What changed in this filing

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Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 144 added, 100 removed, 353 unchanged (41% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of June 30, 2022 and December 31, 2021

As of September 30, 2022 and December 31, 2021

(in thousands, except share and per share amounts)

September 30,

Cash and cash equivalents

14 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, 32,273,160 and 33,760,940 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 31,772,335 and 33,760,940 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Operations

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

For the Three and Nine Months Ended September 30, 2022 and 2021

(in thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Homebuilding revenues

14 unchanged sentences

Selling, general and administrative

Loss on debt extinguishment

Inventory impairment and other

7 unchanged sentences

Unaudited Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

3 unchanged sentences

Fair value of mortgage loans held for sale and other

Loss on debt extinguishment

Inventory impairment and other

17 unchanged sentences

Payments on revolving credit facilities

Proceeds from issuance of senior notes due 2029

Extinguishment of senior notes due 2025

Proceeds from issuance of insurance premium notes and other

Principal payments on insurance premium notes and other

Debt issuance costs

Net payments for mortgage repurchase facilities

3 unchanged sentences

Other financing activities

Net cash used in financing activities

Net cash (used in) provided by financing activities

Net (decrease) increase

11 unchanged sentences

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

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

For the Three and Nine Months Ended September 30, 2022 and 2021

(in thousands)

For the Three Months Ended June 30, 2022 and 2021

For the Three Months Ended September 30, 2022 and 2021

Additional Paid-In Capital

1 unchanged sentence

Total Stockholders'

Balance at March 31, 2022

Balance at June 30, 2022

Vesting of stock-based compensation awards

3 unchanged sentences

Cash dividends declared and dividend equivalents

Balance at September 30, 2022

Balance at June 30, 2021

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

Balance at September 30, 2021

For the Nine Months Ended September 30, 2022 and 2021

Additional Paid-In Capital

7 unchanged sentences

Cash dividends declared and dividend equivalents

Balance at June 30, 2022

Balance at September 30, 2022

Balance at December 31, 2020

3 unchanged sentences

Cash dividends declared and dividend equivalents

Balance at June 30, 2021

Balance at September 30, 2021

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

Basis of Presentation

6 unchanged sentences

Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.

We now have six states where both Century brands have a presence, and we believe there are more opportunities for increased penetration within our over 45 high-growth markets to enable both brands to benefit from increased scale and enhanced operational efficiencies.

Our homebuilding operations are organized into the following five reportable segments:

37 unchanged sentences

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,

Three Months Ended September 30,

Nine Months Ended September 30,

Century Complete

6 unchanged sentences

The following table summarizes total assets by segment (in thousands):

September 30,

Century Complete

2 unchanged sentences

Inventories included the following (in thousands):

September 30,

Homes under construction

8 unchanged sentences

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 $ 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.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 139.8 million and $ 164.3 million at September 30, 2022 and December 31, 2021, respectively, and carried a weighted average interest rate of approximately 5.3 % and 3.3 %, respectively .

As of September 30, 2022 and December 31, 2021, Inspire had mortgage loans held for sale with an aggregate fair value of $ 194.1 million and $ 353.1 million, respectively, and an aggregate outstanding principal balance of $ 199.7 million and $ 342.0 million, respectively.

Net losses on the sale of mortgage loans were $ 3.6 million and $ 1.4 million for the three and nine months ended September 30, 2022, respectively, and net gains on the sale of mortgage loans were $ 21.7 million and $ 64.2 million for the three and nine months ended September 30, 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.

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.

Losses from the change in fair value for mortgage loans held for sale were $ 8.1 million and $ 1.8 million for the three months ended September 30, 2022 and 2021, respectively, and were $ 16.7 million and $ 6.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Refer to Note 12 – Fair Value Disclosures for further information regarding our derivative instruments .

1 unchanged sentence

Prepaid expenses and other assets included the following (in thousands):

September 30,

Prepaid insurance

9 unchanged sentences

Total prepaid expenses and other assets

(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 .

(1) Restricted cash consists of restricted cash related to land development, 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

Accrued expenses and other liabilities included the following (in thousands):

September 30,

Earnest money deposits

Warranty reserve

Self-insurance reserve

Accrued compensation costs

9 unchanged sentences

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 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,

Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 0.1 million and $ 2.5 million during the three months ended September 30, 2022 and 2021 and we reduced our warranty reserve by $ 0.6 million and $ 4.7 million during the nine months ended September 30, 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 and nine months ended September 30, 2022 and 2021 are detailed in the table below (in thousands) :

Three Months Ended September 30,

Nine Months Ended September 30,

Beginning balance

2 unchanged sentences

Ending balance

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

Self-Insurance Reserve

We maintain general liability insurance coverage, including coverage for certain construction defects.

These insurance policies protect us against a portion of the risk of loss from claims, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy limits.

Prior to the year ended December 31, 2021, we generally maintained construction defect policies with lower self-insurance limits.

In circumstances where we have elected to retain a higher portion of the overall risk for construction defect claims in return for a lower initial premium, we reserve for the estimated costs that we will incur that are above our coverage limits or that are not covered by our insurance policies.

The reserve is recorded on an undiscounted basis at the time revenue is recognized for each home closing.

Amounts accrued, which are included in accrued expenses and other liabilities on the consolidated balance sheets, are based on third party actuarial analyses that are primarily based on industry data and partially on our historical claims, which include estimates of claims incurred but not yet reported.

Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs.

Our self-insurance liability is presented on a gross basis without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.

Estimates of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable.

Based on our third-party actuarial analysis, we increased our self-insurance reserve by $0.9 million during the three and nine months ended September

30, 2022 and recorded no change to our reserve during the three and nine months ended September 30, 2021, respectively.

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

Changes in our self-insurance reserve for incurred but not reported construction defect claims for the three and nine months ended September 30, 2022 and 2021 are detailed in the table below (in thousands) :

Three Months Ended September 30,

Nine Months Ended September 30,

Beginning balance

Self-insurance expense provisions

Self-insurance adjustment

Ending balance

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

September 30,

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.

(2) As of September 30, 2022, other financing obligations included $ 22.7 million related to insurance premium notes and certain secured borrowings, as well as $ 3.0 million outstanding under the Construction Loan Agreements.

As of December 31, 2021, other financing obligations included $ 9.2 million related to insurance premium notes and certain secured borrowings.

Construction Loan Agreements

On August 9, 2022 and March 17, 2022, certain wholly owned subsidiaries of Century Living, LLC entered into construction loan agreements with PNC Bank, National Association and U.S.

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

The construction loan agreements (which we refer to as the “Construction Loan Agreements”), collectively provide that we may borrow up to $ 128.0 million from the Lenders for purposes of construction of multi-family projects in Colorado, with advances made by the Lenders upon the satisfaction of certain conditions.

Borrowings under the Construction Loan Agreements bear interest at floating interest rates per annum equal to the Secured Overnight Financing Rate and the Bloomberg Short-term Bank Yield Index, plus an applicable margin .

The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates through August 9, 2026 , with the option to extend the maturity dates for a period of 12 months if certain conditions are satisfied.

The Construction Loan Agreements contain 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 September 30, 2022, $ 3.0 million was outstanding under the Construction Loan Agreements, with borrowings bearing a weighted average interest rate of 4.423 %, and we were in compliance with all covenants thereunder.

Revolving Line of Credit

2 unchanged sentences

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

Under the terms of the Second A&R Credit Agreement, the Company is entitled to request an increase in the size of the Credit Facility by an amount not exceeding $ 200 million.

Under the terms of the Second A&R Credit Agreement, the Company is entitled to request an increase in the size of the Credit Facility by an

amount not exceeding $ 200 million.

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.

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 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.

As of September 30, 2022 and December 31, 2021, $ 165.0 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

On May 4, 2018, September 14, 2018, and August 1, 2019, Inspire entered into mortgage warehouse facilities, with Comerica Bank, J.P.

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 $ 325.0 million as of June 30, 2022, secured by the mortgage loans financed thereunder.

Inspire is a party to mortgage warehouse facilities with Comerica Bank, J.P.

Morgan, and Wells Fargo (which we refer to as the “Repurchase Facilities”), which provide Inspire with uncommitted repurchase facilities of up to $ 275.0 million as of September 30, 2022, secured by the mortgage loans financed thereunder.

The Repurchase Facilities have varying short term maturity dates through August 15, 2023 and bear a weighted average interest rate of 4.208 %.

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 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.

As of September 30, 2022, and December 31, 2021, we had $ 195.0 million and $ 331.9 million outstanding under the Repurchase Facilities, respectively, and were in compliance with all covenants thereunder.

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

During the nine months ended September 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $ 1.4 million and $ 1.8 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.

As our qualifying assets exceeded our outstanding debt during the three and nine months ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest capitalized beginning of period

3 unchanged sentences

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period.

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 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 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.

Our 2022 estimated annual effective tax rate, before discrete items, of 23.6 % 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 and estimated federal energy home credits for the current year home deliveries, which combined resulted in a net decrease of 1.2 %.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law.

The IRA extended the energy efficient home credit which provides a tax credit for each home delivered that met the energy saving and certification requirements for homes delivered from January 1, 2022 (retroactively) through December 31, 2022, as well as modifies and increases the tax credit starting in 2023 through 2032.

Previously, the federal tax credit expired for homes delivered after December 31, 2021.

During the three months ended September 30, 2022 , our effective tax rate was benefited by a $13.6 million benefit as a result of the retroactive extension of the energy efficient home credit.

For the nine months ended September 30, 2022, our estimated annual rate of 23.6 % was impacted by discrete items which had a net impact of decreasing our rate by 1.2 %, including federal energy home tax credits claimed and the impact of excess tax benefits for vested stock-based compensation.

For the three months ended September 30, 2022 and 2021, we recorded income tax expense of $ 27.6 million and $ 31.8 million, respectively.

For the nine months ended September 30, 2022 and 2021, we recorded income tax expense of $ 128.9 million and $ 95.4 million, respectively.

Fair Value Disclosures

13 unchanged sentences

 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):

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

September 30,

Balance Sheet Classification

10 unchanged sentences

(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.

(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 7.6 %, 10.0 %, and $ 0.086 per year per loan, respectively as of September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Mortgage servicing rights

2 unchanged sentences

End of period

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Mortgage loans held-for-investment at fair value

4 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 June 30, 2022 and December 31, 2021, respectively (in thousands).

June 30, 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 September 30, 2022 and December 31, 2021, respectively (in thousands).

September 30, 2022

December 31, 2021

7 unchanged sentences

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

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 September 30, 2022, these amounts totaled $ 5.3 million and $ 3.8 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 3.875 % senior notes and 6.750 % senior notes, respectively.

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

(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.

(4) Other financing obligations included $ 22.7 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 2.40 % to 3.99 %, and $ 3.0 million related to outstanding borrowings on the Construction Loan Agreements that bore a weighted average interest rate of 4.423 % during the period ended September 30, 2022.

Other financing obligations included $ 9.2 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging 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 and six months ended June 30, 2022 and nominal impairment charges were recorded in the three and six months ended June 30, 2021.

No impairment charges were recorded in the three and nine months ended September 30, 2022.

No impairment charges were recorded in the three months ended September 30, 2021, and nominal impairment charges were recorded in the nine months ended September 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 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.

During the nine months ended September 30, 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 $ 55.43 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 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.

During the nine months ended September 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.

During the nine months ended September 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 $ 63.26 and $ 53.40 per share, respectively, that primarily vest over a three year period.

During the nine months ended September 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 June 30, 2022

As of September 30, 2022

Unvested units

1 unchanged sentence

Weighted-average period to recognize compensation cost

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.

During the three months ended September 30, 2022 and 2021, we recognized stock-based compensation expense of $ 5.2 million and $ 3.5 million, respectively.

During the nine months ended September 30, 2022 and 2021, we recognized stock-based compensation expense of $ 15.0 million and $ 10.8 million, respectively.

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

1 unchanged sentence

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 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.

As of September 30, 2022 and December 31, 2021, there were 31.8 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.

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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

During the nine months ended September 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 September 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 nine months ended September 30, 2022 and 2021, respectively (in thousands, except per share information):

Nine months ended September 30, 2022

Cash Dividends Declared and Paid

Declaration Date

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June 15, 2022

August 17, 2022

August 31, 2022

September 14, 2022

Nine months ended September 30, 2021

Cash Dividends Declared and Paid

Declaration Date

June 16, 2021

August 18, 2021

September 1, 2021

September 15, 2021

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.

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Morgan Securities LLC, BofA Securities, Inc., Citigroup Global Markets Inc., and Fifth Third Securities, Inc.

(which we refer to as the “Distribution Agreement”), as sales agents pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $ 100.0 million from time to time through any of the sales agents party thereto in “at-the-market” offerings, in accordance with the terms and conditions set forth in the Distribution Agreement.

(which we refer to as the “Distribution Agreement”), as sales agents pursuant to

which we may offer and sell shares of our common stock having an aggregate offering price of up to $ 100.0 million from time to time through any of the sales agents party thereto in “at-the-market” offerings, in accordance with the terms and conditions set forth in the Distribution Agreement.

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 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.

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

We did no t sell or issue any shares of our common stock during the three and nine months ended September 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 4.5 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.

During the three and nine months ended September 30, 2022, an aggregate of 0.5 million and 2.3 million shares, respectively, were repurchased for a total purchase price of approximately $ 22.3 million and $ 120.6 million, respectively, and a weighted average price of $ 44.58 and $ 52.32 per share, respectively.

During the three and nine months ended September 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 September 30, 2022 was 1,508,169 shares.

During the nine months ended September 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.

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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 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,

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

Three Months Ended September 30,

Nine Months Ended September 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 0.5 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 .

We excluded 0.5 million and 0.2 million common stock unit equivalents from diluted earnings per share during the three months ended September 30, 2022 and 2021, respectively, and we excluded 0.5 million and 0.2 million common stock unit equivalents from diluted earnings per share during the nine months ended September 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 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.

As of September 30, 2022 and December 31, 2021, we had $ 565 .8 million and $ 492.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

Legal Proceedings

We are subject to claims and lawsuits that arise primarily in the ordinary course of business, which consist primarily of construction claims.

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.

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 on our condensed consolidated statements of operations for our estimated loss.

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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