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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 141 added, 90 removed, 312 unchanged (43% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of March 31, 2022 and December 31, 2021

As of June 30, 2022 and December 31, 2021

(in thousands, except share and per share amounts)

15 unchanged sentences

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none outstanding

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 33,038,361 and 33,760,940 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 32,273,160 and 33,760,940 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2022 and 2021

For the Three and Six Months Ended June 30, 2022 and 2021

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Homebuilding revenues

6 unchanged sentences

Cost of home sales revenues

( 1,523,968 )

( 1,521,175 )

Cost of land sales and other revenues

Total homebuilding cost of revenues

( 1,532,826 )

( 1,538,195 )

Financial services costs

Selling, general and administrative

Inventory impairment and other

Other income (expense)

6 unchanged sentences

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2022 and 2021

For the Six Months Ended June 30, 2022 and 2021

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Fair value of mortgage loans held for sale and other

Inventory impairment and other

Deferred income taxes

7 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Investing activities

Purchases of property and equipment

Expenditures related to development of rental properties

Other investing activities

5 unchanged sentences

Principal payments on insurance premium notes and other

Net (payments) proceeds for mortgage repurchase facilities

Net payments for mortgage repurchase facilities

Withholding of common stock upon vesting of stock-based compensation awards

1 unchanged sentence

Dividend payments

Net cash (used in) provided by financing activities

Other financing activities

Net cash used in financing activities

Net (decrease) increase

3 unchanged sentences

Supplemental cash flow disclosure

Cash (refunds) paid for income taxes

Cash paid for income taxes

Cash and cash equivalents and Restricted cash

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2022 and 2021

For the Three and Six Months Ended June 30, 2022 and 2021

(in thousands)

For the Three Months Ended June 30, 2022 and 2021

Additional Paid-In Capital

1 unchanged sentence

Total Stockholders'

Balance at December 31, 2021

Balance at March 31, 2022

Vesting of stock-based compensation awards

3 unchanged sentences

Cash dividends declared and dividend equivalents

Balance at June 30, 2022

Balance at March 31, 2021

Vesting of stock-based compensation awards

Withholding of common stock upon vesting of stock-based compensation awards

Stock-based compensation expense

Cash dividends declared and dividend equivalents

Balance at June 30, 2021

For the Six Months Ended June 30, 2022 and 2021

Additional Paid-In Capital

Retained Earnings

Total Stockholders'

Balance at December 31, 2021

1 unchanged sentence

Withholding of common stock upon vesting of stock-based compensation awards

Repurchases of common stock

Stock-based compensation expense

Balance at March 31, 2021

Cash dividends declared and dividend equivalents

Balance at June 30, 2022

Balance at December 31, 2020

Vesting of stock-based compensation awards

Withholding of common stock upon vesting of stock-based compensation awards

Stock-based compensation expense

Cash dividends declared and dividend equivalents

Balance at June 30, 2021

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Basis of Presentation

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Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage, title, and insurance services, respectively, primarily to our homebuyers, have been identified as our Financial Services segment.

Additionally, our wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, primarily in Colorado, with the intent to dispose of properties shortly after achieving stabilized rental operations.

Century Living, LLC is included in our Corporate segment.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S.

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Our Corporate operations are a non-operating segment, as they serve to support our homebuilding, and to a lesser extent our Financial Services operations, through functions, such as our executive, finance, treasury, human resources, accounting and legal departments.

The following table summarizes total revenue and income before income tax expense by segment (in thousands ):

Three Months Ended March 31,

Century Living, LLC is included in our Corporate segment.

The following table summarizes total revenue and income (loss) before income tax expense by segment (in thousands ):

Three Months Ended June 30,

Six Months Ended June 30,

Century Complete

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Financial Services

Corporate assets primarily include certain cash and cash equivalents, certain property and equipment, prepaid insurance, and deferred financing costs on our revolving line of credit.

Corporate assets primarily include certain cash and cash equivalents, certain property and equipment, costs associated with development of multi-family rental properties, prepaid insurance, and deferred financing costs on our revolving line of credit.

Inventories included the following (in thousands):

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Inspire primarily finances these loans using its mortgage repurchase facilities.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 230.7 million and $ 164.3 million at March 31, 2022 and December 31, 2021, respectively, and carried a weighted average interest rate of approximately 4.4 % and 3.3 %, respectively .

As of March 31, 2022 and December 31, 2021, Inspire had mortgage loans held for sale with an aggregate fair value of $ 199.0 million and $ 353.1 million, respectively, and an aggregate outstanding principal balance of $ 197.6 million and $ 342.0 million, respectively.

Our net gains on the sale of mortgage loans were $ 0.7 million and $ 18.0 million for the three months ended March 31, 2022 and 2021, respectively, and are included in the financial services revenue on the condensed consolidated statements of operations.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 222.5 million and $ 164.3 million at June 30, 2022 and December 31, 2021, respectively, and carried a weighted average interest rate of approximately 5.2 % and 3.3 %, respectively .

As of June 30, 2022 and December 31, 2021, Inspire had mortgage loans held for sale with an aggregate fair value of $ 216.4 million and $ 353.1 million, respectively, and an aggregate outstanding principal balance of $ 213.8 million and $ 342.0 million, respectively.

Our net gains on the sale of mortgage loans were $ 1.5 million and $ 24.5 million for the three months ended June 30, 2022 and 2021, respectively, and were $ 2.2 million and $ 42.5 million for the six months ended June 30, 2022 and 2021, respectively, and are included in financial services revenue on the condensed consolidated statements of operations.

Interest rate risks related to these obligations are typically mitigated by the preselling of loans to investors or through our interest rate hedging program.

2 unchanged sentences

Gains and losses from the changes in fair value are reflected in financial services revenue on the condensed consolidated statements of operations.

Losses from the change in fair value for mortgage loans held for sale were $ 9.7 million and $ 4.9 million for the three months ended March 31, 2022 and 2021, respectively .

Gains from the change in fair value for mortgage loans held for sale were $ 1.1 million and $ 0.6 million for the three months ended June 30, 2022 and 2021, respectively, and losses from the change in fair value were $ 8.6 million and $ 4.3 million for the six months ended June 30, 2022 and 2021, respectively.

Refer to Note 11 – Fair Value Disclosures for further information regarding our derivative instruments .

7 unchanged sentences

Right of use assets

Other assets and prepaid expenses

Mortgage loans held for investment

Mortgage loans held for investment at fair value

Mortgage loans held for investment at amortized cost

Derivative assets and mortgage servicing rights

Other assets and prepaid expenses

Total prepaid expenses and other assets

(1) Restricted cash consists of earnest money deposits for home sale contracts held by third parties as required by various jurisdictions, and certain pledge balances associated with our mortgage repurchase facilities.

(1) Restricted cash consists of restricted cash related to land purchases, earnest money deposits for home sale contracts held by third parties as required by various jurisdictions, and certain pledge balances associated with our mortgage repurchase facilities .

Accrued Expenses and Other Liabilities

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We subsequently assess the adequacy of our warranty accrual on a quarterly basis through a model that incorporates historical payment trends and adjust the amounts recorded, if necessary.

Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 0.6 million and $ 1.8 million during the three months ended March 31, 2022 and 2021, respectively.

These adjustments are included in cost of home sales revenues on our condensed consolidated statements of operations.

Changes in our warranty accrual for the three months ended March 31, 2022 and 2021 are detailed in the table below (in thousands) :

Three Months Ended March 31,

Based on warranty payment trends relative to our estimates at the time of home closing, we increased our warranty reserve by $ 58.0 thousand during the three months ended June 30, 2022 and reduced our warranty reserve by $ 0.4 million during the three months ended June 30, 2021, respectively, and we reduced our warranty reserve by $ 0.5 million and $ 2.2 million during the six months ended June 30, 2022 and 2021, respectively.

These adjustments are included in cost of home sales revenues on our condensed consolidated statements of

Changes in our warranty accrual for the three and six months ended June 30, 2022 and 2021 are detailed in the table below (in thousands) :

Three Months Ended June 30,

Six Months Ended June 30,

Beginning balance

2 unchanged sentences

Ending balance

Our outstanding debt obligations included the following as of March 31, 2022 and December 31, 2021 (in thousands):

Our outstanding debt obligations included the following as of June 30, 2022 and December 31, 2021 (in thousands):

3.875 % senior notes, due August 2029 (1)

5 unchanged sentences

(1) The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest expense over the respective terms of the senior notes.

(2) As of June 30, 2022, other financing obligations included $ 18.2 million related to insurance premium notes and certain secured borrowings, as well as $ 0.9 million outstanding under the Construction Loan Agreement.

As of June 30, 2021, other financing obligations included $ 9.2 million related to insurance premium notes and certain secured borrowings.

Construction Loan Agreement

On March 17, 2022, a wholly owned subsidiary of Century Living entered into a Construction Loan Agreement with U.S.

Bank National Association, a national banking association, d/b/a Housing Capital Company (which we refer to as “the Lender”).

The Construction Loan Agreement provides that we may borrow up to $ 80.0 million from the Lender for purposes of construction of a multi-family project in Colorado, with advances made by the Lender upon the satisfaction of certain conditions.

Borrowings under the Construction Loan Agreement bear interest at a rate per annum equal to a forward-looking term rate based on the secured overnight financing rate (which we refer to as “SOFR”) plus 210 basis points.

The outstanding principal balance and all accrued and unpaid interest is due on the maturity date of March 17, 2026 , and prepayments of the unpaid principal balance and accrued interest may be prepaid in full or in part, without premium or penalty.

We have the option to extend the maturity date for a period of 12 months if certain conditions are satisfied.

The Construction Loan Agreement contains customary affirmative and negative covenants (including covenants related to construction completion, and limitations on the use of loan proceeds, transfers of land, equipment, and improvements), as well as customary events of default.

As of June 30, 2022, $ 0.9 million was outstanding under the Construction Loan Agreement, and we were in compliance with all covenants thereunder.

Revolving Line of Credit

On May 21, 2021, we entered into a Second Amended and Restated Credit Agreement (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto.

The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement , provides us with

a senior unsecured revolving line of credit (which we refer to as the “Credit Facility”) of up to $ 800 million, and unless terminated earlier, will mature on April 30, 2026.

The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement , provides us with a senior unsecured revolving line of credit (which we refer to as the “Credit Facility”) of up to $ 800.0 million, and unless terminated earlier, will mature on April 30, 2026.

The Credit Facility includes a $ 250.0 million sublimit for standby letters of credit.

1 unchanged sentence

Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries.

The Second A&R Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default.

merger, consolidation or asset sale transactions), as well as customary events of default.

Borrowings under the Second A&R Credit Agreement bear interest at a floating rate equal to the adjusted Eurodollar Rate plus an applicable margin between 2.05 % and 2.65 % per annum, and if made available in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.05 % and 1.65 % per annum.

As of March 31, 2022 and December 31, 2021, no amounts were outstanding under the Credit Facility, and we were in compliance with all covenants.

As of June 30, 2022 and December 31, 2021, $ 141.0 million and no amounts were outstanding under the Credit Facility, respectively, and we were in compliance with all covenants under the Second A&R Credit Agreement.

Mortgage Repurchase Facilities – Financial Services

1 unchanged sentence

Morgan, and Wells Fargo, respectively.

The mortgage warehouse lines of credit (which we refer to as the “Repurchase Facilities”), which were increased in 2020, provide Inspire with uncommitted repurchase facilities of up to $ 325 million as of March 31, 2022, secured by the mortgage loans financed thereunder.

The mortgage warehouse lines of credit (which we refer to as the “Repurchase Facilities”), which were increased in 2020, provide Inspire with uncommitted repurchase facilities of up to $ 325.0 million as of June 30, 2022, secured by the mortgage loans financed thereunder.

The Repurchase Facilities have varying short term maturity dates through August 23, 2022 and bear a weighted average interest rate of 2.938 %.

Amounts outstanding under the Repurchase Facilities are not guaranteed by us or any of our subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type.

As of March 31, 2022 and December 31, 2021, we had $ 193.0 million and $ 331.9 million outstanding under the Repurchase Facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended March 31, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $ 0.4 million and $ 0.8 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

Interest is capitalized to inventories while the related communities are being actively developed and until homes are completed.

As our qualifying assets exceeded our outstanding debt during the three months ended March 31, 2022 and 2021, we capitalized all interest costs incurred during these periods, except for interest incurred on our Repurchase Facilities.

As of June 30, 2022, and December 31, 2021, we had $ 209.0 million and $ 331.9 million outstanding under the Repurchase Facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended June 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $ 0.4 million and $ 0.6 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

During the six months ended June 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $ 0.8 million and $ 1.4 million, respectively.

Interest on Senior Notes and Revolving Line of Credit

Interest on our senior notes and Revolving Line of Credit is capitalized to inventories while the related communities are being actively developed and until homes are completed.

As our qualifying assets exceeded our outstanding debt during the three and six months ended June 30, 2022 and 2021, we capitalized all interest costs incurred on these facilities during these periods.

Our interest costs were as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest capitalized beginning of period

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Our 2022 estimated annual effective tax rate, before discrete items, of 25.6 % is driven by our blended federal and state statutory rate of 24.8 %, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation which increased our rate by 0.8 %.

For the three months ended March 31, 2022, our estimated annual rate of 25.5 % was impacted by discrete items which had a net impact of decreasing our rate by 1.0 %, including excess tax benefits for vested stock-based compensation and federal energy tax credits claimed on prior year home deliveries in excess of previous estimates .

Our estimated annual rate for the three months ended March 31, 2022 of 25.5 % increased by 330 basis points as compared to our effective tax rate for the year ended December 31, 2021 of 22.2 %.

The increase in our estimated rate is driven by the expiration of the

Energy Efficient Home Credit on December 31, 2021.

For the six months ended June 30, 2022, our estimated annual rate of 25.6 % was impacted by discrete items which had a net impact of decreasing our rate by 0.4 %, including excess tax benefits for vested stock-based compensation and federal energy tax credits claimed on prior year home deliveries in excess of previous estimates .

Our estimated annual rate for the six months ended June 30, 2022 of 25.6 % increased by 340 basis points as compared to our effective tax rate for the year ended December 31, 2021 of 22.2 %.

The increase in our estimated rate is driven by the expiration of the Energy Efficient Home Credit on December 31, 2021.

The Energy Efficient Home Credit provided a $ 2,000 tax credit for each home delivered that met the energy saving and certification requirements under the statute.

For the three months ended March 31, 2022 and 2021, we recorded income tax expense of $ 46.3 million and $ 29.4 million, respectiv ely.

For the three months ended June 30, 2022 and 2021, we recorded income tax expense of $ 55.0 million and $ 34.2 million, respectively.

For the six months ended June 30, 2022 and 2021, we recorded income tax expense of $ 101.3 million and $ 63.6 million, respectively.

Fair Value Disclosures

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The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service.

 Mortgage loans held for investment – The fair value of mortgage loans held for investment is calculated based on Level 3 analysis which incorporates information including the value of underlying collateral, from markets where there is little observable trading activity.

The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, respectively (in thousands):

 Mortgage loans held for investment at fair value – The fair value of mortgage loans held for investment at fair value is calculated based on Level 3 analysis which incorporates information including the value of underlying collateral, from markets where there is little observable trading activity.

The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021, respectively (in thousands):

Balance Sheet Classification

1 unchanged sentence

Mortgage loans held for sale

Mortgage loans held for investment (1)

Mortgage loans held for investment at fair value (1)

Prepaid expenses and other assets

5 unchanged sentences

Accrued expenses and other liabilities

(1) The unobservable inputs used in the valuation of the mortgage loans held for investment include, among other items, the value of underlying collateral, from markets where there is little observable trading activity.

(2) The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were 7.1 %, 9.9 %, and $ 0.090 per year per loan, respectively as of March 31, 2022, and 8.5 %, 9.9 %, and $ 0.085 per year per loan, respectively, as of December 31, 2021.

(1) The unobservable inputs used in the valuation of the mortgage loans held for investment at fair value include, among other items, the value of underlying collateral, from markets where there is little observable trading activity.

(2) The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were 7.7 %, 9.9 %, and $ 0.086 per year per loan, respectively as of June 30, 2022, and 8.5 %, 9.9 %, and $ 0.085 per year per loan, respectively, as of December 31, 2021.

The high and low end of the range of unobservable inputs used in the valuation did not result in a significant change to the fair value measurement.

The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements, with gains and losses from the changes in fair value reflected in financial services revenue on the condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Mortgage servicing rights

2 unchanged sentences

End of period

Three Months Ended March 31,

Mortgage loans held-for-investment

Three Months Ended June 30,

Six Months Ended June 30,

Mortgage loans held-for-investment at fair value

Beginning of period

3 unchanged sentences

End of period

For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at March 31, 2022 and December 31, 2021, respectively (in thousands).

March 31, 2022

For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at June 30, 2022 and December 31, 2021, respectively (in thousands).

June 30, 2022

December 31, 2021

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(2) Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts.

As of March 31, 2022, these amounts totaled $ 5.7 million and $ 4.2 million for the 3.875 % senior notes and 6.750 % senior notes, respectively.

As of June 30, 2022, these amounts totaled $ 5.5 million and $ 4.0 million for the 3.875 % senior notes and 6.750 % senior notes, respectively.

As of December 31, 2021, these amounts totaled $ 5.9 million and $ 4.4 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

(3) Carrying amount approximates fair value due to short-term nature and interest rate terms.

(4) Other financing obligations included insurance premium notes and certain secured borrowings and generally bore interest rates ranging from 2.40 % to 3.24 % during the period ended March 31, 2022 and from 2.99 % to 3.24 % during the period ended December 31, 2021.

(4) Other financing obligations included $ 0.9 million related to outstanding borrowings on the Construction Loan Agreement, and $ 18.2 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 2.40 % to 3.64 % during the period ended June 30, 2022 and from 2.99 % to 3.24 % during the period ended December 31, 2021.

Non-financial assets and liabilities include items such as inventory and property and equipment that are measured at fair value when acquired and as a result of impairments, if deemed necessary.

No impairment charges were recorded in the three months ended March 31, 2022 and 2021, respectively.

No impairment charges were recorded in the three and six months ended June 30, 2022 and nominal impairment charges were recorded in the three and six months ended June 30, 2021.

When impairment charges are recognized, the estimated fair value of communities are determined through a discounted cash flow approach utilizing Level 3 inputs.

1 unchanged sentence

Stock-Based Compensation

During the three months ended March 31, 2022 and 2021, we granted performance share units (which we refer to as “PSUs”) covering up to 0.5 million and 0.2 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $ 55.93 and $ 58.28 per share, respectively, that are subject to both service and performance vesting conditions.

During the six months ended June 31, 2022 and 2021, we granted performance share units (which we refer to as “PSUs”) covering up to 0.5 million and 0.2 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $ 55.93 and $ 58.28 per share, respectively, that are subject to both service and performance vesting conditions.

The quantity of shares that will ultimately vest for the PSUs ranges from 0 % to up to 250 % of a targeted number of shares for each participant and will be determined based on an achievement of a three year adjusted pre-tax income performance goal.

During the three months ended March 31, 2022 and 2021, we issued 0.3 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods.

Approximately 0.9 million shares will vest in 2022 to 2024 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

During the three months ended March 31, 2022 and 2021, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.2 million shares of

common stock, respectively, with a grant date fair value of $ 64.37 and $ 52.74 per share, respectively, that primarily vest over a three year period.

During the six months ended June 30, 2022 and 2021, we issued 0.3 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods.

Approximately 0.9 million shares will vest from 2022 to 2024 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

During the six months ended June 30, 2022 and 2021, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.2 million shares of common stock, respectively, with a grant date fair value of $ 63.77 and $ 53.43 per share, respectively, that primarily vest over a three year period.

During the six months ended June 30, 2022, we granted 11.0 thousand shares of common stock on an unrestricted basis (which we refer to as “stock awards”) with a grant date fair value of $ 54.46 per share to our non-employee directors.

A summary of our outstanding PSUs, assuming the current estimated level of performance achievement, and RSUs are as follows (in thousands, except years):

As of March 31, 2022

As of June 30, 2022

Unvested units

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Weighted-average period to recognize compensation cost

During the three months ended March 31, 2022 and 2021, we recognized stock-based compensation expense of $ 4.1 million and $ 3.0 million, respectively.

During the three months ended June 30, 2022 and 2021, we recognized stock-based compensation expense of $ 5.7 million and $ 4.2 million, respectively.

During the six months ended June 30, 2022 and 2021, we recognized stock-based compensation expense of $ 9.8 million and $ 7.2 million, respectively.

Stock-based compensation expense is included in selling, general, and administrative expense on our condensed consolidated statements of operations.

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Our authorized capital stock consists of 100.0 million shares of common stock, par value $ 0.01 per share, and 50.0 million shares of preferred stock, par value $ 0.01 per share.

As of March 31, 2022 and December 31, 2021, there were 33.0 million and 33.8 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding.

On May 10, 2017, our stockholders approved the adoption of the Century Communities, Inc.

2017 Omnibus Incentive Plan (which we refer to as our “2017 Incentive Plan”), which replaced our First Amended & Restated 2013 Long-Term Incentive Plan.

We had reserved a total of 1.8 million shares of our common stock for issuance under our First Amended & Restated 2013 Long-Term Incentive Plan, of which approximately 0.6 million shares rolled over into the 2017 Incentive Plan when it became effective.

On May 8, 2019, our stockholders approved the Century Communities, Inc.

Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as our “Amended 2017 Incentive Plan”), which increased the number of shares of our common stock authorized for issuance under the 2017 Incentive Plan by an additional 1.6 million shares.

We issued 0.5 million and 0.6 million shares of common stock related to the vesting and settlement of RSUs and PSUs during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, approximately 0.3 million shares of common stock remained available for issuance under the Amended 2017 Incentive Plan.

On May 19, 2021, our Board of Directors announced the approval of the initiation of a quarterly cash dividend.

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the three months ended March 31, 2022 (in thousands, except per share information):

As of June 30, 2022 and December 31, 2021, there were 32.3 million and 33.8 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding.

On May 4, 2022, the stockholders approved the adoption of the Century Communities, Inc.

2022 Omnibus Incentive Plan (which we refer to as the “2022 Incentive Plan”), which replaced the Century Communities, Inc.

Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as our “2017 Incentive Plan”).

Under the 2022 Incentive Plan, 3.1 million shares of common stock are available for issuance to eligible participants, plus 51.2 thousand shares of our common stock that remained available for issuance under the 2017 Incentive Plan and any shares subject to awards outstanding under the 2017 Incentive Plan that are subsequently forfeited, cancelled, expire or otherwise terminate without the issuance of such shares.

During the six months ended June 30, 2022 and 2021, we issued 0.5 million and 0.7 million shares of common stock, respectively, related to the vesting and settlement of RSUs, PSUs, and stock awards.

As of June 30, 2022, approximately 3.1 million shares of common stock remained available for issuance under the 2022 Incentive Plan.

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the six months ended June 30, 2022 (in thousands, except per share information):

Cash Dividends Declared

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March 16, 2022

Under the Amended 2017 Incentive Plan, at the discretion of the Compensation Committee of the Board of Directors, RSUs and PSUs granted under the plan have the right to earn dividend equivalents, which entitles the holders of such RSUs and PSUs to additional RSUs and PSUs equal to the same dividend value per share as holders of common stock.

June 15, 2022

Under the 2022 Incentive Plan and the previous 2017 Incentive Plan, at the discretion of the Compensation Committee of the Board of Directors, RSUs and PSUs granted under the plan have the right to earn dividend equivalents, which entitles the holders of such RSUs and PSUs to additional RSUs and PSUs equal to the same dividend value per share as holders of common stock.

Dividend equivalents are subject to the same vesting and other terms and conditions as the underlying RSUs and PSUs.

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This Distribution Agreement, which superseded and replaced a prior similar distribution agreement, and was amended in July 2021 to acknowledge our filing of a new registration statement on Form S-3 registering the issuance and sale of shares of our common stock under the Distribution Agreement and replace Citigroup Global Markets Inc.

with Wells Fargo Securities, LLC as a sales agent, had all $ 100.0 million available for sale as of March 31, 2022.

We did no t sell or issue any shares of our common stock during the three months ended March 31, 2022 and 2021, respectively.

with Wells Fargo Securities, LLC as a sales agent, had all $ 100.0 million available for sale as of June 30, 2022.

We did no t sell or issue any shares of our common stock during the three and six months ended June 30, 2022 and 2021, respectively.

The Distribution Agreement will remain in full force and effect until terminated by either party pursuant to the terms of the agreement or such date that the maximum offering amount has been sold in accordance with the terms of the agreement .

On November 6, 2018, we authorized a stock repurchase program, under which we may repurchase up to 4,500,000 shares of our outstanding common stock.

During the three months ended March 31, 2022, an aggregate of 1.0 million shares were repurchased for a total purchase price of approximately $ 62.4 million and a weighted average price of $ 61.52 per share.

During the three months ended

March 31, 2021 we did not repurchase any shares of common stock.

The maximum number of shares available to be purchased under the stock repurchase program as of March 31, 2022 was 2,799,552 shares.

During the three months ended March 31, 2022 and 2021, shares of common stock at a total cost of $ 12.1 million and $ 12.2 million, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock-based compensation awards.

Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased and retired by us but are not part of publicly announced share repurchase programs.

On November 6, 2018, we authorized a stock repurchase program, under which we may repurchase up to 4.5 million shares of our outstanding common stock.

During the three and six months ended June 30, 2022, an aggregate of 0.8 million and 1.8 million shares, respectively, were repurchased for a total purchase price of approximately $ 35.9 million and $ 98.3 million, respectively, and a weighted average price of $ 45.42 and $ 54.46 per share, respectively.

During the three and six months ended June 30, 2021, we did not repurchase any shares of common stock.

The maximum number of shares available to be repurchased under the stock repurchase program as of June 30, 2022 was 2,008,994 shares.

During the six months ended June 30, 2022 and 2021, shares of common stock at a total cost of $ 12.7 million and $ 13.7 million, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock-based compensation awards.

Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased and retired by us but are not part of our publicly announced share repurchase programs.

Earnings Per Share

We use the treasury stock method to calculate earnings per share as our currently issued non-vested RSUs and PSUs do not have participating rights.

The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share information):

Three Months Ended March 31,

The following table sets forth the computation of basic and diluted EPS for the three and six months ended June 30, 2022 and 2021 (in thousands, except share and per share information):

Three Months Ended June 30,

Six Months Ended June 30,

Weighted average common shares outstanding - basic

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Stock-based awards are excluded from the calculation of diluted EPS in the event they are subject to unsatisfied performance conditions or are antidilutive.

We excluded 0.6 million and 0.8 million common stock unit equivalents from diluted earnings per share during each of the three months ended March 31, 2022 and 2021, respectively, related to the PSUs for which performance conditions remained unsatisfied .

We excluded 0.5 million and 0.8 million common stock unit equivalents from diluted earnings per share during the three months ended June 30, 2022 and 2021, respectively, and we excluded 0.5 million and 0.8 million common stock unit equivalents from diluted earnings per share during the six months ended June 30, 2022 and 2021, respectively, related to the PSUs for which performance conditions remained unsatisfied .

Commitments and Contingencies

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In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities.

As of March 31, 2022 and December 31, 2021, we had $ 528.9 million and $ 492.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

As of June 30, 2022 and December 31, 2021, we had $ 564.0 million and $ 492.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

Legal Proceedings

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It is the opinion of our management that if the claims have merit, parties other than the Company would be, at least in part, liable for the claims, and the eventual outcome of these claims will not have a material adverse effect upon our consolidated financial condition, results of operations, or cash flows.

When we believe that a loss is probable and estimable, we record a charge to selling, general, and administrative expense on our condensed consolidated statements of operations for our estimated loss.

When we believe that a loss is probable and estimable, we record a charge on our condensed consolidated statements of operations for our estimated loss.

Under various insurance policies, we have the ability to recoup costs in excess of applicable self-insured retentions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements