~$13,875 and ~~$15,441,~~$15,030, respectively, as of September 30, ~~2021,~~2022, and ~~$15,772~~$14,578 and ~~$16,173,~~$15,413, respectively, as of December 31, ~~2020.~~2021. Our leases have remaining lease terms of up to ~~18.9~~18 years, some of which include options to extend the ~~leases~~lease for up to 20 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.

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NVR, Inc.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

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,
	2022		2021		2022		2021
Lease expense
Operating lease expense	$	9,422	$	7,906	$	26,051	$	23,395
Finance lease expense:
Amortization of ROU assets	489		454		1,426		1,342
Interest on lease liabilities	106		107		313		324
Short-term lease expense	7,395		6,001		20,219		17,752

Total lease expense	$	17,412	$	14,468	$	48,009	$	42,813

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Lease expense
Operating lease expense $ 7,906 $ 7,689 $ 23,395 $ 23,542
Finance lease expense:
Amortization of ROU assets 454 327 1,342 874
Interest on lease liabilities 107 70 324 170
Short-term lease expense 6,001 5,625 17,752 18,236
Total lease expense $ 14,468 $ 13,711 $ 42,813 $ 42,822
Other information related to leases was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022			2021
Supplemental Cash Flows Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,197	$	7,143	$	21,301		$	20,831
Operating cash flows from finance leases	106		107		313			324
Financing cash flows from finance leases	384		347		1,107			1,008

ROU assets obtained in exchange for lease obligations:
Operating leases	$	11,169	$	3,711	$	35,055		$	23,282
Finance leases	$	—	$	187	$	723		$	276


					September 30, 2022			December 31, 2021
Weighted-average remaining lease term (in years):
Operating leases					6.1			6.3
Finance leases					11.0			11.7

Weighted-average discount rate:
Operating leases					3.4		%	3.0		%
Finance leases					2.9		%	2.8		%

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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,
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.~~15. Income Taxes

Our effective tax rate for the three and nine months ended September 30, ~~2021~~2022 was ~~23.5%~~23.6% and ~~22.5%~~24.3%, respectively, compared to ~~20.2%~~23.5% and 13.9% for the three and nine months ended September 30, 2020, respectively. The increase in the effective tax rate in the three and nine month periods of 2021 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 $37,83422.5% for the three and nine months ended September 30, 2021, ~~respectively, and $17,834 and $80,343~~respectively. The increase in the effective tax rate for the ~~three~~nine month period of 2022 compared to the same period in 2021 was primarily attributable to a lower income tax benefit recognized for excess tax benefits from stock option exercises of $27,748 and $37,834 for the nine months ended September 30, ~~2020,~~2022 and 2021, 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"~~“should” 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 economic impact of COVID-19 ~~on us~~ and ~~the economy generally;~~related supply chain disruption; 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~~our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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, ~~2021~~2022 and ~~2020~~2021

~~Overview~~Business Environment and Current Outlook

~~Impact~~During the third quarter of ~~COVID-19~~

~~The COVID-19 pandemichas had~~2022, we experienced 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~~continued decline in the safety and well-being of our employees, customers and trade partners. 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 have resulted in significant changes to the way we conduct business.

~~Although current~~ demand for new homes ~~is strong, there remains uncertainty regarding~~as home affordability continued to be negatively impacted by rising mortgage interest rates and higher home prices. In addition to affordability concerns, current market conditions including a high rate of inflation, anticipated further interest rate increases and the ~~extent and timing~~possibility of ~~disruption~~a recession have contributed to ~~our business that may result from COVID-19 and related governmental actions. There is also uncertainty as to the effects of economic relief efforts on the U.S. economy, unemployment,~~lower consumer confidence levels. We also continue to face higher costs for certain materials and labor as strong demand in prior quarters has resulted in increased construction activity and demand for building materials and contractor labor. These factors have led to supply chain disruptions and longer construction cycle times. We expect to continue to face some disruption and continue to work closely with our suppliers and trade partners to manage these disruptions and reduce construction cycle times.

We expect that demand for new homes will continue to be negatively impacted by higher mortgage interest rates and lower consumer confidence driven by affordability issues, high inflation, anticipated further interest rate increases and the ~~mortgage market, including lending standards~~possibility of a recession. We also expect to continue to face cost pressures related to building materials, labor and ~~secondary mortgage markets. We~~land costs, as well as pricing pressures, which will impact profit margins based on our ability to manage these costs while balancing sales pace and declining home prices. Although we are unable to predict the extent to which this will impact our operational and financial performance, ~~including~~we believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the ~~impact~~strength of ~~future developments such as the duration~~our balance sheet and ~~spread of COVID-19, corresponding governmental actions, and the impact of such on~~ our ~~employees, customers and trade partners.~~

disciplined lot acquisition strategy.

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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, Tennessee, Florida and ~~Tennessee~~Georgia

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 from various third party land developers pursuant to fixed price finished lot purchase agreements (“LPAs”). These 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 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 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 LPAs with forfeitable deposits.

As of September 30, ~~2021,~~2022, we controlled approximately ~~118,600~~131,400 lots as described below.

Lot Purchase Agreements

We controlled approximately ~~116,550~~125,600 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately ~~$483,600~~$543,400 and ~~$10,700,~~$7,300, respectively. Included in the number of controlled lots are approximately ~~5,700~~7,300 lots for which we have recorded a contract land deposit impairment reserve of approximately ~~$34,700~~$32,200 as of September 30, ~~2021.~~

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2022.

Joint Venture Limited Liability Corporations (“JVs”)

We had an aggregate investment totaling approximately ~~$20,800~~$27,800 in ~~four~~five JVs, expected to produce approximately ~~2,300~~5,400 lots. Of the lots to be produced by the JVs, approximately ~~1,950~~5,000 lots were controlled by us and approximately ~~350~~400 were either under contract with unrelated parties or currently not under contract. We had additional funding commitments totaling approximately ~~$2,900~~$13,500 to one of the JVs at September 30, ~~2021.~~2022.

Land Under Development

We ~~directly~~ owned ~~two separate raw~~ land ~~parcels, zoned for their intended use,~~ with a ~~cost basis, including development costs,~~carrying value of approximately ~~$8,200~~$15,200 that we intend to develop into approximately ~~100~~800 finished lots. We had additional funding commitments of approximately ~~$2,700~~$2,200 under a joint development

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agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately ~~$800.~~$900.

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

Raw Land Purchase Agreements

In addition, we have certain properties under contract with land owners that are expected to yield approximately ~~12,500~~23,100 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~~As of September 30, 2022, these properties are controlled with deposits in cash ~~and letters of credit~~ totaling approximately ~~$4,400 and $100, respectively, as of September 30, 2021,~~$10,400, of which approximately ~~$3,300~~$4,600 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 an LPA with the assignee if the project is determined to be feasible.

Key Financial Results

Our consolidated revenues for the third quarter of ~~2021~~2022 totaled ~~$2,395,640,~~$2,776,900, a ~~20%~~16% increase from the third quarter of ~~2020.~~2021. Net income for the third quarter ended September 30, ~~2021~~2022 was ~~$332,081,~~$411,393, or ~~$86.44~~$118.51 per diluted share, increases of ~~29%~~24% and ~~33%~~37% when compared to net income and diluted earnings per share in the third quarter of ~~2020,~~2021, respectively. Our homebuilding gross profit margin percentage increased to 23.6% in the third quarter of 2022 from 22.2% in the third quarter of ~~2021 from 20.0% in the third quarter of 2020.~~2021. New orders, net of cancellations (“New Orders”) decreased by ~~22% to 5,201 units~~15% in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. The New Order cancellation rate for the third quarter of 2022 increased to 15% from 9% in the same period in 2021. The average sales price for New Orders in the third quarter of ~~2021 increased by 15% to $442.0~~2022 was $453.4, an increase of 3% compared to the third quarter of ~~2020.~~2021.

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Homebuilding Operations

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Financial Data:	Financial Data:													Financial Data:
Revenues	Revenues	$	2,336,615		$	1,920,751		$	6,524,886		$	5,065,216		Revenues	$	2,739,445		$	2,336,615		$	7,658,734		$	6,524,886
Gross Profit Margin		518,676			384,707			1,407,821			949,936
Cost of sales														Cost of sales	$	2,092,457		$	1,817,939		$	5,668,549		$	5,117,065
Gross profit margin percentage	Gross profit margin percentage	22.2		%	20.0		%	21.6		%	18.8		%	Gross profit margin percentage	23.6		%	22.2		%	26.0		%	21.6		%
Selling, general and administrative expenses	Selling, general and administrative expenses	$	112,226		$	105,741		$	347,051		$	318,610		Selling, general and administrative expenses	$	129,416		$	112,226		$	391,358		$	347,051
Operating Data:	Operating Data:													Operating Data:
New orders (units)	New orders (units)	5,201			6,681			17,036			17,597			New orders (units)	4,421			5,201			15,011			17,036
Average new order price	Average new order price	$	442.0		$	384.2		$	429.8		$	374.5		Average new order price	$	453.4		$	442.0		$	463.9		$	429.8
Settlements (units)	Settlements (units)	5,683			5,180			16,440			13,706			Settlements (units)	5,949			5,683			16,983			16,440
Average settlement price	Average settlement price	$	411.1		$	370.8		$	396.9		$	369.5		Average settlement price	$	460.5		$	411.1		$	450.9		$	396.9
Backlog (units)	Backlog (units)							12,145			12,124			Backlog (units)							10,758			12,145
Average backlog price	Average backlog price							$	442.4		$	384.0		Average backlog price							$	472.8		$	442.4
New order cancellation rate	New order cancellation rate	9.2		%	11.8		%	9.1		%	15.8		%	New order cancellation rate	15.0		%	9.2		%	13.0		%	9.1		%
Average active communities		414			465			426			475

Consolidated Homebuilding - Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

Homebuilding revenues increased ~~22%~~17% in the third quarter of ~~2021~~2022 compared to the same period in ~~2020,~~2021, as a result of a ~~10%~~5% increase in ~~the number of units settled~~settlements and ~~an 11%~~a 12% increase in the average settlement price. The increase in ~~the number of units settled~~settlements 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

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settlement price was primarily attributable to ~~a 14%~~an 11% higher average sales price of units in backlog entering the third quarter of ~~2021~~2022 compared to the same period ~~in 2020.~~of 2021.

Gross profit margin percentage in the third quarter of ~~2021~~2022 increased to ~~22.2%~~23.6%, from ~~20.0%~~22.2% in the third quarter of ~~2020.~~2021. 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~~offset partially ~~offset~~ by higher ~~prices for lumber, certain other commodities~~material and labor ~~quarter over quarter.~~costs.

~~The number of~~ New Orders decreased ~~22%~~15%, while the average sales price of New Orders increased ~~15%~~3% in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. New Orders were negatively impacted in each of our reportable segments by the significant increase in mortgage interest rates during the quarter, which resulted in a decline in affordability and in turn, led to lower ~~due primarily~~absorption rates and to an ~~11% decrease~~increase in the ~~average number of active communities in the third~~cancellation rate quarter ~~of 2021 compared to the same period in 2020.~~over quarter. The increase in the average sales price of New Orders ~~quarter over quarter~~ was primarily attributable to ~~favorable market conditions which, coupled with low housing inventory levels, drove~~significant price appreciation resulting from strong demand ~~and has provided us sustained pricing power since~~through the ~~second half~~first quarter of ~~2020.~~2022.

Selling, general and administrative (“SG&A”) expense in the third quarter of ~~2021~~2022 increased by approximately ~~$6,500~~$17,200 compared to the third quarter of ~~2020,~~2021, but as a percentage of revenue ~~decreased to 4.8% from 5.5%~~remained relatively flat at 4.7% quarter over ~~quarter due to improved leveraging of SG&A costs.~~quarter. The increase in SG&A expense ~~quarter over quarter~~ was ~~attributable~~due primarily to ~~increased personnel costs~~an $11,200 increase in equity-based compensation due to ~~increased headcount.~~ a block grant of non-qualified stock options ("Options") and restricted share units ("RSUs") in the second quarter of 2022 to key management employees and directors, as further discussed in Note 7 in the accompanying condensed consolidated financial statements.

Consolidated Homebuilding - Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

Homebuilding revenues increased ~~29%~~17% in the first nine months of ~~2021~~2022 compared to the same period in ~~2020,~~2021, as a result of a ~~20%~~3% increase in ~~the number of units settled~~settlements and a 7%14% increase in the average settlement price. The increase in ~~the number of units settled~~settlements was attributable to a ~~40%~~10% higher backlog unit balance entering ~~2021~~2022 compared to the ~~backlog unit balance entering 2020,~~same period in 2021, offset partially by ~~a lower backlog turnover rate year over year.~~

~~Table~~an 11% decrease in New Orders in the first six months of ~~Contents~~

2022 compared to the same period in 2021. The increase in the average settlement price was primarily attributable to a 4%15% higher average sales price of units in backlog entering ~~2021~~2022 compared to ~~backlog entering 2020~~the same period of 2021, coupled with a ~~15%~~10% increase in the average sales price of New Orders induring the first six months of ~~2021~~2022 compared to the same period in ~~2020.~~2021.

Gross profit margin percentage in the first nine months of ~~2021~~2022 increased to ~~21.6%~~26.0%, from ~~18.8%~~21.6% in the first nine months of ~~2020.~~2021. Gross profit margins were favorably impacted by the increase in the aforementioned average settlement price attributable to improved pricing power in prior quarters, offset partially by higher material and ~~improved leveraging of certain operating~~labor 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. Additionally, the increase in gross profit margin year over year was attributable to gross profit margin in 2020 being negatively impacted by contract land deposit impairment charges of approximately $32,500, or 65 basis points.

~~The number of~~ New Orders decreased 3%12% while the average sales price of New Orders increased ~~15%~~8% in the first nine months of ~~2021~~2022 compared to the same period in ~~2020. The number of~~2021. New Orders ~~in the current year~~ were ~~lower due primarily to~~negatively impacted by a ~~10%~~4% decrease in the average number of active communities year over year. In addition, New Orders in each of our reportable segments were negatively impacted by the significant increase in mortgage interest rates in 2022, which resulted in a decline in affordability, and in turn led to lower absorption rates and to an increase in the cancellation rate year over year. The increase in the average sales price of New Orders was primarily attributable to ~~favorable market conditions which, coupled with low housing inventory levels, drove~~significant price appreciation resulting from strong demand ~~and provided us sustained pricing power since~~through the ~~second half~~first quarter of ~~2020.~~2022.

SG&A expense in the first nine months of ~~2021~~2022 increased by approximately ~~$28,400,~~$44,300 compared to the same period in 2021, but as a percentage of revenue decreased to 5.1% in 2022 from 5.3% ~~from 6.3% year over year~~in 2021 due to improved leveraging of SG&A costs. The increase in SG&A expense was due primarily to an increase of approximately $16,500 in equity-based compensation due to a block grant of Options and RSUs in the second quarter of 2022 and an increase of approximately $12,400 in personnel costs attributable to increased headcount year over ~~year was attributable primarily to increased incentive compensation attributable to stronger performance year over year, as well as increased personnel costs due to increased headcount.~~year.

Our backlog represents homes sold but not yet settled with our customers. As of September 30, ~~2021,~~2022, our backlog ~~was flat~~decreased on a unit basis ~~at 12,145~~by 11% to 10,758 units and ~~increased~~ on a dollar basis by ~~15%~~5% to ~~$5,372,859~~$5,086,766 when compared to ~~12,124~~12,145 units and ~~$4,655,510,~~$5,372,859, respectively, as of September 30, ~~2020. Backlog~~2021. The decrease in backlog units ~~were flat year over year~~and dollars was primarily ~~due~~attributable to a 15% decrease in New Orders ~~during~~in the six-month period ended September 30, ~~2021~~2022 compared to the same period in 2020, offset partially by a lower backlog turnover rate period over 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 2020.2021.

~~In addition to the potential impact of the ongoing COVID-19 pandemic, our~~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

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period, and a portion are related to sales that occurred in prior periods and therefore appeared in the opening backlog for the current period. Calculated as the total of all cancellations during the period as a percentage of gross sales during that same period, our cancellation rate was approximately 9%13% and ~~16%~~9% in the first nine months of ~~2021~~2022 and ~~2020,~~2021, respectively. During the most recent four quarters, approximately 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 ~~2021~~2022 or future years. Other than those units that are cancelled, and subject to potential construction delays resulting from continued supply chain and/or COVID-19 related ~~restrictions,~~disruptions, we expect to settle substantially all of our September 30, ~~2021~~2022 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 limit construction activities as a result of COVID-19.~~control.

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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 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 an LPA with the developer, or the restructuring of 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, ~~2021~~2022 and December 31, ~~2020~~2021 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 ~~$10,700~~$7,300 and ~~$8,100~~$10,100 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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, ~~2021~~2022 and ~~2020.~~2021.

Selected Segment Financial Data:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenues:	Revenues:									Revenues:
Mid Atlantic	Mid Atlantic	$	1,082,710	$	949,472	$	3,067,267	$	2,563,375	Mid Atlantic	$	1,282,504	$	1,082,710	$	3,632,524	$	3,067,267
North East	North East	213,087		157,973		568,524		362,328		North East	250,067		213,087		663,012		568,524
Mid East	Mid East	503,232		404,992		1,406,364		1,025,642		Mid East	569,991		503,232		1,552,434		1,406,364
South East	South East	537,586		408,314		1,482,731		1,113,871		South East	636,883		537,586		1,810,764		1,482,731

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Gross profit margin percentage:
Gross profit margin:										Gross profit margin:
Mid Atlantic	Mid Atlantic	26.4	%	17.6	%	23.2	%	18.4	%	Mid Atlantic	$	346,395	$	285,563	$	988,595	$	712,809
North East	North East	23.0	%	17.3	%	20.0	%	19.2	%	North East	67,092		48,904		167,958		113,940
Mid East	Mid East	22.2	%	18.2	%	19.8	%	18.3	%	Mid East	128,529		111,465		345,785		278,672
South East	South East	25.2	%	20.5	%	22.8	%	20.8	%	South East	191,612		135,577		537,947		338,166

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		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Segment profit:
Gross profit margin percentage:										Gross profit margin percentage:
Mid Atlantic	Mid Atlantic	$	222,504	$	104,700	$	526,052	$	284,440	Mid Atlantic	27.0	%	26.4	%	27.2	%	23.2	%
North East	North East	33,885		14,272		70,622		31,081		North East	26.8	%	23.0	%	25.3	%	20.0	%
Mid East	Mid East	81,021		45,109		189,849		103,575		Mid East	22.5	%	22.2	%	22.3	%	19.8	%
South East	South East	100,688		52,554		236,272		142,463		South East	30.1	%	25.2	%	29.7	%	22.8	%


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Segment profit:
Mid Atlantic	$	272,860	$	222,504	$	774,380	$	526,052
North East	49,614		33,885		116,839		70,622
Mid East	92,364		81,021		246,059		189,849
South East	145,619		100,688		409,895		236,272

Operating Activity:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
		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:	New orders, net of cancellations:													New orders, net of cancellations:
Mid Atlantic	Mid Atlantic	2,024	$	523.7	2,592	$	455.5	6,405	$	519.8	7,034	$	447.4	Mid Atlantic	1,813	$	516.2	2,024	$	523.7	5,980	$	527.1	6,405	$	519.8
North East	North East	403	$	496.7	542	$	441.1	1,237	$	489.7	1,269	$	405.4	North East	348	$	510.5	403	$	496.7	1,249	$	512.7	1,237	$	489.7
Mid East	Mid East	1,190	$	376.8	1,644	$	335.5	4,305	$	365.4	4,405	$	326.0	Mid East	955	$	406.7	1,190	$	376.8	3,603	$	404.4	4,305	$	365.4
South East	South East	1,584	$	372.9	1,903	$	313.0	5,089	$	356.2	4,889	$	305.3	South East	1,305	$	385.0	1,584	$	372.9	4,179	$	410.2	5,089	$	356.2
Total	Total	5,201	$	442.0	6,681	$	384.2	17,036	$	429.8	17,597	$	374.5	Total	4,421	$	453.4	5,201	$	442.0	15,011	$	463.9	17,036	$	429.8


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
		Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price			Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price
Settlements:	Settlements:													Settlements:
Mid Atlantic	Mid Atlantic	2,177	$	497.3	2,172	$	437.1	6,411	$	478.4	5,898	$	434.6	Mid Atlantic	2,417	$	530.6	2,177	$	497.3	6,889	$	527.3	6,411	$	478.4
North East	North East	455	$	468.3	396	$	398.9	1,260	$	451.2	939	$	385.9	North East	487	$	513.5	455	$	468.3	1,307	$	507.3	1,260	$	451.2
Mid East	Mid East	1,430	$	351.8	1,250	$	324.0	4,097	$	343.2	3,180	$	322.5	Mid East	1,468	$	388.3	1,430	$	351.8	4,034	$	384.8	4,097	$	343.2
South East	South East	1,621	$	331.6	1,362	$	299.8	4,672	$	317.3	3,689	$	301.9	South East	1,577	$	403.9	1,621	$	331.6	4,753	$	381.0	4,672	$	317.3
Total	Total	5,683	$	411.1	5,180	$	370.8	16,440	$	396.9	13,706	$	369.5	Total	5,949	$	460.5	5,683	$	411.1	16,983	$	450.9	16,440	$	396.9

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,					As of September 30,
		2021		2020		2021		2020			2022			2021
New order cancellation rate:
											Units	Average Price		Units	Average Price
Backlog:										Backlog:
Mid Atlantic	Mid Atlantic	9.3	%	11.3	%	8.9	%	16.1	%	Mid Atlantic	4,009	$	536.2	4,473	$	530.3
North East	North East	7.6	%	8.1	%	8.4	%	14.5	%	North East	911	$	519.1	927	$	499.0
Mid East	Mid East	11.7	%	11.5	%	9.9	%	15.3	%	Mid East	2,596	$	407.8	3,082	$	375.4
South East	South East	7.6	%	13.7	%	8.7	%	16.3	%	South East	3,242	$	433.5	3,663	$	377.0
Total										Total	10,758	$	472.8	12,145	$	442.4

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		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,				Nine Months Ended September 30,
		2021	2020	2021	2020		2022		2021		2022		2021
Average active communities:
New order cancellation rate:						New order cancellation rate:
Mid Atlantic	Mid Atlantic	151	170	154	183	Mid Atlantic	16.1	%	9.3	%	13.6	%	8.9	%
North East	North East	34	41	34	41	North East	19.1	%	7.6	%	12.0	%	8.4	%
Mid East	Mid East	125	135	130	138	Mid East	15.3	%	11.7	%	14.4	%	9.9	%
South East	South East	104	119	108	113	South East	12.0	%	7.6	%	11.0	%	8.7	%
Total		414	465	426	475


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Average active communities:
Mid Atlantic	164	151	157	154
North East	37	34	36	34
Mid East	126	125	126	130
South East	96	104	92	108
Total	423	414	411	426

Homebuilding Inventory:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Sold inventory:	Sold inventory:					Sold inventory:
Mid Atlantic	Mid Atlantic	$	758,804	$	704,595	Mid Atlantic	$	838,952	$	867,892
North East	North East	160,800		140,461		North East	176,912		154,053
Mid East	Mid East	339,963		278,510		Mid East	416,365		342,011
South East	South East	418,756		336,902		South East	518,242		439,892
Total (1)	Total (1)	$	1,678,323	$	1,460,468	Total (1)	$	1,950,471	$	1,803,848


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Unsold lots and housing units inventory:	Unsold lots and housing units inventory:					Unsold lots and housing units inventory:
Mid Atlantic	Mid Atlantic	$	94,841	$	76,690	Mid Atlantic	$	137,197	$	87,412
North East	North East	12,471		7,941		North East	18,524		14,656
Mid East	Mid East	9,228		13,252		Mid East	13,915		12,892
South East	South East	13,085		23,220		South East	26,338		14,193
Total (1)	Total (1)	$	129,625	$	121,103	Total (1)	$	195,974	$	129,153

(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, 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

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Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Contract land deposit impairments (recoveries), net:
Mid Atlantic $ 8 $ 114 $ 16 $ 114
North East — 56 — 60
Mid East — (1) 11 293
South East — 25 — 927
Total $ 8 $ 194 $ 27 $ 1,394
Lots Controlled and Land Deposits:


	September 30, 2022	December 31, 2021
Total lots controlled:
Mid Atlantic	47,800	47,900
North East	11,700	11,900
Mid East	22,600	23,700
South East	49,300	41,400
Total	131,400	124,900


	September 30, 2022		December 31, 2021
Contract land deposits, net:
Mid Atlantic	$	229,918	$	257,244
North East	57,858		51,257
Mid East	51,037		52,537
South East	190,025		146,246
Total	$	528,838	$	507,284

Mid Atlantic

Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The Mid Atlantic segment had an approximate ~~$117,800,~~$50,400, or ~~113%~~23%, increase in segment profit in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. The increase in segment profit was driven by an increase in segment revenues of approximately ~~$133,200,~~$199,800, or ~~14%~~18%, ~~quarter over quarter.~~coupled with an increase in gross profit margins. Segment revenues increased ~~primarily~~ due to ~~a 14% increase~~increases in settlements and the average settlement price of 11% and 7%, respectively. The increase in settlements was attributable to a higher backlog turnover rate quarter over quarter. The increase in the average settlement price was primarily attributable to a ~~15%~~5% higher average sales price of units in backlog entering the third quarter of ~~2021~~2022 compared to the same period ~~in 2020.~~of 2021. The Mid Atlantic segment’s gross profit margin percentage increased to 27.0% in the third quarter of 2022 from 26.4% in the third quarter of ~~2021 from 17.6% in the third quarter of 2020.~~2021. Gross profit margins were favorably impacted primarily by the aforementioned 7% 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 wereoffset partially ~~offset~~ by higher ~~prices for certain commodities~~material and labor costs quarter over quarter.

Segment New Orders ~~decreased 22% while~~and the average sales price of New Orders ~~increased 15%~~decreased 10% and 1%, respectively, in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. As previously discussed in the "Consolidated Homebuilding" section above, New Orders were ~~lower due primarily to a 12% decrease in~~negatively impacted by 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~~significant 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.mortgage interest rates.

Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The Mid Atlantic segment had an approximate ~~$241,600,~~$248,300, or ~~85%~~47%, increase in segment profit in the first nine months of ~~2021~~2022 compared to the first nine months of ~~2020.~~2021. The increase in segment profit was driven by an increase in segment revenues of approximately ~~$503,900,~~$565,300, or ~~20%~~18%, ~~year over year.~~coupled with an increase in gross profit margins. Segment revenues increased due to increases in ~~the number of units settled~~settlements and the average settlement price of 9%7% and 10%, ~~respectively,~~respectively. The increases in settlements and the average settlement price were primarily attributable to a 10% higher backlog unit balance and a 14% higher average sales price of units in backlog entering 2022 compared to backlog entering 2021. The Mid Atlantic segment’s gross profit margin percentage increased to 27.2% in the first nine months of 2022 from 23.2% in the first nine months of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 10% increase in the average settlement price attributable to improved pricing power in prior quarters, offset partially by higher material and labor costs period over period.

Segment New Orders decreased 7% in the first nine months of 2022 compared to the first nine months of 2021, while the average sales price of New Orders increased 1% year over year. As previously discussed in the "Consolidated Homebuilding" section above, New Orders were negatively impacted by the significant increase in

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mortgage interest rates. The increase in the ~~number~~average sales price of ~~units settled~~New Orders was attributable to significant price appreciation resulting from strong demand in through the first quarter of 2022.

North East

Three Months Ended September 30, 2022 and 2021

The North East segment had an approximate $15,700, or 46%, increase in segment profit in the third quarter of 2022 compared to the third quarter of 2021, due primarily to an increase in segment revenues of approximately $37,000, or 17%, coupled with an increase in gross profit margins. Segment revenues increased due to increases in settlements and the average settlement price of 7% and 10%, respectively. The increase in settlements was attributable to a ~~24%~~7% higher backlog unit balance entering ~~2021~~the third quarter of 2022 compared to backlog entering the ~~backlog unit balance entering 2020, offset partially by a lower backlog turnover rate year over year.~~third quarter of 2021. The increase in the average settlement price was primarily attributable to a 7% higher average sales price of units in backlog entering ~~2021~~the third quarter of 2022 compared to backlog entering the ~~same period in 2020,~~third quarter of 2021, coupled with a ~~17% increase~~shift in ~~the average sales price of New Orders in the first six months of 2021 compared~~settlements to ~~the same period in 2020.~~higher priced markets. The ~~Mid Atlantic~~ segment’s gross profit margin percentage increased to ~~23.2%~~26.8% in the ~~first nine months~~third quarter of ~~2021~~2022 from ~~18.4%~~23.0% in the ~~first nine months~~third quarter of ~~2020.~~2021. Gross profit margins were favorably impacted by the aforementioned 10% 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~~quarter over ~~year. These favorable factors were~~quarter, offset partially ~~offset~~ by higher ~~prices for lumber, certain other commodities~~material and labor ~~year~~costs quarter over ~~year.~~quarter.

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Segment New Orders decreased 9%14% in the third quarter of 2022 compared to the third quarter of 2021, while the average sales price of New Orders increased ~~16%~~3% quarter over quarter. As previously discussed in the "Consolidated Homebuilding" section above, New Orders were negatively impacted by the significant increase in mortgage interest rates.

Nine Months Ended September 30, 2022 and 2021

The North East segment had an approximate $46,200, or 65%, increase in segment profit in the first nine months of ~~2021~~2022 compared to the first nine months of ~~2020.~~2021, due primarily to an increase in segment revenues of approximately $94,500, or 17%, coupled with an increase in gross profit margins. Segment revenues increased due to increases in settlements and the average settlement price of 4% and 12%, respectively. The increase in settlements was primarily attributable to a 2% higher backlog unit balance entering 2022 compared to backlog entering 2021, coupled with an 8% increase in New Orders in the segment during the first six months of 2022 compared to the same period in 2021. The increase in the average settlement price was primarily attributable to a 14% higher average sales price of units in backlog entering 2022 compared to backlog entering 2021. The segment’s gross profit margin percentage increased to 25.3% in the first nine months of 2022 from 20.0% in the first nine months of 2021. Gross profit margins were ~~negatively~~favorably impacted by the aforementioned 12% increase in the average settlement price, offset partially by higher material and labor costs period over period.

Segment New Orders and the average sales price of New Orders increased 1% and 5%, respectively, in the first nine months of 2022 compared to the first nine months of 2021. The increase in New Orders was primarily ~~by a 16% decrease~~attributable to an 8% increase in the average number of active communities year over year, offset partially by lower absorption rates and an increase in the ~~first nine months of 2021 compared to the same period in 2020.~~cancellation rate year over year. The increase in the average sales price of New Orders ~~year over year~~ was primarily attributable to ~~favorable market conditions which, coupled with low housing inventory levels, drove~~significant price appreciation resulting from strong demand ~~and have provided us sustained pricing power since~~through the ~~second half~~first quarter of ~~2020.~~2022.

~~North~~Mid East

Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The ~~North~~Mid East segment had an approximate ~~$19,600,~~$11,300, or ~~137%~~14%, increase in segment profit in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020,~~2021, due primarily to an increase in segment revenues of approximately ~~$55,100,~~$66,800, or ~~35%, quarter over quarter.~~13%. Segment revenues increased due to increases in ~~the number of units settled~~settlements and the average settlement price of ~~15%~~3% and ~~17%~~10%, ~~respectively, quarter over quarter.~~respectively. The increase in the ~~number of units settled and the~~ average settlement price ~~were~~was primarily attributable to a ~~27% higher backlog unit balance and 20%~~9% higher average sales price of units in backlog entering the third quarter of ~~2021, respectively,~~2022 compared to ~~the~~same period in 2021. The increase in settlements was attributable to a higher backlog ~~unit balance and average sales price of units in backlog entering the third~~turnover rate quarter ~~of 2020.~~over quarter. The ~~segment’s~~segment's gross profit margin percentage increased to ~~23.0%~~22.5% in the third quarter of ~~2021~~2022 from ~~17.3%~~22.2% in the third quarter of ~~2020.~~2021. Gross profit margins were favorably impacted primarily by the aforementioned 10% 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 wereoffset partially ~~offset~~ by higher ~~prices for certain commodities~~material and labor costs quarter over quarter.

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Segment New Orders decreased ~~26%~~20% in the third quarter of 2022 compared to the third quarter of 2021, while the average sales price of New Orders increased ~~13%~~8%. As previously discussed in the ~~third quarter of 2021 compared to the third quarter of 2020.~~"Consolidated Homebuilding" section above, New Orders were ~~lower due primarily to a 16% decrease~~negatively impacted by the significant increase 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.~~mortgage interest rates. The increase in the average sales price of New Orders ~~quarter over quarter~~ was primarily attributable to ~~favorable market conditions which, coupled with low housing inventory levels, drove~~significant price appreciation resulting from strong demand ~~and provided us sustained pricing power since~~through the ~~second half~~first quarter of ~~2020.~~2022.

Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The ~~North~~Mid East segment had an approximate ~~$39,500,~~$56,200, or ~~127%~~30%, increase in segment profit in the first nine months of ~~2021~~2022 compared to the first nine months of 2020. The increase in segment profit was driven by an increase in segment revenues of approximately $206,200, or 57%, year over year. Segment revenues increased due to increases in the number of units settled and the average settlement price of 34% and 17%, respectively, year over year. The increase in the number of units settled was attributable to a 62% 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 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,~~$146,100, or ~~24%~~10%, ~~quarter over quarter.~~coupled with an increase in gross profit margins. Segment revenues increased ~~primarily~~ due to a ~~14% increase in the number of units settled and a 9%~~12% 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~~2% decrease in settlements year over ~~quarter.~~year. 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~~2022 compared to ~~same period~~backlog entering 2021. The decrease in ~~2020.~~settlements was primarily attributable to a lower backlog turnover rate year over year. The segment's gross profit margin percentage increased to ~~22.2%~~22.3% in the ~~third quarter~~first nine months of ~~2021~~2022 from ~~18.2%~~19.8% in the ~~third quarter~~first nine months of ~~2020.~~2021. Gross profit margins were favorably impacted primarily by the aforementioned 12% 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 wereoffset partially ~~offset~~ by higher ~~prices for certain commodities~~material and labor ~~quarter~~costs period over ~~quarter.~~period.

Segment New Orders decreased ~~28%~~16% in the first nine months of 2022 compared to the first nine months of 2021, while the average sales price of New Orders increased ~~12%~~11%. As previously discussed in the ~~third quarter of 2021 compared to the third quarter of 2020.~~"Consolidated Homebuilding" section above, New Orders were negatively impacted by ~~an 8%~~the significant increase in mortgage interest rates. In addition, New Orders were also negatively impacted by a 4% decrease in the average number of active communities ~~coupled with a decline in absorption rates quarter~~year over ~~quarter.~~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.~~

~~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~~significant price ~~of units in backlog entering 2021 compared to backlog entering 2020, coupled with a 13% increase in the average sales price of New Orders in~~appreciation resulting from strong demand through the first ~~six months~~quarter of 2021 compared to the same period in 2020. The segment's gross profit margin percentage increased to 19.8% in the first nine months of 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 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 decreased 2% while the average sales price of New Orders increased 12% in the first nine months of 2021 compared to the first nine months of 2020. New Orders were negatively impacted primarily by a 6% 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 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.

~~Table of Contents~~2022.

South East

Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The South East segment had an approximate ~~$48,100,~~$44,900, or ~~92%~~45%, increase in segment profit in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. The increase in segment profit was primarily driven by an increase in segment revenues of approximately ~~$129,300,~~$99,300, or ~~32%~~18%, ~~quarter over quarter.~~coupled with an increase in gross profit margins. The increase in revenues iswas attributable to a ~~19% increase in the number of units settled and an 11%~~22% increase in the average settlement price, quarter over quarter. The increase in the number of units settled was attributable to a 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~~3% decrease in settlements quarter over quarter. The increase in the average settlement price was primarily attributable to a ~~16%~~22% higher average sales price of units in backlog entering the third quarter of ~~2021~~2022 compared to backlog entering the third quarter of 2021. The decrease in settlements was attributable to a 5% lower backlog unit balance entering the third quarter of 2022 compared to the ~~same period in 2020.~~backlog unit balance entering the third quarter of 2021. The segment’s gross profit margin percentage increased to 30.1% in the third quarter of 2022 from 25.2% in the third quarter of ~~2021 from 20.5% in the third quarter of 2020.~~2021. Gross profit margins were favorably impacted primarily by the aforementioned 22% 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 wereoffset partially ~~offset~~ by higher ~~prices for certain commodities~~material and labor costs quarter over quarter.

Segment New Orders decreased ~~17%~~18% in the third quarter of 2022 compared to the third quarter of 2021, while the average sales price of New Orders increased ~~19%~~3% quarter over quarter. As previously discussed in the ~~third quarter of 2021 compared to the third quarter of 2020.~~"Consolidated Homebuilding" section above, New Orders were negatively impacted ~~primarily~~ by ~~a 12%~~the significant increase in mortgage interest rates. In addition, New Orders were also negatively impacted by an 8% 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 primarily attributable to ~~favorable market conditions which, coupled with low housing inventory levels, drove~~significant price appreciation resulting from strong demand ~~and provided us sustained pricing power since~~through the ~~second half~~first quarter of ~~2020.~~2022.

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Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The South East segment had an approximate ~~$93,800,~~$173,600, or ~~66%~~73%, increase in segment profit in the first nine months of ~~2021~~2022 compared to the first nine months of ~~2020.~~2021. The increase in segment profit was driven by an increase in segment revenues of approximately ~~$368,900,~~$328,000, or ~~33%~~22%, ~~year over year.~~coupled with an increase in gross profit margins. Segment revenues increased due to increases in ~~the number of units settled~~settlements and the average settlement price of ~~27%~~2% and 5%20%, respectively, year over year. The increase in ~~the number of units settled~~settlements was attributable to ~~a 46%~~an 18% higher backlog unit balance entering ~~2021~~2022 compared to the backlog unit balance entering ~~2020,~~2021, offset partially by a lower backlog turnover rate year over ~~year.~~year due in part to the impact of supply chain issues on our construction cycle times. The increase in the average settlement price was primarily attributable to a 3%22% higher average sales price of units in backlog entering ~~2021~~2022 compared to backlog entering ~~2020,~~2021. The segment’s gross profit margin percentage increased to 29.7% in the first nine months of 2022 from 22.8% in the first nine months of 2021. Gross profit margins were favorably impacted by the aforementioned 20% increase in the average settlement price, offset partially by higher material and labor costs period over period.

Segment New Orders decreased 18% in the first nine months of 2022 compared to the first nine months of 2021, while the average sales price of New Orders increased 15% year over year. The decrease in New Orders was primarily attributable to a 15% decrease in the average number of active communities, coupled with ~~a 16%~~the previously discussed impact of the significant increase in mortgage interest rates. The increase in the average sales price of New Orders inwas primarily attributable to significant price appreciation resulting from strong demand through the first ~~six months~~quarter of 2021 compared to the same period in 2020. The segment’s gross profit margin 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 4% and 17%, respectively, in the first nine months of 2021 compared to the first nine months of 2020. New Orders and the average sales price of New Orders were higher 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 2020.2022.

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 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. 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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Homebuilding consolidated gross profit:	Homebuilding consolidated gross profit:									Homebuilding consolidated gross profit:
Mid Atlantic	Mid Atlantic	$	285,563	$	167,314	$	712,809	$	471,839	Mid Atlantic	$	346,395	$	285,563	$	988,595	$	712,809
North East	North East	48,904		27,265		113,940		69,512		North East	67,092		48,904		167,958		113,940
Mid East	Mid East	111,465		73,630		278,672		187,181		Mid East	128,529		111,465		345,785		278,672
South East	South East	135,577		83,520		338,166		231,594		South East	191,612		135,577		537,947		338,166
Consolidation adjustments and other	Consolidation adjustments and other	(62,833)		32,978		(35,766)		(10,190)		Consolidation adjustments and other	(86,640)		(62,833)		(50,100)		(35,766)
Homebuilding consolidated gross profit	Homebuilding consolidated gross profit	$	518,676	$	384,707	$	1,407,821	$	949,936	Homebuilding consolidated gross profit	$	646,988	$	518,676	$	1,990,185	$	1,407,821

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Homebuilding consolidated income before taxes:
Mid Atlantic $ 222,504 $ 104,700 $ 526,052 $ 284,440
North East 33,885 14,272 70,622 31,081
Mid East 81,021 45,109 189,849 103,575
South East 100,688 52,554 236,272 142,463
Reconciling items:
Contract land deposit recoveries (impairments) (1) 4,126 4,867 17,500 (31,208)
Equity-based compensation expense (13,779) (12,561) (39,484) (33,398)
Corporate capital allocation (2) 64,055 60,662 188,638 177,184
Unallocated corporate overhead (27,801) (26,915) (101,605) (87,912)
Consolidation adjustments and other (3) (56,786) 38,244 (22,456) 54,769
Corporate interest expense (12,805) (11,287) (38,598) (26,625)
Reconciling items sub-total (42,990) 53,010 3,995 52,810
Homebuilding consolidated income before taxes $ 395,108 $ 269,645 $ 1,026,790 $ 614,369

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Homebuilding consolidated income before taxes:
Mid Atlantic	$	272,860	$	222,504	$	774,380	$	526,052
North East	49,614		33,885		116,839		70,622
Mid East	92,364		81,021		246,059		189,849
South East	145,619		100,688		409,895		236,272
Reconciling items:
Contract land deposit reserve adjustment (1)	(8,736)		4,126		(2,391)		17,500
Equity-based compensation expense (2)	(25,279)		(13,779)		(56,251)		(39,484)
Corporate capital allocation (3)	81,020		64,055		228,276		188,638
Unallocated corporate overhead	(22,565)		(27,801)		(100,109)		(101,605)
Consolidation adjustments and other (4)	(57,165)		(56,786)		(2,561)		(22,456)
Corporate interest expense	(6,803)		(12,805)		(31,374)		(38,598)
Reconciling items sub-total	(39,528)		(42,990)		35,590		3,995
Homebuilding consolidated income before taxes	$	520,929	$	395,108	$	1,582,763	$	1,026,790

~~Table~~(2)The increase in equity-based compensation expense for the three and nine-month periods ended September 30, 2022 was primarily attributable to a four-year block grant of ~~Contents~~Options and RSUs in May 2022. See additional discussion of equity-based compensation in Note 7 in the accompanying condensed consolidated financial statements.

~~(2)~~(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 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,
		2021		2020		2021		2020			2022		2021		2022		2021
Corporate capital allocation charge:	Corporate capital allocation charge:									Corporate capital allocation charge:
Mid Atlantic	Mid Atlantic	$	31,057	$	31,383	$	92,788	$	92,720	Mid Atlantic	$	37,305	$	31,057	$	108,514	$	92,788
North East	North East	6,719		5,793		19,214		17,142		North East	7,994		6,719		23,238		19,214
Mid East	Mid East	11,114		10,386		32,804		29,436		Mid East	14,509		11,114		38,801		32,804
South East	South East	15,165		13,100		43,832		37,886		South East	21,212		15,165		57,723		43,832
Total	Total	$	64,055	$	60,662	$	188,638	$	177,184	Total	$	81,020	$	64,055	$	228,276	$	188,638

~~(3)~~(4)The ~~decrease in~~ consolidation adjustments and other for the three and nine month periods of 2022 and 2021 ~~compared to the respective 2020 periods~~ is primarily driven by changes in lumber prices in ~~2021.~~the respective periods. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. ~~For~~Costs related to homes not yet settled ~~these intercompany profits~~ are reversed through the consolidation ~~adjustments.~~adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled. Due to ~~the significantly~~ higher lumber prices in the first half of both 2022 and 2021, the previously reversed intercompany profits were recognized in the third quarter of the respective years through the consolidation adjustment as homes were settled, ~~and our consolidated homebuilding margins were~~which negatively impacted bymargins in the ~~higher lumber costs.~~

respective periods.

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Mortgage Banking Segment

Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

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, ~~2021~~2022 and ~~2020:~~

2021:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Loan closing volume:	Loan closing volume:													Loan closing volume:
Total principal	Total principal	$	1,615,880		$	1,382,060		$	4,593,854		$	3,658,591		Total principal	$	1,656,186		$	1,615,880		$	4,788,751		$	4,593,854

Loan volume mix:	Loan volume mix:													Loan volume mix:
Adjustable rate mortgages	Adjustable rate mortgages	4		%	2		%	3		%	2		%	Adjustable rate mortgages	8		%	4		%	8		%	3		%
Fixed-rate mortgages	Fixed-rate mortgages	96		%	98		%	97		%	98		%	Fixed-rate mortgages	92		%	96		%	92		%	97		%

Operating profit:	Operating profit:													Operating profit:
Segment profit	Segment profit	$	40,249		$	52,890		$	140,183		$	80,461		Segment profit	$	18,993		$	40,249		$	97,899		$	140,183
Equity-based compensation expense	Equity-based compensation expense	(1,230)			(1,078)			(3,375)			(2,167)			Equity-based compensation expense	(1,407)			(1,230)			(2,190)			(3,375)
Mortgage banking income before tax	Mortgage banking income before tax	$	39,019		$	51,812		$	136,808		$	78,294		Mortgage banking income before tax	$	17,586		$	39,019		$	95,709		$	136,808

Capture rate:	Capture rate:	88		%	89		%	89		%	90		%	Capture rate:	81		%	88		%	84		%	89		%

Mortgage banking fees:	Mortgage banking fees:													Mortgage banking fees:
Net gain on sale of loans	Net gain on sale of loans	$	47,577		$	58,774		$	162,729		$	100,348		Net gain on sale of loans	$	25,222		$	47,577		$	120,035		$	162,729
Title services	Title services	11,246			10,237			32,478			26,755			Title services	12,154			11,246			35,327			32,478
Servicing fees	Servicing fees	202			250			591			589			Servicing fees	79			202			156			591
		$	59,025		$	69,261		$	195,798		$	127,692			$	37,455		$	59,025		$	155,518		$	195,798

Loan closing volume for the three and nine months ended September 30, ~~2021~~2022 increased by approximately ~~$233,800,~~$40,300, or ~~17%~~2%, and ~~$935,300,~~$194,900, or ~~26%~~4%, respectively, from the same periods in ~~2020, respectively.~~2021. The increase in loan closing volume during both the three and nine months ended September 30, ~~2021~~2022 was primarily attributable to the ~~10%~~12% and ~~20%~~14% increases, respectively, in the homebuilding ~~segment’s~~segment's average home settlement price in each period compared to the same periods in 2021. These increases were partially offset by a 5% decrease in number of ~~units settled during~~loans closed in both periods, which was primarily attributable to the decreases in the capture rate in the three and nine month periods ended September 30, 2022, respectively, compared to the same periods in 2021.

Segment profit for the three and nine months ended September 30, ~~2021,~~2022 decreased by approximately $21,300, or 53%, and $42,300, or 30%, respectively, ~~compared to~~from 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 2020. This decrease was~~2021. These decreases were primarily attributable to ~~a decrease~~decreases of approximately $21,600, or 37%, and $40,300, or 21%, respectively, in mortgage banking fees, ~~of approximately $10,200~~ primarily due to ~~a decrease~~decreases in ~~secondary marketing~~ gains on sales of loans ~~quarter over quarter.~~

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

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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. However, our typical seasonal New Order and settlement trends have been affected since 2020 by the pandemic and supply chain disruptions.

Effective Tax Rate

Our effective tax rate for the three and nine months ended September 30, ~~2021~~2022 was ~~23.5%~~23.6% and ~~22.5%~~24.3%, respectively, compared to ~~20.2%~~23.5% and ~~13.9%~~22.5% for the three and nine months ended September 30, ~~2020,~~2021, respectively. The increase in the effective tax rate in the ~~three and~~ nine month ~~periods~~period of ~~2021~~2022 compared to the same ~~periods~~period in ~~2020 is~~2021 was primarily attributable to ~~the impact of the~~a lower income tax benefit recognized ~~related to~~for excess tax benefits from stock option exercises totaling ~~$9,244~~$27,748 and $37,834 for the ~~three and~~ nine months ended September 30, ~~2021, respectively,~~2022 and ~~$17,834 and $80,343 for the three and nine months ended September 30, 2020,~~2021, 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~~fund our operations primarily from our current cash holdings and cash flows generated by operating activities. In addition, we have available a ~~very strong liquidity position~~short-term unsecured working capital revolving credit facility and revolving mortgage repurchase facility, as further described below. As of September 30, ~~2021, with~~2022, we had approximately ~~$2,700,000~~$1,800,000 in cash and cash equivalents, approximately ~~$284,400~~$286,600 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~~Material Cash Requirements

We believe that our current cash holdings, cash generated from operations, ~~from~~and cash ~~flows provided by operating activities, a~~available under our short-term unsecured ~~working capital~~credit agreement and revolving ~~credit~~mortgage repurchase facility, ~~and capital raised in~~as well as the public debt and equity ~~markets.~~markets, will be sufficient to satisfy both our short term and long term cash requirements for working capital to support our daily operations and meet commitments under our contractual obligations with third parties. 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 revolving mortgage repurchase facility.

~~Credit Agreement~~

Our unsecured Credit Agreement (the “Credit Agreement”) provides for aggregate revolving loan commitments of $300,000. 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 there was approximately $15,600 outstanding at September 30, 2021. The Credit Agreement termination date is February 12, 2026. There was no debt outstanding under the Credit Agreement at September 30, 2021.

~~Repurchase Agreement~~

NVRM's revolving mortgage repurchase facility (the “Repurchase Agreement”) provides for aggregate borrowings up to $150,000 and is non-recourse to NVR. In July 2021, NVRM entered into the Thirteenth Amendment to the Repurchase Agreement, which extended the termmaterial contractual obligations primarily consist of the ~~Repurchase Agreement through July 20,~~following:

(i) Payments due to service our debt and interest on that debt. In June 2022, we used cash holdings to redeem $600,000 in outstanding 3.95% Senior Notes that were set to mature in September 2022. ~~All other terms~~The Senior Notes were redeemed at par, plus accrued interest. Future interest payments on our remaining outstanding senior notes total approximately $212,550, with approximately $27,000 due within the next twelve months.

(ii) Payment obligations totaling approximately $337,000 under existing LPAs for deposits to be paid to land developers, assuming that contractual development milestones are met by the developers and ~~conditions~~we exercise our option to acquire finished lots under those LPAs. We expect to make the ~~amended Repurchase Agreement remained materially consistent. At September 30, 2021, there were no borrowing base limitations reducing~~majority of these payments within the ~~amount available~~next three years.

(iii) Obligations under ~~the Repurchase Agreement. There was no debt outstanding under the Repurchase Agreement at September 30, 2021.~~

~~For additional information regarding lines~~operating and finance leases related primarily to office space and our production facilities. See Note 14 of ~~credit and notes payable, see Part II, Item 7 of our Annual~~this Quarterly Report on Form ~~10-K~~10-Q for ~~the year ended December 31, 2020.~~

~~Cash Flows~~

For the nine months ended September 30, 2021, cash, restricted cash, and cash equivalents decreased by $61,722. Cash provided by operating activities was $982,292. Cash was provided by earnings for the nine months ended September 30, 2021, net proceeds of $319,140 from mortgage loan 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 $154,443 due to an increase in the number of units under construction at September 30, 2021 compared to December 31, 2020.

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

~~Net cash used in financing activities was $1,032,028 for the nine months ended September 30, 2021. Cash was used to repurchase 244,595 shares~~additional discussion of our ~~common stock at an aggregate purchase price of $1,152,855 under our ongoing common stock repurchase program, discussed below. Cash was provided from stock option exercise proceeds totaling $121,835.~~leases.

~~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. 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 activity during the third quarter of 2022. For the nine months endedSeptember 30, 2022, we repurchased 295,148 shares of our common stock at an aggregate purchase price of $1,384,193. As of September 30, 2022, we had approximately $623,850 available under Board approved repurchase authorizations.

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Capital Resources

Senior Notes

During the second quarter of 2022, we redeemed the outstanding $600,000 principal amount of 3.95% Senior Notes due September 15, 2022, at par, plus accrued interest.

As of September 30, 2022, we had a total of $900,000 in outstanding Senior Notes which mature in May 2030. The Senior Notes are senior unsecured obligations and rank equally in right of payment with any of our existing and future unsecured senior indebtedness, will rank senior in right of payment to any of our future indebtedness that is by its terms expressly subordinated to the Senior Notes and will be effectively subordinated to any of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The indenture governing the Senior Notes does not contain any financial covenants; however, it does contain, among other items, and subject to certain exceptions, covenants that restrict our ability to create, incur, assume or guarantee secured debt, enter into sale and leaseback transactions and conditions related to mergers and/or the sale of assets. We were in compliance with all covenants under the Senior Notes at September 30, 2022.

Credit Agreement

We have an unsecured revolving credit agreement (the "Credit Agreement") with a group of lenders which may be used for working capital and general corporate purposes. The Credit Agreement provides for aggregate revolving loan commitments of $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. In addition, the Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit of which there was approximately $13,400 outstanding at September 30, 2022. The Credit Agreement termination date is February 12, 2026. There was no debt outstanding under the Facility at September 30, 2022.

Repurchase Agreement

In July 2022, NVRM entered into The Second Amended and Restated Master Repurchase Agreement with U.S. Bank National Association, as Agent and a Buyer (the "Amended MRA"), which replaced our prior repurchase agreement in its entirety. The Amended MRA provides for loan purchases up to $150,000, subject to certain sub-limits. Advances under the Amended MRA bear interest at the secured overnight financing rate published by the Board of Governors of the Federal Reserve System ("SOFR") plus the SOFR Margin of 1.70%, per annum. All other terms and conditions of the Amended MRA are materially consistent with the prior repurchase agreement. The Amended MRA expires on July 19, 2023. At September 30, 2022, there were no borrowing base limitations reducing the amount available under the Amended MRA. There was no debt outstanding under the Amended MRA at September 30, 2022.

For additional information regarding the Credit Agreement and Senior Notes, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

Cash Flows

For the nine months ended September 30, 2022, cash, restricted cash, and cash equivalents decreased by $815,629. Net cash provided by operating activities was $1,052,906. Cash was provided by earnings for the nine months ended September 30, 2022 and net proceeds of $129,479 from mortgage loan activity. Cash was primarily used to fund the increase in inventory of $223,083, attributable to an increase in units under construction at September 30, 2022 compared to December 31, 2021.

Net cash used in investing activities for the nine months ended September 30, 2022 was $20,641. Cash was used primarily for purchases of property, plant and equipment of $11,972 and investments in unconsolidated joint ventures totaling $9,222.

Net cash used in financing activities was $1,847,894 for the nine months ended September 30, 2022. Cash was used to repurchase 295,148 shares of our common stock at an aggregate purchase price of $1,384,193 under our ongoing common stock repurchase program, discussed above. In addition, cash was used to redeem the outstanding $600,000 principal amount of 3.95% Senior Notes due September 15, 2022. Cash was provided from stock option exercise proceeds totaling $137,406.

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Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates as previously disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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, ~~2021.~~2022. 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, ~~2020.~~2021.

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

There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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

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

We had two share repurchase authorizations outstanding during the quarter ended September 30, ~~2021.~~2022. On May ~~5, 2021~~4, 2022 and August ~~4, 2021,~~3, 2022, 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 ~~$500,000~~$500 million per ~~each~~ authorization. The repurchase authorizations do not have expiration dates. We repurchased the following shares of our common stock during the third quarter of ~~2021:~~2022:
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


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 (in thousands)
July 1 - 31, 2022	9,430	$	4,330.10	9,430	$	451,507
August 1 - 31, 2022	29,460	$	4,302.45	29,460	$	824,757
September 1 - 30, 2022	49,126	$	4,089.62	49,126	$	623,850
Total	88,016	$	4,186.62	88,016

(1) Of the shares repurchased in September 2021, 29,888 shares were repurchased under the May 5, 2021 share repurchase 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

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~~Furnished 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)

3739

Table of Contents

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 ~~2, 2021~~4, 2022	By:	/s/ Daniel D. Malzahn
		Daniel D. Malzahn
		Senior Vice President, Chief Financial Officer and Treasurer

3840


		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	1922
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	3537
Item 4.	Controls and Procedures	3537


PART II	OTHER INFORMATION	3638
Item 1.	Legal Proceedings	3638
Item 1A.	Risk Factors	3638
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3638
Item 6.	Exhibits	3739

	SIGNATURE	3840