Item 15. Exhibits and Financial Statement Schedules.

The following documents are filed as part of this report:

1.		Financial Statements NVR, Inc. — Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Shareholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements
2.		Exhibits

Exhibit
Number		Description
3.1		Restated Articles of Incorporation of NVR, Inc. (“NVR”). Filed herewith.
3.2		Bylaws, as amended, of NVR, Inc. Filed herewith.
4.1		Indenture dated as of April 14, 1998 between NVR, as issuer and the Bank of New York as trustee. Filed as Exhibit 4.3 to NVR’s Current Report on Form 8-K filed April 23, 1998 and incorporated herein by reference.
4.2		Form of Note (included in Indenture filed as Exhibit 4.1).
10.1*		Employment Agreement between NVR, Inc. and Paul C. Saville dated December 21, 2010. Filed as Exhibit 10.1 to NVR’s Form 8-K filed on December 21, 2010 and incorporated herein by reference.
10.2*		Employment Agreement between NVR, Inc. and Dennis M. Seremet dated December 21, 2010. Filed as Exhibit 10.2 to NVR’s Form 8-K filed on December 21, 2010 and incorporated herein by reference.
10.3*		Employment Agreement between NVR, Inc. and Robert A. Goethe dated December 21, 2010. Filed as Exhibit 10.3 to NVR’s Form 8-K filed on December 21, 2010 and incorporated herein by reference.

Exhibit
Number		Description
10.4*		Employment Agreement between NVR, Inc. and Robert W. Henley dated December 21, 2010. Filed as Exhibit 10.4 to NVR’s Form 8-K filed on December 21, 2010 and incorporated herein by reference.
10.5*		Profit Sharing Plan of NVR, Inc. and Affiliated Companies. Filed as Exhibit 4.1 to NVR’s Registration Statement on Form S-8 (No. 333-29241) filed June 13, 1997 and incorporated herein by reference.
10.6*		Employee Stock Ownership Plan of NVR, Inc. Incorporated by reference to NVR’s Annual Report on Form 10-K/A for the year ended December 31, 1994.
10.7*		NVR, Inc. 1998 Management Long-Term Stock Option Plan. Filed as Exhibit 4 to NVR’s Registration Statement on Form S-8 (No. 333-79951) filed June 4, 1999 and incorporated herein by reference.
10.8*		NVR, Inc. 1998 Directors’ Long-Term Stock Option Plan. Filed as Exhibit 4 to NVR’s Registration Statement on Form S-8 (No. 333-79949) filed June 4, 1999 and incorporated herein by reference.
10.09*		NVR, Inc. Management Long-Term Stock Option Plan. Filed as Exhibit 99.3 to NVR’s Registration Statement on Form S-8 (No. 333-04975) filed May 31, 1996 and incorporated herein by reference.
10.10*		NVR, Inc. 2000 Broadly-Based Stock Option Plan. Filed as Exhibit 99.1 to NVR’s Registration Statement on Form S-8 (No. 333-56732) filed March 8, 2001 and incorporated herein by reference.
10.11*		NVR, Inc. Nonqualified Deferred Compensation Plan. Filed as Exhibit 10.1 to NVR’s Form 8-K filed on December 16, 2005 and incorporated herein by reference.
10.12*		Description of the Board of Directors’ compensation arrangement. Filed as Exhibit 10.27 to NVR’s Annual Report on Form 10-K for the period ended December 31, 2004 and incorporated herein by reference.
10.13*		The NVR, Inc. 2010 Equity Incentive Plan. Filed as exhibit 10.1 to NVR’s Form S-8 filed on May 4, 2010 and incorporated herein by reference.
10.14*		The Form of Non-Qualified Stock Option Agreement (Management grants) under the NVR, Inc. 2010 Equity incentive Plan. Filed as exhibit 10.1 to NVR’s Form 8-K filed on May 6, 2010 and incorporated herein by reference.
10.15*		The Form of Non-Qualified Stock Option Agreement (Director grants) under the NVR, Inc. 2010 Equity incentive Plan. Filed as exhibit 10.2 to NVR’s Form 8-K filed on May 6, 2010 and incorporated herein by reference.
10.16*		The Form of Restricted Share Units Agreement (Management grants) under the NVR, Inc. 2010 Equity incentive Plan. Filed as exhibit 10.3 to NVR’s Form 8-K filed on May 6, 2010 and incorporated herein by reference.
10.17*		The Form of Restricted Share Units Agreement (Director grants) under the NVR, Inc. 2010 Equity incentive Plan. Filed as exhibit 10.4 to NVR’s Form 8-K filed on May 6, 2010 and incorporated herein by reference.
10.18		Director Resignation Agreement with all Class II director nominees and current Class I directors, dated February 22, 2010. Filed as Exhibit 10.1 to NVR’s Form 8-K filed February 23, 2010 and incorporated herein by reference.

Exhibit
Number		Description
10.19*		The Form of Non-Qualified Stock Option Agreement under the NVR, Inc. 2000 Broadly Based Stock Option Plan. Filed as Exhibit 10.1 to NVR’s Form 8-K filed January 3, 2008 and incorporated herein by reference.
10.20*		The Form of Non-Qualified Stock Option Agreement under the 1998 Directors’ Long-Term Stock Option Plan. Filed as Exhibit 10.34 to NVR’s Annual Report on Form 10-K for the period ended December 31, 2007 and incorporated herein by reference.
10.21		Repurchase Agreement dated August 5, 2008 among NVR Finance and U.S. Bank National Association, as Agent, and other lenders party thereto. Filed as Exhibit 10.1 to NVR’s Form 8-K filed on August 8, 2008 and incorporated herein by reference.
10.22*		Summary of 2011 Named Executive Officer annual incentive compensation plan. Filed herewith.
10.23		First Amendment to Repurchase Agreement dated August 5, 2008 among NVR Finance and U.S. Bank National Association, as agent and a Buyer, and the other Buyers. Filed as Exhibit 10.1 to NVR’s Form 8-K filed August 7, 2009 and incorporated herein by reference.
10.24		Second Amendment to Master Repurchase Agreement dated July 30, 2010 among U.S. Bank National Association, as Agent and a Buyer, the other Buyers party hereto and NVR Mortgage Finance, Inc., as Seller. Filed as Exhibit 10.6 to NVR’s Quarterly report on Form 10-Q for the Quarter ended June 30, 2010 and incorporated herein by reference.
21		NVR, Inc. Subsidiaries. Filed herewith.
23		Consent of KPMG LLP (Independent Registered Public Accounting Firm). Filed herewith.
31.1		Certification of NVR’s Chief Executive Officer pursuant to Rule 13a-14(a). Filed herewith.
31.2		Certification of NVR’s Chief Financial Officer pursuant to Rule 13a-14(a). Filed herewith.
32		Certification of NVR’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*		Exhibit is a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
	By:	/s/ Paul C. Saville
		Paul C. Saville
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ Dwight C. Schar Dwight C. Schar		Chairman		February 25, 2011
/s/ C. E. Andrews C. E. Andrews		Director		February 25, 2011
/s/ Robert C. Butler Robert C. Butler		Director		February 25, 2011
/s/ Timothy M. Donahue Timothy M. Donahue		Director		February 25, 2011
/s/ Alfred E. Festa Alfred E. Festa		Director		February 25, 2011
/s/ Manuel H. Johnson Manuel H. Johnson		Director		February 25, 2011
/s/ William A. Moran William A. Moran		Director		February 25, 2011
/s/ David A. Preiser David A. Preiser		Director		February 25, 2011
/s/ W. Grady Rosier W. Grady Rosier		Director		February 25, 2011
/s/ John M. Toups John M. Toups		Director		February 25, 2011
/s/ Paul W. Whetsell Paul W. Whetsell		Director		February 25, 2011
/s/ Paul C. Saville Paul C. Saville		Principal Executive Officer		February 25, 2011
/s/ Dennis M. Seremet Dennis M. Seremet		Principal Financial Officer		February 25, 2011
/s/ Robert W. Henley Robert W. Henley		Principal Accounting Officer		February 25, 2011

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders NVR, Inc.:

We have audited the accompanying consolidated balance sheets of NVR, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NVR, Inc. as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), NVR, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting_._

KPMG LLP

McLean, Virginia February 25, 2011

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders NVR, Inc.:

We have audited NVR, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). NVR, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, NVR, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NVR, Inc. as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated February 25, 2011 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

McLean, Virginia February 25, 2011

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

		December 31,
		2010				2009
ASSETS
Homebuilding:
Cash and cash equivalents		$	1,190,731			$	1,248,689
Marketable securities			—				219,535
Receivables			6,948				7,995
Inventory:
Lots and housing units, covered under sales agreements with customers			275,272				337,523
Unsold lots and housing units			70,542				73,673
Land under development			78,058				—
Manufacturing materials and other			7,457				7,522
			431,329				418,718
Assets related to consolidated variable interest entities			22,371				70,430
Contract land deposits, net			100,786				49,906
Property, plant and equipment, net			19,523				20,215
Reorganization value in excess of amounts allocable to identifiable assets, net			41,580				41,580
Deferred tax assets, net			184,930				200,340
Other assets			58,075				58,319
			2,056,273				2,335,727
Mortgage Banking:
Cash and cash equivalents			2,661				1,461
Mortgage loans held for sale, net			177,244				40,097
Property and equipment, net			950				446
Reorganization value in excess of amounts allocable to identifiable assets, net			7,347				7,347
Other assets			15,586				10,692
			203,788				60,043
Total assets		$	2,260,061			$	2,395,770

(Continued)

See notes to consolidated financial statements.

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

		December 31,
		2010				2009
LIABILITIES AND SHAREHOLDERS’ EQUITY
Homebuilding:
Accounts payable		$	115,578			$	120,464
Accrued expenses and other liabilities			237,052				221,352
Liabilities related to consolidated variable interest entities			500				65,915
Non-recourse debt related to consolidated variable interest entities			7,592				—
Customer deposits			53,705				63,591
Other term debt			1,751				2,166
Senior notes			—				133,370
			416,178				606,858
Mortgage Banking:
Accounts payable and other liabilities			13,171				19,306
Note payable			90,338				12,344
			103,509				31,650
Total liabilities			519,687				638,508
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,557,913 and 20,559,671 shares issued as of December 31, 2010 and 2009, respectively			206				206
Additional paid-in-capital			951,234				830,531
Deferred compensation trust — 158,894 and 265,278 shares of NVR, Inc. common stock as of December 31, 2010 and 2009, respectively			(27,582	)			(40,799	)
Deferred compensation liability			27,582				40,799
Retained earnings			4,029,072				3,823,067
Less treasury stock at cost — 14,894,357 and 14,609,560 shares as of December 31, 2010 and 2009, respectively			(3,240,138	)			(2,896,542	)
Total shareholders’ equity			1,740,374				1,757,262
Total liabilities and shareholders’ equity		$	2,260,061			$	2,395,770

See notes to consolidated financial statements.

NVR, Inc. Consolidated Statements of Income (in thousands, except per share data)

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Homebuilding:
Revenues		$	2,980,758			$	2,683,467			$	3,638,702
Other income			9,299				8,697				16,386
Cost of sales			(2,438,292	)			(2,185,733	)			(3,181,010	)
Selling, general and administrative			(257,394	)			(233,152	)			(308,739	)
Operating income			294,371				273,279				165,339
Interest expense			(4,903	)			(10,196	)			(12,902	)
Goodwill and intangible asset impairment			—				—				(11,686	)
Homebuilding income			289,468				263,083				140,751
Mortgage Banking:
Mortgage banking fees			61,134				60,381				54,337
Interest income			5,411				2,979				3,955
Other income			767				629				745
General and administrative			(33,261	)			(27,474	)			(31,579	)
Interest expense			(1,126	)			(1,184	)			(754	)
Mortgage banking income			32,925				35,331				26,704
Income before taxes			322,393				298,414				167,455
Income tax expense			(116,388	)			(106,234	)			(66,563	)
Net income		$	206,005			$	192,180			$	100,892
Basic earnings per share		$	34.96			$	33.10			$	18.76
Diluted earnings per share		$	33.42			$	31.26			$	17.04
Basic weighted average shares outstanding			5,893				5,807				5,379
Diluted weighted average shares outstanding			6,165				6,149				5,920

See notes to consolidated financial statements.

NVR, Inc. Consolidated Statements of Shareholders’ Equity (in thousands)

						Additional												Deferred				Deferred
		Common				Paid-in				Retained				Treasury				Compensation				Compensation
		Stock				Capital				Earnings				Stock				Trust				Liability				Total
Balance, December 31, 2007		$	206			$	663,631			$	3,529,995			$	(3,064,457	)		$	(75,636	)		$	75,636			$	1,129,375
Net income			—				—				100,892				—				—				—				100,892
Deferred compensation activity			—				—				—				—				786				(786	)			—
Purchase of common stock for treasury			—				—				—				—				(128	)			128				—
Stock-based compensation			—				41,204				—				—				—				—				41,204
Tax benefit from stock options exercised and deferred compensation distributions			—				50,240				—				—				—				—				50,240
Proceeds from stock options exercised			—				52,078				—				—				—				—				52,078
Treasury stock issued upon option exercise			—				(84,888	)			—				84,888				—				—				—
Balance, December 31, 2008			206				722,265				3,630,887				(2,979,569	)			(74,978	)			74,978				1,373,789
Net income			—				—				192,180				—				—				—				192,180
Deferred compensation activity			—				—				—				—				34,179				(34,179	)			—
Stock-based compensation			—				46,302				—				—				—				—				46,302
Tax benefit from stock options exercised and deferred compensation distributions			—				66,448				—				—				—				—				66,448
Proceeds from stock options exercised			—				78,543				—				—				—				—				78,543
Treasury stock issued upon option exercise			—				(83,027	)			—				83,027				—				—				—
Balance, December 31, 2009			206				830,531				3,823,067				(2,896,542	)			(40,799	)			40,799				1,757,262
Net income			—				—				206,005				—				—				—				206,005
Deferred compensation activity			—				—				—				—				13,217				(13,217	)			—
Purchase of common stock for treasury			—				—				—				(417,079	)			—				—				(417,079	)
Stock-based compensation			—				53,136				—				—				—				—				53,136
Tax benefit from stock options exercised and deferred compensation distributions			—				63,558				—				—				—				—				63,558
Proceeds from stock options exercised			—				77,492				—				—				—				—				77,492
Treasury stock issued upon option exercise			—				(73,483	)			—				73,483				—				—				—
Balance, December 31, 2010		$	206			$	951,234			$	4,029,072			$	(3,240,138	)		$	(27,582	)		$	27,582			$	1,740,374

See notes to consolidated financial statements

NVR, Inc. Consolidated Statements of Cash Flows (in thousands)

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Cash flows from operating activities:
Net income		$	206,005			$	192,180			$	100,892
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			7,263				9,713				13,641
Excess income tax benefit from exercise of stock options			(63,558	)			(66,448	)			(50,240	)
Equity-based compensation expense			53,136				46,302				41,204
Contract land deposit impairments (recoveries)			4,264				(6,464	)			165,024
Gain on sale of loans			(46,225	)			(46,960	)			(38,921	)
(Gain) loss on sale of fixed assets			(167	)			(358	)			472
Gain on extinguishment of debt			—				—				(251	)
Impairment of goodwill and intangible assets			—				—				11,686
Deferred tax expense (benefit)			13,558				21,905				(12,048	)
Mortgage loans closed			(2,109,505	)			(1,943,074	)			(2,046,575	)
Proceeds from sales of mortgage loans			2,011,765				2,018,151				2,115,607
Principal payments on mortgage loans held for sale			2,554				2,072				4,321
Distribution of earnings from unconsolidated joint ventures			1,307				—				—
Net change in assets and liabilities:
(Increase) decrease in inventories			(8,783	)			(18,148	)			288,284
(Increase) decrease in contract land deposits			(53,866	)			(14,848	)			29
Decrease (increase) in receivables			1,532				3,682				(1,016	)
Increase (decrease) in accounts payable, accrued expenses and customer deposits			56,752				82,578				(157,111	)
Other, net			(20,644	)			(38,641	)			27,363
Net cash provided by operating activities			55,388				241,642				462,361
Cash flows from investing activities:
Purchase of marketable securities			(150,000	)			(858,362	)			—
Redemption of marketable securities at maturity			369,535				638,827				—
Investments in unconsolidated joint ventures			(2,000	)			—				—
Distribution of capital from unconsolidated joint ventures			1,193				—				—
Purchase of property, plant and equipment			(6,943	)			(3,044	)			(6,899	)
Proceeds from the sale of property, plant and equipment			655				962				1,401
Net cash provided by (used in) investing activities			212,440				(221,617	)			(5,498	)
Cash flows from financing activities:
Purchase of treasury stock			(417,079	)			—				—
Purchase of NVR common stock for deferred compensation plan			—				—				(128	)
Net borrowings (repayments) under notes payable and credit lines			77,579				(32,559	)			(39,214	)
Net borrowings under non-recourse debt related to consolidated variable interest entity			7,592				—				—
Redemption of senior notes			(133,370	)			(29,950	)			(36,405	)
Excess income tax benefit from exercise of stock options			63,558				66,448				50,240
Exercise of stock options			77,492				78,543				52,078
Net cash (used in) provided by financing activities			(324,228	)			82,482				26,571
Net (decrease) increase in cash and cash equivalents			(56,400	)			102,507				483,434
Cash and cash equivalents, beginning of year			1,250,150				1,147,643				664,209
Cash and cash equivalents, end of year		$	1,193,750			$	1,250,150			$	1,147,643

(Continued)

See notes to consolidated financial statements.

NVR, Inc. Consolidated Statements of Cash Flows (Continued) (in thousands)

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Supplemental disclosures of cash flow information:
Interest paid during the year		$	5,805			$	10,010			$	12,656
Income taxes paid during the year, net of refunds		$	40,669			$	(28,807	)		$	65,128
Supplemental disclosures of non-cash activities:
Investment in newly formed consolidated joint venture		$	(25,214	)		$	—			$	—
Change in net consolidated variable interest entities		$	—			$	(976	)		$	(10,346	)

See notes to consolidated financial statements.

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of NVR, Inc. (“NVR” or the “Company”) and its subsidiaries and certain other entities in which the Company is deemed to be the primary beneficiary (see Note 3 herein for additional information). All significant intercompany transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management continually evaluates the estimates used to prepare the consolidated financial statements and updates those estimates as necessary. In general, the Company’s estimates are based on historical experience, on information from third party professionals, and other various assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ materially from those estimates made by management.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with original maturities of three months or less. At December 31, 2010, $358 of cash related to a consolidated variable interest entity is included in “Assets related to consolidated variable interest entities” in the accompanying balance sheet.

The homebuilding segment had restricted cash of $22,889 and $4,613 at December 31, 2010 and 2009, respectively. Restricted cash in 2010 is primarily attributable to holding requirements related to outstanding letters of credit issued under the Company’s letter of credit agreement as discussed further in Note 10. In addition, restricted cash relates to customer deposits for certain home sales. Restricted cash is recorded in “Other assets” in the homebuilding section of the accompanying consolidated balance sheets.

The mortgage banking segment had restricted cash of $555 and $49 at December 31, 2010 and 2009, respectively, which included amounts collected at closing related to mortgage loans held for sale. The mortgage banking segment’s restricted cash is recorded in “Other assets” in the mortgage banking section of the accompanying consolidated balance sheets.

Marketable Securities

As of December 31, 2010 and 2009 the Company held marketable securities totaling $0 and $219,535, respectively. These securities, which are debt securities issued by U.S. government agencies, are classified by the Company as held to maturity and are measured at amortized cost and mature within one year.

Homebuilding Inventory

The carrying value of inventory is stated at the lower of cost or market value. Cost of lots and completed and uncompleted housing units represent the accumulated actual cost of the units. Field construction supervisors’ salaries and related direct overhead expenses are included in inventory costs. Interest costs are not capitalized into inventory, with the exception of land under development, as

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

applicable (see below). Upon settlement, the cost of the unit is expensed on a specific identification basis. Cost of manufacturing materials is determined on a first-in, first-out basis.

Sold inventory is evaluated for impairment based on the contractual selling price compared to the total estimated cost to construct. Unsold inventory is evaluated for impairment by analyzing recent comparable sales prices within the applicable community compared to the costs incurred to date plus the expected costs to complete. Any calculated impairments are recorded immediately.

Contract Land Deposits

The Company purchases finished lots under fixed price purchase agreements that require deposits that may be forfeited if NVR fails to perform under the contract. The deposits are in the form of cash or letters of credit in varying amounts and represent a percentage of the aggregate purchase price of the finished lots.

NVR maintains an allowance for losses on contract land deposits that reflects the Company’s judgment of the present loss exposure in the existing contract land deposit portfolio at the end of the reporting period. To analyze contract land deposit impairments, NVR utilizes an Accounting Standards Codification (“ASC”) 450, Contingencies, loss contingency analysis that is conducted each quarter. In addition to considering market and economic conditions, NVR assesses contract land deposit impairments on a community-by-community basis pursuant to the purchase contract terms, analyzing, as applicable, current sales absorption levels, recent sales’ gross profit, the dollar differential between the contractual purchase price and the current market price for lots, a developer’s financial stability, a developer’s financial ability or willingness to reduce lot prices to current market prices, and the contract’s default status by either the Company or the developer along with an analysis of the expected outcome of any such default.

NVR’s analysis is focused on whether the Company can sell houses profitably in a particular community in the current market with which the Company is faced. Because the Company does not own the finished lots on which the Company has placed a contract land deposit, if the above analysis leads to a determination that the Company can’t sell homes profitably at the current contractual lot price, the Company then determines whether it will elect to default under the contract, forfeit the deposit and terminate the contract, or whether the Company will attempt to restructure the lot purchase contract, which may require it to forfeit the deposit to obtain contract concessions from a developer. The Company also assesses whether an impairment is present due to collectibility issues resulting from a developer’s non-performance because of financial or other conditions.

For the year ended December 31, 2010, the Company incurred pre-tax charges of approximately $4,300 related to the impairment of contract land deposits. During the year ended December 31, 2009, the Company had a net pre-tax recovery of approximately $6,500 of contract land deposits previously considered to be uncollectible. For the year ended December 31, 2008, the Company incurred pre-tax charges of approximately $165,000. These impairment charges were recorded in cost of sales on the accompanying consolidated statements of income. The contract land deposit asset on the accompanying consolidated balance sheets is shown net of an approximate $73,500 and $89,500 impairment valuation allowance at December 31, 2010 and 2009, respectively.

Land Under Development

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

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

Land under development, including the land under development held by our unconsolidated joint ventures and the related joint venture investments, is reviewed for potential write-downs when impairment indicators are present. In addition to considering market and economic conditions, the Company assesses land under development impairments on a community-by-community basis, analyzing, as applicable, current sales absorption levels, recent sales’ gross profit, and the dollar differential between the projected fully-developed cost of the lots and the current market price for lots. If indicators of impairment are present for a community, NVR performs an analysis to determine if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts, and if so, impairment charges are required to be recorded if the fair value of such assets is less than their carrying amounts. For those assets deemed to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the assets. The Company’s determination of fair value is primarily based on discounting the estimated future cash flows at a rate commensurate with the inherent risks associated with the asset and related estimated cash flow streams. NVR does not believe that any of the land under development, all of which was acquired during 2010, is impaired at this time.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is based on the estimated useful lives of the assets using the straight-line method. Amortization of capital lease assets is included in depreciation expense. Model home furniture and fixtures are generally depreciated over a two-year period, office facilities and other equipment are depreciated over a period from three to ten years, manufacturing facilities are depreciated over periods of from five to forty years and property under capital leases is depreciated in a manner consistent with the Company’s depreciation policy for owned assets, or the lease-term if shorter.

Intangible Assets

Reorganization value in excess of identifiable assets (“excess reorganization value”) is an indefinite life intangible asset that was created upon NVR’s emergence from bankruptcy on September 30, 1993. Based on the allocation of the reorganization value, the portion of the reorganization value which was not attributed to specific tangible or intangible assets has been reported as excess reorganization value, which is treated similarly to goodwill. Excess reorganization value is not subject to amortization. Rather, excess reorganization value is subject to an impairment assessment on an annual basis or more frequently if changes in events or circumstances indicate that impairment may have occurred. Because excess reorganization value was based on the reorganization value of NVR’s entire enterprise upon bankruptcy emergence, the impairment assessment is conducted on an enterprise basis based on the comparison of NVR’s total equity compared to the market value of NVR’s outstanding publicly-traded common stock. The Company completed its annual assessment of impairment and management determined that there was no impairment of excess reorganization value.

Warranty/Product Liability Accruals

The Company establishes warranty and product liability reserves to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to NVR’s homebuilding business. Liability estimates are determined based on management’s judgment considering such factors as historical experience, the likely 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 the Company’s general counsel and outside counsel retained to handle specific product liability cases.

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

Mortgage Loans Held for Sale, Derivatives and Hedging Activities

NVR originates several different loan products to its customers to finance the purchase of a home through its wholly-owned mortgage subsidiary. NVR sells all of the loans it originates into the secondary market typically within 30 days from origination. All of the loans that the Company 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 FNMA, VA and FHA. Insofar as the Company underwrites its originated loans to those standards, the Company bears no increased concentration of credit risk from the issuance of loans, except in certain limited instances where early payment default occurs. The Company employs a quality control department to ensure that its underwriting controls are effectively operating, and further assesses the underwriting function as part of its assessment of internal controls over financial reporting. The Company maintains an allowance for losses on mortgage loans originated that reflects NVR’s judgment of the present loss exposure in the loans that it has originated and sold. The allowance is calculated based on an analysis of historical experience and anticipated losses on mortgages held for investment, real estate owned, and specific expected loan repurchases or indemnifications (see Note 12 herein for further information).

Mortgage loans held for sale are recorded at fair value at closing 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, our mortgage banking segment enters into contractual commitments to extend credit to buyers of single-family homes with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within time frames established by NVR. 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, the Company enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers. The forward sale contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. NVR 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 December 31, 2010, there were contractual commitments to extend credit to borrowers aggregating $96,265, and open forward delivery sale contracts aggregating $262,839. See Note 11 herein for a description of our fair value accounting calculation.

Earnings per Share

The following weighted average shares and share equivalents are used to calculate basic and diluted earnings per share for the years ended December 31, 2010, 2009 and 2008:

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Weighted average number of shares outstanding used to calculate basic EPS			5,893,105				5,806,773				5,379,409
Dilutive securities:
Stock options and restricted share units			271,512				341,996				540,876
Weighted average number of shares and share equivalents outstanding used to calculate diluted EPS			6,164,617				6,148,769				5,920,285

The assumed proceeds used in the treasury method for calculating NVR’s diluted earnings per share includes the amount the employee must pay upon exercise, the amount of compensation cost attributed to future services and not yet recognized and the amount of tax benefits that would be credited or charged to additional paid-in capital assuming exercise of the stock option or vesting of the restricted share unit. The assumed amount credited to additional paid-in capital equals the tax benefit from assumed exercise of stock options or the assumed vesting of restricted share units after consideration of the intrinsic value upon assumed exercise or vesting less the actual stock-based compensation expense to be recognized in the income statement from 2006 and future periods.

Stock options issued under equity benefit plans to purchase 443,565; 134,405 and 316,747 shares of common stock were outstanding during the years ended December 31, 2010, 2009 and 2008, respectively, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

Revenues-Homebuilding Operations

NVR builds single-family detached homes, townhomes and condominium buildings, which generally are constructed on a pre-sold basis for the ultimate customer. Revenues are recognized at the time the unit is settled and title passes to the customer, adequate cash payment has been received and there is no continuing involvement. In situations where the buyer’s financing is originated by NVR Mortgage Finance, Inc. (“NVRM), a wholly-owned subsidiary of NVR, and the buyer has not made an adequate initial or continuing investment as prescribed by GAAP, the profit on such settlement is deferred until the sale of the related loan to a third-party investor has been completed.

Mortgage Banking Fees

Mortgage banking fees include income earned by NVRM for originating mortgage loans, servicing mortgage loans held on an interim basis, title fees, gains and losses on the sale of mortgage loans and mortgage servicing and other activities incidental to mortgage banking. Mortgage banking fees are generally recognized after the loan has been sold to an unaffiliated, third party investor.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not (defined as a likelihood of more than 50%) that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. If a tax position does not meet the more-likely-than-not recognition threshold, despite the Company’s belief that its filing position is supportable, the benefit of that tax position is not recognized in the statements of income. The Company recognizes interest related to unrecognized tax benefits as a component of income tax expense. Based on its historical experience in dealing with various taxing authorities, the Company has found that it is the administrative practice of the taxing authorities to not seek penalties from the Company for the tax positions it has taken on its returns, related to its unrecognized tax benefits. Therefore, the Company does not accrue penalties for the positions in which it has an unrecognized tax benefit. However, if such penalties were to be accrued, they would be recorded as a component of income tax expense. The Company recognizes unrecognized tax benefits in the period that the uncertainty is eliminated by either affirmative agreement of the uncertain tax position by the applicable taxing authority, or by expiration of the applicable statute of limitation.

Financial Instruments

Except as otherwise noted herein, NVR believes that insignificant differences exist between the carrying value and the fair value of its financial instruments (see Note 11 herein for further information).

Stock-Based Compensation

The company accounts for its stock-based compensation in accordance with ASC 718, Compensation — Stock Compensation. ASC 718 requires an entity to recognize an expense within its income statement for all share-based payment arrangements, which includes employee stock option and restricted share unit plans. The expense is based on the grant-date fair value of the stock options and restricted share units granted, and is recognized ratably over the requisite service period. The Company calculates the fair value of its non-publicly traded, employee stock options using the Black-Scholes option-pricing model. The grant date fair value of the restricted share units is the closing price of the Company’s common stock on the day immediately preceding the date of grant. The Company’s equity-based compensation programs are accounted for as equity-classified awards. See Note 9 herein for further discussion of stock-based compensation plans.

Comprehensive Income

For the years ended December 31, 2010, 2009 and 2008, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying Consolidated Financial Statements.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements, which amends ASC 820 to require the disclosure of additional information related to fair value measurement and provide clarification to existing requirements for fair value measurement disclosure. ASU 2010-06 was effective for the Company beginning January 1, 2010. The Company’s disclosures conform to the requirements of ASU 2010-06. See Note 11 herein for additional discussion of fair value measurements.

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, as codified in ASC 860, Transfers and Servicing, which changes the conditions for reporting a transfer of a portion of a financial asset as a sale and requires additional year-end and interim disclosures. ASC 860 was effective for the Company beginning January 1, 2010. The adoption of ASC 860 did not have a material impact on the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), as codified in ASC 810, Consolidation, through Accounting Standards Update 2009-17. This statement amends FASB Interpretation 46R related to the consolidation of variable interest entities (“VIEs”) and revises the approach to determining the primary beneficiary of a VIE to be more qualitative in nature and requires companies to more frequently reassess whether they must consolidate a VIE. The amendment to ASC 810 was effective for the Company’s fiscal year beginning January 1, 2010. Upon adoption of ASC 810, all of the assets and liabilities of consolidated VIEs at December 31, 2009 were deconsolidated, and there was no resultant gain or loss. See Note 3 herein for further discussion of consolidated VIEs.

2. Segment Information, Nature of Operations, and Certain Concentrations

NVR’s homebuilding operations primarily construct and sell single-family detached homes, townhomes and condominium buildings under four trade names: Ryan Homes, NVHomes, Fox Ridge Homes, and Rymarc Homes. The Ryan Homes, Fox Ridge Homes, and Rymarc Homes products are marketed primarily to first-time homeowners and first-time move-up buyers. The Ryan Homes product is sold in twenty-three metropolitan areas located in Maryland, Virginia, West Virginia, Pennsylvania, New York, North Carolina, South Carolina, Florida, Ohio, New Jersey, Delaware, Indiana and Kentucky. The Fox Ridge Homes product is sold solely in the Nashville, TN metropolitan area. The Rymarc Homes product is sold solely in the Columbia, SC metropolitan area. The NVHomes product is sold in the Washington, D.C., Baltimore, MD, Philadelphia, PA and Maryland Eastern Shore metropolitan areas, and is marketed primarily to move-up and up-scale buyers. NVR derived approximately 47% of its 2010 homebuilding revenues in the Washington, D.C. and Baltimore, MD metropolitan areas.

NVR’s mortgage banking segment is a regional mortgage banking operation. Substantially all of the mortgage banking segment’s loan closing activity is for NVR’s homebuilding customers. NVR’s mortgage banking business generates revenues primarily from origination fees, gains on sales of loans, and title fees. A substantial portion of the Company’s mortgage operations is conducted in the Washington, D.C. and Baltimore, MD metropolitan areas.

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

Homebuilding Mid Atlantic — Virginia, West Virginia, Maryland, and Delaware Homebuilding North East — New Jersey and eastern Pennsylvania Homebuilding Mid East — Kentucky, New York, Ohio, western Pennsylvania and Indiana Homebuilding 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 eliminates in consolidation, is based on the segment’s average net assets employed, and is charged using a consistent methodology in the years presented. The corporate

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment’s results are providing the desired rate of return after covering the Company’s cost of capital. The Company records 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 charged to the operating segment upon the determination to terminate a finished lot purchase agreement with the developer, or to restructure a lot purchase agreement 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 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. NVR’s overhead functions, such as accounting, treasury, human resources, etc., are centrally performed and the costs are not allocated to the Company’s 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 the Company’s operating segments. Likewise, equity-based compensation expense is not charged to the operating segments. External corporate interest expense is primarily comprised of interest charges on the Company’s Senior Notes and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

Following are tables presenting revenues, segment profit and segment assets for each reportable segment, with reconciliations to the amounts reported for the consolidated enterprise, where applicable:

		Year Ended December 31,
		2010				2009				2008
Revenues:
Homebuilding Mid Atlantic		$	1,780,521			$	1,661,244			$	2,161,764
Homebuilding North East			287,561				254,654				347,142
Homebuilding Mid East			632,377				505,431				659,649
Homebuilding South East			280,299				262,138				470,147
Mortgage Banking			61,134				60,381				54,337
Total Consolidated Revenues		$	3,041,892			$	2,743,848			$	3,693,039

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

		Year Ended December 31,
		2010				2009				2008
Profit:
Homebuilding Mid Atlantic		$	209,496			$	185,861			$	103,690
Homebuilding North East			25,090				19,572				13,182
Homebuilding Mid East			56,882				38,012				39,643
Homebuilding South East			10,870				7,384				7,904
Mortgage Banking			35,704				38,138				29,227
Total Segment Profit			338,042				288,967				193,646
Contract land deposit impairment reserve (1)			16,206				42,939				(41,134	)
Equity-based compensation expense (2)			(53,136	)			(46,302	)			(41,204	)
Corporate capital allocation (3)			65,971				61,753				108,509
Unallocated corporate overhead (4)			(55,992	)			(44,103	)			(52,696	)
Consolidation adjustments and other			15,848				4,970				24,437
Impairment of goodwill and intangible assets (5)			—				—				(11,686	)
Corporate interest expense			(4,546	)			(9,810	)			(12,417	)
Reconciling items sub-total			(15,649	)			9,447				(26,191	)
Consolidated Income before Taxes		$	322,393			$	298,414			$	167,455

		As of December 31,
		2010				2009				2008
Assets:
Homebuilding Mid Atlantic		$	414,090			$	448,019			$	403,439
Homebuilding North East			35,827				54,132				53,732
Homebuilding Mid East			78,246				94,225				82,976
Homebuilding South East			43,041				37,663				53,890
Mortgage Banking			196,441				52,696				83,432
Total Segment Assets			767,645				686,735				677,469
Consolidated variable interest entities (6)			22,371				70,430				114,930
Cash and cash equivalents			1,190,731				1,248,689				1,146,426
Land under development (7)			78,058				—				—
Marketable securities			—				219,535				—
Deferred taxes			184,930				200,340				223,393
Intangible assets			48,927				48,927				48,927
Contract land deposit reserve			(73,517	)			(94,940	)			(155,858	)
Consolidation adjustments and other (8)			40,916				16,054				47,949
Reconciling items sub-total			1,492,416				1,709,035				1,425,767
Consolidated Assets		$	2,260,061			$	2,395,770			$	2,103,236

		Year Ended December 31,
		2010				2009				2008
Interest Income:
Mortgage Banking		$	5,411			$	2,979			$	3,955
Total Segment Interest Income			5,411				2,979				3,955
Other unallocated interest income			5,301				5,407				10,909
Consolidated Interest Income		$	10,712			$	8,386			$	14,864

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

		Year Ended December 31,
		2010				2009				2008
Interest Expense:
Homebuilding Mid Atlantic		$	45,082			$	41,130			$	73,441
Homebuilding North East			5,936				6,475				10,084
Homebuilding Mid East			9,669				8,873				12,976
Homebuilding South East			5,641				5,661				12,493
Mortgage Banking			1,126				1,184				754
Total Segment Interest Expense			67,454				63,323				109,748
Corporate capital allocation			(65,971	)			(61,753	)			(108,509	)
Senior Note and other interest			4,546				9,810				12,417
Consolidated Interest Expense		$	6,029			$	11,380			$	13,656

		Year Ended December 31,
		2010				2009				2008
Depreciation and Amortization:
Homebuilding Mid Atlantic		$	3,369			$	4,351			$	7,005
Homebuilding North East			515				612				974
Homebuilding Mid East			1,224				1,233				1,626
Homebuilding South East			758				1,163				1,715
Mortgage Banking			362				357				395
Total Segment Depreciation and Amortization			6,228				7,716				11,715
Unallocated corporate			1,035				1,997				1,926
Consolidated Depreciation and Amortization		$	7,263			$	9,713			$	13,641

		Year Ended December 31,
		2010				2009				2008
Expenditures for Property and Equipment:
Homebuilding Mid Atlantic		$	2,165			$	1,511			$	3,142
Homebuilding North East			440				414				508
Homebuilding Mid East			2,247				741				1,372
Homebuilding South East			583				269				1,369
Mortgage Banking			883				87				305
Total Segment Expenditures for Property and Equipment			6,318				3,022				6,696
Unallocated corporate			625				22				203
Consolidated Expenditures for Property and Equipment		$	6,943			$	3,044			$	6,899

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

(1)		This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments. During both 2010 and 2009, unallocated reserves decreased from the respective prior years primarily as a result of charging previously reserved land impairments to the operating segments and to certain recoveries of deposits previously determined to be impaired.
(2)		The increase in equity-based compensation expense in 2010 compared to the prior year was primarily due to the granting of non-qualified stock options and restricted share units from the 2010 Equity Incentive Plan in the current year. The current year increase in stock based compensation expense was partially offset by an approximate $7,600 pre-tax reversal of stock-based compensation expense attributable to an adjustment of the Company’s option forfeiture estimates based on the Company’s actual forfeiture experience.
(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 years presented:

		Year Ended December 31,
		2010				2009				2008
Homebuilding Mid Atlantic		$	44,758			$	40,765			$	73,042
Homebuilding North East			5,926				6,473				10,081
Homebuilding Mid East			9,657				8,863				12,902
Homebuilding South East			5,630				5,652				12,484
Total		$	65,971			$	61,753			$	108,509

(4)		The increases in unallocated corporate overhead in 2010 from 2009 is attributable to increased personnel levels year over year and to higher management incentive costs as the prior year incentive plan was limited to a payout of 50% of the maximum bonus opportunity. The decrease in 2009 from 2008 was primarily driven by a reduction in personnel and other overhead costs as part of the Company’s focus to size the organization to meet current activity levels.
(5)		The 2008 impairment charge relates to the write-off of goodwill and indefinite life intangible assets related to the Company’s 2005 acquisition of Rymarc Homes and the goodwill related to the 1997 acquisition of Fox Ridge Homes.
(6)		The decrease in consolidated variable interest entities (“VIEs”) was attributable to the adoption of amended ASC 810, which resulted in the deconsolidation in 2010 of all VIEs consolidated in 2009. The current year balance relates to the assets of one joint venture consolidated under ASC 810. See Note 3 for additional discussion of VIEs.
(7)		Land under development is not allocated to the respective operating segment until the building lots are finished. See Note 3 for additional discussion of land under development.
(8)		The increase in consolidation adjustments and other was attributable to an approximate $18,000 increase in restricted cash resulting from the transition to a new letter of credit agreement which requires the Company to maintain cash reserves equal to the value of letter of credits outstanding. The decrease in 2009 from 2008 was primarily attributable to changes in the corporate consolidation entries based on production volumes year over year.

3. Consolidation of Variable Interest Entities, Joint Ventures and Land Under Development

Effective January 1, 2010, NVR adopted Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R), as codified in ASC 810, Consolidation, through Accounting Standards Update 2009-17 (“ASC 810”). This statement amends FASB Interpretation 46R related to the consolidation of variable interest entities (“VIEs”), revises the approach to determining the primary

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

beneficiary of a VIE to be more qualitative in nature, and requires companies to more frequently reassess whether they must consolidate a VIE.

Fixed Price Purchase Agreements

NVR generally does not engage in the land development business. Instead, the Company typically acquires finished building lots at market prices from various development entities under fixed price purchase agreements. The purchase agreements require deposits that may be forfeited if NVR fails to perform under the agreement. The deposits required under the purchase agreements 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.

NVR believes this lot acquisition strategy reduces the financial requirements and risks associated with direct land ownership and land development. NVR may, at its option, choose for any reason and at any time not to perform under these purchase agreements by delivering notice of its intent not to acquire the finished lots under contract. NVR’s sole legal obligation and economic loss for failure to perform under these purchase agreements is limited to the amount of the deposit pursuant to the liquidated damage provisions contained within the purchase agreements. In other words, if NVR does not perform under a purchase agreement, NVR loses only its deposit. None of the creditors of any of the development entities with which NVR enters fixed price purchase agreements have recourse to the general credit of NVR. NVR generally does not have any specific performance obligations to purchase a certain number or any of the lots, nor does NVR guarantee completion of the development by the developer or guarantee any of the developers’ financial or other liabilities.

NVR is not involved in the design or creation of any of the development entities from which the Company purchases lots under fixed price purchase agreements. The developer’s equity holders have the power to direct 100% of the operating activities of the development entity. NVR has 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 to the equity holders. Further, NVR does 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 NVR pursuant to the fixed price purchase agreement is deemed to be a variable interest in the respective development entities. Those development entities are deemed to be variable interest entities. Therefore, the development entities with which NVR enters fixed price purchase agreements, including the joint venture limited liability corporations, as discussed below, are evaluated for possible consolidation by NVR. 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 variable interest entity 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.

NVR believes 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 able to sell, the process of which the development entities’ equity investors bear the full risk, the entity does not earn any revenues. The operating development activities are managed solely by the development entity’s equity investors.

The development entities with which NVR contracts to buy finished lots typically select the respective projects, obtain the necessary zoning approvals, obtain the financing required with no support or guarantees from NVR, select who will purchase the finished lots and at what price, and manage the completion of the infrastructure improvements, all for the purpose of generating a cash flow return to the development entity’s equity holders and all independent of NVR. The Company possesses no more than limited protective legal

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

rights through the purchase agreement in the specific finished lots that it is purchasing, and NVR possesses no participative rights in the development entities. Accordingly, NVR does not have the power to direct the activities of a developer that most significantly impact the developer’s economic performance. For this reason, NVR has concluded that it is not the primary beneficiary of the development entities with which the Company enters fixed price purchase agreements, and therefore, NVR does not consolidate any of these VIEs.

As of December 31, 2010, NVR controlled approximately 50,400 lots with deposits in cash and letters of credit totaling approximately $174,300 and $6,600, respectively. As noted above, NVR’s sole legal obligation and economic loss for failure to perform under these purchase agreements is limited to the amount of the deposit pursuant to the liquidated damage provisions contained within the purchase agreements and in very limited circumstances, specific performance obligations, as follows:

		December 31, 2010
Contract land deposits		$	174,303
Loss reserve on contract land deposits			(73,517	)
Contract land deposits, net			100,786
Contingent obligations in the form of letters of credit			6,610
Contingent specific performance obligations (1)			1,944
Total risk of loss		$	109,340

(1)		At December 31, 2010, the Company was committed to purchase 43 finished lots under specific performance obligations.

At December 31, 2009, the Company evaluated all of its fixed price purchase agreements and LLC arrangements and determined that it was the primary beneficiary of twenty-one of those development entities with which the agreements and arrangements are held. As a result, at December 31, 2009, NVR had consolidated such development entities in the accompanying consolidated balance sheet. Where NVR deemed itself to be the primary beneficiary of a development entity created after December 31, 2003 and the development entity refused to provide financial statements, NVR utilized estimation techniques to perform the consolidation. The effect of the consolidation at December 31, 2009 was the inclusion on the balance sheet of $70,430 as “Consolidated assets not owned,” with a corresponding inclusion of $65,915 as “Liabilities related to consolidated assets not owned,” after elimination of intercompany items. Inclusive in these totals were assets and liabilities of approximately $40,900 for twelve development entities created after December 31, 2003 that did not provide financial statements. Upon adoption of ASC 810, all of the assets and liabilities of consolidated VIEs at December 31, 2009 were deconsolidated, and there was no resultant gain or loss.

Joint Ventures

On a limited basis, NVR also obtains finished lots using joint venture limited liability corporations (“JVs”). All JVs are typically structured such that NVR is a non-controlling member and is at risk only for the amount the Company has invested. NVR is not a borrower, guarantor or obligor on any debt of the JVs. The Company enters into a standard fixed price purchase agreement to purchase lots from these JVs, and as a result has a variable interest in these JVs.

At December 31, 2010, the Company had an aggregate investment totaling approximately $37,200 in three JVs that are expected to produce approximately 1,100 finished lots. At December 31, 2010, NVR had additional funding commitments in the aggregate totaling $5,000 to one of the three JVs. The Company has determined that it is not the primary beneficiary of two of the JVs because NVR and the respective JV partner share power, and the joint venture investments related to those two JV’s are included in other assets in the

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

accompanying consolidated balance sheet. NVR has concluded that it is the primary beneficiary of the remaining JV because the Company has the controlling financial interest in the JV. The condensed balance sheet at December 31, 2010 of the consolidated JV is as follows:

		December 31, 2010
Cash		$	358
Restricted cash			501
Other assets			126
Land under development			21,386
Total assets		$	22,371
Debt		$	7,592
Accrued expenses			59
Equity			14,720
Total liabilities and equity		$	22,371

At December 31, 2009, NVR had an aggregate investment totaling approximately $25,000 in ten separate LLCs. As of December 31, 2009, eight of these LLCs were non-performing and as a result NVR had recorded an impairment reserve equal to the Company’s total investment of approximately $3,000 in these LLCs. NVR does not expect to obtain any lots from these eight LLCs in future periods. In the two performing LLCs, the Company’s aggregate investment totaled $22,000 and the Company controlled approximately 760 lots through these LLCs. The Company’s investment in LLCs is recorded in “Other assets” in the consolidated financial statements. At December 31, 2009, NVR had additional funding commitments totaling $4,000 to one of these two performing LLCs. Also included in “Other assets” in the 2009 consolidated balance sheet is an acquisition and development loan note receivable that the Company purchased for approximately $20,000, on which the Company foreclosed on the underlying real estate.

Distributions received from joint ventures are considered operating cash flows within the accompanying statements of cash flows to the extent of NVR’s cumulative share of joint venture income. Any distributions received in excess of that amount are considered a return of capital, and is classified as cash flows from investing activities.

Land Under Development

During 2010, NVR directly acquired four separate raw parcels of land zoned for their intended use with a cost basis at December 31, 2010 of approximately $78,000 that it intends to develop into approximately 890 finished lots for use in its homebuilding operations. All of the raw parcels are located in the Washington, D.C. metropolitan area. One of the parcels, with a cost basis of approximately $51,000 at December 31, 2010, was acquired from an entity controlled by Elm Street Development, Inc., which is controlled by one of our directors, William A. Moran. Land under development includes the land acquisition costs, direct improvement costs, capitalized interest, where applicable, and real estate taxes. Based on current market conditions, NVR may, on a very limited basis, directly acquire additional raw parcels to develop into finished lots.

4. Related Party Transactions

During the year ended December 31, 2010, NVR entered into new forward lot purchase agreements to purchase finished building lots for a total purchase price of approximately $55,000 with Elm Street Development, Inc. (“Elm Street”), which is controlled by one of our directors, Mr. Moran. The independent members of our Board approved these transactions, and the Company expects to purchase these finished lots over the next four years at the contract prices. During 2010, 2009 and 2008, NVR purchased developed lots at

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

market prices from Elm Street for approximately $54,600, $46,700 and $38,000. NVR expects to purchase the majority of the remaining lots under contract at December 31, 2010 over the next four years for an aggregate purchase price of approximately $117,000. During 2010, NVR forfeited $118 of deposit to restructure a forward lot purchase agreement to obtain reduced purchase prices for finished lots under the agreement. The Company also continues to control a parcel of raw land expected to yield at least 600 finished lots through a joint venture entered into with Elm Street during 2009. NVR did not make any additional capital contributions to that joint venture in 2010. Further, during 2010, NVR also purchased a zoned, unimproved raw parcel of land from Elm Street for a total purchase price of approximately $49,000 which is included in the land under development caption in the accompanying balance sheet at a current cost basis, including development costs, of approximately $51,000. See Note 3 herein for further discussion of land under development.

5. Property, Plant and Equipment, net

		December 31,
		2010				2009
Homebuilding:
Office facilities and other		$	13,554			$	13,324
Model home furniture and fixtures			16,545				18,354
Manufacturing facilities			28,398				28,581
Property under capital leases			3,976				3,976
			62,473				64,235
Less: accumulated depreciation			(42,950	)			(44,020	)
		$	19,523			$	20,215
Mortgage Banking:
Office facilities and other		$	4,088			$	3,586
Less: accumulated depreciation			(3,138	)			(3,140	)
		$	950			$	446

Certain property, plant and equipment listed above is collateral for certain debt of NVR as more fully described in Note 6 herein.

6. Debt

		December 31,
		2010				2009
Homebuilding:
Working capital revolving credit (a)		$	—			$	—
Other term debt:
Capital lease obligations due in monthly installments through 2015 (b)		$	1,751			$	2,166
Senior notes (c)		$	—			$	133,370
Mortgage Banking:
Master repurchase agreement (d)		$	90,338			$	12,344

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

(a)		During 2010 and 2009, the Company, as borrower, had available a $300,000 unsecured working capital revolving credit facility (the “Facility”). Effective October 27, 2010, the Company voluntarily terminated the Facility which was set to expire on December 6, 2010. The Company currently does not intend to enter into a new credit facility; however, effective October 27, 2010, the Company entered into an uncommitted collateralized letter of credit facility to issue letters of credit in our ordinary course of business. See Note 10 for further discussion of letters of credit.
(b)		The capital lease obligations have fixed interest rates ranging from 13.1% to 14.1% and are collateralized by land, buildings and equipment with a net book value of approximately $681 and $866 at December 31, 2010 and 2009, respectively.
		The following schedule provides future minimum lease payments under all capital leases together with the present value as of December 31, 2010:

Year ending December 31,
2011		$	346
2012			644
2013			644
2014			669
2015			56
Thereafter			—
			2,359
Amount representing interest			(608	)
		$	1,751

(c)		On June 17, 2003, NVR completed an offering, at par, for $200,000 of 5% Senior Notes due 2010 (the “Senior Notes”) under a shelf registration statement filed in 1998 with the Securities and Exchange Commission (the “SEC”). The Senior Notes bore interest at 5%, payable semi-annually in arrears on June 15 and December 15. The Senior Notes matured on June 15, 2010, and upon their maturity, the Company redeemed the $133,370 in outstanding Senior Notes at par.
		On September 8, 2008, the Company filed a shelf registration statement (the “2008 Shelf Registration”) with the SEC to register for future offer and sale an unlimited amount of debt securities, common shares, preferred shares, depositary shares representing preferred shares and warrants. This discussion of the 2008 Shelf Registration does not constitute an offer of any securities for sale.
(d)		On July 30, 2010, NVRM renewed and amended its Master Repurchase Agreement dated August 5, 2008 with U.S. Bank National Association, as Agent and representative of itself as a Buyer, and the other Buyers thereto (the “Master Repurchase Agreement”) pursuant to a Second Amendment to Master Repurchase Agreement with U.S. Bank National Association, as Agent and representative of itself as Buyer (“Agent”), and the other Buyers thereto (together with the Master Repurchase Agreement, the “Repurchase Agreement”). The purpose of the Repurchase Agreement is to finance the origination of mortgage loans by NVRM. The Repurchase Agreement provides for loan purchases up to $100,000, subject to certain sub limits. In addition, the Repurchase Agreement provides for an accordion feature under which NVRM may request that the aggregate commitments under the Repurchase Agreement be increased to an amount up to $125,000. The Repurchase Agreement expires on August 2, 2011.
		Advances under the Repurchase Agreement carry a Pricing Rate based on the Libor Rate plus the

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

Libor Margin, or the Default Pricing Rate, as determined under the Repurchase Agreement, provided that the Pricing Rate shall not be less than 4.5%. Prior to the July 30, 2010 renewal date, the Pricing Rate was based on LIBOR plus LIBOR Margin, or at NVRM’s option, the Balance Funded Rate, which included credit for compensating balances. Under the Repurchase Agreement, the Company may enter into separate agreements with the Buyers party to the Repurchase Agreement, adjusting the Pricing Rate in effect. These separate agreements do not effect the maximum aggregate commitment available under the Repurchase Agreement. 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. The average Pricing Rate on outstanding balances at December 31, 2010 was 4.1%. The average Pricing Rate for amounts outstanding under the previous Repurchase Agreement at December 31, 2009 was 4.1%.

At December 31, 2010, there was $90,338 outstanding under the Repurchase Agreement, which is included in Mortgage Banking “Note payable” in the accompanying consolidated balance sheet. Amounts outstanding under the Repurchase Agreement are collateralized by the Company’s mortgage loans held for sale, which are included in assets in the December 31, 2010 balance sheet in the accompanying consolidated financial statements. There were no borrowing base limitations at December 31, 2010.

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 upon any of its Mortgage Notes. Additional covenants include (i) a tangible net worth requirement, (ii) a minimum liquidity requirement, (iii) a minimum tangible net worth ratio, (iv) a minimum net income requirement, and (v) a maximum leverage ratio requirement. The Company was in compliance with all covenants under the Repurchase Agreement at December 31, 2010.

---

Maturities with respect to the Company’s debt as of December 31, 2010 are as follows:

Year ending December 31,
2011		$	90,441
2012			456
2013			520
2014			616
2015			56
Thereafter			—
Total		$	92,089

The $90,441 maturing in 2011 includes $90,338 of borrowings under the Repurchase Agreement.

7. Common Stock

There were 5,663,556 and 5,950,111 common shares outstanding at December 31, 2010 and 2009, respectively. As of December 31, 2010, NVR had reacquired a total of approximately 21,400,000 shares of NVR common stock at an aggregate cost of approximately $3,837,000 since December 31, 1993. The Company repurchased 644,562 shares at an aggregate purchase price of approximately $417,080 during 2010. The Company did not repurchase any shares during 2009 or 2008.

Since 1999, the Company has issued shares from the treasury for all stock option exercises. There

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

have been approximately 6,507,000 common shares reissued from the treasury in satisfaction of stock option exercises and other employee benefit obligations. The Company issued 359,765; 418,775 and 426,751 such shares during 2010, 2009 and 2008, respectively.

8. Income Taxes

The provision for income taxes consists of the following:

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Current:
Federal		$	96,449			$	69,911			$	63,614
State			12,468				8,556				9,785
Deferred:
Federal			6,352				23,474				(5,702	)
State			1,119				4,293				(1,134	)
		$	116,388			$	106,234			$	66,563

In addition to amounts applicable to income before taxes, the following income tax benefits were recorded in shareholders’ equity:

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Income tax benefits arising from compensation expense for tax purposes in excess of amounts recognized for financial statement purposes		$	63,558			$	66,448			$	50,240

Deferred income taxes on NVR’s consolidated balance sheets are comprised of the following:

		December 31,
		2010				2009
Deferred tax assets:
Other accrued expenses and contract land deposit reserve		$	96,459			$	104,907
Deferred compensation			11,642				16,897
Equity-based compensation expense			49,469				43,149
Uniform capitalization			5,495				5,477
Unrecognized tax benefit			24,514				25,671
Other			5,856				10,480
Total deferred tax assets			193,435				206,581
Less: deferred tax liabilities			948				531
Net deferred tax position		$	192,487			$	206,050

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

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

Management believes that the Company will have sufficient available carry-backs and 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 $118,240 for the year ended December 31, 2010, and was $56,157 for the year ended December 31, 2009.

A reconciliation of income tax expense in the accompanying Consolidated Statements of Income to the amount computed by applying the statutory Federal income tax rate of 35% to income before taxes is as follows:

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Income taxes computed at the Federal statutory rate		$	112,838			$	104,445			$	58,609
State income taxes, net of Federal income tax benefit			7,731				7,467				6,004
Other, net			(4,181	)			(5,678	)			1,950
		$	116,388			$	106,234			$	66,563

The Company’s effective tax rate in 2010, 2009 and 2008 was 36.10%, 35.60% and 39.75%, respectively. The lower effective tax rates in 2010 and 2009 as compared to 2008 were due to the expiration of certain tax reserves previously established, the amendment of certain prior year federal and state income tax returns that the Company believes will result in tax refunds, and changes under Internal Revenue Code Section 199, domestic manufacturing deduction, that provides the Company the ability to obtain a larger tax benefit. In addition, the 2009 effective tax rate was favorably impacted by Mr. Schar relinquishing his Executive Officer role with the Company in 2009, generating a tax benefit related to compensation expense recorded for certain outstanding option grants held by Mr. Schar that were previously considered to be a permanent non-deductible tax difference.

The Company files a consolidated U.S. federal income tax return, as well as state and local tax returns in all jurisdictions where the Company maintains operations. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years prior to 2007.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		Year Ended				Year Ended
		December 31, 2010				December 31, 2009
Balance at beginning of year		$	48,669			$	53,339
Additions for tax positions for prior years			—				72
Additions based on tax positions related to the current year			4,092				2,769
Reductions for tax positions of prior years			(8,039	)			(7,511	)
Settlements			—				—
Balance at end of year		$	44,722			$	48,669

If recognized, the total amount of unrecognized tax benefits that would affect the effective tax rate (on a net basis) is $29,070.

The Company recognizes interest related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2010, 2009 and 2008 the Company accrued interest on unrecognized tax benefits in the amounts of $573, $932 and $5,150, respectively. For the years ended December 31, 2010 and 2009, the Company had a total of $22,721 and $22,149, respectively, of accrued

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

interest on unrecognized tax benefits in its balance sheet. Based on its historical experience in dealing with various taxing authorities, the Company has found that it is the administrative practice of these authorities to not seek penalties from the Company for the tax positions it has taken on its returns, related to its unrecognized tax benefits. Therefore, the Company does not accrue penalties for the positions in which it has an unrecognized tax benefit. However, if such penalties were to be accrued, they would be recorded as a component of income tax expense.

The Company believes that within the next 12 months, it is reasonably possible that the unrecognized tax benefits will be reduced by approximately $3,026 due to statute expiration in various state jurisdictions. The Company is currently under audit by the states of New York, Pennsylvania, South Carolina and Tennessee.

9. Equity-Based Compensation, Profit Sharing and Deferred Compensation Plans

Equity-Based Compensation Plans

NVR’s equity-based compensation plans provide for the granting of non-qualified stock options to purchase shares of NVR common stock (“Options”) and restricted share units (“RSUs”) to key management employees, including executive officers and Board members, of the Company. The exercise price of Options granted is equal to the closing price of the Company’s common stock on the New York Stock Exchange on the day prior to the date of grant, and RSUs are issued at a $0 exercise price. Options are granted for a ten-year term and typically vest in separate tranches over periods of 3 to 8 years, depending upon the plan from which the shares were granted, based solely on continued employment or continued service as a Director. RSUs are also granted for a ten-year term and generally vest in separate tranches over a period of 2 years, based solely on continued employment or continued service as a Director. At December 31, 2010, there was an aggregate of 1,053,425 options and 149,727 RSUs outstanding, and there were an additional 270,247 available shares to be granted under existing equity-based compensation plans. Of the available shares to be granted, up to 90,273 shares may be granted in the form of RSUs.

The following is a summary description of each of the Company’s equity-based compensation plans for any plan with grants outstanding at December 31, 2010:

	•		During 1996, the Company’s shareholders approved the Board of Directors’ adoption of the Management Long-Term Stock Option Plan (the “1996 Option Plan”). There are 2,000,000 Options authorized under the Management Long Term Stock Option Plan. All Options were granted at an exercise price equal to the closing price of the Company’s common stock on the New York Stock Exchange on the day prior to the date of grant. The outstanding Options expire 10 years after the dates upon which they were granted, and vest annually in 25% increments beginning on December 31, 2006, or later depending on the date of grant. There are no grants remaining available to issue from the 1996 Option Plan.
	•		During 1999, the Company’s shareholders approved the Board of Directors’ adoption of the 1998 Management Long-Term Stock Option Plan (the “1998 Option Plan”). There are 1,000,000 Options authorized under the 1998 Option Plan. All Options were granted at an exercise price equal to the closing price of the Company’s common stock on the New York Stock Exchange on the day prior to the date of grant. The Options expire 10 years after the dates upon which they were granted. The outstanding Options generally vest in 25% increments beginning on December 31, 2006, or later depending on the date of grant. There are no grants remaining available to issue from the 1998 Option Plan.

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

	•		During 1999, the Company’s shareholders approved the Board of Directors’ adoption of the 1998 Directors’ Long Term Stock Option Plan (the “1998 Directors’ Plan”). There were 150,000 Options to purchase shares of common stock authorized for grant to the Company’s outside directors under the 1998 Directors’ Plan. All Options are granted at an exercise price equal to the closing price of the Company’s common stock on the New York Stock Exchange on the day prior to the date of grant. The Options were granted for a 10-year period and generally vest annually in twenty-five percent (25%) increments beginning on December 31, 2006, or later as determined by the date of grant. There are no grants remaining available to issue from the 1998 Directors’ Plan.
	•		During 2000, the Board approved the 2000 Broadly-Based Stock Option Plan (the “2000 Plan”). The Company did not seek approval from its shareholders for the 2000 Plan. There are 2,000,000 Options authorized under the 2000 Plan. All Options are granted at an exercise price equal to the closing price of the Company’s common stock on the New York Stock Exchange on the day prior to the date of grant. Grants under the 2000 Plan are available to both employees and members of the Board. The distribution of Options to key employees and members of the board, in aggregate, are limited to 50% or less of the total options authorized under the 2000 Plan. Options granted under the 2000 Plan expire 10 years from the date of grant, and generally vest annually in 25% increments beginning on December 31, 2006, or later depending on the date of grant. There are no grants remaining available to issue from the 2000 Plan.
	•		During 2010, the Company’s shareholders approved the Board of Directors’ adoption of the 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan authorizes the Company to issue non-qualified stock options (“Options”) and restricted share units (“RSUs”) to key management employees, including executive officers and Board members, to acquire up to an aggregate 700,000 shares of the Company’s common stock. Of the 700,000 aggregate shares available to issue, up to 240,000 may be granted in the form of RSUs. All Options are granted at an exercise price equal to the closing price of the Company’s common stock on the New York Stock Exchange on the day prior to the date of grant, and all RSUs are granted at a $0 exercise price. The Options and RSUs are granted for a 10-year period. The RSUs generally vest annually in 50% increments beginning on December 31, 2011, and the Options generally vest as to 50% of the underlying shares in annual increments beginning on December 31, 2013. At December 31, 2010, there were 270,247 shares available to be granted under the 2010 Equity Plan, of which 90,273 may be granted as RSU’s.

During 2010, the Company issued Options to purchase 152,690 shares of its common stock under the 2000 Plan. The Company also issued 282,143 Options and 150,504 RSUs under the 2010 Plan. The exercise price of each Option granted was equal to the closing price of the Company’s common stock on the day immediately preceding the date of grant, and each RSU was granted at a $0 exercise price. Each Option and RSU was granted for a term of ten (10) years from the date of grant. The majority of the Options will vest in 50% increments on each of December 31, 2013 and 2014, and the RSUs will vest in 50% increments on each of December 31, 2011 and 2012. All Options and RSUs granted are subject to the grantee’s continued employment or continued service as a Director, as applicable.

The following table provides additional information relative to NVR’s equity-based compensation plans for the year ended December 31, 2010:

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
						Exercise				Contract Life				Intrinsic
		Options				Price				(Years)				Value
Stock Options
Outstanding at beginning of period			999,142			$	342.08
Granted			434,833				701.94
Exercised			(359,765	)			218.55
Forfeited			(20,723	)			524.91
Expired			(62	)			759.00
Outstanding at end of period			1,053,425			$	529.18				6.2			$	170,486
Exercisable at end of period			567,383			$	400.94				3.3			$	164,586
RSUs (1)
Outstanding at beginning of period			—
Granted			150,504
Forfeited			(777	)
Outstanding at end of period			149,727											$	103,464
Exercisable at end of period			—											$	—

(1)		RSUs granted in the current year were issued at a $0 exercise price.

To estimate the grant-date fair value of its stock options, the Company uses the Black-Scholes option-pricing model. The Black-Scholes 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, the Company uses a U.S. Treasury Strip due in a number of years equal to the option’s expected term. NVR has concluded that its historical exercise experience is the best estimate of future exercise patterns to determine an option’s expected term. To estimate expected volatility, NVR analyzed the historic volatility of its common stock over a period equal to the option’s expected term. The fair value of the Options granted during 2010 was estimated on the grant date using the Black-Scholes option-pricing model based on the following assumptions:

		2010				2009				2008
Estimated option life		5.02 years				4.70 years				3.95 years
Risk free interest rate (range)			0.99% - 2.84	%			1.78% - 3.65	%			1.00% - 4.19	%
Expected volatility (range)			34.34% - 41.12	%			31.83% - 41.72	%			31.57% - 38.75	%
Expected dividend rate			0.00	%			0.00	%			0.00	%
Weighted average grant-date fair value per share of options granted		$	256.35			$	187.10			$	156.85

In accordance with ASC Topic 718, Compensation-Stock Compensation, the fair value of the RSUs is measured as if they were vested and issued on the grant date. Additionally, under ASC 718, service only restrictions on vesting of RSUs are not reflected in the fair value calculation at the grant date. As a result, the fair value of the RSUs was the closing price of the Company’s common stock on the day immediately preceding the date of grant. The weighted average fair value of the RSUs granted in the current year was $702.94 per share.

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

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

portion of the grant). For the recognition of equity-based compensation, the RSUs are treated as a separate award from the Options. Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid to the respective employees. ASC 718 also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation and requires that the compensation costs of stock-based awards be recognized net of estimated forfeitures. The impact on compensation costs due to changes in the expected forfeiture rate will be recognized in the period that they become known. In 2010, 2009, and 2008, the Company recognized $53,136, $46,302 and $41,204 in equity-based compensation costs, respectively, and approximately $19,200, $18,000 and $12,600 tax benefit related to equity-based compensation costs, respectively. In 2010, the Company reversed approximately $7,600 in stock-based compensation expense previously recorded to adjust compensation expense for the actual forfeiture experience from prior forfeiture rate estimates. The reversal was made to the accounts originally charged as follows; approximately $6,600 and $400 from homebuilding general and administrative and cost of sales expense, respectively, and approximately $600 from NVRM general and administrative expense.

As of December 31, 2010, the total unrecognized compensation cost for all outstanding Options and RSUs equals approximately $165,232, net of estimated forfeitures. The unrecognized compensation cost will be recognized over each grant’s applicable vesting period with the latest vesting date being December 31, 2016. The weighted-average period over which the unrecognized compensation will be recorded is equal to approximately 2.1 years.

The Company settles option exercises by issuing shares of treasury stock to option holders. Shares are relieved from the treasury account based on the weighted average cost of treasury shares acquired. During the years ended December 31, 2010, 2009 and 2008, options to purchase shares of the Company’s common stock of 359,765; 418,775 and 426,751 were exercised. Information with respect to the exercised options is as follows:

		2010				2009				2008
Aggregate exercise proceeds (1)		$	78,626			$	79,157			$	70,978
Aggregate intrinsic value on exercise dates		$	165,007			$	135,652			$	175,190

(1)		Aggregate exercise proceeds include the option exercise price received in cash or the fair market value of NVR stock surrendered by the optionee in lieu of cash.

The Company has elected the alternative transition method to establish the beginning balance of the additional paid-in capital pool available to absorb any future write-offs of deferred tax benefits associated with stock-based compensation.

Profit Sharing Plans

NVR has 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 the NVR Board of Directors. The combined plan contribution for the years ended December 31, 2010, 2009 and 2008 was $6,567, $6,447 and $6,856, respectively. The ESOP purchased approximately 8,700 and 9,400 shares of NVR common stock in the open market for the 2010 and 2009 plan year contributions, respectively, using cash contributions provided by the Company. As of December 31, 2010, all shares held by the ESOP had been allocated to participants’ accounts. The 2010 plan year contribution was funded and fully allocated to participants in February 2011.

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

Deferred Compensation Plans

The Company has two 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 the Company would realize a tax deduction for the amounts paid, and ii) to enable certain of our employees who are subject to the Company’s 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 NVR 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 158,894 and 265,278 shares of NVR common stock as of December 31, 2010 and 2009, respectively. During 2010, 106,384 shares of NVR common stock were issued from the rabbi trust related to deferred compensation for which the deferral period ended. There were no shares of NVR common stock contributed to the rabbi trust in 2010, 2009 or 2008. Shares held by the Deferred Comp Plan are treated as outstanding shares in the Company’s earnings per share calculation for each of the years ended December 31, 2010, 2009 and 2008.

10. Commitments and Contingent Liabilities

NVR is committed under multiple non-cancelable operating leases involving office space, model homes, manufacturing facilities, automobiles and equipment. Future minimum lease payments under these operating leases as of December 31, 2010 are as follows:

Year ended December 31,
2011		$	19,014
2012			13,715
2013			10,305
2014			8,188
2015			6,260
Thereafter			16,926
			74,408
Sublease income			(1,201	)
		$	73,207

Total rent expense incurred under operating leases was approximately $29,741, $34,024 and $45,841 for the years ended December 31, 2010, 2009 and 2008, respectively.

The Company generally does not engage in the land development business. Instead, the Company typically acquires finished building lots at market prices from various development entities under fixed price purchase agreements. The purchase agreements require deposits that may be forfeited if the Company fails to perform under the agreement. The deposits required under the purchase agreements are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots. The Company believes this lot acquisition strategy reduces the financial requirements and risks associated with direct land ownership and land development. The Company generally seeks to maintain control over a supply of lots believed to be suitable to meet its five-year business plan. At December 31, 2010, assuming that contractual development milestones are met, the Company is committed to placing additional forfeitable deposits with land developers under existing lot option contracts of $43,178. The Company also has seven specific performance contracts pursuant to

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

which the Company is committed to purchasing forty-three finished lots at an aggregate purchase price of approximately $1,900.

During the ordinary course of operating the mortgage banking and homebuilding businesses, the Company is required to enter into bond or letter of credit arrangements with local municipalities, government agencies, or land developers to collateralize its obligations under various contracts. The Company had approximately $38,300 of contingent obligations under such agreements (including $16,400 for letters of credit as described in Note 6(a) herein) as of December 31, 2010. The Company believes it will fulfill its obligations under the related contracts and does not anticipate any material losses under these bonds or letters of credit.

The following table reflects the changes in the Company’s warranty reserve for the following (see Note 1 herein for further discussion of warranty/product liability reserves):

		Year Ended				Year Ended				Year Ended
		December 31, 2010				December 31, 2009				December 31, 2008
Warranty reserve, beginning of year		$	64,417			$	68,084			$	70,284
Provision			44,633				35,688				40,468
Payments			(39,263	)			(39,355	)			(42,668	)
Warranty reserve, end of year		$	69,787			$	64,417			$	68,084

On July 18, 2007, former and current employees filed lawsuits against the Company in the Court of Common Pleas in Allegheny County, Pennsylvania and Hamilton County, Ohio, in Superior Court in Durham County, North Carolina, and in the Circuit Court in Montgomery County, Maryland, and on July 19, 2007 in the Superior Court in New Jersey, alleging that the Company incorrectly classified its sales and marketing representatives as being exempt from overtime wages. These lawsuits are similar in nature to another lawsuit filed on October 29, 2004 by another former employee in the United States District Court for the Western District of New York. The complaints seek injunctive relief, an award of unpaid wages, including fringe benefits, liquidated damages equal to the overtime wages allegedly due and not paid, attorney and other fees and interest, and where available, multiple damages. The suits were filed as purported class actions. However, while a number of individuals have filed consents to join and assert federal claims in the New York action, none of the groups of employees that the lawsuits purport to represent have been certified as a class. The lawsuits filed in Ohio, Pennsylvania, Maryland, New Jersey and North Carolina have been stayed pending further developments in the New York action.

The Company believes that its compensation practices in regard to sales and marketing representatives are entirely lawful and in compliance with two letter rulings from the United States Department of Labor (“DOL”) issued in January 2007. The two courts to most recently consider similar claims against other homebuilders have acknowledged the DOL’s position that sales and marketing representatives were properly classified as exempt from overtime wages and the only court to have directly addressed the exempt status of such employees concluded that the DOL’s position was valid. Accordingly, the Company has vigorously defended and intends to continue to vigorously defend these lawsuits. Because the Company is unable to determine the likelihood of an unfavorable outcome of this case, or the amount of damages, if any, the Company has not recorded any associated liabilities in the accompanying consolidated balance sheets.

In June 2010, the Company received a Request for Information from the United States Environmental Protection Agency (the “EPA”) pursuant to Section 308 of the Clean Water Act. The request seeks information about storm water discharge practices in connection with homebuilding projects completed or underway by the Company. The Company has been cooperating with this request, has provided information to the EPA and intends to continue cooperating with the EPA’s inquiries. At this time, the Company cannot predict the outcome of this inquiry, nor can it reasonably estimate the potential costs that may be associated

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

with its eventual resolution.

In April 2010, NVRM received a Report of Examination (“ROE”) from the Office of the Commissioner of Banks of the State of North Carolina (the “NCCOB”) reporting certain findings that resulted from the NCCOB’s examination of selected files relating to loans originated by NVRM in North Carolina between August 1, 2006 and August 31, 2009. The ROE alleged that certain of the loan files reflected violations of North Carolina and/or U.S. lending or consumer protection laws. The ROE requested that NVRM correct or otherwise address the alleged violations and in some instances requested that NVRM undertake an examination of all of its other loans in North Carolina to determine whether similar alleged violations may have occurred, and if so, to take corrective action. NVRM responded to the ROE by letter dated June 10, 2010, contesting the findings and allegations, providing factual information to correct certain of the findings, and refuting the NCCOB’s interpretation of applicable law. On November 15, 2010, the NCCOB provided a written response to NVRM’s June 10, 2010 letter closing certain alleged violations while reasserting certain other violations. On January 12, 2011, NVRM responded to the NCCOB’s November 15, 2010 letter providing additional factual information to address the remaining findings, and refuting the NCCOB’s interpretation of applicable law. Accordingly, while the outcome of the matter is currently not determinable, the Company does not expect resolution of the matter to have a material adverse effect on the Company’s financial position.

The Company and its subsidiaries are also involved in various other 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 the financial position or results of operations of the Company. Legal costs incurred in connection with outstanding litigation are expensed as incurred.

11. Fair Value

Financial Instruments

On June 15, 2010, the Company redeemed upon maturity, the outstanding 5% Senior Notes due 2010 (“Senior Notes”) at par. As of December 31, 2009, the carrying value of the Senior Notes was $133,370, and the estimated fair value, which is based on a quoted market price, was $134,829.

Derivative Instruments and Mortgage Loans Held for Sale

In the normal course of business, NVR’s mortgage banking segment enters into contractual commitments to extend credit to buyers of single-family homes with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within time frames established by NVR. 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, the Company enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers. The forward sale contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. NVR 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 December 31, 2010, there were contractual commitments to extend credit to borrowers aggregating $96,265 and open forward delivery contracts aggregating $262,839.

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

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

unobservable inputs. The fair value of the Company’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 amount that the Company has discounted the price to the borrower from par for competitive reasons and 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, the Company 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. The Company 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, which averaged 148 basis points of the loan amount as of December 31, 2010, is included in the fair value measurement and is based upon contractual terms with investors and varies depending on the loan type. The Company assumes an approximate 7% fallout rate when measuring the fair value of rate lock commitments. Fallout is defined as locked loan commitments for which the Company does not close a mortgage loan and is based on historical experience.

The fair value of the Company’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. The fair value of loans held for sale of $177,244 included in the accompanying consolidated balance sheet has been reduced by $4,453 from the aggregate principal balance of $181,697.

The undesignated derivative instruments are included in the accompanying consolidated balance sheet as follows:

		Balance Sheet				Fair Value
		Location				December 31, 2010
Derivative Assets:
Rate Lock Commitments and Forward Sales Contracts		NVRM - Other assets				$	5,461

The unrealized gain or loss from the change in the fair value measurements is included in earnings as a component of mortgage banking fees in the accompanying consolidated statements of income as follows:

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

						Assumed				Interest												Total Fair
		Notional or				Gain (Loss)				Rate				Servicing				Security				Value
		Principal				From Loan				Movement				Rights				Price				Adjustment
		Amount				Sale				Effect				Value				Change				Gain/(Loss)
Rate lock commitments		$	96,265			$	(459	)		$	(317	)		$	1,333			$	—			$	557
Forward sales contracts		$	262,839				—				—				—				4,904				4,904
Mortgages held for sale		$	181,697				(907	)			(6,217	)			2,671				—				(4,453	)
Total Fair Value Measurement, December 31, 2010							(1,366	)			(6,534	)			4,004				4,904				1,008
Less: Fair Value Measurement, December 31, 2009							(788	)			(2,501	)			2,187				2,445				1,343
Total Fair Value Adjustment for the period ended December 31, 2010						$	(578	)		$	(4,033	)		$	1,817			$	2,459			$	(335	)

The fair value measurement will be impacted in the future by the change in the value of the servicing rights and the volume and product mix of the Company’s closed loans and locked loan commitments.

12. Mortgage Loan Loss Allowance

During the years ended December 31, 2010, 2009 and 2008, the Company recorded pre-tax charges for loan losses of approximately $6,200, $200 and $850, respectively. Included in the Mortgage Banking segment’s Accounts Payable and Other Liabilities line item within the accompanying consolidated balance sheet is a mortgage loan loss allowance equal to approximately $8,200 and $3,200 at December 31, 2010 and December 31, 2009, respectively.

13. Quarterly Results (unaudited)

The following table sets forth unaudited selected financial data and operating information on a quarterly basis for the years ended December 31, 2010 and 2009.

		Year Ended December 31, 2010
		4th				3rd				2nd				1st
		Quarter				Quarter				Quarter				Quarter
Revenues-homebuilding operations		$	794,470			$	661,935			$	946,972			$	577,381
Gross profit — homebuilding operations		$	139,505			$	121,152			$	175,497			$	106,312
Mortgage banking fees		$	16,535			$	14,234			$	17,532			$	12,833
Net income		$	58,698			$	43,944			$	71,276			$	32,087
Diluted earnings per share		$	9.96			$	7.31			$	11.13			$	5.01
Contracts for sale, net of cancellations (units)			1,765				2,151				2,559				2,940
Settlements (units)			2,639				2,127				3,345				1,919
Backlog, end of period (units)			2,916				3,790				3,766				4,552
Loans closed		$	597,949			$	497,404			$	706,551			$	418,042

NVR, Inc. Notes to Consolidated Financial Statements (dollars in thousands, except per share data)

		Year Ended December 31, 2009
		4th				3rd				2nd				1st
		Quarter				Quarter				Quarter				Quarter
Revenues-homebuilding operations		$	730,140			$	792,510			$	612,488			$	548,329
Gross profit — homebuilding operations		$	137,919			$	155,868			$	118,248			$	85,699
Mortgage banking fees		$	15,662			$	21,506			$	12,943			$	10,270
Net income		$	60,639			$	72,127			$	41,426			$	17,988
Diluted earnings per share		$	9.61			$	11.59			$	6.79			$	3.02
Contracts for sale, net of cancellations (units)			2,000				2,255				2,728				2,426
Settlements (units)			2,550				2,671				2,048				1,773
Backlog, end of period (units)			3,531				4,081				4,497				3,817
Loans closed		$	542,147			$	603,317			$	487,618			$	427,294