NVR INC - Annual Report: 2024 (Form 10-K)

Proceeds from the exercise of stock options Net cash used in financing activities()()()Net (decrease) increase in cash, restricted cash, and cash equivalents() ()Cash, restricted cash, and cash equivalents, beginning of the year Cash, restricted cash, and cash equivalents, end of the year$ $ $ Supplemental disclosures of cash flow information:Interest paid during the year, net of interest capitalized$ $ $ Income taxes paid during the year, net of refunds$ $ $

See notes to consolidated financial statements.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

related to the impairment of contract land deposits. For the year ended December 31, 2023, we recognized a net pre-tax recovery of approximately $ of contract land deposits previously determined to be unrecoverable. For the year ended December 31, 2022, we incurred a net pre-tax charge of approximately $ related to the impairment of contract land deposits. The contract land deposit assets on the accompanying consolidated balance sheets are shown net of the allowance for losses of $ and $ as of December 31, 2024 and 2023, respectively.

-year period, office facilities and other equipment are depreciated over a period of to years and production facilities are depreciated over periods of to years.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

days from closing. All of the loans that NVRM originates are underwritten to the standards and specifications of the ultimate investor. Those underwriting standards are typically equal to or more stringent than the underwriting standards required by Fannie Mae (“FNMA”), Ginnie Mae (“GNMA”), Freddie Mac ("FHLMC"), the Department of Veterans Affairs (“VA”) and the Federal Housing Administration (“FHA”). Insofar as NVRM underwrites its originated loans to those standards, NVRM bears no increased concentration of credit risk from the issuance of loans, except in certain limited instances where repurchases or early payment defaults occur. NVRM employs a quality control department to ensure that its underwriting controls are operating effectively, and further assesses the underwriting function as part of its assessment of internal controls over financial reporting. NVRM maintains a reserve for losses on mortgage loans originated that reflects our judgment of the present loss exposure in the loans that NVRM has originated and sold. The reserve is calculated based on an analysis of historical experience and exposure (see Note 15 herein for further information).

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.

In the normal course of business, NVRM enters into contractual commitments to extend credit to 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 borrowers 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 an investor. 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 investors. The forward sale contracts lock-in a range of interest rates and prices for the sale of loans similar to the specific rate lock commitments. NVRM does not engage in speculative derivative activities. Both the rate lock commitments to borrowers and the forward sale contracts to investors are undesignated derivatives, and, accordingly, are marked to fair value through earnings. As of December 31, 2024, there were contractual commitments to extend credit to borrowers aggregating $, and open forward delivery sale contracts aggregating $, which hedge both the rate lock loan commitments and closed loans held for sale (see Note 14 herein for a description of the Company’s fair value accounting).

Dilutive securities: Stock options and restricted share units Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS

The assumed proceeds used in the treasury method for calculating our diluted earnings per share includes the amount the employee must pay upon exercise and the amount of compensation cost attributed to future services not yet recognized.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

and $ as of December 31, 2024 and 2023, respectively. Substantially all customer deposits are recognized in revenue within twelve months of being received from customers. Our contract assets, consisting of prepaid sales compensation, totaled approximately $ and $ as of December 31, 2024 and 2023, respectively. These amounts are included in homebuilding “Other assets” on the accompanying consolidated balance sheets.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

trade names: Ryan Homes, NVHomes and Heartland Homes. The Ryan Homes product is marketed primarily to first-time and first-time move-up buyers. Ryan Homes operates in metropolitan areas located in Maryland, Virginia, Washington, D.C., Delaware, West Virginia, Pennsylvania, Ohio, New York, New Jersey, Indiana, Illinois, North Carolina, South Carolina, Georgia, Florida, Tennessee and Kentucky. The NVHomes and Heartland Homes products are marketed primarily to move-up and luxury buyers. NVHomes operates in Delaware, New Jersey, and the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. Heartland Homes operates in the Pittsburgh, PA metropolitan area.

Our mortgage banking operations primarily operate in the markets where we have homebuilding operations, as substantially all of our loan closing activity is for our homebuilding customers. Our mortgage banking business generates revenues primarily from origination fees, gains on sales of loans, and title fees.

The following disclosure includes homebuilding operating and reportable segments that aggregate geographically our homebuilding divisions, and the mortgage banking operations presented as a single reportable segment. The homebuilding reportable segments are comprised of divisions in the following geographic areas:


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

The Company's Chief Operating Decision Maker ("CODM"), identified as the Chief Executive Officer, utilizes segment profit to evaluate the performance of the Company's homebuilding and mortgage banking operating segments against the annual plan to make resource allocation decisions.

Homebuilding segment profit 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 CODM to determine whether the operating segment’s results are providing the desired rate of return after covering our cost of capital.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

% 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.

$ $ Homebuilding North East Homebuilding Mid East Homebuilding South East Mortgage Banking Consolidated revenues$ $ $

)$()$()Homebuilding North East()()()Homebuilding Mid East()()()Homebuilding South East()()()

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

)$()$()Homebuilding North East()()()Homebuilding Mid East()()()Homebuilding South East()()()Mortgage Banking()()()

)$()$()Homebuilding North East()()()Homebuilding Mid East()()()Homebuilding South East()()()

$ $ Homebuilding North East Homebuilding Mid East Homebuilding South East Mortgage Banking (1)

(1)This item relates primarily to interest income received on mortgage loans closed and mortgage loans held for sale.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

$ $ Homebuilding North East Homebuilding Mid East Homebuilding South East Mortgage Banking Total segment profit Reconciling items: Contract land deposit allowance adjustment (2) ()Equity-based compensation expense (3)()()()Corporate capital allocation (4) Unallocated corporate overhead()()()Consolidation adjustments and other (5) ()Corporate interest income Corporate interest expense()()()Reconciling items sub-total Consolidated profit before taxes$ $ $

(2) This item represents changes to the contract land deposit impairment allowance, which are not allocated to our reportable segments. See further discussion of contract land deposit impairment charges in Note 3.

(3) This item represents compensation expense for all Option and RSU grants. See Note 11 for additional discussion of equity-based compensation.

(4) This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding segments. The corporate capital allocation charge is based on the segment's monthly average asset balance.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

$ Homebuilding North East Homebuilding Mid East Homebuilding South East Mortgage Banking Total segment assets Reconciling items: Cash and cash equivalents Deferred taxes Intangible assets and goodwill Operating lease right-of-use assets Finance lease right-of-use assets Contract land deposit allowance()()Consolidation adjustments and other Reconciling items sub-total Consolidated assets$ $

% of the aggregate purchase price of the finished lots.

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

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

The deposit placed by us pursuant to the LPA is deemed to be a variable interest in the respective development entities. Those development entities are deemed to be variable interest entities (“VIE”). 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. An enterprise must consolidate a VIE when that enterprise has a controlling financial interest in the VIE. An enterprise is deemed to have a controlling financial interest if it has i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE.

We believe the activities that most significantly impact a development entity’s economic performance are the operating activities of the entity. Unless and until a development entity completes finished building lots through the development process to be

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $ and $, respectively. As noted above, 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. During 2024, we incurred pre-tax impairment charges on lot deposits of approximately $. Our contract land deposit asset is shown net of a $ and $ impairment allowance as of December 31, 2024 and December 31, 2023, respectively.

In addition, we have certain properties under contract with land owners that are expected to yield approximately 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 cash deposits totaling approximately $ as of December 31, 2024, of which approximately $ is refundable if we do not perform under the contract. 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.

$ Allowance for losses on contract land deposits()()Contract land deposits, net Contingent obligations in the form of letters of credit Total risk of loss$ $

in JVs that are expected to produce approximately lots, of which approximately lots were controlled by us and the remaining approximately lots were either under contract with unrelated parties or not currently under contract. We had additional funding commitments totaling approximately $ in one of the JVs as of December 31, 2024. The investment in JVs is reported in the “Other assets” line item on the accompanying consolidated balance sheets. None of the JVs had any indicators of impairment as of December 31, 2024.

in JVs that were expected to produce approximately finished lots, of which approximately lots were controlled by us and the remaining approximately lots were either under contract with unrelated parties or not currently under contract. In addition, as of December 31, 2023, we had additional funding commitments in the aggregate totaling approximately $ in of the JVs.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

, which is expected to produce approximately lots.

As of December 31, 2024, we owned land with a carrying value of $ that we expect to be developed into approximately finished lots primarily for use in our homebuilding operations. None of our land under development projects had any indicators of impairment as of December 31, 2024.

As of December 31, 2023, we directly owned land with a carrying value of $, which was expected to produce approximately finished lots.

$ $ Interest incurred Interest charged to interest expense()()()Interest charged to cost of sales()()()Interest capitalized, end of year$ $ $

$ Model home furniture and fixtures Production facilities Finance lease right-of-use assets Gross Homebuilding PP&E Less: accumulated depreciation()()Net Homebuilding PP&E$ $ Mortgage Banking: Office facilities and other$ $ Less: accumulated depreciation()()Net Mortgage Banking PP&E$ $

of the 2030 Senior Notes. The 2030 Senior Notes were issued at a discount to yield % and have been reflected net of the unamortized discount and unamortized debt issuance costs in the accompanying consolidated

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

, after deducting underwriting discount and offering expenses. The 2030 Senior Notes mature on and bear interest at %, payable . As of December 31, 2024 and 2023, the unamortized discount was $ and $, respectively, and unamortized debt issuance costs were $ and $, respectively.

On September 9 and September 17, 2020, we issued an additional $ and $, respectively, of the 2030 Senior Notes (the "2030 Additional Notes" and together with the 2030 Senior Notes, the "Senior Notes"). The 2030 Additional Notes were issued at a premium to yield % and have been reflected net of the unamortized premium and unamortized debt issuance costs in the accompanying consolidated balance sheet. The offering of the 2030 Additional Notes resulted in aggregate net proceeds of approximately $, including the underwriting premium, less offering expenses. As of December 31, 2024 and 2023, the 2030 Additional Notes unamortized premium was $ and $, respectively, and unamortized debt issuance costs were $ and $, respectively.

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 has, 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 as of December 31, 2024.

Credit Agreement

On February 12, 2021, we entered into The Amended and Restated Credit Agreement with Bank of America, N.A., as Administrative Agent, BOFA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, and other lenders party thereto (the "Credit Agreement"). The Credit Agreement provides for aggregate revolving loan commitments of $ (the "Facility"). Under the Credit Agreement, we may request increases of up to $ 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 $ sublimit for the issuance of letters of credit of which approximately $ was outstanding as of December 31, 2024.

Effective December 9, 2022, we entered into the First Amendment to Amended and Restated Credit Agreement (the "Amended Credit Agreement") which primarily replaces LIBOR based borrowing rates with the secured overnight financing rate published by the Board of Governors of the Federal Reserve System ("SOFR") as defined in the amendment.

The Amended Credit Agreement contains various representations and affirmative and negative covenants that are generally customary for credit facilities of this type. Such covenants include, among others, the following financial maintenance covenants: (i) minimum consolidated tangible net worth; (ii) minimum interest coverage ratio or minimum liquidity and (iii) a maximum leverage ratio. The negative covenants include, among others, certain limitations on liens, investments and fundamental changes. The Amended Credit Agreement termination date is . We were in compliance with all covenants under the Amended Credit Agreement as of December 31, 2024. There was debt outstanding under the Facility as of December 31, 2024.

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 $, subject to certain sub-limits. Amounts outstanding under the Repurchase Agreement are collateralized by the Company’s mortgage loans held for sale.

Advances under the Repurchase Agreement bear interest at SOFR plus the SOFR Margin of %, per annum, provided that the Pricing Rate shall not be less than %. The Pricing Rate as of December 31, 2024 was %. There are several restrictions on purchased loans, including that they cannot be sold to others, they cannot be pledged to anyone other than the agent, and they cannot support any other borrowing or repurchase agreement. Amounts outstanding under the Repurchase Agreement are collateralized by our mortgage loans held for sale. As of December 31, 2024, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. As of both December 31, 2024 and 2023, there was debt outstanding under the Repurchase Agreement. The Repurchase Agreement expires on .

The Repurchase Agreement contains various affirmative and negative covenants. The negative covenants include, among others, certain limitations on transactions involving acquisitions, mergers, the incurrence of debt, sale of assets and creation of liens

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

and common shares outstanding as of December 31, 2024 and 2023, respectively. $ $ Number of shares repurchased

We issue shares from the treasury account for all equity plan activity. We issued , and such shares during 2024, 2023 and 2022, respectively.

10.

$ $ State Deferred: Federal ()()State () Income tax expense$ $ $

$ Deferred compensation Equity-based compensation expense Inventory Unrecognized tax benefit Other Total deferred tax assets Less: Deferred tax liabilities Net deferred tax asset$ $

Deferred tax assets arise principally as a result of various accruals required for financial reporting purposes and equity-based compensation expense, which are not currently deductible for tax return purposes.

Management believes that we will have sufficient future taxable income to make it more likely than not that the net deferred tax assets will be realized. Federal taxable income is estimated to be approximately $ for the year ended December 31, 2024, and was $ for the year ended December 31, 2023.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

% in 2024, 2023, and 2022) to income tax expense is as follows:


	Year Ended December 31,
	2024	2023	2022
Income taxes computed at the federal statutory rate	$	$	$
State income taxes, net of federal income tax benefit (1)
Excess tax benefits from equity-based compensation	()	()	()
Other, net (2)	()	()	()
Income tax expense	$	$	$

(1)Excludes state excess tax benefits from equity-based compensation included in the line below.

(2)Primarily attributable to tax benefits from certain energy credits for the years ended December 31, 2024, 2023 and 2022.

Our effective tax rate in 2024, 2023 and 2022 was %, % and %, respectively.

We file a consolidated U.S. federal income tax return, as well as state and local tax returns in all jurisdictions where we maintain operations. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2021.

$ Additions based on tax positions related to the current year Reductions for tax positions of prior years()()Settlements Balance at end of year$ $

If recognized, the total amount of unrecognized tax benefits that would affect the effective tax rate (net of the federal tax benefit) is $ as of December 31, 2024.

We recognize interest related to unrecognized tax benefits as a component of income tax expense. For the year ended December 31, 2024, we recognized a net reversal of accrued interest on unrecognized tax benefits in the amount of $. For the year ended December 31, 2023, we recognized a net addition of accrued interest on unrecognized tax benefits in the amount of $. For the year ended December 31, 2022, we recognized a net reversal of accrued interest on unrecognized tax benefits in the amount of $. As of December 31, 2024 and 2023, we had a total of $ and $, respectively, of accrued interest on unrecognized tax benefits which are included in “Accrued expenses and other liabilities” on the accompanying consolidated balance sheets.

due to statute expiration and effectively settled positions in various state jurisdictions.

11.

-year term. Both Option and RSU grants typically vest in separate tranches over periods of to years. Grants to key management employees are generally divided such that vesting for % of the grant is contingent solely on continued employment, while vesting for the remaining % of the grant is contingent upon both continued employment and the achievement of a performance metric based on our return on capital performance relative to a peer group during a 3-year period specified on the date of grant. Grants to directors generally vest solely based on continued service as a Director.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

2014 Equity Incentive Plan (2) 2018 Equity Incentive Plan (3)

(1)The 2010 Equity Incentive Plan (the “2010 Plan”) authorized us to issue Options and RSUs. There were Options and RSUs outstanding as of December 31, 2024. Shares can no longer be granted from this plan.

(2)The 2014 Equity Incentive Plan (the “2014 Plan”) authorized us to issue Options only. Shares can no longer be granted from this plan.

(3)The 2018 Equity Incentive Plan (the "2018 Plan") authorizes us to issue Options and RSUs. Of the aggregate shares authorized to issue, all may be granted in the form of Options and up to may be granted in the form of RSUs. There were Options and RSUs outstanding as of December 31, 2024. Of the shares available to issue, may be granted in the form of RSUs.

During 2024, we issued Options under the 2014 Plan and Options under the 2018 Plan. Of the Options issued, vest over in % increments beginning on December 31, 2026, and Options issued vest over in % increments beginning on December 31, 2028. Vesting for half of the Options issued is contingent solely upon continued employment, while vesting for the other half of the Options is contingent upon both continued employment and our return on capital performance during the three year period beginning with 2024.

In addition, we granted RSUs under the 2018 Plan during 2024. Of the RSUs granted, RSUs will vest over in % increments beginning on either December 31, 2026 or December 31, 2027, and RSUs will vest predominately over in % increments beginning on December 31, 2026. Vesting for approximately half of the RSUs issued is contingent solely upon continued employment, while vesting for the remaining RSUs issued is contingent upon both continued employment and our return on capital performance during the three year periods beginning with either 2024 or 2025, based on the RSU's initial vesting date.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

$ Granted Exercised() Forfeited() Outstanding at December 31, 2024 $ $ Exercisable at December 31, 2024 $ $ RSUsOutstanding at December 31, 2023 Granted Vested()Forfeited()Outstanding at December 31, 2024 $ Vested, but not issued at December 31, 2024 $

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.

Risk free interest rate (range)

%-%

Expected volatility (range)

%-%

Expected dividend rate % % %Weighted average grant-date fair value per share of options granted$ $ $

The weighted average grant date fair value per share of $ for the RSUs was determined based on 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 which 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 RSUs granted. Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid to the respective employees.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

, $, and $ in equity-based compensation costs, respectively, and approximately $, $, and $ in tax benefit related to equity-based compensation costs, respectively.

As of December 31, 2024, the total unrecognized compensation cost for all outstanding Options and RSUs equaled approximately $. The unrecognized compensation cost will be recognized over each grant’s applicable vesting period with the latest vesting date being December 31, 2030. The weighted-average period over which the unrecognized compensation cost will be recorded is equal to approximately years.

We settle Option exercises and vesting of RSUs by issuing shares of treasury stock. Shares are relieved from the treasury account based on the weighted average cost of treasury shares acquired. During the years ended December 31, 2024, 2023 and 2022, we issued , and shares, respectively, from the treasury account for Option exercises and vesting of RSUs.

$ $ Aggregate intrinsic value on exercise dates$ $ $

Profit Sharing Plans

We have a trustee-administered, profit sharing retirement plan (the “Profit Sharing Plan”) and an Employee Stock Ownership Plan (“ESOP”) covering substantially all employees. The Profit Sharing Plan and the ESOP provide for annual discretionary contributions in amounts as determined by our Board of Directors. The combined plan contribution for the years ended December 31, 2024, 2023 and 2022 equaled approximately $, $ and $, respectively. We purchased approximately and shares of our common stock in the open market for the 2024 and 2023 plan year contributions to the ESOP, respectively. As of December 31, 2024, all shares held by the ESOP had been allocated to participants’ accounts. The 2024 plan year contribution was funded in January 2025 and fully allocated to participants in February 2025.

Deferred Compensation Plans

We have deferred compensation plans (“Deferred Comp Plans”). The specific purpose of the Deferred Comp Plans is to i) establish a vehicle whereby named executive officers may defer the receipt of salary and bonus that otherwise would be nondeductible for Company tax purposes into a period where we would realize a tax deduction for the amounts paid, and ii) to enable certain employees who are subject to our stock holding requirements to acquire shares of our common stock on a pre-tax basis in order to more quickly meet, and maintain compliance with those stock holding requirements. Amounts deferred into the Deferred Comp Plans are invested in our common stock, held in a rabbi trust account, and are paid out in a fixed number of shares upon expiration of the deferral period.

The rabbi trust account held shares of NVR common stock as of both December 31, 2024 and 2023. Shares held by the Deferred Comp Plans are treated as outstanding shares in our earnings per share calculation for each of the years ended December 31, 2024, 2023 and 2022.

12.

years, some of which include options to extend the leases for up to years, and some of which include options to terminate the lease. Operating leases are reported in "Operating lease right-of-use assets" and "Operating lease liabilities" and finance leases are recorded in homebuilding "Property, plant and equipment, net" and "Accrued expenses and other liabilities" on the accompanying consolidated balance sheets. Our finance lease ROU assets and liabilities were $ and $, respectively as of December 31, 2024 and $ and $, respectively as of December 31, 2023. See Note 1 herein for additional information regarding leases.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

$ $ Finance lease expense:Amortization of ROU assets Interest on lease liabilities Short-term lease expense Total lease expense$ $ $ $ Operating cash flows from finance leases$ $ Financing cash flows from finance leases$ $ ROU assets obtained in exchange for lease obligations:Operating leases$ $ Finance leases$ $ Weighted-average remaining lease term (in years):Operating leasesFinance leasesWeighted-average discount rate:Operating leases % %Finance leases % %

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

$ 2026 2027 2028 2029 Thereafter Total lease payments Less:Imputed interest Short-term lease payments Total lease liability$ $

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% of the aggregate purchase price of the finished lots. As of December 31, 2024, assuming that contractual development milestones are met and we exercise our option, we expect to place additional forfeitable deposits with land developers under existing LPAs of approximately $.

Bonds and Letters of Credit

During the ordinary course of operating the homebuilding and mortgage banking businesses, we are required to enter into bond or letter of credit arrangements with local municipalities, government agencies, or land developers to collateralize our obligations under various contracts. We had approximately $ of contingent obligations under such agreements, including approximately $ for letters of credit issued under the Credit Agreement as of December 31, 2024. We believe we will fulfill our obligations under the related contracts and do not anticipate any material losses under these bonds or letters of credit.

Warranty Reserve

$ $ Provision Payments()()()Warranty reserve, end of year$ $ $

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

14.

and $, respectively. The estimated fair value is based on recent market prices of similar transactions, which is classified as Level 2 within the fair value hierarchy. The carrying values as of December 31, 2024 and 2023 were $ and $, respectively.

Due to the short-term nature of our cash equivalents, we believe that differences between their carrying value and fair value are insignificant.

Derivative Instruments and Mortgage Loans Held for Sale

In the normal course of business, NVRM enters into contractual commitments to extend credit to homebuyers with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within time frames established by NVRM, and some of these commitments include a prepaid float down option. All borrowers 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 an investor. 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 sales contracts to sell whole loans and mortgage-backed securities to investors. The forward sales contracts lock-in a range of interest rates and prices 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 investors are undesignated derivatives and, accordingly, are marked to fair value through earnings. As of December 31, 2024, there were contractual commitments to extend credit to borrowers aggregating $ and open forward delivery contracts aggregating $, which hedge both the rate lock loan commitments and closed loans held for sale.

The fair value of NVRM's rate lock commitments to borrowers and the related input levels includes, 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 its loans primarily 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 and market conditions.

The fair value of NVRM’s forward sales contracts to investors 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 December 31, 2024, the fair value of loans held for sale of $ included on the accompanying consolidated balance sheets was increased by $ from the aggregate principal balance of $. As of December 31, 2023, the fair value of loans held for sale of $ was increased by $ from the aggregate principal balance of $.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

$ Gross liabilities Net rate lock commitments$ $ Forward sales contracts:Gross assets$ $ Gross liabilities Net forward sales contracts$ $()

As of December 31, 2024, the net rate lock commitments and the net forward sales contracts are reported in mortgage banking "Other assets" on the accompanying consolidated balance sheets. As of December 31, 2023, 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".

$ $()$ $ $ Forward sales contracts$ Mortgages held for sale$ () Total fair value measurement$ $()$ $ $

The total fair value measurement as of December 31, 2023 was a net gain of $. NVRM recorded a fair value adjustment to expense of $ for the year ended December 31, 2024, a fair value adjustment to income of $ for the year ended December 31, 2023, and a fair value adjustment to expense of $ for the year ended December 31, 2022. 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 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.

15.

. During the year ended December 31, 2023, we recognized a pre-tax recovery for loan losses related to mortgage loans sold of approximately $. During the year ended December 31, 2022, we recognized pre-tax charges for loan losses related to mortgage loans sold of approximately $. Included in NVRM’s “Accounts payable and other liabilities” line item on the accompanying consolidated balance sheets is a mortgage repurchase reserve equal to approximately $ and $ as of December 31, 2024 and 2023, respectively.

NVR INC - Annual Report: 2024 (Form 10-K)

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