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NVR INC - Quarter Report: 2022 June (Form 10-Q)


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 June 30, 2022
OR
☐
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)
Virginia54-1394360
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareNVRNew 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 August 1, 2022 there were 3,282,665 total shares of common stock outstanding.


NVR, Inc.
FORM 10-Q
TABLE OF CONTENTS
Page
PART I
Item 1.
Item 2.
PART II
Item 1A.
Item 2.
Item 6.



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NVR, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
 June 30, 2022December 31, 2021
ASSETS  
Homebuilding:  
Cash and cash equivalents$1,483,445 $2,545,069 
Restricted cash60,695 60,730 
Receivables29,007 18,552 
Inventory:
Lots and housing units, covered under sales agreements with customers2,138,456 1,777,862 
Unsold lots and housing units177,372 127,434 
Land under development16,274 12,147 
Building materials and other46,643 29,923 
 2,378,745 1,947,366 
Contract land deposits, net524,398 497,139 
Property, plant and equipment, net57,397 56,979 
Operating lease right-of-use assets68,323 59,010 
Reorganization value in excess of amounts allocable to identifiable assets, net41,580 41,580 
Other assets233,987 229,018 
 4,877,577 5,455,443 
Mortgage Banking:  
Cash and cash equivalents16,158 28,398 
Restricted cash3,403 2,519 
Mortgage loans held for sale, net335,624 302,192 
Property and equipment, net3,296 3,658 
Operating lease right-of-use assets13,405 9,758 
Reorganization value in excess of amounts allocable to identifiable assets, net7,347 7,347 
Other assets30,889 25,160 
 410,122 379,032 
Total assets$5,287,699 $5,834,475 


See notes to condensed consolidated financial statements.
1

NVR, Inc.
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
(unaudited)
June 30, 2022December 31, 2021
LIABILITIES AND SHAREHOLDERS' EQUITY  
Homebuilding:  
Accounts payable$417,771 $336,560 
Accrued expenses and other liabilities388,179 435,860 
Customer deposits439,119 417,463 
Operating lease liabilities73,075 64,128 
Senior notes915,801 1,516,255 
 2,233,945 2,770,266 
Mortgage Banking:  
Accounts payable and other liabilities47,868 51,394 
Operating lease liabilities14,220 10,437 
 62,088 61,831 
Total liabilities2,296,033 2,832,097 
Commitments and contingencies
Shareholders' equity:  
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both June 30, 2022 and December 31, 2021
206 206 
Additional paid-in capital2,498,123 2,378,191 
Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both June 30, 2022 and December 31, 2021
(16,710)(16,710)
Deferred compensation liability16,710 16,710 
Retained earnings10,907,253 10,047,839 
Less treasury stock at cost – 17,271,177 and 17,107,889 shares as of June 30, 2022 and December 31, 2021, respectively
(10,413,916)(9,423,858)
Total shareholders' equity2,991,666 3,002,378 
Total liabilities and shareholders' equity$5,287,699 $5,834,475 


See notes to condensed consolidated financial statements.
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NVR, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Homebuilding:    
Revenues$2,610,062 $2,224,560 $4,919,289 $4,188,271 
Other income3,896 1,632 5,235 3,218 
Cost of sales(1,924,727)(1,721,673)(3,576,092)(3,299,126)
Selling, general and administrative(132,432)(113,406)(261,942)(234,825)
Operating income556,799 391,113 1,086,490 657,538 
Interest expense(11,852)(12,850)(24,656)(25,856)
Homebuilding income544,947 378,263 1,061,834 631,682 
Mortgage Banking:    
Mortgage banking fees48,881 59,038 118,063 136,773 
Interest income2,772 2,209 4,846 4,241 
Other income1,303 988 2,375 1,855 
General and administrative(23,486)(22,613)(46,394)(44,269)
Interest expense(405)(420)(767)(811)
Mortgage banking income29,065 39,202 78,123 97,789 
Income before taxes574,012 417,465 1,139,957 729,471 
Income tax benefit (expense)(140,698)(96,170)(280,543)(159,414)
Net income$433,314 $321,295 $859,414 $570,057 
Basic earnings per share$131.84 $88.69 $257.65 $156.27 
Diluted earnings per share$123.65 $82.45 $240.05 $145.53 
Basic weighted average shares outstanding3,287 3,623 3,336 3,648 
Diluted weighted average shares outstanding3,504 3,897 3,580 3,917 


See notes to condensed consolidated financial statements.
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NVR, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Six Months Ended June 30,
 20222021
Cash flows from operating activities:  
Net income$859,414 $570,057 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization8,991 10,038 
Equity-based compensation expense31,755 27,850 
Contract land deposit recoveries, net(6,342)(13,355)
Gain on sale of loans, net(94,813)(115,152)
Mortgage loans closed(3,133,046)(2,981,630)
Mortgage loans sold and principal payments on mortgage loans held for sale3,195,784 3,194,279 
Distribution of earnings from unconsolidated joint ventures4,000 5,500 
Net change in assets and liabilities:  
Increase in inventory(431,379)(264,291)
Increase in contract land deposits(20,917)(24,318)
Increase in receivables(16,394)(4,327)
Increase in accounts payable and accrued expenses25,716 7,943 
Increase in customer deposits21,656 124,685 
Other, net2,781 (16,259)
Net cash provided by operating activities447,206 521,020 
Cash flows from investing activities:  
Investments in and advances to unconsolidated joint ventures(9,222)(659)
Purchase of property, plant and equipment(8,751)(6,620)
Proceeds from the sale of property, plant and equipment346 657 
Net cash used in investing activities(17,627)(6,622)
Cash flows from financing activities:  
Purchase of treasury stock(1,015,703)(754,366)
Redemption of senior notes(600,000)— 
Principal payments on finance lease liabilities(723)(661)
Proceeds from the exercise of stock options113,822 95,673 
Net cash used in financing activities(1,502,604)(659,354)
Net decrease in cash, restricted cash, and cash equivalents(1,073,025)(144,956)
Cash, restricted cash, and cash equivalents, beginning of the period2,636,984 2,809,782 
Cash, restricted cash, and cash equivalents, end of the period$1,563,959 $2,664,826 
Supplemental disclosures of cash flow information:  
Interest paid during the period, net of interest capitalized$32,627 $26,875 
Income taxes paid during the period, net of refunds$291,721 $172,563 


See notes to condensed consolidated financial statements.
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars 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, 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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 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 six months ended June 30, 2022 and 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 June 30, 2022 and December 31, 2021 was $258 and $268, respectively, and as of June 30, 2021 and December 31, 2020 was $273 and $269, 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 $439,119 and $417,463 as of June 30, 2022 and December 31, 2021, respectively. We expect that substantially all of the customer deposits held at December 31, 2021 will be recognized in revenue in 2022. Our contract assets consist of prepaid sales compensation and totaled approximately $24,400 and $25,200, as of June 30, 2022 and December 31, 2021, respectively. Prepaid sales compensation is included in homebuilding “Other assets” on the accompanying condensed consolidated balance sheets.
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.  
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
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 June 30, 2022, we controlled approximately 127,700 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $541,400 and $8,100, 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 and, in very limited circumstances, specific performance obligations. For the three and six months ended June 30, 2022, we recorded a net reversal of approximately $400 and $6,300, respectively, related to previously impaired lot deposits based on current market conditions. For the three and six months ended June 30, 2021, we recorded a net reversal of approximately $7,200 and $13,400, respectively, related to previously impaired lot deposits. Our contract land deposit asset is shown net of a $23,516 and $30,041 impairment reserve at June 30, 2022 and December 31, 2021, respectively.
In addition, we have certain properties under contract with land owners that are expected to yield approximately 23,900 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 totaling approximately $6,500 as of June 30, 2022, of which approximately $4,300 is refundable if certain contractual conditions are not met.  We generally expect to assign the raw land contracts to a land developer and simultaneously enter into 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 June 30, 2022 and December 31, 2021, our total risk of loss was as follows:
June 30, 2022December 31, 2021
Contract land deposits$547,914 $527,180 
Loss reserve on contract land deposits(23,516)(30,041)
Contract land deposits, net524,398 497,139 
Contingent obligations in the form of letters of credit8,077 10,145 
Total risk of loss$532,475 $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 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.
At June 30, 2022, we had an aggregate investment totaling approximately $30,000 in five JVs that are expected to produce approximately 5,400 finished lots, of which approximately 5,050 lots were controlled by us and the remaining approximately 350 lots were either under contract with unrelated parties or not currently under contract. We had additional funding commitments totaling approximately $2,000 to one of the JVs at June 30, 2022.
We determined that we are not the primary beneficiary in four of the JVs because we 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 $30,000 and $20,300 at June 30, 2022 and December 31, 2021, respectively, and is reported in the homebuilding “Other assets” line item on the accompanying condensed consolidated balance
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
sheets. None of the unconsolidated JVs had any indicators of impairment as of June 30, 2022. For the remaining JV, we concluded that we are the primary beneficiary because we have the controlling financial interest in the JV. All activities under the consolidated JV have been completed and we have no remaining investment in the JV. As of June 30, 2022, the JV had remaining balances of $258 in cash and $232 in accrued expenses, which are included in homebuilding "Other assets" and "Accrued expenses and other liabilities," respectively, in the accompanying condensed consolidated balance sheets.
We recognize income from the JVs as a reduction to the lot cost of the lots purchased from the respective JVs when the homes are settled, based on the expected total profitability and the total number of lots expected to be produced by the respective JVs.
We classify distributions received from unconsolidated JVs using the cumulative earnings approach. As a result, distributions received up to the amount of cumulative earnings recognized by us are reported as distributions of earnings and those in excess of that amount are reported as a distribution of capital. These distributions are classified within the accompanying condensed consolidated statements of cash flows as cash flows from operating activities and investing activities, respectively.
4.    Land Under Development
On a limited basis, we directly acquire raw land parcels already zoned for their 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.
As of June 30, 2022, we owned land parcels with a carrying value of $16,274 that we intend to develop into approximately 450 finished lots. We have additional funding commitments of approximately $1,800 under a joint development agreement related to one parcel, a portion of which we expect will be offset by development credits of approximately $600. None of the raw parcels had any indicators of impairment as of June 30, 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 respective lots.  Interest incurred in excess of the interest capitalizable based on the level of qualified assets is expensed in the period incurred.
The following table reflects the changes in our capitalized interest during the three and six months ended June 30, 2022 and 2021:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Interest capitalized, beginning of period$640 $829 $593 $1,025 
Interest incurred12,349 13,291 25,603 26,714 
Interest charged to interest expense(12,257)(13,270)(25,423)(26,667)
Interest charged to cost of sales(52)(206)(93)(428)
Interest capitalized, end of period$680 $644 $680 $644 

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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
6.    Earnings per Share
The following weighted average shares and share equivalents were used to calculate basic and diluted earnings per share ("EPS") for the three and six months ended June 30, 2022 and 2021:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Weighted average number of shares outstanding used to calculate basic EPS3,286,574 3,622,635 3,335,644 3,647,874 
Dilutive securities:
Stock options and restricted share units217,730 274,074 244,445 269,230 
Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS3,504,304 3,896,709 3,580,089 3,917,104 

The following non-qualified stock options ("Options") and restricted stock units ("RSUs") issued under equity incentive plans were outstanding during the three and six months ended June 30, 2022 and 2021, but were not included in the computation of diluted EPS because the effect would have been anti-dilutive.
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Anti-dilutive securities217,662 18,182 189,988 19,002 

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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars 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 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 six month period ended June 30, 2022 totaled 168,366 and 17,694, 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 Granted2014 Plan2018 Plan
Options - service-only (1)55,415 31,351 
Options - performance-based (2)55,415 26,185 
Total Options Granted110,830 57,536 
RSUs Granted
RSUs - service-only (3)— 8,870 
RSUs - performance-based (4)— 8,824 
Total RSUs Granted— 17,694 


(1)Of the 86,766 service-only Options granted, 68,466 Options will vest over four years in 25% increments on December 31, 2024, 2025, 2026, and 2027; 16,090 Options will vest over two years in 50% increments on December 31, 2026 and 2027; and the remaining 2,210 Options will vest over two years 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 81,600 performance-based Options granted, 63,300 will vest over four years in 25% increments on December 31, 2024, 2025, 2026, and 2027; 16,090 Options will vest over two years in 50% increments on December 31, 2026 and 2027; and the remaining 2,210 Options will vest over two years 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 8,870 service-only RSUs granted, 5,109 will vest over two years in 50% increments on December 31, 2024 and 2025; 3,119 RSUs will vest over four years in 25% increments on December 31, 2024, 2025, 2026, and 2027; and the remaining 642 RSUs will vest over two years in 50% increments on December 31, 2026 and 2027. Vesting for the RSUs is contingent solely upon continued employment.

(4)Of the 8,824 performance-based RSUs granted, 5,109 will vest over two years in 50% increments on December 31, 2024 and 2025; 3,119 RSUs will vest over four years in 25% increments on December 31, 2024, 2025, 2026, and 2027; and the remaining 596 RSUs will vest over two years 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.

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.
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
The following table provides additional information relative to our equity-based compensation plans for the six months ended June 30, 2022:
 SharesWeighted Avg. Per Share
Exercise Price		Weighted Avg. Remaining
Contract Life (years)		Aggregate
Intrinsic Value
Stock Options
Outstanding at December 31, 2021534,695 $2,424.62 
Granted168,366 4,487.97 
Exercised(43,719)2,598.73 
Forfeited(11,450)3,406.42 
Outstanding at June 30, 2022647,892 $2,931.72 6.1$788,955 
Exercisable at June 30, 2022297,665 $1,927.47 3.6$618,152 
RSUs
Outstanding at December 31, 202116,564 
Granted17,694 
Vested— 
Forfeited(1,314)
Outstanding at June 30, 202232,944 $131,912 
Vested, but not issued at June 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 six 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%-3.07%
Expected volatility (range)24.93%-30.52%
Expected dividend rate—%
Weighted average grant-date fair value per share of options granted$1,434.57 

The weighted average grant date fair value per share of $4,509.67 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 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
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
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 six months ended June 30, 2022, we recognized $20,087 and $31,755 in equity-based compensation costs, respectively. During the three and six months ended June 30, 2021, we recognized $13,379 and $27,850 in equity-based compensation costs, respectively.
As of June 30, 2022, the total unrecognized compensation cost for all outstanding Options and RSUs equaled approximately $406,545. 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 2.8 years.
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
8.    Shareholders’ Equity
A summary of changes in shareholders’ equity for the three months ended June 30, 2022 is presented below:
 Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Deferred
Compensation
Trust		Deferred
Compensation
Liability		Total
Balance, March 31, 2022$206 $2,416,660 $10,473,939 $(10,165,206)$(16,710)$16,710 $2,725,599 
Net income— — 433,314 — — — 433,314 
Purchase of common stock for treasury— — — (266,915)— — (266,915)
Equity-based compensation— 20,087 — — — — 20,087 
Proceeds from Options exercised— 79,581 — — — — 79,581 
Treasury stock issued upon Option exercise — (18,205)— 18,205 — — — 
Balance, June 30, 2022$206 $2,498,123 $10,907,253 $(10,413,916)$(16,710)$16,710 $2,991,666 
A summary of changes in shareholders’ equity for the six months ended June 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— — 859,414 — — — 859,414 
Purchase of common stock for treasury— — — (1,015,703)— — (1,015,703)
Equity-based compensation— 31,755 — — — — 31,755 
Proceeds from Options exercised— 113,822 — — — — 113,822 
Treasury stock issued upon Option exercise — (25,645)— 25,645 — — — 
Balance, June 30, 2022$206 $2,498,123 $10,907,253 $(10,413,916)$(16,710)$16,710 $2,991,666 

We repurchased 61,078 and 207,132 shares of our outstanding common stock during the three and six months ended June 30, 2022, respectively. We settle Option exercises and vesting of RSUs by issuing shares of treasury stock.  We issued 30,396 and 43,719 shares from the treasury account during the three and six months ended June 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.
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
A summary of changes in shareholders’ equity for the three months ended June 30, 2021 is presented below:
 Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Deferred
Compensation
Trust		Deferred
Compensation
Liability		Total
Balance, March 31, 2021$206 $2,272,006 $9,059,882 $(8,285,587)$(16,710)$16,710 $3,046,507 
Net income— — 321,295 — — — 321,295 
Purchase of common stock for treasury— — — (376,941)— — (376,941)
Equity-based compensation— 13,379 — — — — 13,379 
Proceeds from Options exercised— 38,048 — — — — 38,048 
Treasury stock issued upon Option exercise and RSU vesting— (8,869)— 8,869 — — — 
Balance, June 30, 2021$206 $2,314,564 $9,381,177 $(8,653,659)$(16,710)$16,710 $3,042,288 
A summary of changes in shareholders’ equity for the six months ended June 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— — 570,057 — — — 570,057 
Purchase of common stock for treasury— — — (754,366)— — (754,366)
Equity-based compensation— 27,850 — — — — 27,850 
Proceeds from Options exercised— 95,673 — — — — 95,673 
Treasury stock issued upon Option exercise and RSU vesting— (23,385)— 23,385 — — — 
Balance, June 30, 2021$206 $2,314,564 $9,381,177 $(8,653,659)$(16,710)$16,710 $3,042,288 

We repurchased 78,452 and 164,975 shares of our outstanding common stock during the three and six months ended June 30, 2021, respectively. We issued 18,033 and 48,588 shares from the treasury account during the three and six months ended June 30, 2021, respectively, in settlement of Option exercises and vesting of RSUs.  
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.
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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 Warranty Reserve during the three and six months ended June 30, 2022 and 2021:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Warranty reserve, beginning of period$135,341 $124,836 $134,859 $119,638 
Provision24,551 21,760 42,518 44,089 
Payments(21,652)(19,094)(39,137)(36,225)
Warranty reserve, end of period$138,240 $127,502 $138,240 $127,502 

10.    Segment Disclosures
Our homebuilding operations are aggregated geographically into four homebuilding reportable segments and our mortgage banking operations are presented as one reportable segment.  The homebuilding reportable segments are comprised of operating divisions in the following geographic areas:
Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East: New Jersey and Eastern Pennsylvania
Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East: North Carolina, South Carolina, Florida and Tennessee
Homebuilding profit before tax includes all revenues and income generated from the sale of homes, less the cost of homes sold, selling, general and administrative expenses and a corporate capital allocation charge.  The corporate capital allocation charge is eliminated in consolidation and is based on the segment’s average net assets employed.  The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker (“CODM”) to determine whether the operating segment’s results are providing the desired rate of return after covering our cost of capital.  
Assets not allocated to the operating segments are not included in either the operating segment’s corporate capital allocation charge or the CODM’s evaluation of the operating segment’s performance.  We record charges on contract land deposits when it is determined that it is probable that recovery of the deposit is impaired.  For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of 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 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 (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 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 June 30,Six Months Ended June 30,
 2022202120222021
Revenues:
Homebuilding Mid Atlantic$1,208,312 $1,048,416 $2,350,020 $1,984,556 
Homebuilding North East237,394 193,245 412,945 355,438 
Homebuilding Mid East521,038 478,179 982,442 903,132 
Homebuilding South East643,318 504,720 1,173,882 945,145 
Mortgage Banking48,881 59,038 118,063 136,773 
Total consolidated revenues$2,658,943 $2,283,598 $5,037,352 $4,325,044 

Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Income before taxes:
Homebuilding Mid Atlantic$251,739 $174,481 $501,520 $303,548 
Homebuilding North East41,297 21,510 67,225 36,737 
Homebuilding Mid East82,512 59,887 153,695 108,828 
Homebuilding South East150,822 78,919 264,276 135,584 
Mortgage Banking28,800 40,372 78,906 99,934 
Total segment profit before taxes555,170 375,169 1,065,622 684,631 
Reconciling items:
Contract land deposit recoveries (1)419 7,178 6,345 13,374 
Equity-based compensation expense (2)(20,087)(13,379)(31,755)(27,850)
Corporate capital allocation (3)77,512 63,032 147,256 124,583 
Unallocated corporate overhead(32,282)(33,668)(77,543)(73,804)
Consolidation adjustments and other (4)5,096 31,944 54,603 34,330 
Corporate interest expense(11,816)(12,811)(24,571)(25,793)
Reconciling items sub-total18,842 42,296 74,335 44,840 
Consolidated income before taxes$574,012 $417,465 $1,139,957 $729,471 
(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 six months ended June 30, 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022. See additional discussion of equity-based compensation in Note 7.
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NVR, Inc.
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 June 30,Six Months Ended June 30,
 2022202120222021
Corporate capital allocation charge:
Homebuilding Mid Atlantic$37,121 $31,135 $71,208 $61,731 
Homebuilding North East8,158 6,457 15,245 12,495 
Homebuilding Mid East12,875 11,066 24,292 21,690 
Homebuilding South East19,358 14,374 36,511 28,667 
Total$77,512 $63,032 $147,256 $124,583 

(4)The change in consolidation adjustments and other for the three and six month periods of 2022 compared to the respective 2021 periods was primarily driven by changes in lumber prices in the respective periods. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled. The decrease in the three month period ended June 30, 2022 compared to the same period in 2021 was primarily due to lower lumber prices quarter over quarter. The increase for the six month period ended June 30, 2022 compared to the same period in 2021 was primarily attributable to the overall higher lumber costs year over year driven by higher lumber costs in the first quarter of 2022 compared to the first quarter of 2021.

 June 30, 2022December 31, 2021
Assets:
Homebuilding Mid Atlantic$1,408,484 $1,322,818 
Homebuilding North East286,776 235,048 
Homebuilding Mid East538,877 438,700 
Homebuilding South East780,118 629,198 
Mortgage Banking402,775 371,685 
Total segment assets3,417,030 2,997,449 
Reconciling items:
Cash and cash equivalents1,483,445 2,545,069 
Deferred taxes139,263 132,894 
Intangible assets and goodwill49,368 49,368 
Operating lease right-of-use assets68,323 59,010 
Finance lease right-of-use assets14,364 14,578 
Contract land deposit reserve(23,516)(30,041)
Consolidation adjustments and other139,422 66,148 
Reconciling items sub-total1,870,669 2,837,026 
Consolidated assets$5,287,699 $5,834,475 

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NVR, Inc.
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 June 30, 2022 and December 31, 2021. See Note 12 for a description of the redemption of our 3.95% Senior Noted due 2022. The estimated fair value is based on recent market prices of similar transactions, which is classified as Level 2 within the fair value hirarchy.
June 30, 2022December 31, 2021
Estimated Fair Values:
3.95% Senior Notes due 2022$— $610,452 
3.00% Senior Notes due 2030774,531 942,192 
Total$774,531 $1,552,644 
Carrying Values:
3.95% Senior Notes due 2022$— $599,553 
3.00% Senior Notes due 2030915,801 916,702 
Total$915,801 $1,516,255 
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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

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 June 30, 2022, there were rate lock commitments to extend credit to borrowers aggregating $2,670,889 and open forward delivery contracts aggregating $2,766,048, 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.
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 June 30, 2022, the fair value of loans held for sale of $335,624 included on the accompanying condensed consolidated balance sheet was decreased by $11,777 from the aggregate principal balance of $347,401. 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 $302,192 was increased by $4,296 from the aggregate principal balance of $297,896.
The fair value measurement of NVRM's undesignated derivative instruments was as follows:
June 30, 2022December 31, 2021
Rate lock commitments:
Gross assets$48,491 $15,949 
Gross liabilities38,064 1,790 
Net rate lock commitments$10,427 $14,159 
Forward sales contracts:
Gross assets$14,323 $708 
Gross liabilities12,166 926 
Net forward sales contracts$2,157 $(218)
As of June 30, 2022, the net rate lock commitments and the net forward sales contracts are reported in mortgage banking "Other assets" on the accompanying condensed consolidated balance sheets. As of December 31, 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 as of June 30, 2022 was as follows:
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$2,670,889 $8,756 $(30,908)$32,579 $— $10,427 
Forward sales contracts$2,766,048 — — — 2,157 2,157 
Mortgages held for sale$347,401 1,336 (17,686)4,573 — (11,777)
Total fair value measurement$10,092 $(48,594)$37,152 $2,157 $807 

The total fair value measurement as of December 31, 2021 was $18,237. NVRM recorded a fair value adjustment to expense of $27,540 and $17,430 for the three and six months ended June 30, 2022, respectively. NVRM recorded a fair value adjustment to income of $1,692 and $2,240 for the three and six months ended June 30, 2021, respectively. 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
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 June 30, 2022, we had the following debt instruments outstanding:
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 $14,200 was outstanding at June 30, 2022. The Credit Agreement termination date is February 12, 2026. There was no debt outstanding under the Facility at June 30, 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.
At June 30, 2022, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. There was no debt outstanding under the Repurchase Agreement at June 30, 2022.
Effective July 20, 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 the 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 Repurchase Agreement. The Amended MRA expires on July 19, 2023.
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.
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 ROU assets and finance lease liabilities were $14,364 and $15,413, respectively, as of June 30, 2022, and $14,578 and $15,413, respectively, as of December 31, 2021. Our leases have remaining lease terms of up to 18.2 years, some of which include options to extend the 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 June 30,Six Months Ended June 30,
2022202120222021
Lease expense
Operating lease expense$8,529 $7,911 $16,630 $15,488 
Finance lease expense:
Amortization of ROU assets473 445 937 888 
Interest on lease liabilities103 108 207 217 
Short-term lease expense6,491 5,861 12,823 11,751 
Total lease expense$15,596 $14,325 $30,597 $28,344 
Other information related to leases was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Supplemental Cash Flows Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$6,935 $6,878 $14,104 $13,688 
Operating cash flows from finance leases103 108 207 217 
Financing cash flows from finance leases367 331 723 661 
ROU assets obtained in exchange for lease obligations:
Operating leases$18,073 $16,558 $23,886 $19,571 
Finance leases$451 $— $723 $89 
June 30, 2022December 31, 2021
Weighted-average remaining lease term (in years):
Operating leases6.26.3
Finance leases11.211.7
Weighted-average discount rate:
Operating leases3.1 %3.0 %
Finance leases2.8 %2.8 %

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NVR, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
15.    Income Taxes
Our effective tax rate for the three and six months ended June 30, 2022 was 24.5% and 24.6%, respectively, compared to 23.0% and 21.9% for the three and six months ended June 30, 2021, respectively. The increase in the effective tax rate in the three and six month periods of 2022 compared to the same periods in 2021 was primarily attributable to a lower income tax benefit recognized for excess tax benefits from stock option exercises, which totaled $8,744 and $17,190 for the three and six months ended June 30, 2022, respectively, and $11,213 and $28,590 for the three and six months ended June 30, 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” 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 and 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 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 Six Months Ended June 30, 2022 and 2021
Business Environment and Current Outlook
During the second quarter of 2022, we began to experience a rapid decline in demand for new homes. Home affordability during the second quarter was negatively impacted by rising mortgage interest rates and higher home prices. In addition to affordability issues, current market conditions including a high rate of inflation and the possibility of a recession have contributed to 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 along with the ongoing effects of the COVID-19 pandemic have led to supply chain disruptions and longer construction cycle times. We expect to continue to face these disruptions throughout 2022, and we continue to work closely with our suppliers and trade partners to manage these disruptions.
We expect that demand for new homes may continue to be negatively impacted by lower consumer confidence, affordability issues, high inflation and the possibility of a recession. We also expect to continue to face cost pressures related to building materials, labor and land costs, which will impact profit margins based on our ability to manage these costs while balancing sales pace and pricing. Although we are unable to predict the extent to which this will impact our operational and financial performance, 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 strength of our balance sheet and our disciplined lot acquisition strategy.
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Business
Our primary business is the construction and sale of single-family detached homes, townhomes and condominiums, all of which are primarily constructed on a pre-sold basis.  To fully serve customers of our homebuilding operations, we also operate a mortgage banking and title services business.  We primarily conduct our operations in mature markets. Additionally, we generally grow our business through market share gains in our existing markets and by expanding into markets contiguous to our current active markets.  Our four homebuilding reportable segments consist of the following regions:
Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East: New Jersey and Eastern Pennsylvania
Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East: North Carolina, South Carolina, Florida and Tennessee
Our lot acquisition strategy is predicated upon avoiding the financial requirements and risks associated with direct land ownership and development.  We generally do not engage in land development (see discussion below of our land development activities). Instead, we typically acquire finished building lots 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 June 30, 2022, we controlled approximately 133,200 lots as described below.
Lot Purchase Agreements
We controlled approximately 127,700 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $541,400 and $8,100, respectively. Included in the number of controlled lots are approximately 4,400 lots for which we have recorded a contract land deposit impairment reserve of approximately $23,500 as of June 30, 2022.
Joint Venture Limited Liability Corporations (“JVs”)
We had an aggregate investment totaling approximately $30,000 in five JVs, expected to produce approximately 5,400 lots. Of the lots to be produced by the JVs, approximately 5,050 lots were controlled by us and approximately 350 were either under contract with unrelated parties or currently not under contract. We had additional funding commitments totaling approximately $2,000 to one of the JVs at June 30, 2022.
Land Under Development
We owned land with a carrying value of approximately $16,300 that we intend to develop into approximately 450 finished lots.  We had additional funding commitments of approximately $1,800 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 $600.
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 23,900 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.  As of June 30, 2022, these properties are controlled with deposits in cash totaling approximately $6,500, of which approximately $4,300 is refundable if certain contractual conditions are not met.  We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible.
Key Financial Results
Our consolidated revenues for the second quarter of 2022 totaled $2,658,943, a 16% increase from the second quarter of 2021.  Net income for the second quarter ended June 30, 2022 was $433,314, or $123.65 per diluted share, increases of 35% and 50% when compared to net income and diluted earnings per share in the second quarter of 2021, respectively.  Our homebuilding gross profit margin percentage increased to 26.3% in the second quarter of 2022 from 22.6% in the second quarter of 2021. New orders, net of cancellations (“New Orders”) decreased by 16% in the second quarter of 2022 compared to the second quarter of 2021. The average sales price for New Orders in the second quarter of 2022 was $471.6, an increase of 7% compared to the second quarter of 2021.


Homebuilding Operations
The following table summarizes the results of operations and other data for our homebuilding operations:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Financial Data:
Revenues$2,610,062 $2,224,560 $4,919,289 $4,188,271 
Cost of sales$1,924,727 $1,721,673 $3,576,092 $3,299,126 
Gross profit margin percentage26.3 %22.6 %27.3 %21.2 %
Selling, general and administrative expenses$132,432 $113,406 $261,942 $234,825 
Operating Data:
New orders (units)4,663 5,521 10,590 11,835 
Average new order price$471.6 $440.2 $468.3 $424.4 
Settlements (units)5,820 5,685 11,034 10,757 
Average settlement price$448.4 $391.3 $445.8 $389.3 
Backlog (units)12,286 12,627 
Average backlog price$473.9 $428.5 
New order cancellation rate14.3 %8.3 %12.1 %9.0 %

Consolidated Homebuilding - Three Months Ended June 30, 2022 and 2021
Homebuilding revenues increased 17% in the second quarter of 2022 compared to the same period in 2021, as a result of a 2% increase in settlements and a 15% increase in the average settlement price. The increase in settlements was attributable to a 5% higher backlog unit balance entering the second quarter of 2022 compared to the same period in 2021, offset partially by a lower backlog turnover rate quarter over quarter attributable in part to the impact of supply chain issues on our construction cycle times. The increase in the average settlement price was
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primarily attributable to a 14% higher average sales price of units in backlog entering the second quarter of 2022 compared to the same period of 2021.
Gross profit margin percentage in the second quarter of 2022 increased to 26.3%, from 22.6% in the second quarter of 2021. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters, offset partially by higher material and labor costs.
New Orders decreased 16% while the average sales price of New Orders increased 7% in the second quarter of 2022 compared to the second quarter of 2021.  New Orders were negatively impacted by a significant increase in mortgage interest rates during the quarter, which resulted in a decline in affordability and in turn, led to lower absorption rates quarter over quarter. Additionally, New Orders were negatively impacted by an increase in the cancellation rate in the second quarter of 2022 compared to the same period in 2021. The increase in the average sales price of New Orders was primarily attributable to significant price appreciation resulting from strong demand in prior quarters.
Selling, general and administrative (“SG&A”) expense in the second quarter of 2022 increased by approximately $19,000 compared to the second quarter of 2021, but as a percentage of revenue remained flat at 5.1% in each quarter. The increase in SG&A expense was due primarily to a $10,100 increase in personnel costs attributable to both increased headcount and to a $7,800 increase in equity-based compensation. The increase in equity-based compensation was due to 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 - Six Months Ended June 30, 2022 and 2021
Homebuilding revenues increased 17% in the first six months of 2022 compared to the same period in 2021, as a result of a 3% increase in settlements and a 15% increase in the average settlement price. The increase in settlements was attributable to a 10% higher backlog unit balance entering 2022 compared to the same period in 2021, offset partially by a lower backlog turnover rate year over year attributable 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 15% higher average sales price of units in backlog entering 2022 compared to the same period of 2021.
Gross profit margin percentage in the first six months of 2022 increased to 27.3%, from 21.2% in the first six months of 2021. Gross profit margins were favorably impacted by the increase in the average settlement price attributable to improved pricing power in prior quarters, offset partially by higher material and labor costs year over year.
New Orders decreased 11% while the average sales price of New Orders increased 10% in the first six months of 2022 compared to the same period in 2021.  New Orders were negatively impacted by a 6% decrease in the average number of active communities year over year. Additionally, the significant increase in mortgage interest rates during the first six months of 2022 resulted in a decline in affordability and in turn, led to lower absorption rates year over year. The increase in the average sales price of New Orders was primarily attributable to significant price appreciation resulting from strong demand in prior quarters.
SG&A expense in the first six months of 2022 increased by approximately $27,100 compared to the same period in 2021, but as a percentage of revenue decreased to 5.3% in 2022 from 5.6% in 2021 due to improved leveraging of SG&A costs. The increase in SG&A expense was due primarily to an increase of approximately $18,200 in personnel costs attributable to both increased headcount and to an increase of approximately $5,300 in equity-based compensation. As noted in the quarterly SG&A discussion above, the increase in equity-based compensation was due to a block grant of Options and RSUs in the second quarter of 2022.
Our backlog represents homes sold but not yet settled with our customers. As of June 30, 2022, our backlog decreased on a unit basis by 3% to 12,286 units and increased on a dollar basis by 8% to $5,821,745 when compared to 12,627 units and $5,410,376, respectively, as of June 30, 2021. The decrease in backlog units was primarily attributable to an 11% decrease in New Orders in the six-month period ended June 30, 2022 compared to the same period in 2021. Backlog dollars were higher due primarily to a 10% increase in the average sales price of New Orders during the six-month period ended June 30, 2022 compared to the same period in 2021.
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Our backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as failure to obtain mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons.  In any period, a portion of the cancellations that we experience are related to new sales that occurred during the same period, and a portion are related to sales that occurred in prior periods and therefore appeared in the opening backlog for the current period.  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 12% and 9% in the first six months of 2022 and 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 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 disruptions, we expect to settle substantially all of our June 30, 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.
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 June 30, 2022 and December 31, 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 $8,100 and $10,100 at June 30, 2022 and December 31, 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 six months ended June 30, 2022 and 2021.
Selected Segment Financial Data:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenues:
Mid Atlantic$1,208,312 $1,048,416 $2,350,020 $1,984,556 
North East237,394 193,245 412,945 355,438 
Mid East521,038 478,179 982,442 903,132 
South East643,318 504,720 1,173,882 945,145 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Gross profit margin:
Mid Atlantic$323,986 $235,944 $642,200 $427,246 
North East59,162 36,090 100,866 65,037 
Mid East115,849 89,702 217,256 167,206 
South East194,236 112,859 346,335 202,589 
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 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Gross profit margin percentage:
Mid Atlantic26.8 %22.5 %27.3 %21.5 %
North East24.9 %18.7 %24.4 %18.3 %
Mid East22.2 %18.8 %22.1 %18.5 %
South East30.2 %22.4 %29.5 %21.4 %
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Segment profit:
Mid Atlantic$251,739 $174,481 $501,520 $303,548 
North East41,297 21,510 67,225 36,737 
Mid East82,512 59,887 153,695 108,828 
South East150,822 78,919 264,276 135,584 
Operating Activity:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 UnitsAverage
Price		UnitsAverage
Price		UnitsAverage
Price		UnitsAverage
Price
New orders, net of cancellations:       
Mid Atlantic1,860 $535.1 2,090 $535.4 4,167 $531.8 4,381 $518.1 
North East441 $503.7 394 $499.3 901 $513.5 834 $486.3 
Mid East1,114 $410.5 1,320 $375.7 2,648 $403.6 3,115 $361.1 
South East1,248 $420.0 1,717 $360.3 2,874 $421.6 3,505 $348.7 
Total4,663 $471.6 5,521 $440.2 10,590 $468.3 11,835 $424.4 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 UnitsAverage
Price		UnitsAverage
Price		UnitsAverage
Price		UnitsAverage
Price
Settlements:        
Mid Atlantic2,292 $527.1 2,224 $471.4 4,472 $525.5 4,234 $468.7 
North East472 $503.0 433 $446.3 820 $503.6 805 $441.5 
Mid East1,356 $384.2 1,404 $340.6 2,566 $382.8 2,667 $338.6 
South East1,700 $378.4 1,624 $310.7 3,176 $369.6 3,051 $309.8 
Total5,820 $448.4 5,685 $391.3 11,034 $445.8 10,757 $389.3 
 As of June 30,
 20222021
 UnitsAverage
Price		UnitsAverage
Price
Backlog:    
Mid Atlantic4,613 $541.1 4,626 $517.7 
North East1,050 $519.3 979 $485.7 
Mid East3,109 $399.0 3,322 $364.8 
South East3,514 $438.2 3,700 $359.0 
Total12,286 $473.9 12,627 $428.5 
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 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
New order cancellation rate:
Mid Atlantic15.2 %7.8 %12.5 %8.7 %
North East9.8 %6.6 %9.0 %8.9 %
Mid East17.0 %10.4 %14.1 %9.3 %
South East11.7 %7.5 %10.5 %9.2 %
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Average active communities:
Mid Atlantic155 153 153 156 
North East38 32 36 33 
Mid East121 126 125 133 
South East92 109 91 110 
Total406 420 405 432 
Homebuilding Inventory:
 June 30, 2022December 31, 2021
Sold inventory:
Mid Atlantic$945,903 $867,892 
North East197,451 154,053 
Mid East425,800 342,011 
South East540,641 439,892 
Total (1)$2,109,795 $1,803,848 
 June 30, 2022December 31, 2021
Unsold lots and housing units inventory:
Mid Atlantic$114,633 $87,412 
North East18,007 14,656 
Mid East17,822 12,892 
South East25,488 14,193 
Total (1)$175,950 $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.
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Lots Controlled and Land Deposits:
 June 30, 2022December 31, 2021
Total lots controlled:
Mid Atlantic48,900 47,900 
North East11,600 11,900 
Mid East23,700 23,700 
South East49,000 41,400 
Total133,200 124,900 
 June 30, 2022December 31, 2021
Contract land deposits, net:
Mid Atlantic$247,884 $257,244 
North East56,289 51,257 
Mid East53,815 52,537 
South East174,487 146,246 
Total$532,475 $507,284 

Mid Atlantic
Three Months Ended June 30, 2022 and 2021
The Mid Atlantic segment had an approximate $77,300, or 44%, increase in segment profit in the second quarter of 2022 compared to the second quarter of 2021.  The increase in segment profit was driven by an increase in segment revenues of approximately $159,900, or 15%, coupled with an increase in gross profit margins. Segment revenues increased due to increases in settlements and the average settlement price of 3% and 12%, respectively.  The increases in settlements and the average settlement price were primarily attributable to a 6% higher backlog unit balance and a 10% higher average sales price of units in backlog entering the second quarter of 2022 compared to backlog entering the second quarter of 2021. The Mid Atlantic segment’s gross profit margin percentage increased to 26.8% in the second quarter of 2022 from 22.5% in the second quarter of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 12% increase in the average settlement price, offset partially by higher material and labor costs quarter over quarter.
Segment New Orders decreased 11% in the second quarter of 2022 compared to the second quarter of 2021. The average sales price of New Orders was flat quarter over quarter. New Orders were negatively impacted by a significant increase in mortgage interest rates during the quarter which resulted in a decline in affordability and in turn, led to lower absorption rates quarter over quarter. Additionally, New Orders were negatively impacted by an increase in the segment's cancellation rate in the second quarter of 2022 compared to the same period in 2021.
Six Months Ended June 30, 2022 and 2021
The Mid Atlantic segment had an approximate $198,000, or 65%, increase in segment profit in the first six months of 2022 compared to the first six months of 2021.  The increase in segment profit was driven by an increase in segment revenues of approximately $365,500, or 18%, coupled with an increase in gross profit margins. Segment revenues increased due to increases in settlements and the average settlement price of 6% and 12%, 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 27.3% in the first six months of 2022 from 21.5% in the first six months of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 12% increase in the average settlement price, offset partially by higher material and labor costs period over period.
Segment New Orders decreased 5% in the first six months of 2022 compared to the first six months of 2021. The average sales price of New Orders increased 3% in the first six months of 2022 compared to the first six months
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of 2021. New Orders were negatively impacted by the significant increase in mortgage interest rates during the first six months of 2022 resulting in a decline in affordability and in turn, led to lower absorption rates year over year. The increase in the average sales price of New Orders was attributable to significant price appreciation resulting from strong demand in prior quarters.
North East
Three Months Ended June 30, 2022 and 2021
The North East segment had an approximate $19,800, or 92%, increase in segment profit in the second quarter of 2022 compared to the second quarter of 2021, due primarily to an increase in segment revenues of approximately $44,100, or 23%, coupled with an increase in gross profit margins. Segment revenues increased due to increases in settlements and the average settlement price of 9% and 13%, respectively. The increase in settlements was attributable to a 6% higher backlog unit balance entering the second quarter of 2022 compared to backlog entering the second quarter of 2021, coupled with a higher backlog turnover rate quarter over quarter. The increase in the average settlement price was primarily attributable to a 12% higher average sales price of units in backlog entering the second quarter of 2022 compared to backlog entering the second quarter of 2021. The segment’s gross profit margin percentage increased to 24.9% in the second quarter of 2022 from 18.7% in the second quarter of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 13% increase in the average settlement price quarter over quarter, offset partially by higher material and labor costs quarter over quarter.  
Segment New Orders and the average sales price of New Orders increased 12% and 1%, respectively, in the second quarter of 2022 compared to the second quarter of 2021. The increase in New Orders was primarily attributable to a 16% increase in the average number of active communities, offset partially by lower absorption rates quarter over quarter.
Six Months Ended June 30, 2022 and 2021
The North East segment had an approximate $30,500, or 83%, increase in segment profit in the first six months of 2022 compared to the first six months of 2021, due primarily to an increase in segment revenues of approximately $57,500, or 16%, coupled with an increase in gross profit margins. Segment revenues increased due to increases in settlements and the average settlement price of 2% and 14%, respectively. The increases in settlements and the average settlement price were primarily attributable to a 2% higher backlog unit balance and 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 24.4% in the first six months of 2022 from 18.3% in the first six months of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 14% 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 8% and 6%, respectively, in the first six months of 2022 compared to the first six months of 2021. The increase in New Orders was primarily attributable to a 7% increase in the average number of active communities quarter over quarter. The increase in the average sales price of New Orders was primarily attributable to significant price appreciation resulting from strong demand in prior quarters.
Mid East
Three Months Ended June 30, 2022 and 2021
The Mid East segment had an approximate $22,600, or 38%, increase in segment profit in the second quarter of 2022 compared to the second quarter of 2021, due primarily to an increase in segment revenues of approximately $42,900, or 9%, coupled with an increase in gross profit margins. Segment revenues increased due to a 13% increase in the average settlement price, offset partially by a 3% decrease in settlements. The increase in the average settlement price was primarily attributable to an 11% higher average sales price of units in backlog entering the second quarter of 2022 compared to same period in 2021. The decrease in settlements was attributable to a 4% lower backlog unit balance entering the second quarter of 2022 compared to the same period in 2021. The segment's gross profit margin percentage increased to 22.2% in the second quarter of 2022 from 18.8% in the
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second quarter of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 13% increase in the average settlement price, offset partially by higher material and labor costs quarter over quarter.
Segment New Orders decreased 16% in the second quarter of 2022 compared to the second quarter of 2021, while the average sales price of New Orders increased 9%. New Orders were negatively impacted by a significant increase in mortgage interest rates during the quarter which resulted in a decline in affordability and in turn, led to lower absorption rates and an increase in the segment's cancellation rate quarter over quarter. Additionally, New Orders were negatively impacted by a 3% decrease in average number of active communities quarter over quarter. The increase in the average sales price of New Orders was primarily attributable to significant price appreciation resulting from strong demand in prior quarters.
Six Months Ended June 30, 2022 and 2021
The Mid East segment had an approximate $44,900, or 41%, increase in segment profit in the first six months of 2022 compared to the first six months of 2021, due primarily to an increase in segment revenues of approximately $79,300, or 9%, coupled with an increase in gross profit margins. Segment revenues increased due to a 13% increase in the average settlement price, offset partially by a 4% decrease in settlements year over year. The increase in the average settlement price was primarily attributable to an 11% higher average sales price of units in backlog entering 2022 compared to backlog entering 2021. The decrease in settlements was attributable to a lower backlog turnover rate due in part to the impact of supply chain issues on our construction cycle times. The segment's gross profit margin percentage increased to 22.1% in the first six months of 2022 from 18.5% in the first six months of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 13% increase in the average settlement price, offset partially by higher material and labor costs period over period.
Segment New Orders decreased 15% in the first six months of 2022 compared to the first six months of 2021, while the average sales price of New Orders increased 12%. New Orders were negatively impacted by a significant increase in mortgage interest rates during the first six months of 2022 which resulted in a decline in affordability and in turn, lower absorption rates and an increase in the segment's cancellation rate year over year. Additionally, New Orders were negatively impacted by a 6% decrease in average number of active communities year over year. The increase in the average sales price of New Orders was primarily attributable to significant price appreciation resulting from strong demand in prior quarters.
South East
Three Months Ended June 30, 2022 and 2021
The South East segment had an approximate $71,900, or 91%, increase in segment profit in the second quarter of 2022 compared to the second quarter of 2021. The increase in segment profit was primarily driven by an increase in segment revenues of approximately $138,600, or 27%, coupled with an increase in gross profit margins. The increase in revenues was attributable to a 5% increase in settlements and a 22% increase in the average settlement price quarter over quarter. The increase in settlements was attributable to a 10% higher backlog unit balance entering the second quarter of 2022 compared to the backlog unit balance entering the second quarter of 2021, offset by a lower backlog turnover rate attributable 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 24% higher average sales price of units in backlog entering the second quarter of 2022 compared to backlog entering the second quarter of 2021. The segment’s gross profit margin percentage increased to 30.2% in the second quarter of 2022 from 22.4% in the second quarter of 2021. Gross profit margins were favorably impacted primarily by the aforementioned 22% increase in the average settlement price, offset partially by higher material and labor costs quarter over quarter.
Segment New Orders decreased 27% in the second quarter of 2022 compared to the second quarter of 2021, while the average sales price of New Orders increased 17% in the second quarter of 2022. The decrease in New Orders was primarily attributable to a 16% decrease in average number of active communities quarter over quarter. Additionally, New Orders were negatively impacted by a significant increase in mortgage interest rates during the second quarter of 2022 which resulted in a decline in affordability and led to lower absorption rates and an increase in the segment's cancellation rate quarter over quarter. The increase in the average sales price of New Orders was primarily attributable to significant price appreciation resulting from strong demand in prior quarters.
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Six Months Ended June 30, 2022 and 2021
The South East segment had an approximate $128,700, or 95%, increase in segment profit in the first six months of 2022 compared to the first six months of 2021.  The increase in segment profit was driven by an increase in segment revenues of approximately $228,700, or 24%, year over year. Segment revenues increased due to increases in settlements and the average settlement price of 4% and 19%, respectively, year over year. The increase in settlements was attributable to an 18% higher backlog unit balance entering 2022 compared to the backlog unit balance entering 2021, offset partially by a lower backlog turnover rate year over 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 22% higher average sales price of units in backlog entering 2022 compared to backlog entering 2021. The segment’s gross profit margin percentage increased to 29.5% in the first six months of 2022 from 21.4% in the first six months of 2021. Gross profit margins were favorably impacted by the aforementioned 19% 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 six months of 2022 compared to the first six months of 2021, while the average sales price of New Orders increased 21% year over year. The decrease in New Orders was primarily attributable to a 17% decrease in the average number of active communities. The average sales price of New Orders increased 21% in the first six months of 2022 compared to the first six months of 2021 due primarily to significant price appreciation resulting from strong demand in prior quarters.
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 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 June 30,Six Months Ended June 30,
 2022202120222021
Homebuilding consolidated gross profit:
Mid Atlantic$323,986 $235,944 $642,200 $427,246 
North East59,162 36,090 100,866 65,037 
Mid East115,849 89,702 217,256 167,206 
South East194,236 112,859 346,335 202,589 
Consolidation adjustments and other(7,898)28,292 36,540 27,067 
Homebuilding consolidated gross profit$685,335 $502,887 $1,343,197 $889,145 
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 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Homebuilding consolidated income before taxes:
Mid Atlantic$251,739 $174,481 $501,520 $303,548 
North East41,297 21,510 67,225 36,737 
Mid East82,512 59,887 153,695 108,828 
South East150,822 78,919 264,276 135,584 
Reconciling items:
Contract land deposit recoveries (1)419 7,178 6,345 13,374 
Equity-based compensation expense (2)(20,352)(12,209)(30,972)(25,705)
Corporate capital allocation (3)77,512 63,032 147,256 124,583 
Unallocated corporate overhead(32,282)(33,668)(77,543)(73,804)
Consolidation adjustments and other (4)5,096 31,944 54,603 34,330 
Corporate interest expense(11,816)(12,811)(24,571)(25,793)
Reconciling items sub-total18,577 43,466 75,118 46,985 
Homebuilding consolidated income before taxes$544,947 $378,263 $1,061,834 $631,682 
(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 in the accompanying condensed consolidated financial statements.
(2)The increase in equity-based compensation expense for the three and six-month periods ended June 30, 2022 was primarily attributable to a four-year block grant of Options and RSUs in May 2022. See additional discussion of equity-based compensation in Note 7 in the accompanying condensed consolidated financial statements.
(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 June 30,Six Months Ended June 30,
 2022202120222021
Corporate capital allocation charge:
Mid Atlantic$37,121 $31,135 $71,208 $61,731 
North East8,158 6,457 15,245 12,495 
Mid East12,875 11,066 24,292 21,690 
South East19,358 14,374 36,511 28,667 
Total$77,512 $63,032 $147,256 $124,583 

(4)The change in consolidation adjustments and other for the three and six month periods of 2022 compared to the respective 2021 periods is primarily driven by changes in lumber prices in the respective periods. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled. The decrease in the three month period ended June 30, 2022 compared to the same period in 2021 is primarily due to lower lumber prices quarter over quarter. The increase for the six month period ended June 30, 2022 compared to the same period in 2021 is primarily attributable to the overall higher lumber costs year over year driven by higher lumber costs in the first quarter of 2022 compared to the first quarter of 2021.
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Mortgage Banking Segment
Three and Six Months Ended June 30, 2022 and 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 six months ended June 30, 2022 and 2021:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Loan closing volume:    
Total principal$1,647,972 $1,565,095 $3,132,565 $2,977,974 
Loan volume mix:
Adjustable rate mortgages10 %4 %8 %2 %
Fixed-rate mortgages90 %96 %92 %98 %
Operating profit:
Segment profit$28,800 $40,372 $78,906 $99,934 
Equity-based compensation expense265 (1,170)(783)(2,145)
Mortgage banking income before tax$29,065 $39,202 $78,123 $97,789 
Capture rate:84 %89 %85 %89 %
Mortgage banking fees:
Net gain on sale of loans$36,835 $47,602 $94,813 $115,152 
Title services11,997 11,235 23,173 21,232 
Servicing fees49 201 77 389 
 $48,881 $59,038 $118,063 $136,773 
Loan closing volume for the three and six months ended June 30, 2022 increased by approximately $82,900, or 5%, and $154,000, or 5% from the same periods in 2021. The increase in loan closing volume during both the three and six months ended June 30, 2022 was primarily attributable to an 11% increase in the average loan balance for loans closed, resulting from a 15% increase in the homebuilding 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 loans closed in both periods, which was primarily attributable to the 5% and 4% decreases in the capture rate in the three and six month periods ended June 30, 2022, respectively, compared to the same periods in 2021.
Segment profit for the three and six months ended June 30, 2022 decreased by approximately $11,600, or 29%, and $21,000, or 21%, respectively, from the same periods in 2021. These decreases were primarily attributable to decreases of approximately $10,200, or 17%, and $18,700, or 14%, respectively, in mortgage banking fees, primarily due to decreases in gains on sales of loans.
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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 six months ended June 30, 2022 was 24.5% and 24.6%, respectively, compared to 23.0% and 21.9% for the three and six months ended June 30, 2021, respectively. The increase in the effective tax rate in the three and six month periods of 2022 compared to the same periods in 2021 was primarily attributable to the impact of the income tax benefit recognized related to excess tax benefits from stock option exercises totaling $8,744 and $17,190 for the three and six months ended June 30, 2022, respectively, and $11,213 and $28,590 for the three and six months ended June 30, 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
We fund our operations primarily from our current cash holdings and cash flows generated by operating activities. In addition, we have available a short-term unsecured working capital revolving credit facility and revolving mortgage repurchase facility, as further described below. As of June 30, 2022, we had approximately $1,500,000 in cash and cash equivalents, approximately $285,800 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility.
Material Cash Requirements
We believe that our current cash holdings, cash generated from operations, and cash available under our short-term unsecured credit agreement and revolving mortgage repurchase facility, as well as the public debt and equity 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 material contractual obligations primarily consist of the 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 set to mature in September 2022. 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 $336,000 under existing LPAs for deposits to be paid to land developers, assuming that contractual development milestones are met by the developers and we exercise our option to acquire finished lots under those LPAs. We expect to make the majority of these payments within the next three years.
(iii) Obligations under operating and finance leases related primarily to office space and our production facilities. See Note 14 of this Form 10-Q for additional discussion of our leases.
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 program assists us in accomplishing our primary objective, creating increases in shareholder value. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this Form 10-Q for further discussion of repurchase activity during the second quarter of 2022. For the six months ended June 30, 2022, we repurchased 207,132 shares of our common stock at an aggregate purchase price of $1,015,703. As of June 30, 2022, we had approximately $492,300 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 June 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 June 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 $14,200 outstanding at June 30, 2022. The Credit Agreement termination date is February 12, 2026. There was no debt outstanding under the Facility at June 30, 2022.
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.  
At June 30, 2022, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. There was no debt outstanding under the Repurchase Agreement at June 30, 2022.
Effective July 20, 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 the 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 Repurchase Agreement. The Amended MRA expires on July 19, 2023. See Exhibit 10.1 filed herewith for additional information regarding the Amended MRA.
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 six months ended June 30, 2022, cash, restricted cash, and cash equivalents decreased by $1,073,025.  Net cash provided by operating activities was $447,206, due primarily to cash provided by earnings for the six months ended June 30, 2022. Cash was primarily used to fund the increase in inventory of $431,379, attributable to an increase in units under construction at June 30, 2022 compared to December 31, 2021.
Net cash used in investing activities for the six months ended June 30, 2022 was $17,627. Cash was used primarily for purchases of property, plant and equipment of $8,751 and investments in unconsolidated joint ventures totaling $9,222.
Net cash used in financing activities was $1,502,604 for the six months ended June 30, 2022.  Cash was used to repurchase 207,132 shares of our common stock at an aggregate purchase price of $1,015,703 under our ongoing
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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 $113,822.
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, 2021.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in our market risks during the six months ended June 30, 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, 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
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.

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, 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 June 30, 2022. On February 16, 2022 and May 4, 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 per authorization.  The repurchase authorizations do not have expiration dates.  We repurchased the following shares of our common stock during the second quarter of 2022:
PeriodTotal 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
April 1 - 30, 202225,870 $4,503.35 25,870 $142,753 
May 1 - 31, 202224,119 $4,311.45 24,119 $538,765 
June 1 - 30, 2022 (1)11,089 $4,186.59 11,089 $492,340 
Total61,078 $4,370.06 61,078 

(1) Of the 11,089 shares repurchased in June 2022, 9,192 outstanding shares were repurchased under the February authorization, and the remaining 1,897 outstanding shares were repurchased under the May authorization. The February authorization has been fully utilized as of June 30, 2022.

On August 3, 2022, the Board of Directors approved an additional repurchase authorization of up to an aggregate of $500,000. The repurchase authorization does not have an expiration date.
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Item 6.    Exhibits
   
Exhibit NumberExhibit Description
10.1
10.2
10.3
10.4
31.1
31.2
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101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  NVR, Inc.
   
Date: August 3, 2022By:/s/ Daniel D. Malzahn
  Daniel D. Malzahn
  Senior Vice President, Chief Financial Officer and Treasurer

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