What changed in this filing

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Item 1. Financial Statements

2024-04-25 compared with 2023-10-26 · 118 added, 151 removed, 347 unchanged (44% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022

As of March 31, 2024 and December 31, 2023

(in thousands, except share and per share amounts)

September 30,

Cash and cash equivalents

5 unchanged sentences

Deferred tax assets, net

Liabilities and stockholders'

Liabilities and stockholders' equity

Accounts payable

4 unchanged sentences

Total liabilities

Stockholders'

Stockholders' equity:

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

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 31,773,033 and 31,772,791 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 31,790,585 and 31,774,615 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

Retained earnings

Total stockholders'

Total liabilities and stockholders'

Total stockholders' equity

Total liabilities and stockholders' equity

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Unaudited Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Homebuilding revenues

6 unchanged sentences

Cost of home sales revenues

( 1,910,630 )

( 2,365,633 )

Cost of land sales and other revenues

Total homebuilding cost of revenues

( 1,911,005 )

( 2,374,784 )

Financial services costs

8 unchanged sentences

Unaudited Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

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

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

Depreciation and amortization

1 unchanged sentence

Fair value of mortgage loans held for sale and other

Impairment on other investment

Purchase price accounting for acquired work in process inventory

Abandonment of lot option contracts

8 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing activities

1 unchanged sentence

Expenditures related to development of rental properties

Other investing activities

Business combination and other investing activities

Net cash used in investing activities

5 unchanged sentences

Principal payments on insurance premium notes and other

Net payments for mortgage repurchase facilities

Net proceeds (payments) for mortgage repurchase facilities

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

3 unchanged sentences

Net cash used in financing activities

Net increase (decrease)

Cash and cash equivalents and Restricted cash

10 unchanged sentences

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

(in thousands)

For the Three Months Ended September 30, 2023 and 2022

Additional Paid-In Capital

Retained Earnings

Total Stockholders'

Balance at June 30, 2023

Vesting of stock-based compensation awards

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

Repurchases of common stock

Stock-based compensation expense

Cash dividends declared and dividend equivalents

Balance at September 30, 2023

Balance at June 30, 2022

Vesting of stock-based compensation awards

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

Repurchases of common stock

Stock-based compensation expense

Cash dividends declared and dividend equivalents

Balance at September 30, 2022

For the Nine Months Ended September 30, 2023 and 2022

Additional Paid-In Capital

Retained Earnings

Total Stockholders'

Total Stockholders' Equity

Balance at December 31, 2023

4 unchanged sentences

Cash dividends declared and dividend equivalents

Balance at September 30, 2023

Balance at March 31, 2024

Balance at December 31, 2022

1 unchanged sentence

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

Repurchases of common stock

Stock-based compensation expense

Cash dividends declared and dividend equivalents

Balance at September 30, 2022

Balance at March 31, 2023

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2023

March 31, 2024

Basis of Presentation

1 unchanged sentence

(which we refer to as “we,” “CCS,” or the “Company”), together with its subsidiaries, is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 18 states.

In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land.

In many of our projects, in addition to building homes, we entitle and develop the underlying land.

We build and sell homes under our Century Communities and Century Complete brands.

Our Century Communities brand targets a wide range of buyer profiles including:

Our Century Communities brand has an emphasis on serving the entry-level homebuilding market but offers a wide range of buyer profiles including:

entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities.

2 unchanged sentences

West, Mountain, Texas, Southeast, and Century Complete.

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.

Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, IHL Home Insurance Agency, LLC, and IHL Escrow Inc., which provide mortgage, title, insurance and escrow 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, currently all located in Colorado.

12 unchanged sentences

Accordingly, actual results could differ from those estimates.

‎ Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation.

Business Acquisition

On January 22, 2024, we closed on the acquisition of substantially all the assets of Landmark Homes of Tennessee, Inc.

(“Landmark”), a homebuilder with operations, including six active communities, in Nashville, Tennessee, for approximately $ 33.4 million in cash, inclusive of customary holdbacks.

Recently Issued Accounting Standards

There are no recent accounting standards that are expected to have a material impact on our consolidated financial statements.

In December 2023, the Financial Accounting Standards Board (which we refer to as “FASB”) issued Accounting Standards Update (which we refer to as “ASU”) No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 requires more disaggregated income tax disclosures, including additional information in the rate reconciliation and additional disclosures about income taxes paid.

ASU 2023-09 will become effective for us for the fiscal year ending December 31, 2025.

Early adoption is permitted, and guidance should be applied prospectively, with an option to apply guidance retrospectively.

We are currently evaluating the impact of the adoption of ASU 2023-09 on our consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (which we refer to as “CODM”) and included within each reported measure of segment profit or loss.

The guidance also expands disclosure requirements for interim periods, as well as requires disclosure of other segment items, including the title and position of the entity’s CODM .

ASU 2023-07 will become effective for us for the fiscal year ending December 31, 2024, and for interim periods starting in our first quarter of 2025 .

Early adoption is permitted, and guidance is required to be applied retrospectively.

We are currently evaluating the impact of the adoption of ASU 2023-07 on our consolidated financial statements and related disclosures.

Reporting Segments

4 unchanged sentences

Each of our four geographic regions is considered a separate operating segment.

Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the

internet, and generally provides no option or upgrade selections.

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

Our Century Complete brand currently has operations in 11 states and it is considered a separate operating segment.

6 unchanged sentences

 Century Complete (Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Louisiana, Michigan, North Carolina, Ohio, South Carolina)

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment.

Accordingly, we have presented segment information under this new basis as of and for the three and nine months ended September 30, 2023, and we have restated the corresponding segment information for those segments as of December 31, 2022 and for the three and nine months ended September 30, 2022 .

We have identified our Financial Services operations, which provide mortgage, title, and insurance services to our homebuyers, as a sixth reportable segment.

We have identified our Financial Services operations, which provide mortgage, title, insurance and escrow services to our homebuyers, as a sixth reportable segment.

Our Corporate operations are a non-operating segment, as our Corporate operations 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.

2 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Century Complete

6 unchanged sentences

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

September 30,

Century Complete

Financial Services

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

Corporate assets primarily include costs associated with development of multi-family rental properties, certain cash and cash equivalents, certain property and equipment, deferred tax assets, certain receivables, and prepaid insurance.

Inventories included the following (in thousands):

September 30,

Homes under construction

11 unchanged sentences

Net gains and losses from the sale of mortgage loans held for sale, which are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale, are also included in financial services revenue on the consolidated statements of operations.

Financial services revenue also includes fees earned from originating mortgage loans which are recognized at the time the mortgage loans are funded, including origination fees, discount points to reduce interest rates and fees earned from forward commitment agreements entered into between our homebuilding segments and Financial Services.

As of September 30, 2023 and December 31, 2022, Inspire had mortgage loans held for sale with an aggregate fair value of $ 162.7 million and $ 203.6 million, respectively, and an aggregate outstanding principal balance of $ 165.7 million and $ 202.0 million, respectively.

Net losses on the sale of mortgage loans were $ 6.9 million and $ 3.4 million for the three and nine months ended September 30, 2023, respectively, and net gains on the sale of mortgage loans were $ 4.5 million and $ 15.3 million for the three and nine months ended September 30, 2022, respectively.

Losses from the change in fair value for mortgage loans held for sale were $ 2.9 million and $ 4.9 million for the three and nine months ended September 30, 2023, respectively, and were $ 8.1 million and $ 16.7 million for the three and nine months ended September 30, 2022, respectively.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 138.9 million and $ 68.1 million at September 30, 2023 and December 31, 2022, respectively, and carried a weighted average interest rate of approximately 6.0 % and 6.1 %, respectively .

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

Financial services revenue also includes fees earned from originating mortgage loans which are recognized at the time the mortgage loans are funded, which include origination fees and discount points to reduce interest rates based on commitment agreements entered into between our homebuilding and Financial Services segments.

As of March 31, 2024 and December 31, 2023, Inspire had mortgage loans held for sale with an aggregate fair value of $ 217.7 million and $ 251.9 million, respectively, and an aggregate outstanding principal balance of $ 218.6 million and $ 247.7 million, respectively.

Net gains on the sale of mortgage loans were $ 2.0 million and $ 1.8 million for the three months ended March 31, 2024 and 2023, respectively.

The loss from the change in fair value for mortgage loans held for sale was $ 5.0 million for the three months ended March 31, 2024, and was nominal for the three months ended March 31, 2023.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 147.1 million and $ 49.6 million at March 31, 2024 and December 31, 2023, respectively, and carried a weighted average interest rate of approximately 5.5 % and 5.8 %, respectively .

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

Derivative instruments used to economically hedge our market and interest rate risk are carried at fair value.

Derivative instruments typically include interest rate lock commitments and forward commitments on mortgage-backed securities.

Changes in fair value of these derivatives as well as any gains or losses upon settlement

are reflected in financial services revenue on our condensed consolidated statements of operations.

Changes in fair value of these derivatives as well as any gains or losses upon settlement are reflected in financial services revenue on our condensed consolidated statements of operations.

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

12 unchanged sentences

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

September 30,

Earnest money deposits

4 unchanged sentences

Accrued interest

Income taxes payable

Derivative liabilities

4 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 reduced our warranty reserve by $ 0.5 million and $ 0.1 million during the three months ended September 30, 2023 and 2022, respectively, and we reduced our warranty reserve by $ 1.2 million and $ 0.6 million during the nine months ended September 30, 2023 and 2022, respectively.

Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 1.3 million and $ 0.5 million during the three months ended March 31, 2024 and 2023, 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, 2023 and 2022 are detailed in the table below (in thousands) :

Three Months Ended September 30,

Nine Months Ended September 30,

Changes in our warranty accrual for the three months ended March 31, 2024 and 2023 are detailed in the table below (in thousands) :

Three Months Ended March 31,

Beginning balance

11 unchanged sentences

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 reduced our self-insurance reserve by $ 3.4 million during the three and nine months ended September 30, 2023, and we increased our self-insurance reserve by $ 0.9 million during the three and nine months ended September 30, 2022.

During the three months ended March 31, 2024 and 2023, we recorded no change to our self-insurance reserve.

Any 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, 2023 and 2022 are detailed in the table below (in thousands) :

Three Months Ended September 30,

Nine Months Ended September 30,

Changes in our self-insurance reserve for incurred but not reported construction defect claims for the three months ended March 31, 2024 and 2023 are detailed in the table below (in thousands) :

Three Months Ended March 31,

Beginning balance

2 unchanged sentences

Ending balance

Our outstanding debt obligations included the following as of September 30, 2023 and December 31, 2022 (in thousands):

September 30,

Our outstanding debt obligations included the following as of March 31, 2024 and December 31, 2023 (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 September 30, 2023, other financing obligations included $ 30.0 million related to insurance premium notes and certain secured borrowings, as well as $ 28.8 million outstanding under construction loan agreements.

(2) As of March 31, 2024, other financing obligations included $ 15.6 million related to insurance premium notes and certain secured borrowings, as well as $ 60.9 million outstanding under construction loan agreements.

As of December 31, 2023, other financing obligations included $ 24.7 million related to insurance premium notes and certain secured borrowings, as well as $ 44.9 million outstanding under construction loan agreements.

Construction Loan Agreements

Certain wholly owned subsidiaries of Century Living, LLC, are parties to construction loan agreements entered into during 2022 and the first quarter of 2023 with various banks, (which we collectively refer to as “the lenders”).

The three construction loan agreements collectively provide that we may borrow up to an aggregate of $ 187.6 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 various rates, including a fixed rate, and floating interest rates per annum equal to the Secured Overnight Financing Rate (which we refer to as “SOFR”) and the Bloomberg Short-term Bank Yield Index, plus an applicable

The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates through March 17, 2028 , with certain of the construction loan agreements allowing for the option to extend the maturity dates for a period of 12 months if certain conditions are satisfied.

Certain wholly owned subsidiaries of Century Living, LLC, are parties to construction loan agreements with various banks, (which we collectively refer to as “the lenders”).

These construction loan agreements collectively provide that we may borrow up to an aggregate of $ 187.6 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.

The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates from March 17, 2026 through March 17, 2028 , with certain of the construction loan agreements allowing for 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.

Interest on our construction loan agreements is capitalized to the multi-family properties assets included in prepaid expenses and other assets on the condensed consolidated balance sheets while the related multi-family rental properties are being actively developed .

As of September 30, 2023, $ 28.8 million was outstanding under the construction loan agreements, with borrowings that bore a weighted average interest rate of 7.2 % during the nine months ended September 30, 2023, and we were in compliance with all covenants thereunder.

As of March 31, 2024 and December 31, 2023, $ 60.9 million and $ 44.9 million was outstanding under the construction loan agreements respectively, with borrowings that bore a weighted average interest rate of 7.5 % and 7.4 % during the three months ended March 31, 2024 and during the year ended December 31, 2023, respectively, and we were in compliance with all covenants thereunder.

Revolving Line of Credit

2 unchanged sentences

The revolving line of credit 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 revolving line of credit by an amount not exceeding $ 200.0 million.

Under the terms of the Second A&R Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not

exceeding $ 200.0 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.

On December 21, 2022, we entered into a First Modification Agreement with Texas Capital Bank (formerly known as Texas Capital Bank, National Association), as Administrative Agent, amending the Second A&R Credit Agreement pursuant to which, effective January 3, 2023, all existing borrowings using an interest rate based on a LIBOR reference rate had the interest rate replaced with one based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50 % or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10 %.

As of September 30, 2023 and December 31, 2022, no amounts were outstanding under the revolving line of credit, respectively, and we were in compliance with all covenants under the Second A&R Credit Agreement.

Borrowings under the Second A&R Credit Agreement are based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50 % or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10 %.

As of March 31, 2024 and December 31, 2023, no amounts were outstanding under the revolving line of credit, respectively, and we were in compliance with all covenants under the Second A&R Credit Agreement.

Mortgage Repurchase Facilities – Financial Services

Inspire is a party to a mortgage warehouse facility with J.P.

Morgan, which provides Inspire with uncommitted repurchase facilities of up to an aggregate of $ 200.0 million as of September 30, 2023, secured by the mortgage loans financed thereunder, and a maturity date through January 19, 2024 .

During the three months ended September 30, 2023, we terminated our mortgage warehouse facility agreement with Comerica, which provided uncommitted repurchase facilities of up to an aggregate of $ 75.0 million , with outstanding principal and interest due on December 29, 2023.

The repurchase facilities bore a weighted average interest rate of 6.80 % during the nine months ended September 30, 2023.

Inspire is party to mortgage warehouse facilities with J.P.

Morgan Chase Bank, N.A., Texas Capital Bank, and U.S.

Bank National Association, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $ 450.0 million as of March 31, 2024, secured by the mortgage loans financed thereunder.

The repurchase facilities have varying short term maturity dates through March 21, 2025 .

Borrowings under the mortgage repurchase facilities bear interest at variable interest rates per annum equal to SOFR plus an applicable margin, and bore a weighted average interest rate of 7.2 % during the year ended March 31, 2024.

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 September 30, 2023 and December 31, 2022, we had $ 162.1 million and $ 197.6 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.

As of March 31, 2024 and December 31, 2023, we had $ 212.4 million and $ 239.3 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.

Interest on Senior Notes and Revolving Line of Credit

Interest on our senior notes and revolving line of credit, if applicable, 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 nine months ended September 30, 2023 and 2022, we capitalized all interest costs incurred on these facilities during these periods.

As our qualifying assets exceeded our outstanding debt during the three months ended March 31, 2024 and 2023, we capitalized all interest costs incurred on these facilities during these periods.

Our interest costs were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Interest capitalized beginning of period

4 unchanged sentences

Our 2024 estimated annual effective tax rate, before discrete items of 25.0 %, is driven by our blended federal and state statutory rate of 24.7 %, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation offset by estimated federal energy home credits for current year home deliveries, which combined resulted in a net increase of 0.3 %.

For the nine months ended September 30, 2023, our estimated annual rate of 26.4 % was benefitted by discrete items which had a net impact of decreasing our rate by 1.1 %, including federal energy home tax credits claimed for prior year home deliveries in excess of previous estimates and the impact of excess tax benefits for vested stock-based compensation.

For the three months ended September 30, 2023 and 2022, we recorded income tax expense of $ 28.8 million and $ 27.6 million, respectively .

For the nine months ended September 30, 2023 and 2022, we recorded income tax expense of $ 56.9 million and $ 128.9 million, respectively.

For the three months ended March 31, 2024, our estimated annual rate of 25.0 % was benefitted by discrete items which had a net impact of decreasing our rate by 1.3 %, including the impact of excess tax benefits for vested stock-based compensation.

For the three months ended March 31, 2024 and 2023, we recorded income tax expense of $ 20.0 million and $ 10.7 million, respectively .

Fair Value Disclosures

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 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 September 30, 2023 and December 31, 2022, respectively (in thousands):

September 30,

The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023, respectively (in thousands):

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 9.0 %, 10.2 %, and $ 0.071 per year per loan, respectively, as of September 30, 2023, and 7.6 %, 9.0 %, and $ 0.072 per year per loan, respectively, as of December 31, 2022.

(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 8.7 %, 10.3 %, and $ 0.072 per year per loan, respectively, as of March 31, 2024, and 8.6 %, 10.3 %, and $ 0.072 per year per loan, respectively, as of December 31, 2023.

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 our condensed consolidated statements of operations (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Mortgage servicing rights

2 unchanged sentences

End of period

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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 September 30, 2023 and December 31, 2022, respectively (in thousands).

September 30, 2023

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, 2024 and December 31, 2023, respectively (in thousands).

March 31, 2024

December 31, 2023

7 unchanged sentences

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

As of September 30, 2023, these amounts totaled $ 4.5 million and $ 3.0 million for the 3.875 % senior notes and 6.750 % senior notes, respectively.

As of March 31, 2024, these amounts totaled $ 4.2 million and $ 2.6 million for the 3.875 % senior notes and 6.750 % senior notes, respectively.

As of December 31, 2023, these amounts totaled $ 4.3 million and $ 2.8 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/or interest rate terms.

(4) During the period ended September 30, 2023, other financing obligations included $ 30.0 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 2.40 % to 7.70 %, and $ 28.8 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 7.2 %.

(4) During the period ended March 31, 2024, other financing obligations included $ 15.6 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 5.0 % to 7.7 %, and $ 60.9 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 7.5 %.

During the period ended December 31, 2023, other financing obligations included $ 24.7 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 4.8 % to 7.7 %, and $ 44.9 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 7.4 %.

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 nine months ended September 30, 2023 and 2022.

No impairment charges were recorded in the three ended March 31, 2024 and 2023.

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 nine months ended September 30, 2023 and 2022, 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 $ 62.68 and $ 63.26 per share, respectively, that primarily vest over a three year period.

During the nine months ended September 30, 2023 and 2022, we granted 11.0 thousand and 11.0 thousand shares of common stock, respectively, on an unrestricted basis (which we refer to as “stock awards”) with a grant date fair value of $ 65.77 and $ 54.46 per share, respectively, to our non-employee directors.

During the nine months ended September 30, 2023 and 2022, we granted performance share units (which we refer to as “PSUs”) covering up to 0.5 million and 0.5 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $ 60.05 and $ 55.93 per share, respectively, that are subject to both service and performance vesting conditions.

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

During the nine months ended September 30, 2023 and 2022, 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 three months ended March 31, 2024 and 2023, 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 $ 85.84 and $ 62.61 per share, respectively, that vest over a three year period.

During the three months ended March 31, 2024, we granted performance share units (which we refer to as “PSUs”) covering up to 0.3 million shares of common stock assuming maximum level of performance with a grant date fair value of $ 82.23 per share that are subject

to both service and performance vesting conditions.

During the three months ended March 31, 2023, we did not grant any PSUs.

The quantity of shares that will ultimately vest and be issued upon settlement of the PSUs ranges from 0 % to 250 % of a targeted number of shares 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, 2024 and 2023, we issued 0.2 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods.

Approximately 1.1 million shares will vest from 2025 to 2027 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

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 September 30, 2023

March 31, 2024

Unvested units

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Weighted-average years to recognize compensation cost

During the three months ended September 30, 2023 and 2022, we recognized stock-based compensation expense of $ 12.2 million and $ 5.2 million, respectively.

During the nine months ended September 30, 2023 and 2022, we recognized stock-based compensation expense of $ 26.5 million and $ 15.0 million, respectively.

During the three months ended March 31, 2024 and 2023, we recognized stock-based compensation expense of $ 2.8 million and $ 5.4 million, respectively.

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

D uring the three and nine months ended September 30, 2023, in accordance with ASC 718, Compensation—Stock Compensation we updated our recognition of stock-based compensation expense associated with previously granted PSU awards to reflect probable financial results as they relate to the performance goals of the awards.

Accordingly, our estimate of the number of shares which will ultimately vest under our PSU awards increased by 0.4 million shares during the three months ended September 30, 2023 and 0.4 million shares during the nine months ended September 30, 2023.

We recorded a cumulative catch-up adjustment to increase stock-based compensation expense of $ 7.4 million ($ 5.5 million net of tax), or $ 0.17 per share (basic and diluted), for the three months ended September 30, 2023, and $ 10.8 million ($ 8.0 million net of tax), or $ 0.25 per share (basic and diluted), for the nine months ended September 30, 2023.

Stock-based compensation expense for PSUs is initially estimated based on target performance achievement and adjusted as appropriate throughout the performance period.

Accordingly, future compensation cost associated with outstanding PSUs may increase or decrease based on the probability and extent of achievement with respect to the applicable performance measures.

Stockholders’ Equity

The Company’s 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 September 30, 2023 and December 31, 2022, there were 31.8 million and 31.8 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding.

As of March 31, 2024 and December 31, 2023, there were 31.8 million and 31.8 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 nine months ended September 30, 2023 and 2022, we issued 0.4 million and 0.5 million shares of common stock, respectively, related to the vesting and settlement of RSUs and PSUs.

As of September 30, 2023, approximately 2.5 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, 2023 and 2022, respectively (in thousands, except per share information):

Nine Months Ended September 30, 2023

During the three months ended March 31, 2024 and 2023, we issued 0.3 million and 0.4 million shares of common stock, respectively, related to the vesting and settlement of RSUs and PSUs.

As of March 31, 2024, approximately 2.2 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 three months ended March 31, 2024 and 2023, respectively (in thousands, except per share information):

Three Months Ended March 31, 2024

Cash Dividends Declared and Paid

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February 7, 2024

March 1, 2023

February 28, 2024

March 13, 2024

June 14, 2023

August 16, 2023

August 30, 2023

September 13, 2023

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Cash Dividends Declared and Paid

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March 15, 2023

June 15, 2022

August 17, 2022

August 31, 2022

September 14, 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.

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(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.

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.

We did no t sell or issue any shares of our common stock during the three and nine months ended September 30, 2023 and 2022, and as of September 30, 2023, all $ 100.0 million remained available for sale.

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.

We did no t sell or issue any shares of our common stock during the three months ended March 31, 2024 and 2023, and as of March 31, 2024, all $ 100.0 million remained available for sale.

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

During the three and nine months ended September 30, 2023, an aggregate of 247.8 thousand and 278.2 thousand shares,

respectively, were repurchased for a total purchase price of approximately $ 17.3 million and $ 19.2 million, respectively, and a weighted average price of $ 69.61 and $ 69.09 per share, respectively.

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.

The maximum number of shares available to be repurchased under the stock repurchase program as of September 30, 2023 was 1,230,010 shares.

During the nine months ended September 30, 2023 and 2022, shares of common stock at a total cost of $ 10.7 million and $ 12.7 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 months ended March 31, 2024, an aggregate of 186.9 thousand shares were repurchased for a total purchase price of approximately $ 16.1 million and a weighted average price of $ 86.16 per share.

During the three months ended March 31, 2023, we did no t repurchase any shares of common stock.

The maximum number of shares available to be repurchased under the stock repurchase program as of March 31, 2024 was 1,043,123 shares.

During the three months ended March 31, 2024 and 2023, shares of common stock at a total cost of $ 10.4 million and $ 9.9 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 nine months ended September 30, 2023 and 2022 (in thousands, except share and per share information):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2024 and 2023 (in thousands, except share and per share information):

Three Months Ended March 31,

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 0.9 million and 0.5 million common stock unit equivalents from diluted earnings per share during the three months ended September 30, 2023 and 2022, respectively, and we excluded 0.8 million and 0.5 million common stock unit equivalents from diluted earnings per share during the nine months ended September 30, 2023 and 2022, respectively, related to the PSUs for which performance conditions remained unsatisfied .

We excluded 0.5 million and 0.5 million common stock unit equivalents from diluted earnings per share during the three months ended March 31, 2024 and 2023, 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 September 30, 2023 and December 31, 2022, we had $ 513.9 million and $ 574.8 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

As of March 31, 2024 and December 31, 2023, we had $ 509.0 million and $ 510.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

Legal Proceedings

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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